When my friend was 26 years old, she purchased her initial condominium. She told us about the details during dinner– we got excited about it. Meaning the entire adulating thing is a huge appealing deal correct? She told us that it happened very fast, as well as that she went with an agent who took her to see some condos each weekend. Finally, she got the condominium she desired with the assistance of her real estate agent and the best thing the service was free.
I got confused as she said, “free.” Why wound an agent can take time every weekend to assist somebody in getting a condo without monetary compensation? “There was nothing like this,” I thought.
While I am doing a fair share of condo searching these days, I have interacted with agents. The Vancouver real estate market has expensive condos for sale, I though that agents should make huge amounts of money. As agents are taking home huge commission cheques nowadays, I got surprised when I discovered that they split the commission in many various ways. For instance, if a real estate agent gets referred by another real estate agent, the other agent is given some commission.
How the commission quiche is sliced
Here is how the commissions are broken down:
The seller gives an agent a cheque. The purchaser’s agent claims that the offered services are ‘free.’ But this isn’t correct. It would be correct to tell purchasers, that they don’t need to cut a different cheque for your services, as the agent is paid by the seller with the fees charged. Being honest, the whole globe of commissions seems a bit misleading and convoluted at time as, if all of us are honest with one another, if I purchased the same condo without utilizing an agent I can simply ask for 3% discount as the seller don’t have to compensate their agent. It might sound confusing.
It is 7-percent of the initial $100000 as well as 3-percent on the balance if you utilize the huge brokerages (such as RE/MAX). This is divided among the selling and buying agent, and the split, is 50/50.
Therefore that implies, if you are purchasing a $600000 condo, the commissions can look like:
7% on initial $100000= $7000
3.5-percent on the balance $500000= $17500
Total= $24500 + tax
(You must pay tax as it’s regarded a “service”)
Therefore the home seller paid $24500 out of the total condo sale for commissions. So, the $24500 is equally split among the 2 agents, amounting $12250 each. But, this isn’t the case always, and it isn’t 50/50 always as there may be other agent involved like mentioned early.
Normally, the agents pay back like 30% plus of the commissions to the main company, depending on the agreement. Other brokerages don’t request their real estate agents to give a lot of money back because the advertising is done by the agents. Tough, several people don’t recognize that the outlined commissions by the brokerages aren’t the case always. The Federal Competition Bureau decided that whatsoever deal that buyers/sellers agree with real estate companies are right. You can agree whatsoever package you wish for the cost agreed upon, the 3-percent isn’t a thing; however other real estate companies pretend it is. The reason why companies such as 1% Reality exist. Never mistaken, 1% Reality and other similar brokerages aren’t able to provide the same time commitment and package that a “complete service agent” offers- however also they cost less thousand of dollars when you choose wisely.
Save thousand of dollars in commissions through negotiation
I think that you should pay the agreed cost based on the quantity of work needed is a good structure than a structured based on commission. You should check out for our free eBook; How To Buy Your First Home In Canada for added details on how to maintain agreed fees controlled for a seller’s and buyer’s perspective.
Several people don’t recognize that commissions are easily negotiated, Justin Hennessy, an experienced lawyer says. As well as if your agent isn’t in for negotiations about the commission, one must dump him/her as they do not have your perfect interests at heart. As purchasing a house will be the largest acquisition in life, it makes a lot of sense to desire to save a lot of money like in said purchase.
Below are other brokerage companies as well as their commission set up:
For RE/MAX, it is 7-percent on the initial $100000, 3.5-percent on the remaining.
1-percent, 1% Reality you pay 1-percent of the remaining, hence with the $600000 example, it costs $6900 only.
Macdonald Realty has the same commission set up like RE/MAX.
These commissions are accurate to the time this article was written. All numbers are written with support from Facebook – Justin Henneseey Maple Ridge Realtor.
Because the brokerage has formed an oligopoly, other agents will uphold their fast reducing commission’s structures by showing homes listed with complete service real estate brokerages. Like many other things currently in the financial sector, companies are rapidly chipping the advantages depended upon by the older guard. Given the amount of money they are trading with while purchasing and selling homes in Canada, I think there is a lot of encouragement to do these stuff on your own as well as save some huge bucks.
Lately, the Federal Competition Bureau as well as the Canadian Real Estate Association has been odds for many decades, because the Federal Competition Bureau desires to open the Multiple Listings Service for utilization by the low-fee individuals as well as brokerages. The Multiple Listings Service is where many Canadians began searching for a house, and the Federal Competition Bureau needs it to be available to every Canadian. The Multiple Listings Service is maintained as well as owned by the Canadian Real Estate Association; this is the reason why there has always been a conflict concerning this issue over market access. Slowly however surely, added information, as well as wider access, is been made accessible to non-traditional players. This will continue to add force on fees as well as aid more competition.
Special thanks to Justin Hennessey for writing this article on Real Estate Supply. You can find him here at:
Justin Hennessey – Maple Ridge Realtor
22308 Dewdney Trunk Rd #805, Maple Ridge, BC V2X 3J2