After thirteen years as a Realtor I found that there is a general misconception about the commission we charge. When I talk to people the first thing that comes to their minds is: "Wow ! This guy should make a pile of money" which, by the way, I'd wish but, unfortunately, reality is a little bit different. So, the more you know about this, the better your understanding.
I think that there is nothing better to illustrate this than with a real example: Let's say that you hired an agent to sell your home and the selling price was $300,000 with a "standard" 5% commission (plus HST).
In most of the cases, the buyer is provided by another Realtor (the "Cooperating Broker") who, generally, gets 2.5% (half of the original total commission). After that, within both Brokerages, the corporations also takes their parts of the deal by splitting the commission received according to the contract signed by that specific Realtor (let's say 30/70).
If that is not a chunk big enough, then Revenue Canada gets into the field to play this game to also take its part (usually about 50%).
So, after the above explanation, the final numbers would be more or less like this:
Selling Price: $300,000
Total Commission (5%) = $15,000
50% for each Brokerage: $7,500
What's left after 30/70 split with the Broker: $5,250
After sharing with our friends of Revenue Canada: $2,625
So far so good?? Don't get too excited because the story continues: From those $2,625, we have to pay Annual Memberships to OREA, CREA and RECO, Monthly Administration Fees to our Broker, Professional Insurance for E & O, Gas, For Sale Sign installation, printing Colourful Brochures and other general expenses.
As you can see, at the end of the process your Realtor only nets about 15% of the money you paid.
Maybe this could be totally transparent for you but, contrary to the general believe, Realtors are human beings who need to make a living to eat and enjoy life once in a while (if we are not busy making Open Houses, Showings, Promoting your home, Making Phone Calls, Follow Ups, preparing marketing materials, etc)
So... If someday you (or someone you know) needs to hire a Realtor to sell a property, get the best agent you can but, before asking for a commission "reduction" (which comes from OUR pocket, NOT the Brokerage's), please, read this blog again.
Also remember that, after signing the Listing Agreement, the only one who spends (and risks) money until the house is sold is your Realtor. And finally, ask yourself if you'd ask for a "Fee Reduction" to a Lawyer (probably not, eh?).
Next time a Realtor is driving by your neighbourhood showing houses to a client, maybe people could say: "We were wrong. That guy works really hard and deserves to drive a car like that".
In behalf of ALL Canadian Realtors... Thanks for your time and understanding !