Although it is Most Common for a Seller to cover the commission to both the Listing Brokerage and the Co-operating Brokerage (Buyer's agent), there are some situations where the Buyer may be responsible for part of or all commission to Co-operating Brokerage. The monetary obligation of the Buyer is outlined and agreed in a Representation or Service Agreement prior to seeing homes. In Ontario, as in most Real Estate Associations, a Buyer must enter into a contract with a Brokerage at the earliest opportunity when transacting in real estate*. This is usually following an initial meeting or call, prior to seeing any homes. On these contracts, the total commission your Brokerage is to be paid will be outlined.
There are two main contracts a Buyer can choose, the first being a Buyer Representation Agreement. This contract establishes a "Client" relationship between the Buyer and the Brokerage. This means that all information, motivation, financial knowledge, etc. is kept confidential and the Brokerage/ REALTOR® will be representing the Buyer's best interests. The second contract type commonly used in Ontario, is a Buyer Customer Service Agreement. This type of contract establishes a more arms-length form of representation. A Customer Service Agreement offers no obligatory loyalty to the Buyer, no binding confidentiality, or discretion. Of course the representative must always act with professionalism, kindness and ethics, but if the Brokerage already has a Buyer Representation Agreement with the Seller, that is where the loyalty lies. Many REALTORS®, including Laura McBride, only work with Clients under a Buyer Representation Agreement. In the event that parties on opposite sides of a transaction are represented by the same Brokerage, it is mandatory to disclose such, as a Multiple Representation situation. It is the job of the REALTOR® to remain impartial in multiple representation situations, so it is often the practice of the Brokerage or REALTOR® to refer one of the parties to another representative.
- Scenario 1 The property of interest is listed by the Seller directly, not a Brokerage. The Seller may not be offering any compensation to the Co-operating Brokerage. In this case the Buyer is responsible for the full commission to Co-operating, which would be established as a dollar value or percentage on the Buyer Representation Agreement prior to seeing this home.
- Scenario 2 The property of interest is listed by the Seller directly, not a Brokerage. The Seller may be offering a nominal compensation to the Co-operating Brokerage. In this case the Buyer is responsible for the difference of commission to Co-operating, which would be established as a dollar value or percentage on the Buyer Representation Agreement prior to seeing this home.
- Scenario 3 The property of interest is listed by a Brokerage but only as a "mere posting". The Seller may be offering little or no commission to the Co-operating Brokerage. In this case the Seller may be willing to negotiate compensation to Co-operating (not always). The Buyer is responsible for the full commission or the difference, whichever is equal to the amount established as a dollar value or percentage on the Buyer Representation Agreement prior to seeing this home.
- Scenario 4 The property of interest is listed by a discount Brokerage and is only offering a portion of the Co-operating Brokerage commission. In this case the Buyer is responsible for the difference of co-operating commission total, which would be established as a dollar value or percentage on the Buyer Representation Agreement prior to seeing this home.
Let's say, for example, that a Buyer enters into a Buyer Representation Agreement with their Brokerage, and the amount of Co-operating Brokerage compensation agreed on the contract is 2.5%. This is what a Buyer would be obligated to pay:
