🧠 Why Are Real Estate Commissions So High?
(What Realtors Actually Pay For — and Why It’s Not Just “Easy Money”)
💬 “I used to wonder the same thing — until I became one.”
Let me show you exactly where your money goes when you hire a full-service real estate agent — and why the good ones often spend thousands before they ever get paid.
🤨 First, Let’s Acknowledge the Obvious...
Yes — 4% to 5% of your home’s sale price feels like a lot.
If you’re selling a $700,000 home, that’s up to $35,000. So let’s break that down.
💼 What Happens to That Commission?
Here’s a typical 5% commission breakdown:
- 2.5% goes to the buyer’s agent (required to attract qualified buyers)
- 2.5% goes to the listing agent (your agent)
Let’s focus on the 2.5% your listing agent receives — and where that money actually goes.
📉 But Wait — Realtors Don’t Keep 100% of That Either
Most agents are independent contractors who split their earnings with their brokerage.
That means 25–30% comes off the top before expenses.
| $700,000 Home | 2.5% Listing Side = $17,500 |
| Brokerage Split (30%) | –$5,250 |
| Net Before Expenses | = $12,250 |
🧾 Real Costs a Full-Service Realtor Pays — Up Front
Here’s what a top listing agent like me typically spends on a single listing — before I’m ever paid:
| Expense | Approx. Cost |
| Professional Photography & Video | $400–$1,200 |
| Social Media Ads (Facebook, IG, Google) | $300–$800 |
| Signage & Installation | $150–$300 |
| Feature Sheets, Print Materials | $100–$300 |
| Lockbox, Key Coordination | $75–$125 |
| MLS Fees + Admin | $50–$150 |
| Client Support (VA, Admin Team) | $300–$600 |
| Staging or Prep Advice (Time + Service) | $500–$2,000 |
| Home Inspection (optional, but powerful) | $400–$600 |
| Total (Typical Range) | $2,500–$6,000+ |
🔁 Reminder: All of this is paid before a home is sold — and if it doesn’t sell, I absorb those costs.
🏢 Why Do Agents Pay the Brokerage?
In Ontario, agents must operate under a licensed brokerage, which provides:
- Legal Compliance: Ensures all transactions adhere to provincial regulations.
- Administrative Support: Handles paperwork, transaction processing, and record-keeping.
- Training & Development: Offers ongoing education and resources.
- Technology & Tools: Provides access to MLS systems, CRM platforms, and marketing tools.
- Insurance Coverage: Includes Errors & Omissions insurance to protect against potential legal issues.
These services are essential for agents to operate effectively and are covered by the brokerage split and additional fees.
💳 Fixed Costs Agents Cover (Even Without a Sale)
Beyond per-listing expenses, agents incur ongoing operational costs:
- Vehicle Expenses: Fuel, maintenance, insurance, and depreciation.
- Technology: CRM systems, website hosting, email marketing platforms.
- Office Supplies: Printers, paper, signage materials.
- Professional Development: Courses, certifications, and industry events.
- Insurance: Errors & Omissions insurance, personal liability coverage.
- Licensing Fees: Annual dues to RECO, CREA, OREA, and local boards.
These expenses can total several thousand dollars annually and are necessary to maintain a professional and compliant real estate business.
🕒 No Salary, No Sick Days, No Benefits
It's important to understand that real estate agents:
- Work on Commission: Income is only earned upon successful transactions.
- Lack Traditional Benefits: No paid vacations, sick leave, or employer-sponsored health plans.
- Face Income Variability: Market fluctuations can significantly impact earnings.
Despite these challenges, dedicated agents invest time and resources to provide exceptional service, often working evenings and weekends to meet client needs.
👀 What About Discount Brokerages?
Discount brokerages offer lower commission rates but may provide limited services:
- Reduced Marketing: Minimal advertising and promotional efforts.
- Limited Support: Fewer resources for staging, photography, and open houses.
- Client Responsibility: Sellers may need to handle showings and negotiations themselves.
While cost-effective, these models may not offer the comprehensive support needed for optimal sale outcomes.
🧠 FSBO (For Sale by Owner): “I’ll Just Do It Myself”
Selling a home independently is possible but comes with challenges:
- Marketing Limitations: Reduced exposure without MLS listings.
- Negotiation Complexities: Handling offers and counteroffers without professional guidance.
- Legal Risks: Ensuring compliance with real estate laws and regulations.
- Time Commitment: Managing showings, inquiries, and paperwork.
FSBO sellers often find the process more demanding than anticipated, and potential savings may be offset by lower sale prices or legal complications.
💬 But Do You Really Need to Pay 5%?
Commission rates are negotiable. When discussing fees with an agent, consider:
- Services Offered: What marketing, staging, and support are included?
- Experience Level: Does the agent have a proven track record?
- Market Knowledge: Is the agent familiar with your local area?
- Communication Style: Will the agent keep you informed throughout the process?
Choosing the right agent involves evaluating the value they provide, not just the commission rate.
🔍 Real Client Example:
A couple in London listed their home with a discount brokerage for $1,500 + HST.
They took photos themselves, wrote the description, and handled the showings.
After 62 days, no offers.
They called me. I staged the home, brought in professional photos and video, ran full ads, and handled negotiations.
Sold in 9 days — for $28,000 more than their previous asking price.
🎯 Final Word: “Ask the Question Most Sellers Don’t”
It’s not just how much commission — it’s what you get for it.
Not all agents are the same. And not all full-service listings are equal.
If you’re thinking of selling — even months from now — I’m happy to walk through your options, side by side.
No pressure. Just honest answers.
👉 Book a 15-Minute “What Am I Really Paying For?” Consultation with Ken Small
Let’s walk through your real options — and show you where every dollar goes.
📚 Sources / References:
- Canadian Real Estate Association (CREA) — 2023
- National Association of Realtors (NAR) — FSBO vs Agent Stats
- Real Estate Council of Ontario (RECO) Fee Breakdown
- Ontario Real Estate Association (OREA) Membership Fees
- Real client examples from Ken Small's listings (2023–2024)
“Why Are Real Estate Commissions So High?”
(And Why It’s Not Just “Easy Money” — A Real Behind-the-Scenes Look)
CENTURY 21 First Canadian Corp. Brokerage
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