How Much are Realtor Fees in Calgary? The Ultimate Guide
Buying a house is the largest investment most people will make in their lifetimes. Naturally, the potentially life-changing event that the purchase of a home can be warrants that you do your due diligence before entering into any kind of formal agreement. The same logic holds when selling a home.
But whether you are buying or selling a home on the Calgary real estate market, you should have a good understanding of the rules and conventions surrounding realtor fees to avoid unwelcome surprises.
Realtors Help you Navigate the Calgary Real Estate Market
Unfortunately, the realtor fee and commission structures involved in the Calgary real estate market are often poorly understood, which can be the source of confusion for home buyers and sellers about what is appropriate.
This short guide will shine some light on the issue of Calgary realtor fees and how they are applied, which is often one of the more opaque aspects of a real estate transaction, as well as what you can do to have a positive experience when buying or selling a home.
Why Are Realtor Fees Charged?
Essentially, your realtor is your guiding hand throughout the entire process of buying or selling your home. They are a service provider that will handle a variety of tasks related to the sale or purchase of your property.
Whether you are buying or selling, a good realtor will handle all aspects of your marketing and research needs as well as negotiate on your behalf in order to simplify the process as much as possible and facilitate a smooth transition from one owner to the next.
When using a realtor to sell your home, the bulk of the cost will usually go towards your realtor's marketing efforts. This could include:
- Professional photo shoots
- Staging services
These are all costs that your realtor would have to pay out of pocket otherwise.
Providing this kind of service involves a lot of legwork and a significant time investment on the part of your realtor, as well as handling all the related expenses. The realtor fees that you pay to your Calgary realtor compensate them for their time and effort, as well as offset the costs of the investments they make in order to sell your property.
And let’s not forget: By hiring them, you get to use the experience and knowledge they have built up over a career. It is often said that “knowledge is power” - and so it is not surprising that knowledge comes at a cost.
Because commission fees are only payable after a purchase or a sale, realtors have both economic and professional incentives to complete the transaction. They only get paid when all the parties are satisfied and the sale goes through.
Commission Fee Structures
In order to fully understand how these fees are charged, received and divided between the various parties involved, it is worth stepping back to get an overview of the whole transaction.
In the Calgary real estate market, fees are charged and received by brokerages, not individual agents. In most cases, the seller pays the commission fee to the selling brokerage and the selling brokerage pays commission to the buying brokerage. After that, the respective brokerages pay out their agents.
Another way of putting it would be to say that because realtors must be associated with a brokerage firm, the commission fees are paid to the brokerage of the selling agent, never directly to the realtor. The seller pays the commission to the selling brokerage, and the selling brokerage pays a portion to the buying brokerage. From there, each brokerage takes their administrative fees before paying their respective agents.
Depending on your choice of realtor, the fee you pay and the services you get could vary significantly, as there are no mandated legal or legislative structures that govern realtor fees in Calgary. However, an unofficial industry-specific standard has evolved in the Calgary real estate market over the years known as the "7/3 split."
This means that conventional commission fee structures in Calgary real estate see a charge of 7% on the first $100,000 and 3% on the balance of the sale price, which is evenly split between the listing and buying realtors.
Make sure to discuss the details of realtor fees with your potential realtor before entering into any sort of engagement and remember fees are negotiable!
An Example of how Calgary Realtor Fees are Applied
Although fees can vary, we will stick to the "7/3 split" convention for this example to give you an idea of how it works out in practice.
For the sake of simplicity, we will use a figure that is within striking distance of the average price for a home on the Calgary real estate market. That figure currently sits around $470,000, so this example will be based on a Calgary home that sells for $500,000. In this case, the amount taken through a "7/3 split" commission fee would be $19,000. The 7% on the first $100,000 is essentially a fixed amount ($7,000), while the variance is made up by the 3% on the balance (3% of $400,000 is $12,000).
Because Calgary realtor fees are split evenly between the buyers and sellers, another way of looking at it would be $9,500 for the realtor on either side of the home purchase, for a total of $19,000. For each party, this amount breaks down evenly:
- For the seller: 3.5% on the first $100,000 ($3,500) and 1.5% ($6,000) on the remaining balance.
- For the buyer: 3.5% on the first $100,000 ($3,500) and 1.5% ($6,000) on the remaining balance.
The transaction can be approached from either side, but the end result of applying the convention of 7% on the first $100,000 and 3% on the balance works out the same for both the selling and buying agent.
Document the Details: From Sale Price to Realtor Commission Structure and Everything in Between
As previously mentioned, the realtor fees you will find on the Calgary real estate market are the result of convention and tradition, they are not set in stone.
So if you are thinking about selling or buying a home in the Calgary area, you should look for a real estate agent that will answer any question you might have and be transparent about their commission fee structure. Be wary of a discount realtor who tries to give you the run-around if you ask clear questions.
Whether they operate in residential real estate, property management or mortgage brokerage, a professional realtor must provide a written service agreement when starting a new client relationship. The language in these documents can be difficult to understand for the uninitiated so having clear lines of communication with your realtor should be a top priority.
Once you have been able to discuss the terms and conditions required to sell your home or buy a new one with your realtor, the service agreement will lay out basic information such as:
- The relationship between the parties
- The services to be provided
- The obligations and responsibilities of the parts
- The method for calculating remuneration and compensation, which will dictate the realtor fees
Alternative Commission Structures
Although uncommon, a realtor commission fee can take different forms than the aforementioned "7/3 split," including:
- A fixed percentage commission fee on the sale price of the home
- A flat commission fee that is independent of the sale price
Although the overwhelming majority of realtor fees are fair and warranted, the purchase or sale of a home is the kind of situation where the old adage of "buyer beware" applies.
For example, the Calgary Real Estate Board expressly forbids commission fee structures where the realtor gets paid based on the difference between the asking price and sale price. You will not encounter this kind of unethical commission fee stipulation from a reputable realtor.
Find a Trustworthy Calgary Realtor
Ultimately, you will have to decide if one of these alternative structures makes sense for your real estate situation, but it is widely suggested that home buyers or sellers should be highly skeptical of a situation that seems too good to be true, as there could be a hidden commission fee somewhere in the fine print.
Every party involved, from the selling realtor to the buying agent to the home owners, should feel that they are getting a fair shake when it comes to the commission fee structure, which is why the professionals at Calgary House Finder take their fiduciary responsibilities very seriously.
Our realtor team provides our clients with the utmost in professionalism and customer service because we always put their interests first.
Please note: This guide is meant to be informative in nature and does not constitute legal advice. We seek to provide clear and accurate information about the Calgary real estate market and related issues, like realtor commission fees. If you have questions or concerns about anything in this article, please contact us.