Whether for a contract involving a buyer or a seller, broker compensation customarily corresponds to a percentage of the sale or purchase price as agreed between the broker and their client.
Furthermore, under the Competition Act, brokers have the right to set their own rates based on the services they offer.
How Is Compensation Determined?
As a self-employed professional, the broker decides how they wish to be compensated. In most cases, they’re paid a percentage of the property’s sale or purchase price. Compensation can also take the form of a predetermined fixed fee.
Who Pays the Broker?
The seller must pay their broker the compensation owed as stipulated in the brokerage contract to sell.
In the case of the buyer, it depends on whether they’re represented by a broker or not.
- If the buyer isn’t represented by a broker, they must pay the fee specified in the brokerage contract to purchase.
- If the seller is represented by a broker, the latter will have established how their compensation is to be shared beforehand. If the compensation sharing conditions are higher than or equivalent to what is stipulated in the brokerage contract to purchase, the buyer won’t have to pay anything. If, however, the sharing conditions are lower than what is stipulated in the brokerage contract to purchase, the buyer will have to pay their broker the difference.
Is Compensation Negotiable?
Yes, broker compensation is negotiable.
Nevertheless, taking a broker’s service offer into account matters when evaluating compensation. During a sale, for example, a broker offering a lower rate may accordingly provide fewer services, which may impact the property’s market visibility and the speed of the sale.
Similarly, for a real estate purchase, one must consider the time the broker devotes to researching properties, organizing viewings, and advising their client.
What Services Does My Broker’s Compensation Cover?
The compensation paid by the buyer to their real estate broker includes several services:
- Searching for properties that correspond to the client’s needs.
- Analyzing the property and its potential drawbacks.
- Overseeing visits and negotiations.
- Supporting their client throughout the transaction process.
Is Compensation Taxable (GST and QST)?
Yes, a real estate broker’s compensation is subject to tax.
What Happens if a Brokerage Contract Is Terminated?
If a seller or buyer decides to terminate their brokerage contract before its term, they may be required to reimburse the broker for fees, expenses, and the value of services rendered upon termination. This is why carefully reading the contract and making sure you understand all its conditions before you sign is essential. To learn more, consult our detailed article!
Having a real estate broker by your side ensures not only a successful property purchase experience, but an enjoyable one as well. You can count on your broker’s expertise!
