How Much Are Commissions for REALTORS® in Calgary Alberta

Posted by Lana Waller on Tuesday, August 2nd, 2016 at 8:58am

 

What you should know

There are more options every day to sell your home and you may wonder if you should try to sell on your own or give one of the new providers on the scene like Purple Bricks, for example, a try or hire a local Real Estate Professional and what the Realtor commissions cost to work with one.  This can be very confusing for home sellers.  I am sure you are trying to figure out the best option for you and how you can save money on commissions especially with the performance of the Calgary Real  Estate market over the past 3 - 4 years.  Calgary homeowners have been hit hard and I understand that.

The first thing you need to know about Realtor fees in Alberta is there is no such thing as a standard or fixed commission in real estate.  This is a federal law, under the Competition Act. The only time you may have a standard commission is if a single office demands it, or it is that particular brokerage's business model.  However, in every marketplace, there is a commission that is considered a typical or common full commission.  At Waller Real Estate Group our real estate commissions have always been negotiable and we offer a preferred Realtor commission rate for anyone purchasing with Cedarglen Homes or Cedarglen Living.  One of the most important things to consider is the experience of the agent and how many contracts they are negotiating a year.  This is where you can save money by getting the most amount you can when you sell your home.  

What do the numbers mean?

I’ve been in the real estate industry for 32+ years, and my entire time in the industry in the Calgary residential marketplace, a full Realtor commission has always been considered to be 7% on the first $100,000 and 3% on the balance of everything over $100,000.  The listing Agent gets 50% and the Agent that brings the buyer or the buyers Agent gets 50%.  

The 7% & 3% is split 50/50 between the 2 agents when they are paid their Realtor fees in Calgary. In this example the commission is split like this, 3.5% for the first $100,000 and 1.5% for the balance that is over $100,000 goes to both the listing Realtor and the buyer's Realtor.  Do your research when looking at service providers, many look really good at first and cheap but there can be fees and extra add on services that can quickly add up.

 

Who pays the commission?

Normally, the seller's pay the commission; traditionally speaking the buyer pays no commission.  Most Buyers are working with a Real Estate Agent to negotiate the best price for them and to make sure they are protected with proper conditions in place.  In today's market agents usually, have the buyers sign a Buyer Brokerage document explaining what services are provided to them and what the agent will be paid. 

How is the commission split? (who gets what)

The seller will want to negotiate a commission with the listing agent or whoever it is that they’re interviewing. However, it’s important for the seller of the property to understand that the commission should be reduced on the listing Realtor's side, and he or she would not want to reduce it on the buying Realtors's side. The reason is that within the MLS System®, the buyers Realtor can see how much commission is offered on the transaction, and unless there will be what they consider to be a full commission, the buying Realtor may think, Well, I’m not getting my just due over there. I think I just won’t show that property.   This flies in the face of the Laws of Agency because the buyers Realtor is supposed to act in the best interest of their client. But as the old saying goes, “money talks,” and with a lower commission offered, the buyers Realtor may naturally be less motivated to show the property. Even though this isn't right, what goes on inside the buyers Realtor's mind can’t be proven, and therefore a lower commission offered may result in less exposure for a home, and therefore fewer potential buyers seeing the home.

Can I save money?

In addition, the Realtor working with the buyer will in most cases have a Buyer Representation Agreement with the client stating he or she will be paid 3.5% on the first $100,000 & 1.5%  of the balance from the seller.  If a seller is offering less then the buyer will have to make up the difference or whatever complies with the Buyer Representation Agreement.  As is true with all things, when dealing with commissions, you get what you pay for, and saving a couple of thousand dollars on a reduced commission could ultimately cost you thousands of dollars when it comes to advising and the negotiations skills when dealing with the other Realtor's when an offer comes in.  If a real estate professional is quick to discount everything when you first meet, ask yourself how hard are they going to fight for the best price for your home when an offer is written?  There are companies out there who refer to themselves as offering full service with discounted real estate commissions.  But I wonder what exactly they are discounting since there are no set fees for commissions.    This is a great question for you to ask any company who is marketing mainly about how much commissions are for Realtors.

Who should you choose?

In order for the sale of your home to go as smoothly as possible, it’s most important to hire a REALTOR® with a lot of experience, market knowledge, a great reputation and track record within the real estate industry, who will give you full exposure and has a marketing strategy for the sale of your home. And while commissions are always negotiable, it’s best for sellers to pay what is considered to be a full commission to the buyer’s agent so that their home receives as much exposure as possible. This is, in my opinion, the number one strategy for selling your home.  Find a Realtor who has experienced the trends within your Marketplace, that can give you knowledgeable advice and is an expert negotiator!  If you would like to know more about our services check out our HOME SELLER page for more information, and of course we would love to hear from you if you have any comments or questions.

