What Your Real Estate Commission Actually Pays For

A commission pays a licensed brokerage to price, market, negotiate and close your sale. In Ontario no law sets the rate. Each brokerage sets its own under the Real Estate and Business Brokers Act, it can be a flat fee, a percentage, or both, and it is agreed to in writing before you sign anything.

Selling a home in Ontario means paying a commission when the sale closes, and it is worth understanding what that fee actually buys before you sign anything. Commission is not a government charge and no real estate board sets the rate. It is a service fee for a licensed brokerage, and like any service fee it is worth judging against what the brokerage actually does for the money.

Who sets the commission rate in Ontario?

The brokerage does, not the government and not the Real Estate Council of Ontario. RECO's own consumer guidance is direct about this: brokerages set their own commission rates and fees. The Real Estate and Business Brokers Act, 2002, the law RECO enforces, does not fix a number anywhere in it. There is no official rate, no minimum, and no maximum written into Ontario law.

Is commission negotiable?

Yes. The rate is whatever the seller and the brokerage agree to in the listing agreement, or whatever the buyer and their brokerage agree to in a buyer representation agreement. RECO's guidance says these arrangements can be a fixed dollar amount, a percentage of the sale price, or a combination of the two. One structure is specifically not allowed under Ontario rules: a rate that increases as the sale price goes up. A rate can stay flat or decrease as price rises, but it cannot climb.

Who actually pays the commission, the buyer or the seller?

Usually the seller. RECO's guidance says real estate commissions are usually paid by the seller, with an amount going from that one payment to each of the listing brokerage and the buyer's brokerage. That is why a buyer rarely writes a separate cheque for their own agent's commission.

There is a second route, set out in RECO's bulletin on the remuneration clause used in an agreement of purchase and sale. Here the seller agrees, inside the purchase contract itself, to pay the buyer's brokerage fee on the buyer's behalf. RECO requires that clause to state the exact dollar amount, whether tax is included, when the payment is due, and who actually receives it, the buyer or the buyer's brokerage. RECO is explicit that this is not a cash back arrangement. It is a transparent way of routing one specific payment between the parties to the sale.

When does the commission actually get paid?

On closing, not before. RECO's guidance says agents in Ontario typically get paid on the successful completion of the sale. If the deal falls apart before closing, there is normally nothing to pay.

So what is the money actually paying for?

This is the part no regulator writes down, because it covers the work rather than the fee, but it breaks down into three things.

The first is the licence itself. Every agent earning a commission on your sale is registered with RECO, bound by the Real Estate and Business Brokers Act, and held to the duties set out in RECO's bulletin on representation. An agent representing you owes you an undivided loyalty and must promote and protect your best interests in the transaction, not simply process paperwork on your behalf. That duty, and the complaint and discipline process behind it, is part of what separates a commission from a flat listing fee on a website with nobody accountable if something goes wrong.

The second is the sale process itself: pricing the home correctly, preparing it for market, arranging and running showings, marketing it to the right buyers, and negotiating price and conditions on your behalf once an offer comes in.

The third is the transaction once you have a deal: managing conditions and deadlines, and coordinating with lawyers, lenders, and the other side's brokerage through to closing day so the sale actually completes on time.

Does the commission change if my home sells for more than expected?

Only downward, and only if that was built into the agreement in advance. As covered above, Ontario rules allow a commission structure to decrease as price rises but not to increase, so if your listing agreement includes a sliding scale, check which direction it moves before you sign.

Can I ask a brokerage to negotiate its rate?

Yes. Because the rate is not fixed by law, it is a reasonable question to ask before you sign a listing agreement, and a brokerage is free to say yes, no, or offer a different structure such as a lower rate covering fewer services. What you are really comparing is not just the number but what sits underneath it, since the work described above can vary in scope between brokerages even at the same headline rate.

Does a lower commission mean less service?

Not automatically, but it is worth asking directly rather than assuming either way. Since no regulator standardizes what a commission includes, two brokerages charging the same rate can offer very different levels of marketing spend, staging support, or agent availability. The rate on its own does not tell you which one you are getting, so ask what is actually included before comparing two brokerages on rate alone.

The bottom line

Commission is one line in a longer list of costs that come off your sale price, alongside HST on that commission and legal fees, before whatever is left on your mortgage comes off too. Our net proceeds calculator breaks all of it down against your own numbers, so you can see the real dollar figure for your specific sale instead of working from a percentage in the abstract.