How can I compensate my residential real estate broker?
When you enlist the services of a broker, whether you are a buyer or seller, how much, when and how will you pay him? Many options are available to you.
It’s my own choice
The Real Estate Brokerage Act allows the OACIQ to oversee the activities of real estate brokers, but it does not deal with the compensation amount that a broker can claim as intermediary in a transaction. Compensation varies from one banner to another and even from one broker to another, because it’s an agreement you must negotiate together.
The broker’s compensation can be paid in several forms:
- A percentage of the selling price (often referred to as “commission”);
- A lump sum (fixed in advance);
- An hourly rate (the Annex RC – Remuneration and costs form will then be used);
- A combination of these options.
Compensation is taxable, regardless of the form chosen. If your broker is acting on behalf of an agency, compensation will be paid to the agency once the services are rendered.
How will the compensation agreement be recorded?
Once you reach an agreement with your broker, it will be recorded in writing in the brokerage contract. Note that the OACIQ forms are designed for your protection and that various types of residential brokerage contracts are available to you (for more information, read the article entitled Signing a brokerage contract to sell, purchase or lease).
Other conditions relating to compensation could be indicated elsewhere in the brokerage contract (“Other declarations and conditions” section) or in an annex to such a contract. For example, in order to provide for a compensation reduction for designated persons.
Can I have my broker’s compensation financed?
A frequently asked question is: As a buyer, can I include the compensation due to my broker under my brokerage contract to purchase in the purchase price in order to have it financed? Answer: yes, it is possible to do so. The mandatory form Annex R – Residential immovable contains a clause (R2.5) for this purpose and must be added to your transaction proposal. This clause can be used only if you have signed a brokerage contract to purchase.
Regardless of the brokerage contract used, transparency is required in any real estate transaction. Therefore, if you sell through a broker, he must disclose to you in writing his compensation conditions, including, where applicable, the compensation offered to agencies and brokers collaborating in the transaction, as well as the consequences generated by the proposed conditions. Read carefully what is presented to you and ask questions, if necessary, to fully understand it.
When should I pay my broker?
It’s at the signing of the deed of sale, i.e. once the Promise to purchase is accepted, the financing obtained and the conditions respected and fulfilled by both parties. The notary will be responsible for distributing the sums due to brokers.
I do not know who my broker is
There may be situations where your options and your right to be represented by the broker of your choice are not explained or are not quite clear. If, for instance, you visit a home directly with the seller’s broker without informing him that you intend to be represented by your own broker, this could lead to a dispute.
In fact, determining which broker first drew your interest in a specific property is a criterion that is central to brokers’ right to compensation (this is called the efficient cause of the sale). The rules surrounding brokers’ right to compensation in connection with this criterion are developed and governed by the Association professionnelle des courtiers immobiliers du Québec (APCIQ).
When the situation cannot be avoided, brokers should agree in advance on a compensation sharing, without jeopardizing the transaction. Otherwise, the option available to you is to sign an Exclusive brokerage contract – Purchase, whereby you undertake to pay compensation directly to your broker.
I do not agree with my broker on his compensation
The OACIQ does not usually intervene in compensation disputes between brokers or agencies. However, we put at your disposal protection mechanisms in case ethical breaches are committed by real estate and mortgage brokers. Discover what the OACIQ can do for you.
If you cannot agree with him, or are not satisfied, you may also contact the executive officer of the agency to which the broker is affiliated. The agency executive officer is responsible for ensuring that his agency and the brokers acting on its behalf respect their ethical obligations and put the protection of the parties and the transaction first.