How does real estate commission work as a closing cost for sellers in Ontario?

Real estate commission is typically the largest single cost for sellers in Ontario. The seller pays commission to their listing agent's brokerage, and the listing brokerage then pays a portion (the co-operating commission) to the buyer's agent's brokerage. From the seller's perspective, all of this comes out of the sale proceeds.

Commission rates are fully negotiable in Canada — there is no fixed or standard rate. The amount is agreed upon when you list your property. It is expressed as a percentage of the sale price or a flat fee, depending on the arrangement. HST also applies to commission, so the tax adds to the total cost.

Commission is not a disbursement on your statement of adjustments in the same way that legal fees or taxes are — it is paid directly by the brokerage after closing from the funds held in trust, based on your listing agreement. Your lawyer will account for the commission in the closing funds flow. If you sell without a buyer's agent representing the buyer, the co-operating portion may or may not be paid, depending on the terms of your listing agreement. Before listing, understand exactly what you have agreed to pay and under what circumstances.