Real estate commissions in B.C.

Why does it cost so much to sell a home?

Selling your home can be stressful, time-consuming and expensive. There are all the moving costs to think about. Staging fees. The legal fees you pay your lawyer. Property transfer taxes and mortgage discharge fees. And of course, everyone’s least favourite added cost, the GST.

But for most homeowners, the biggest cost (and most frequent cause of sticker shock) that comes with selling a home is the commission you pay your real estate agent. So we thought we’d take a closer look at exactly what REALTOR® commissions cover, and try to answer once and for all the question of why they’re so high?

Real estate commissions in B.C.

In British Columbia, most real estate agents charge a commission based on a graduated scale. The percentages can vary considerably depending on which part of the province you live in. But on average, most agents in Metro Vancouver charge around 7% on the first $100,000 of the selling price of a home, and 2% to 3% on the remaining balance.

What does that add up to? Let’s say you sold your home for $1-million. If your agent charges 7% on the first $100,000 and 2.5% on the balance, that would work out to a commission of $29,500 ($7,000 for the first $100K + $22,500 for the remaining $900,000).

Sounds pretty good for just a few weeks work, right? But the first thing you have to remember about real estate commissions is that they don’t all go directly into your agent’s pocket.

In the vast majority of cases, the commission you pay when you sell a home in B.C. is split between your agent and the buyer’s agent. That’s why you usually only have to pay your agent when you’re selling a home, but not when you’re the buyer.

The amount of the split also varies, with the seller’s agent generally getting a little more and the buyer’s agent a little less. But to make our hypothetical calculations easier, let’s assume an even 50-50 split. So in the case we outlined above, from that $29,500, your agent would receive about $14,750.

What do those commissions cover?

Still not a bad payday, all things considered. But we’re not done yet. Next, there are all the marketing costs to think about.

When a REALTOR® lists your property, they generally pay for everything they use to market your home. This ranges from professional videos and photography to hiring a writer or graphic designer, paying for market research tools, and the costs of both online and traditional advertising.

Agents who work with a larger real estate company also have to pay a portion of their commissions to the company they work with, to cover all the hard costs associated with things like office space, admin and office staff, advertising support and other expenses.

This can take the form of a fixed monthly payment, or a percentage of each home’s commission, often in the neighbourhood of around another 5% or so. If the agent doesn’t work with a larger company, then they have to pay all those staffing, commercial rent and other office-related costs themselves.

Finally, there are all the other ongoing costs that come with being a professional REALTOR®. This includes everything from license renewal fees and annual Real Estate Association memberships to consumer deposit insurance, the cost of ongoing training and education, and fees for things like mandatory errors and omissions insurance.

Again, the cost of all these fixed expenses can vary. But they often run well into the region of several thousand dollars a year.

Time is money

Once all of those costs are deducted, the total amount your agent actually receives for listing, marketing, showing, negotiating and selling your home is considerably lower than the original commission you paid. And that doesn’t take into account the single biggest expense your agent is putting on the line when you become their client: their time and expertise.

Certified REALTORs® bring years of experience, knowledge and expertise to the table to help you sell your home. They also spend dozens or even hundreds of hours helping you navigate through every step of the selling process, and making sure you sell your home quickly and at the best possible price. This can include services like:

• Helping get your home staged and ready to sell.

• Researching the local market and comparative sales to price your home accurately.

• Listing and marketing your property through multiple channels and platforms.

• Fielding numerous calls, emails and offers.

• Hosting open houses and private showings for multiple buyers.

• Handling offers and negotiating with buyers or navigating bidding wars on your behalf.

• Closing the deal, and making sure all the legal and financial paperwork is correct.

• Providing personal guidance, advice, reassurance and support throughout the selling process.

The only numbers that really matter, are yours

Of course, every agent, homeowner and property are different. Depending on where you live and the property you want to sell, some agents are willing to negotiate a fee that works for everyone involved.

If you have any questions or would like to get a better idea of what it might cost to sell your home, reach out to your local agent, or contact us to schedule a free call.