Understanding real estate commissions in Alberta can lack clarity, sellers are often left confused as to how commission calculations work and who is responsible for paying them.
While some of our users have expressed annoyance over the cost of transacting real estate, others have told us that they feel the whole topic has been veiled in secrecy. There is no standard commission for real estate services in Alberta. Commissions charged by industry professionals are always negotiable and the Competition Act of Canada prevents price-setting or collusion.
The Canadian Real Estate Association (CREA) and member boards represent that they support free and open competition. They adhere to a Code of Conduct that states that commission rates or fees members charge for services offered to the public are solely the choices of those providing the services. That said, in Alberta, the most common commission model is 7%/3%. This means a seller pays $7,000 on the first $100,000 and 3% on the balance. Typically, this amount is split 50/50 between the list agent and the buy agent. To use an example, let’s consider a home that sells for $600,000. The Seller will pay $7,000 on the first $100k and 3% on $500,000 for a total commission of $22,000. The list agent will earn $11,000 and the buyer’s agent will earn $11,000. It is worth noting that GST does apply to real estate fees.
So, who pays the commission?
Traditionally, a seller will pay the commission and the buyer pays no commission. A buyer’s agent may make the argument to their client that the services they provide are “free” because in many cases the buyer does not directly pay the buy agent. However, in true cost terms, the Buyer is *actually* paying the total fee as this amount is ‘baked-in’ to the total cost of the home. So the actual answer is the parties both pay for both the buyer and the seller commissions.
To illustrate this point more clearly, if a house is on the market for $600,000 and two offers come in:
Offer A: $600,000 with a buyer agent charging $11,000 for their services.
Offer B: $595,000 with no buyer representation.
In Offer B, both the buyer and seller are better off as the buyer saved $5,000 and the seller made $6,000 more than they would have in Offer A. This is the true value of a lower-cost transaction, both parties have the opportunity to win at the same time.
So, what if I’m a buyer buying a listing not marketed by Bōde? If you are a buyer in the Bōde marketplace, don’t expect to get paid a commission just because a seller is offering one. These payments are regulated and may only be made to licensed real estate brokerages. You may, of course, decide to account for these fees when placing an offer. If a Seller is offering a buy-side commission and receives an offer from an unrepresented party, they stand to save transaction fees.
Bōde buyers have outperformed competing offers by walking into any deal with a significant cost advantage over the traditional representation model.
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