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Contact Tom Waller at 403-803-5151 to find out more about Buyer or Seller representation.

 

We want to say Thanks to everyone that has taken the time to leave a comment.  Clearly, there are many questions about a commission and how it works.  Due to the large volume of responses to this post we have closed the comments section as most of the questions have already been asked or are answered in the blog post.  We are happy to discuss any questions you have by telephone or to meet with you in person for a coffee to demonstrate our business model.  

We cannot comment on other Realtors business models or other Brokerage business models or their commission agreements with their clients.  These agreements are between the Client and the Agent/Brokerage.  All of the files or contracts are held in a secure location at the specific brokerage.  If you have questions about a commission you paid or have been quoted you would need to speak with the Agent or their Broker you dealt with for that transaction. 

1 Response to How Much Are Commissions for REALTORS® in Calgary Alberta

Lana Waller wrote:

Harks says

December 30, 2015 at 8:27 am

(Edit)
In today’s downturn in the economy, how are Realators commissions being adjusted?
Status quo at 7% and 3% or reduced?
Is it reasonable to negotiate 5% and 2%?
Thanks.

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Lana says

March 13, 2016 at 8:37 am

(Edit)
Hi Harks,
Commissions are always negotiable. However services offered or supplied could be reduced with a lesser commission, you would need to research what all is available or offered by the different companies. It is very important to hire a Real Estate Professional that has experience in all types of market conditions so they can give you the best advice and have the skills to negotiate the best price for you.

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jan says

February 23, 2016 at 7:21 am

(Edit)
say I am a buyer and buy a 400,000.00 home, How much does my realtor get?

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Lana says

February 23, 2016 at 7:44 am

(Edit)
Hi Jan,

The home Buyer does not pay the commission to the Real Estate Agents. The commission is offered or paid by the home seller and would be whatever amount was negotiated and agreed upon between the home seller and the Real Estate Agent. There is no set amount, all commissions are negotiable. Hope that helps.

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Vince says

February 22, 2017 at 8:29 am

(Edit)
I think you did not answer the question. I would not hire you. In the above acticle it state 7 per cent on the first 100,000 and 3 on the rest. So do the math.

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Lana says

February 22, 2017 at 12:54 pm

(Edit)
Hi Vince,
Thank you for taking the time to leave a comment. Let me try to explain, “In the Calgary marketplace, full commission has always been considered to be 7% on the first $100,000 and 3% on the balance of everything over $100,000.” To be clear, this is not a set price as all real estate commissions are negotiable. This is something you would need to discuss with your REALTOR®, and what services or marketing you were interested in. Hope this helps explain things more clearly.

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Jack Hallday says

August 15, 2016 at 5:26 pm

(Edit)
Sometimes Realtors think they are selling the house, but in reality the house will sell itself, based on price, location, features, etc, so the Listing Agent lucks out when he gets selected, basically does nothing but get it on mls for half the commission. The Buyers Agent is really a “Finder”, and gets paid a finders fee for bringing the potential buyer to the house. If a home isn’t selling they Agent is not loosing sleep or necessarily motivated to move it. He or she is not sitting there trying to figure out how he can sell it! They let the mls listing and other Agents sell it. They definately do not earn the absolutely rediculous sales commissions! I sold a property located in Radium Hot Springs. It sold in 4 days, and I paid $15,000 commision-is this fair? The Agent did absolutely nothing, other than the Mls listing! There are so many ways to market a home now with Internet sales. Agents by and large are lazy bunch and do not earn their commissions. I know personally one agent who only sells himself, not the homes he is listing, his business is getting listings, and he is guaranteed 1/2 the commission! He was an Electrician at one time. Something is definitely wrong in this industry, they have not progressed, and not a good service industry. People should try to sell properties themselves. Agents do not provide any guarantee to sell your home, and they don’t care if it sells, they have no vested interest, because there will be other homes to sell tomorrow.

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Lana says

August 22, 2016 at 2:32 pm

(Edit)
Thanks for your response Jack,

“I understand where you are coming from. REALTOR®’s in general get bad reputations for good reasons and many agents just put the listing on the MLS, put a sign in the yard, and pray it will sell. Whether an agent has this mindset or not, it is true that homes do sell quickly sometimes. However, especially in our current market where the average number of days on market is 46, when you are dealing with a dedicated and experienced REALTOR® you will get full value. When you are working with a true professional, you aren’t paying for their time, but rather for their results within that period of time, whether it be short or long. When inventory levels are high, it takes an in depth understanding of what the market is looking for in a home and what it is willing to pay for one home for sale over another one that is listed close by. Further, many people discount the complexity of the typical real estate transaction. When I list a property for sale, these are all the steps that are involved: See Here

