A settlement in a U.S. lawsuit could upend the cornerstone of real estate industry: commissions

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A for sale sign is pictured on the lawn of a house in Toronto’s east end on Oct. 11, 2023.

A landmark deal in the U.S. may lead to enormous changes in how real estate agents are paid. In Canada, two lawsuits filed against various real estate bodies want the courts to come to the same conclusion and force wholesale change in the way Realtors charge their fees.A landmark deal in the U.S. announced earlier this month may lead to big changes in how real estate agents are paid.

At the heart of both the U.S. and Canadian cases is the opaque way in which real estate agents charge their fees.In Canada, there are different fee structures in different jurisdictions. In Ontario, for example, a commission of five per cent of a home's sale price is split between the buyer's and seller's agents.

In Canada, there are different fee structures for real estate agents in different jurisdictions. In Vancouver, Realtors charge seven per cent on the first $100,000 of the sale price, and between 2.5 and three per cent on the balance. But what is common among those different jurisdictions is that the fee paid to the buyer's agent is baked into the price of the home, while a seller can negotiate with their agent and get a better fee.

On March 15, the day the $418-million US settlement was announced, the National Association of Realtors said fees have always been set by the market, not by collusion among agents. Besides, the group said, those fees have always been negotiable. "Since the settlement announcement, there have been numerous articles and stories in the media on what this means for buyers and sellers," Budge Huskey, president and CEO of Premier Sotheby's International Realty in Naples, Fla., said in a statement released on Tuesday.Huskey said the notion that sellers will no longer pay a fee to the buyer's agent is simply false.

The statement goes on to say that buyers and sellers in Canada "have always been able to negotiate commissions with their agent.... On the buyer side, buyer representation agreements are required in at least seven provinces in Canada. These agreements set out terms like services and fees between an agent and their buyer. This represents more than 80 per cent of homes sold in Canada.

 

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