Understanding Real Estate Fees in Alberta
With so many options open to consumers it sometimes can be hard to understand the details behind the fee structure for real estate transactions.
I know, especially when I bought my first home I had no idea how the fees were calculated, what a good deal was etc.
Here is some helpful information from the Real Estate Council of Alberta to make sense of it all!
There is no standard commission for real estate or mortgage brokerage services in Alberta. Commissions to industry professionals are negotiable. Commission is something you can negotiate with your real estate professional. Some industry professionals and brokerages aren’t willing to negotiate their commission while others are. That’s their right. As a buyer or seller, you have the right to work with someone who charges a commission that you’re comfortable with.
Any of the following calculations are possible:
Percentage of the Sale Price
For example, a property sells for $500,000. The agreement bases commission on a percentage of the sale price, in our example, 5%. The commission will be $500,000 X 5% = $25,000 plus GST.
Split percentage of the Sale Price
One amount of percentage charged on a portion of the sale price and a different percentage charged on the balance of the sale price.
For example, 7% on the first $100,000 and 3% on the balance. If this property sells for $500,000, then the commission will be $100,000 X 7% + $400,000 (the balance) X 3%, or $7,000 + $12,000 = $19,000 + GST.
The fee remains the same regardless of the sale price.
For example, a client and professional agree to a flat fee of $15,000 + GST regardless of the final sale price. The home lists at $500,000 and sells 45 days later for $489,750. The professional still receives the flat fee of $15,000 + GST.
Fee for Service
For example, a client may agree to compensate the brokerage for specific services that will be provided. In this case, the client and the brokerage should agree in writing to which services and the fee for each. The agreement could base the fee for service(s) on an hourly rate, specific amount for each service provided, or in the case of property management, a monthly service fee for specified services performed each month. Depending on the number of services provided, you may require an addendum to the service contract.
A Combination of Fee Calculations
For example, a flat fee plus a fee for services based on an agreed list of extraordinary services provided during the agreement period. The total fee includes a $5,000 flat fee for listing and marketing the property, and $5,000 more for three extraordinary services consisting of: $2,500 for open house marketing; $1,500 for preparation and distribution of a unique property brochure; and, $1,000 for development and maintenance of a single property website. Total is $5,000 + $2,500 + $1,500 + $1,000 = $10,000 plus GST.