Real Estate Agent Fees and Commission in Ontario

Real estate commissions are one of the most discussed topics in Ontario's housing market, and the landscape has shifted significantly in recent years. Whether you are a consumer trying to understand what you will pay, or a new agent trying to understand how you will earn, this guide breaks down how commissions actually work in Ontario in 2026.

Key Takeaways

• Real estate commissions in Ontario are fully negotiable and have never been set by law or regulation.
• The traditional total commission has been around 5%, but rates are increasingly variable and often lower.
• Commissions are paid by the seller at closing, though the cost is factored into the transaction.
• Under TRESA, there are enhanced transparency requirements around commission disclosure.
• HST (13%) applies to all real estate commissions in Ontario.
• New agents typically earn their commission through a split arrangement with their brokerage.

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How Real Estate Commissions Work in Ontario

The Basic Structure

When a property sells in Ontario, the commission is typically structured as follows:

1. The seller and the listing brokerage agree on a total commission rate when signing the listing agreement.
2. The listing brokerage offers a portion of that commission to the brokerage that brings the buyer (the cooperating brokerage).
3. At closing, the commission is paid from the sale proceeds before the seller receives their net amount.
4. Each brokerage then splits their portion with their respective salesperson according to their internal agreement.

In practice, this means there are four parties who share in the commission:

• The listing brokerage
• The listing salesperson (agent)
• The buyer's brokerage (cooperating brokerage)
• The buyer's salesperson (agent)

A Worked Example

Let us walk through a typical transaction:

Sale price: $800,000 Total commission: 5% = $40,000 Split between brokerages: 2.5% to listing brokerage, 2.5% to buyer's brokerage

The listing brokerage receives $20,000. If the listing agent's split with their brokerage is 70/30, the listing agent receives $14,000 and the brokerage retains $6,000.

The buyer's brokerage receives $20,000. If the buyer's agent has an 80/20 split, the buyer's agent receives $16,000 and their brokerage retains $4,000.

Before anyone celebrates, HST applies. The commission is subject to 13% HST, which is collected by the brokerage and remitted to the government. The agents themselves also pay income tax on their earnings as self-employed independent contractors.

Typical Commission Rates in Ontario

The Historical Norm

For decades, the standard total commission in Ontario hovered around 5%, with a roughly even split between the listing and cooperating brokerages (2.5% each). This was not a fixed or regulated rate, but it became the widely expected norm through market convention.

The Current Reality

In 2026, commission rates are more variable than ever:

Several factors have driven rates downward:

• Increased competition among brokerages and agents
• Consumer awareness that commissions are negotiable
• Higher property values (5% on an $800,000 home is $40,000, which motivates sellers to negotiate)
• Regulatory pressure for transparency under TRESA
• Discount and flat-fee brokerage models that offer alternatives to the traditional percentage structure

Commissions on Different Property Types

Commission structures can vary by property type:

• Residential resale: Most commonly a percentage of the sale price (3.5-5%)
• New construction: Builders typically set the cooperating brokerage commission, often a flat fee or lower percentage
• Commercial real estate: Commissions may be calculated differently, sometimes based on lease value rather than sale price
• Vacant land: Rates may be higher (up to 6-10%) due to the longer selling timeline and smaller buyer pool

Who Pays the Commission?

This is one of the most debated questions in real estate, and the answer is more nuanced than it appears.

The Contractual Answer

The seller pays the commission. It is deducted from the sale proceeds at closing. The listing agreement between the seller and the listing brokerage is the contract that establishes the commission obligation.

The Economic Answer

Economists point out that the commission is factored into the transaction price. Sellers set their asking price with the commission cost in mind, and buyers are effectively paying a price that includes the commission. So while the seller writes the cheque, the commission is arguably a shared cost embedded in the transaction price.

The Practical Answer for Buyers

In a traditional transaction, the buyer does not pay commission directly. Their agent is compensated through the cooperating commission offered by the listing brokerage. However, there are situations where this dynamic shifts:

• Buyer representation agreements: Under TRESA, the relationship between a buyer and their agent is formalized through a buyer representation agreement, which may specify the agent's compensation. If the cooperating commission offered on a property is less than the agreed-upon rate in the buyer representation agreement, the buyer may be responsible for the difference.
• For-sale-by-owner (FSBO) properties: If a property is not listed on MLS, there is no cooperating commission. A buyer working with an agent may need to negotiate who covers the agent's fee.

TRESA's Impact on Commission Transparency

The Trust in Real Estate Services Act (TRESA) introduced several provisions that affect how commissions are handled and disclosed in Ontario:

Enhanced Disclosure Requirements

Under TRESA, registrants have heightened obligations to disclose their remuneration arrangements. Buyers and sellers must be informed about:

• How the agent and brokerage will be compensated
• The amount or rate of compensation
• Who is paying the compensation
• Any referral fees or other financial arrangements that could create a conflict of interest

Buyer Representation Agreements

TRESA strengthened the framework around buyer representation agreements. These agreements clearly establish:

• The services the agent will provide
• The compensation the agent will receive
• The duration of the agreement
• The buyer's obligations

This increased formality means buyers are more aware of commission structures than they were under the old REBBA framework.

Self-Represented Parties

TRESA introduced the concept of "self-represented parties" -- buyers or sellers who choose not to engage a registrant. Under REBBA, the old term was "customer." The updated framework clarifies the limited obligations registrants have when dealing with self-represented parties, which can affect commission dynamics when one party is unrepresented.

