The days of some real estate agents routinely cashing $57,000 commission cheques may be numbered.
Driving the news: Re/Max Canada has agreed to pay $7.8 million to settle two class-action lawsuits claiming that rules mandating home sellers in Canada pay the commission of their buyer's real estate agent are driving up the cost of homes and limiting competition.
- While sellers are responsible for paying the commissions, the fee is often baked into the price of the home, meaning the buyer is really the one footing the bill.
- The settlement could set the stage for a change in commission structures, like changes recently made in the U.S. that stemmed from a similar class-action lawsuit.
Catch-up: Canadian home sellers generally pay realtors 4% to 5% of the sale price, which the buyer’s and seller’s agents split. It’s technically possible to pay less in commission, but research has found some agents steer buyers away from homes with low commission rates.
Why it matters: Realtor commissions in Australia and the U.K. are about 2%, while in other countries, the fee is based on the agent’s experience or the desirability of a home. With the average Canadian house price jumping nearly 35% in the past five years, that extra cash adds up.
Bottom line: One expert told Global News that if Canada’s realtor commission rules were changed to mirror the new structure in the U.S., the number of agents in the country could drop by 30%.—LA