How do real estate commissions work in Canada

By: Sandra MacGregor on August 12, 2025

This article has been updated from a previous version.

When buying or selling a home in Canada, one of the costs to consider is the real estate commission. But what exactly are you paying for, and how are these fees calculated? Real estate commissions are typically a percentage of the home's final sale price, ranging from 3% to 5%.

With the Canadian Real Estate Association (CREA) predicting the national average home price to reach $677,368 in 2025—despite a 1.7% annual decline—these fees can add up to tens of thousands of dollars. For many Canadians, understanding where this money goes is crucial, especially in a market where affordability remains a challenge.

In a competitive housing market, killed real estate agent can make all the difference. Knowing how commissions are calculated, who pays them, and what services they include is key to ensuring both buyers and sellers get the most value for their money.

What are real estate commissions and how much do they cost?

A real estate commission is the amount an agent gets for handling the sale or purchase of a property. In Canada, there is no legally required commission rate, but fees typically range anywhere from 3% to 5% of the total final selling price of the property.

The fee is generally split between the buyer’s and seller’s agents (e.g., so with a 5% commission, for example, each of the agents would receive 2.5%) and is only paid out by the seller.

Learn more: With prices dropping, is this a good time to buy a condo in Toronto?

What do real estate agents do?

Real estate agents typically fall into two categories: listing agents, who represent the seller, and buyer's agents, who represent the purchaser. While both are licensed professionals, their responsibilities differ depending on whom they’re working for.

For their fee, the selling agent will handle things like:

Listing and marketing the property.
Managing home visits and open houses.
Researching and setting a reasonable property price.
Potentially negotiating with interested buyers.

The agent representing potential buyers is usually tasked with:

Searching for suitable properties
Offering advice
Guiding viewings
Negotiating with the selling agent.
Providing support through to closing.

Before choosing an agent, understand what’s included in their services. Some agents who charge higher commissions may include extras like home inspections (which will cost you out-of-pocket), staging the home and coordinating professional photos.

How are real estate commissions calculated?

Real estate commissions aren’t one-size-fits-all — here’s how real estate agents set their rates:

Fixed percentage

This is the most common type of commission, where you pay a set percentage of the final sale price of the home. For example, if the commission rate is 5% and the house sells for $800,000, the total commission would be $40,000. This amount is typically split between the buyer’s and seller’s agents.

Split or tiered percentage

In this system, a higher percentage is charged on the first portion of the sale price, with a lower percentage applied to the remaining balance. This structure is common in provinces like British Columbia and Alberta, but the specifics differ:

British Columbia: The typical rate is 7% on the first $100,000 of the sale price and 2.5% on the remaining balance. For example, on a $500,000 home, the total commission would be approximately $17,000.
Alberta: The standard rate is 7% on the first $100,000 and 3% on the remaining balance. For a $500,000 home, the total commission would be approximately $19,000.
These amounts are usually split between the buyer’s and seller’s agents.

Flat fee

This model involves paying a predetermined, fixed amount for real estate services, regardless of the home’s final sale price. Flat fees typically range between $5,000 and $9,000 and are often used as an alternative to percentage-based commissions, especially for higher-value properties.

Fee for service

Agents charge a set price for specific services rather than a percentage of the sale price. For example, you might pay a flat fee for marketing, hosting open houses, or listing the property on MLS®. This approach is a flexible option for those who want to control costs while still accessing professional support for key aspects of the sale.

Negotiability

Real estate commissions in Canada are not regulated, meaning they are fully negotiable. Sellers can often negotiate lower rates, especially in a seller’s market where demand is high, or for properties that are expected to sell quickly.

Example scenario

Using the CREA’s predicted national average home price of $677,368:

At a 3% commission, the total fee would be $20,321.04.
At a 5% commission, the total fee would be $33,868.40.

These amounts are typically split equally between the buyer’s and seller’s agents.

What are the factors influencing commission rates?

There are a variety of factors that can impact your real estate agent’s offered commission rate:

Market conditions: In a seller’s market, high demand and quick sales may allow sellers to negotiate lower fees. In contrast, a buyer’s market with slower sales may limit this flexibility as agents often work harder to close deals.
Agent's experience: More experienced agents with a strong sales record may charge higher rates.
Location: Commission rates vary by province and city, with competitive pricing more common in high-demand markets.

How to negotiate real estate agent fees and what to ask upfront?

Don’t be intimidated to talk cash because it could save you thousands (if not tens of thousands) of dollars. It’s your right as a home seller to be financially assertive and get the best value for your transaction.

Here are some tips:

Ask questions: Don’t be shy about asking potential agents about their commission rates and what services are included.
Compare rates: Compare fees and the services included from multiple agents. You may be able to leverage competing rates.
Negotiate: Be sure to discuss a lower rate, especially if your property is highly desirable or if you’re willing to use limited services for a lower fee.

Other expenses to budget for

Commissions are just one of many costs in a real estate transaction. Here are some others to be aware of:

Additional marketing services

Extra services like home staging or professional photography may cost you extra. If your property is especially attractive, you can try to see if you can get some of these services included in your agent’s commission fee.

Closing and other costs

Other expenses to consider include closing costs like land transfer fees and lawyer fees. Home inspections and appraisal fees will also increase the cost. There will also be adjustment fees for your portion of the condo fees, property taxes, and utilities like heat and hydro.

Insurance

Your insurance costs may increase depending on your new home. For instance, moving from a rental to a condo, a condo to a house, or a smaller house to a bigger one, requires more coverage, which can lead to higher insurance premiums.

In addition to property insurance, be sure to budget for title insurance, which will cover you in the event of any legal ownership disputes.