This article is part of Global News’s Home School series, which gives Canadians the basics they need to know about the housing market that they never learned in school.
Buying your first home can be an overwhelming experience, between finding properties, making a bid and negotiating the final deal.
Luckily, there are professionals to help you step-by-step through the process — if you want them.
Realtors are licensed professionals who represent both buyers and sellers in the housing market. On the sellers’ side, Realtors will often help to market your property and bring buyers to you; for buyers, they’ll find you properties and help to dig up data about the neighbourhood, market trends and more to help inform a possible purchase.
Realtors are guides that help Canadians navigate the often confounding waters of Canada’s real estate market, though some alternatives allow buyers and sellers to steer the process themselves.
Here’s what you need to know the benefits, risks and costs that go along with having a Realtor.
How do I pick a real estate agent?
In Canada, someone is considered a Realtor only if they’re licensed to practise real estate and they’re a member of the Canadian Real Estate Association (CREA). The more general term, a real estate agent, means someone is licensed through the province but not a member of CREA, which means they can’t use the trademarked Realtor title.
If your housing search takes you to different provinces, you’ll need a real estate agent who’s licensed to practise in each of the jurisdictions you’re looking in.
Pritesh Parekh, a Realtor in Toronto for just under a decade, says that outside of the courses needed to qualify for a licence, there’s no specific background or education someone needs to be a real estate agent and help you through a home purchase.
Some additional background can be helpful — Parekh says his marketing degree helps him sell properties for clients, for instance — but he tells Global News that it’s important to interview prospective agents to make sure their skill set and style fits your needs.
Most of Parekh’s clients come from referrals, he says, but he adds you can find Realtors through their social media accounts, direct mailers or searching online.
Whichever path you take, do some due diligence on a prospective agent by talking to past clients or checking sources such as Google reviews to ensure they’re as reputable as they might claim in their advertising, Parekh suggests.
It’s also perfectly acceptable to shop around, he says. He advises telling Realtors upfront that you’re talking to two or three other agents before deciding whom you’ll work with, then choosing the one that makes the best impression.
“Find a real estate professional that seems to jive with your type of thinking and don’t necessarily be sucked in by something such as a large billboard in your neighbourhood,” Parekh says.
Technical things to keep in mind
Parekh says that once you’ve landed on your Realtor, he suggests you sign a buyer representation agreement with that person early on in the process.
This contract will lay out what services your agent will offer and for how long you’re committed to working with them in your house hunt. If you end up buying a home without them, they may be entitled to some of the proceeds of the sale, depending on how long your agreement lasts.
That brings up another common question about the Realtor process: how do they get paid?
Like mortgage agents, Realtors are not paid directly by the buyer. Instead, the brokerages for both the buyer and seller agents get a portion of the sale price, which is paid out by the seller of the home.
Typically, this is a 50-50 split for buyers and sellers. In Ontario, the commission is equal to five per cent of the final price plus tax, while other provinces see brokerages receive higher proportions for the first $100,000 and smaller cuts of the remainder.
Some agents might have additional fees that they charge if they provide services that go above-and-beyond the usual Realtor package, but Parekh says these should be laid out clearly ahead of time in a buyer representation agreement.
“The norm at the moment is that from a buyer’s perspective, you should not be charged anything for all of those services that you will receive,” he says.
When you’re putting in an offer, make sure you’re aware if your case involves dual agency or multiple representation, a situation where both sides of the transaction are represented by the same agent, or by two agents from the same brokerage.
Each jurisdiction handles multiple representations a little bit differently, so clarify the situation with your agent before signing any contracts. Some markets, including most of British Columbia, have introduced rules that all but ban dual agency for fears of conflict of interest when an agent negotiates both sides of the deal.
Do I need a Realtor?
While buyers don’t directly pay real estate agents for their services, some, like For Sale By Owner (FSBO) founder Rob Reay, argue that Realtors’ involvement in the transaction at all drives up the final sale price of the home and buyers end up paying more.
Reay launched the platform, which sees sellers pay a flat $550 fee to list their homes on the FSBO website as well as CREA’s Multiple Listings Service (MLS) without the help of a real estate agent, more than two decades ago.
