Selling a House in Ontario Commission: Who Sets It and How It Is Written Down

The short answer

The rules on selling a house in Ontario commission are set by what you sign, not by a published rate. The Real Estate Council of Ontario (RECO), the body every agent in the province must be registered with, says you and the brokerage decide the amount you will pay. It is not fixed or approved by RECO, any government authority or any real estate association or board.

What the law does fix is the paperwork. The amount has to be written into your listing agreement, along with anything you will pay toward the buyer’s brokerage and how the figures change if the brokerage ends up representing the buyer as well. One method of setting commission is not allowed at all.

This post explains how each of those pieces works so you can read a listing agreement with confidence. It is general information, not legal advice. Have your real estate lawyer review anything you are unsure about before you sign.

Who sets real estate commission in Ontario

Nobody outside the agreement. RECO’s guidance for consumers says commission is decided between you and the brokerage. RECO also notes that commissions and fees vary between brokerages and may depend on the services you want, so the price and the service list belong together.

A few points follow from that:

• The contract is with the brokerage. RECO’s Information Guide explains that when you work with an agent, you sign a contract with the brokerage the agent works for. The commission is part of that contract with the brokerage.
• There is no standard set of services. RECO says brokerages offer a variety of service options and the agreement must clearly set out the services you will receive. Staging, professional photos, advertising and open houses are examples RECO gives of services that may be offered.
• A service you assume is not a service you have. RECO advises that if you need or expect a specific service, it should be in the agreement or a schedule to it.

Before the listing agreement, an agent must walk you through the RECO Information Guide. RECO says agents in Ontario are required to do this before providing services or assistance to you. It covers the rules in this post in plain language and RECO notes that where there is any discrepancy, the Trust in Real Estate Services Act, 2002 takes precedence.

What a listing agreement must say about commission

RECO calls the contract between a seller and a brokerage a seller representation agreement or listing agreement. It must be in writing and presented to you as soon as possible. On payment, RECO says a seller’s agreement needs to clearly indicate three things.

What the agreement must show	What it means for you
The amount you agree to pay your brokerage or how it will be calculated	Your own brokerage’s fee for its services and representation
The amount you agree to pay, if any, to compensate the buyer for their brokerage fees	Whether you contribute to the buyer’s side and how much
How the amounts change if you consent to multiple representation	What happens if your brokerage or agent also represents the buyer

Agreements must also identify any other circumstances in which the amounts might change and how they will change in each case. If the agreement is silent on a situation you think is likely, ask for it to be written in.

The forms commission can take

RECO says you can agree to pay a fixed dollar amount, a percentage of the sale price or a combination of both. Whichever form you choose, the agreement has to state the amount or exactly how it will be calculated.

The one method that is not allowed

RECO says a representation agreement cannot specify an amount based on the difference between a property’s listing price and what it sells for. An arrangement where the brokerage keeps everything above a target price, for example, cannot be written into an Ontario agreement.

Paying the buyer’s brokerage

Buyers sign their own agreement with their brokerage, called a buyer representation agreement. RECO says a buyer’s agreement must show what the buyer will pay their brokerage and how that amount changes if the seller agrees to cover some or all of the buyer’s brokerage fees.

That makes the seller’s offer to the buyer’s side a decision you make in your listing agreement, not an automatic deduction. RECO’s guidance to buyers points out that a seller might not offer any amount toward their brokerage fees and that this could affect what a buyer is able to offer. When you discuss pricing and marketing with your agent, ask how making an offer to the buyer’s brokerage or making none is likely to affect the buyers your house reaches. Our sellers’ guide covers pricing and the offer process in more detail.

Selling a house in Ontario commission and multiple representation

Multiple representation is the situation where commission terms most often change. RECO defines it as a brokerage or designated representative representing more than one client with competing interests in the same transaction.

How it happens depends on the type of agreement you sign. RECO describes two types of agreement. The second, designated representation, was introduced in Ontario on December 1, 2023.

1. Brokerage representation. The brokerage and all its agents represent you. Multiple representation happens when the brokerage represents both the buyer and the seller, even if the two clients work with different agents there.
2. Designated representation. One or more named agents represent you. Multiple representation happens only when the same agent is the designated representative for both the buyer and the seller. RECO notes that designated representation reduces the likelihood of multiple representation.

RECO says multiple representation is not permitted unless each client involved agrees. Before anyone agrees, the brokerage must give a written disclosure explaining how its duties change, how the services differ and any change to how much you pay. Until every client has agreed in writing, the brokerage cannot take further steps for any of them.

The trade off is real. RECO says that under multiple representation the brokerage or agent cannot offer you advice on the price you should accept or the terms of the agreement of purchase and sale. You can refuse. RECO says your agreement should be clear about what happens in that situation, for example whether it ends or whether you are referred to another brokerage or designated representative for that transaction.

When commission can still be owed

When commission becomes payable is set by the agreement, so read three parts of it closely.

• Your responsibilities as a client. RECO lists paying the fees you have agreed on as a client responsibility, even if an agreement to buy or sell later falls through because of your default or neglect.
• The holdover clause. RECO explains that most agreements include one and it can require you to pay the brokerage for a sale that happens after the agreement expires. There is no minimum or set length, so agree on the period before you sign.
• Termination terms. RECO says the agreement should list every circumstance in which it can be ended and any penalties or costs that apply in each case.

The expiry date must appear prominently on the first page. RECO says there is no set or standard term, so the length is part of what you negotiate.

Selling without a brokerage

Some sellers list privately to avoid commission. That is a legitimate choice with its own risks. RECO says a person who is not a client of a brokerage is a self-represented party and that very few buyers or sellers make this choice.

A self-represented seller takes on tasks such as setting the value of the property, deciding what to accept, handling competing offers and preparing every document. If the buyer has an agent, that agent works for the buyer and must share with their client anything you tell them, including the lowest price you would take. RECO recommends independent professional advice before going ahead without representation.

Commission and tax on the sale

Commission is a selling cost, so it matters when the gain on a sale is taxable. The Canada Revenue Agency (CRA) lists commissions among the outlays and expenses you can deduct from the proceeds of disposition when you calculate a capital gain. It also counts commissions paid when you bought a property as part of its adjusted cost base.

For a home that was your principal residence for every year you owned it there is usually no taxable gain to reduce. A rental condo, a cottage or a house you moved out of can be different. Our post on selling a house in Ontario taxes walks through the principal residence exemption and a worked capital gain example. If you are selling one home and buying a smaller one, the Toronto downsizing costs post sets commission alongside legal fees and both land transfer taxes.

Executors selling a parent’s home have extra steps before a listing agreement can be signed. Our guide to selling an estate home in Toronto explains them.

Questions to settle before you sign a listing agreement

1. What exactly will I pay the brokerage and how is it calculated?
2. Will I offer anything to the buyer’s brokerage and how is that amount set?
3. Is this a brokerage or a designated representation agreement?
4. How does my payment change if I agree to multiple representation and what happens if I refuse?
5. Which services are included and are they listed in the agreement or a schedule?
6. When does the agreement expire and how long is the holdover period?
7. In what circumstances can either side end the agreement and at what cost?

RECO suggests interviewing at least three agents and checking each one on its public register before you hire. A free home valuation gives you a starting number to discuss with each of them. If you are planning a sale in Toronto and want to talk through how a listing agreement would work, contact us.