HST on Real Estate Commissions

Real estate commissions in Ontario are subject to Harmonized Sales Tax (HST) at 13%. This is an important cost consideration:

• On a $40,000 commission (5% of $800,000), the HST adds $5,200
• The total commission cost to the seller becomes $45,200
• HST is collected by the brokerage, not the individual agent

For sellers, this means the effective commission cost is higher than the stated percentage. A 5% commission is really 5.65% of the sale price when you include HST.

For agents and brokerages registered for HST (which all brokerages are, and most agents should be given their income levels), HST paid on business expenses can be claimed as Input Tax Credits (ITCs), offsetting some of the tax collected.

How Commission Splits Work Between Agents and Brokerages

When you become a registered salesperson, you do not keep 100% of the commission your brokerage receives. Your brokerage retains a portion according to your split arrangement. Understanding these structures is important for new agents.

Common Split Models

Percentage split: The most traditional model. The brokerage and agent split the commission by a percentage. - New agents often start at 50/50 or 60/40 (agent/brokerage) - Experienced agents may negotiate up to 80/20 or 90/10 - Top producers at some brokerages reach 95/5

Graduated split: The split improves as the agent earns more. For example: - First $50,000 in gross commission: 60/40 split - Next $50,000: 70/30 split - Beyond $100,000: 80/20 split

Desk fee (100% commission) model: The agent pays a monthly desk fee (typically $1,500 to $3,000 per month) and keeps 100% of their commission. This model benefits high-producing agents but can be risky for new agents who may not earn enough commission to cover the desk fees.

Flat transaction fee: Some brokerages charge a flat fee per transaction (e.g., $500 per deal) rather than taking a percentage split.

What Else Comes Off the Top?

Beyond the brokerage split, agents may face additional deductions:

• Franchise fees: Agents at franchise brokerages (e.g., RE/MAX, Royal LePage, Century 21) may pay a franchise royalty, typically 1-8% of gross commission
• Technology fees: Monthly fees for the brokerage's CRM, website, or tools
• Transaction fees: Per-deal administrative charges
• E&O insurance: Approximately $460/year, mandatory through RECO's group plan
• Board and association dues: $1,000-$2,000+ annually for real estate board membership

After all deductions, a new agent's effective take-home rate on a commission dollar is often 40-55% before income tax.

How New Agents Earn Their First Commission

For aspiring agents still working through the licensing process, the commission structure is relevant to your career planning. Here is what earning your first commission typically looks like:

Timeline to First Deal

Most new agents close their first deal within 3 to 6 months of becoming registered. Some take longer. During this period, you have ongoing expenses (board dues, insurance, marketing) with no commission income, so budgeting accordingly is essential.

Where First Deals Come From

New agents typically get their first clients through:

• Personal network: Friends, family, and former colleagues who are buying or selling
• Brokerage floor duty: Some brokerages assign incoming leads to agents on rotation
• Open houses: Hosting open houses for other agents' listings is a common lead-generation strategy for new agents
• Online leads: Some brokerages provide leads, though the quality and cost vary

What a First Commission Looks Like

Suppose your first sale is a $600,000 home with a 5% total commission, split evenly between the two brokerages:

• Your brokerage receives: $15,000
• Your split (let us say 60/40 as a new agent): $9,000
• Minus franchise fee (5%): -$450
• Minus transaction fee: -$250
• Net to you before tax: approximately $8,300

That $8,300 may have taken 3-4 months of effort, so your effective hourly rate in the early stages can be modest. This is why understanding the commission structure is critical for career planning: you need to know how many deals per year you need to close to reach your income goals.

Negotiating Commission as a Consumer

If you are selling a property, here are some practical tips for negotiating commission:

What is negotiable

Everything. The total commission rate, the split between listing and cooperating brokerages, whether there is a minimum fee, and additional service fees are all negotiable.

What to consider before negotiating hard

• Cooperating commission affects buyer agent interest: If you reduce the cooperating commission significantly below market norms, some buyer agents may be less motivated to show your property. This is a practical reality, whether or not it should be.
• Service level may vary with commission: A lower commission may mean fewer marketing dollars, fewer open houses, or less hands-on service.
• Agent experience matters: A skilled negotiator who earns you $20,000 more on the sale price is worth more in commission than a discount agent who accepts a lowball offer.

Questions to ask your agent

• What is your total commission rate?
• How is the commission split between your brokerage and the cooperating brokerage?
• What services are included at this rate?
• Are there any additional fees (marketing, admin, staging)?
• What happens to the commission if the sale does not close?

Commission in the Licensing Exams

If you are studying for your Ontario real estate licensing exams as part of the Ontario real estate licensing pathway, commission calculations are tested in Courses 2, 3, and 4. The exams expect you to:

• Calculate total commission from a sale price and rate
• Split the commission between two brokerages
• Calculate an individual agent's share based on their split arrangement
• Apply HST to commission amounts
• Handle non-standard commission structures (e.g., first $100,000 at one rate, balance at another)

These calculations appear regularly on exams and are worth practising until they are automatic. ExamAce's Course 2 practice questions include commission calculation scenarios for residential transactions, and the Course 4 commercial bank covers commercial commission math.

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Understanding Commission Is Part of Being a Professional

Whether you are entering the real estate profession or selling your home, understanding how commissions work makes you a better-informed participant in the transaction. The days of a universal 5% commission are fading, and the transparency requirements under TRESA mean both consumers and agents operate with clearer expectations.

For students preparing for their licensing exams, commission math is a topic you will encounter repeatedly. Practise these calculations with ExamAce so they are second nature before exam day.

Related on ExamAce

• Ontario real estate exam process and licensing pathway — full regulatory route
• TRESA explained — the disclosure framework behind commission rules
• Course 2: Residential Transactions practice bank — commission calculation scenarios

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