Who Pays the Buyer Agent Commission in Ontario?

Commission is one of the largest costs in a real estate deal, and many people are unsure who actually writes the cheque for the buyer's agent. The answer is not the same in every deal. It depends on what the buyer, the seller and their brokerages agreed to in writing.

This article explains which documents decide who pays, how the money generally moves around closing, and what to confirm with your lawyer before you sign.

The short answer: it depends on what was signed

There is no single rule that says the seller always pays or the buyer always pays. Two agreements do most of the work. The first is the buyer's representation agreement between the buyer and their brokerage. The second is the agreement of purchase and sale between the buyer and the seller.

Under the Trust in Real Estate Services Act, 2002 (TRESA) General regulation, a buyer's representation agreement must set out how the brokerage's fee is determined. It must also show how the amount the buyer pays changes if the seller agrees to cover some or all of the buyer's brokerage fees.

In other words, the buyer's agreement should tell you up front what you owe if the seller pays nothing, and what you owe if the seller pays part or all of it.

How a seller's payment is built into the deal

If a seller agrees to cover some or all of the buyer's brokerage fee, that promise is made through a remuneration clause in the agreement of purchase and sale. That clause is an agreement between the buyer and the seller.

This is why the wording of an offer matters. If the clause is missing, vague or conflicts with what the buyer signed with their brokerage, there can be a gap between what the brokerage expects and what the seller has agreed to pay. Your lawyer can read the two documents together before the deal becomes firm.

A seller's own costs of selling can include realtor commission, which is typically 2% to 6% of the sale price and is negotiable. Because it is negotiable, the rate and who bears it are worth discussing before listing or making an offer.

How commission is paid around closing

When a brokerage holds the buyer's deposit in trust, it first deducts the remuneration (commission) owing. The balance owing to the seller may be released only when the transaction is completed, or with the mutual written consent of both parties.

How any commission that is still unpaid after that is handled on closing depends on your agreements and the facts of your deal, so it is worth confirming with a lawyer. The way your brokerage's fee is determined must be set out in your buyer's representation agreement. Ask your lawyer to show you how commission appears on the closing statements, so you can see exactly what was deducted and why.

Commission is a service related to real property in Ontario, so it is subject to HST at the Ontario rate of 13%. Check whether a quoted commission figure includes HST or has it added on top.

Documents that decide who pays

The listing agreement between a seller and their own brokerage is also part of the picture. Its terms are worth reviewing with your lawyer, because they affect what the seller expects to pay out of the sale.

What to do next

• Read the fee section of your buyer's representation agreement before you sign it, and ask what you would owe if the seller pays nothing.
• Check that the remuneration clause in any offer matches what you agreed with your brokerage.
• Ask whether quoted commission amounts include HST.
• Have your lawyer review the commission line on the statement of adjustments or closing statement before closing day.
• Keep copies of every signed agreement and amendment together.

If the wording is unclear or the numbers do not match, raise it with your lawyer before the conditions are waived or the deal closes, while changes are still easy to make.

Frequently asked questions