The public often has no idea where the funds go that they pay out as commission. Just a brief note to discuss the basics: Agents are forbidden to discuss commissions, company-to-company, Broker-to-Broker. Why? There is a fear of being charged with price-fixing by the anti-trust rules and regulations.
So, the general discussion here is just meant as education for the public. Typically, using one method or another, there are five adjuncts sharing the commission paid.
First off, the commission is split between two corporations. Then, internally within each company, splits kick in as to what sort of split there is between the sales rep (registrant) and the company that he or she works for, or has their licence held by as an independent contractor. If there is a referral fee involved in corporate relocation and such (often 35% off the top), that fee is broken down, office by office, leaving the remainder to be divided among the owner/Broker, corporation and the sales representative. Then Revenue Canada and/or the IRS gets involved. Typically, they get 50% of the sales rep's portion, and the corporation pays its taxes based on the volume category they fall within according to business taxation rules.
So you can see, using an example as such, only: If you pay 5 pts, as a Seller and if the split is 2.5 pts to each corporation, using an example of $250,000. as the sale price. that would be total commission, plus GST or other local taxes, equaling $12,500. and that is a lot of money, yes.
Divide the $12,500. by two corporations, equals $6,250. Further divide that by two sales reps (and sometimes more if there is a team involved), and that equals $3,125. to each rep. Now, if the salesperson pays 50% to the government for personal taxes, that leaves the sales rep with $1,562.50 (which represents a little over 10% of what you paid out), out of which he must pay for his car, his insurance, his gasoline, and all his related office expenses. And, if you ask your REALTOR® to cut his commission, typically that figure comes directly out of his own pocket, not that of his company.
See the article - "Realtor Costs : Your Costs at:
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