In many cases, an individual can be perceived as an expert because of bus stop benches and flooding a market area with flyers and other forms of advertising. In many cases, you’re right about these people, they are more focused on selling themselves than the homes they have for sale. In many cases, a REALTOR® will advertise that they are 15 years in the real estate “industry,” but really, 12 of those years were spent selling windows or spent in another loosely related segment of the “industry.” The resale market is an entirely different beast so it is difficult to generalize “all REALTOR®s” in one way when we all come from different backgrounds and have differing levels of experience and professionalism. Personally, I always wanted to be involved in real estate – it’s what I “wanted to be when I grew up” as a kid. My post secondary education is in Real Estate Appraisal at St. Lawrence College. I’ve been known for 30 years as a licensed REALTOR® in Calgary – and I’ve seen and experienced the ups and downs of the real estate market and changing economic climate in Alberta over that amount of time.

The type of insight that can be gained from a professional, licensed REALTOR® (or any form of consultant in any industry) cannot be found by simply “Googling” it or by any other means of personal research. That being said, there will always be DIYers in every type of job – whether it be staining your deck, installing a new home theater system, or marketing your home for sale. There are people that see the value in hiring a professional to do the job, and there are people that do not see this value and would rather attempt to do it themselves – and each point of view is just fine. It just depends on each individual’s knowledge, skillset, resources, the scope of the project, and the amount of time they are willing (or able) to invest in taking on the project themselves. It also depends on the level of confidence an individual has in making the important decisions involved in completing a given project. It’s just about knowing who you are working with and understanding the value that they provide, which is their responsibility to communicate to their clients as salespeople. “

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Nathan says

March 1, 2017 at 6:20 pm

(Edit)
While I believe real estate agents do indeed provide a service and should be paid for it, there is absolutely no way they can justify the absurd commission’s they get.

Even at 45 days on the market, a full commission would dictate each real estate agent would get $12,250 on a $600k house. At a full 8 hours per day, every day that works out to $34 per hour. That would assume the agent dedicates the entire time to one single house.

When house prices jumped, so did the relative commission with no or extremely limited added costs or work required. I’d have far more respect for real estate agents if they admitted the commission’s are completely out of line and then did something about them. While an extremely limited few agents actually might be worth these commissions, on specific properties, the vast majority aren’t.

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Lana says

May 7, 2017 at 7:54 am

(Edit)
Hi Nathan,
Thanks for your reply. According to recent CREB stats the average real estate agent sells 4.7 homes per year. Real Estate commissions are never set and are negotiated between the Agent and the client in each transaction, so not typically what you are quoting. As you know there are many business expenses to be self employed and run your own business. Agents working for a brokerage either have a commission split with the brokerage or are charged a monthly fee to be part of that brokerage, so the $12,250.00 is shared with the brokerage. Real Estate is probably the only job where you wake up every morning unemployed until you interview and get hired by the next client. Things are not always as easy as they appear.

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Lee says

May 24, 2017 at 3:44 pm

(Edit)
Although you say and the same is also said in many places that real estate commissions are negotiable. most of the major brokerages in my area will not even flatly refuse anything less that the 7% & 3 %. Almost like price collusion to me. And yes i agree the fees are outrages when considering the amount of time put in to list, show and sell a house. Agents tell me about the time they put in on my house when I list, but they don’t tell you they are usually working for several other clients at the same time and not just exclusive to my listing!

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Lana says

May 28, 2017 at 6:53 am

(Edit)
Hi Lee,
Commissions are always negotiable and each Brokerage will have their own business model. There are many other alternatives out there like For Sale By Owner, 1%, 2%, 3% and many other types of Real Estate business models that offer alternate commission fees and services. Many times these other business models are pay for service. The more services or features you desire the more you pay. There are many choices for selling a home today. If you are wanting to work with a specific Real Estate professional offering full service that has a proven track record and reputation you may pay a higher fee depending on what you negotiate with that Agent. This is common in many types of professions, the top lawyers for example are usually paid a higher fee. There are many costs and time involved with professionally marketing a home, for example high quality HD photography, 3D virtual tours, producing video or drone overhead views, staging, professional brochures, Facebook ad campaign, etc.. These are all out of pocket expenses the Agent pays up front to market the home and not paid by the Seller, even if the house does not sell (depending on the business model).
I want to make clear that the 7% & 3% are split between the brokerage that has the listing and the brokerage that brings the buyer. In the 7% & 3% commission example the listing agents brokerage would get 3.5% & 1.5% and the buyers brokerage would get the same. Deducted off this amount are any brokerage fees or commission splits paid to the brokerage by the agent, income tax deductions, and all other expenses paid up front to market the home.
In regards to your comment that the Agent may also be working with other clients as well. Homes can sometimes take months to sell depending on current market conditions, location, price and condition. Agents are not paid until after possession date which could also take another 60 – 90 days after any conditions are removed. Sometimes homes do not sell at all. I am sure you would not expect your lawyer, accountant or mortgage broker to only work with 1 client at a time and wait 2 to 6 months for a pay cheque? If you have any other questions we would be happy to meet with you to discuss and to show you our business model and what we do.