Another platform with a similar model, FairSquare, formerly known as Purplebricks in Canada, closed down earlier this year. Others, such as PropertyGuys.com and PropertySold.com, are still running.
A running tracker on FSBO.ca shows more than two-thirds of the last 600 sales through the platform involved no agents at all, with the remainder using just a buyer’s agent. The website also generates estimates of how much a seller saves in fees through the site, with typical amounts ranging from roughly $5,000 to $50,000 after each market’s commission proportions are applied to the final price.
Reay says that business on FSBO picked up dramatically during the pandemic, when many real estate agents were separated from their clients by necessity.
“The biggest driver of the change is the buyers,” he says. “The buyers have finally realized that although the seller writes the check to the realtor for the commission, the buyer is paying more money for the property.”
Pierre Leduc, a spokesperson for CREA, told Global News in a statement that while commissions paid to a selling agent are factored into the asking price of a home, forgoing a Realtor doesn’t necessarily lower the final price.
“If the property is for sale by the owner, that owner will also aim for the highest possible price the market will bear,” Leduc said in an email.
If a buyer purchases a property without anyone representing them, they’re not entitled to the share of the commission that would have gone to their agent — the full amount goes to the selling brokerage, if there is one. In an instance where buyers and sellers are facilitating the transaction privately, any discussion of money saved by avoiding commission fees comes down to negotiations.
Reay argues that today’s buyers are doing their own research on homes, neighbourhoods and market trends, and no longer need real estate agents to act as a go-between.
Technology and services like House Sigma, which allows buyers in some jurisdictions to check recently sold prices for properties in their neighbourhood, have “easily replicated” the traditional role of Realtors, he says.
Beyond the technical jobs of finding homes and negotiating offers, Leduc said in his email that working with a Realtor can give first-time buyers “peace of mind” that the minutiae of paperwork and the sequence of operations won’t be forgotten at a critical moment.
Asked whether there’s any role for agents to play for first-time homebuyers who are new to the process, Reay asserts that buyers trying to break into the housing market are the ones who need a break on their first home the most, given ongoing unaffordability in many Canadian cities.
“If you’re confident, you can do this,” he says of buying a home without an agent.
Jasmine Spudic, an associate lawyer who practises real estate law with Brauti Thorning LLP in Toronto, says the vast majority of buyer clients who come to her have an agent. The main exception might be among members of a family where the deal is more of a formality, she says.
But in general, Spudic tells Global News it’s typically wise to have a Realtor representing your best interests as a buyer. Agents can set your expectations on closing costs and can look out for things you might not know to ask about such as the age of a furnace or roof, or even about the changing demographics of a neighbourhood, she says.
“It really just depends on the situation and the person who’s looking to purchase at the end of the day and what they know about the area and what they know about the property,” she says.
“But I think all in all, for the average buyer when it comes to having an agent on your side, it really is invaluable.”
The modern role of a Realtor
Unsurprisingly, Toronto Realtor Parekh does not agree with arguments that agents have become obsolete.
While he concedes there’s a torrent of real estate data and information available to the modern homebuyer, he thinks of this as more of a setback than an advantage for most.
He says it’s easy in the social media era to see a flurry of sale prices or stats but he often sees statistics online that are calculated in a way that skews actual market conditions, or are just plain wrong.
Services like House Sigma might present a sold price that might not be representative of properties like the one you’re bidding on, and may drive up your final purchase price, he argues.
At least when consumers are working with a Realtor, they know the source of information is official and can be put in context, Parekh says.
“I believe, with the amount of technological advancement and information now at your fingertips as a client, it’s actually even more important to work with a real estate professional,” he says.
There are plenty of misconceptions about Realtors, Parekh concedes, including that they’re paid too much for too little work.
He says that for every agent who works part-time and puts in minimal effort to close a deal as a side hustle, there are Realtors who have been in the game for a decade or more who will take the time to earn your business.
If you make the choice to use a Realtor for your first home purchase, Parekh recommends taking the time to make sure who you’ve picked is a good fit for you — someone who you can trust to guide you through one of the biggest financial decisions of your life.
“This is a very exciting time in your life,” he says. “Work with somebody who will make it an enjoyable but also professional process.”