Real estate commissions can be difficult to understand when you come to sign at a law firm. When it comes to real estate commissions people have to areas of confusion. First they may think that the real estate commissions are too high. Alternatively they think that the rel estate commissions are too low. Yes, people will often say that they think that the commissions should be higher.
Too High: When people think that the real estate commissions are too high, there are two things that have been forgotten about. First is GST. Real estate agents provide a service. In Canada, the GSt is charged on all goods and services. Real estate commissions are the fees charged for the real estate services thus GST has to be added. That extra 5% sometimes throws people. The other reason that the fees may be higher, is that sometimes people work out a special arrangement with their real estate agent with respect to the fees. Sometimes, that amount is not reflect int he invoice that the law firm receives form the listing real estate company. Since all the commission structures are in writing, this is an easy fix. Usually just a quick phone call tot he real estate office indicating that the numbers are off results in an amended invoice being sent right away.
Too Low: While it seems unlikely that someone would think that their real estate commissions are too low, people often forget about the deposit. Real estate agents keep the deposits paid by the buyers in a special trust account. these funds are then used to put towards the real estate commissions. When we receive the invoice for the commissions, it is net of the deposited funds so that we only have to send the difference. We need to get authorization from our client to pay these funds out so they number listed is the difference between the total commissions less the deposit which can seem like not enough money to be paid.
Remember, it is your money. Please always feel free to call or ask about the commissions or any other amount that is involved in your transaction. Sometimes errors do happen and it is best that you are an active participant and work with people whom you feel are always approachable and will be responsive to your needs and concerns.
For our full video on this topic please see this link.