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Brian says

April 28, 2017 at 4:55 pm

(Edit)
So one might as well sell themselves. As you said the buyers realtor is the one that is valuable. If you no your property and its potential, and the average selling price. Why not save a lot of money. Correct me if iam wrong, I believe the lawyer you hire does all pertinent paper work, to sell that home. Is this correct. Thanks Brian

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Lana says

May 5, 2017 at 7:16 am

(Edit)
Thanks for your comment Brian. Both the buyer and the sellers real estate professionals are important in a transaction. Many people do not realize all of the steps involved on the listing side, this is why we created a Listing to close flow chart you can see here https://wallerrealestate.ca/home-selling-process-flow-chart/. Please give me a call if you would like to discuss any of these items.

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Randy says

May 10, 2017 at 9:35 am

(Edit)
I am in the process of talking with realtors to sell my house. I have been offered by one of the realtors a flat 3% and a shared cost (50/50) on marketing expenses, excluding pictures. The market expenses would be for MLS, Internet, Facebook, Homes and Land, etc. and might total about $500/month. I have never heard of this kind of proposal before. Have you seen or heard of deals like this?

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Lana says

May 28, 2017 at 7:05 am

(Edit)
Hi Randy,
Each agent can have a different business model. I cannot comment on what other agents do as that is up to the Agent or their brokerage. I only can comment on what we do. It sounds like you are interviewing a few real estate agents which is always a good idea and what we recommend. You should choose the one that best fits your goals and needs. Marketing a home does cost money, probably more than most people realize.

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Patrick says

May 15, 2017 at 2:28 pm

(Edit)
Here is an alternative commission structure to align the interests of the seller and the seller’s realtor:

Seller Realtor’s Commission = 0.5% of purchase price + 25% of the profits above an agreed upon independent appraisal price.
Buyer Realtor’s Commission = usual full commission

For example:
Purchase Price = $390,000
Buyer Realtor’s Commission = (7% * 100,000 + 3% * $290,000) * 0.5 = $7,850
Legal Fees = $750
Appraisal Costs = $250
Agreed Upon Independent Appraised Value = $350,000
Seller Realtor’s Commission = ($390,000 – $350,000 – $7,850 – $750 – $250) * 0.25 + $390,000*0.005 = $9,737.50

If a realtor really is “amazing at getting top dollar for your home,” then this commission structure would fit perfectly for them.

Otherwise, realtor/client incentives are misaligned in the traditional commission structure. If a realtor spends an extra 50 hours on one $300,000 deal and gets $10,000 more for the property, they would get only $150 more. If they instead spend the extra 50 hours getting another deal, they would get an extra $6,500. It is because of this imbalance of incentives that creates a situation where the “top realty sellers” know more about the human psychological tricks (salesmanship) to get their client to come down or up to the price so that the deal will go through faster. The incentive to sell quickly is so much more powerful than the incentive to sell better as a realtor that most end up either jaded or succumb to the influence of the incentives – working against the clients they represent.

“Never, ever, think about something else when you should be thinking about the power of incentives.” – Charlie Munger

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Lana says

May 28, 2017 at 7:59 am

(Edit)
Hi Patrick,
Why would the Independent Appraisal be so much less then the purchase price in your example? It might be difficult to convince a bank that a house is worth an additional 40,000.00 then the appraised price in your example with a purchase price of $390,000.00. In my experience the bank appraisal is very close to the selling price I have never seen a 40,000.00 difference. Anything like this sounds illegal to me.

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Matt says

May 19, 2017 at 1:10 pm

(Edit)
Lana,

Based on Calgary statistics, can you tell me what per cent of realty in the Calgary area is sold with full commission (considered: 7 per cent on first $100,000 & 3 per cent of remaining)? You consistently say that commissions are negotiated by clients; however I feel that a large majority of sales are set at this considerable amount. Can you provide the actual statistics on this?

If you are unable to provide concrete statistics, can yo explain why this is?

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Lana says

May 28, 2017 at 6:59 am

(Edit)
Hi Matt,
We do not have access to any other Brokerages private files or signed contracts with their clients. These are are kept locked and secure just as your bank or lawyer would not be able to access these types of company files to provide you with stats. Real Estate Brokerages have to comply to the Privacy Act just as everyone else. Contracts are contracts and legal and binding documents, these are all confidential in any type of profession. Hope that helps.

Reply

Posted on Monday, December 10th, 2018 at 7:46am

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