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Buyers’ Agent Fees & Lending Values

Buyers-Agent-Fees-MortgageGoogle “flat-fee MLS” and you’ll find Realtors willing to list your home for as little as $110, or less.

That’s a far cry from the 1% to 3% listing commission that most Canadians have paid for years.

With perceived savings like that, flat-fee Realtors seem destined to win market share.

This change is being fostered, in part, by CREA’s historic rule changes in October. And, as more Canadians choose flat-fee Realtors, there are a variety of implications—including implications for lending values.

For years, it’s been common for home sellers to pay the buyer’s agent’s and listing agent’s commission from the proceeds of the home sale. But now, people can get their property on MLS for a hundred bucks (or for free in one case).

Many of the cost-conscious sellers who use these flat-fee Realtors will refuse to pay commissions to the buyer’s agent. Over time, that could make it increasingly common for buyers’ agents to charge home purchasers directly.

The problem is, many buyers don’t want to pay buyer’s agent fees out of pocket. This is especially true for first-time buyers who have saved just enough for a down payment and closing costs.

So that raises a question.

On a typical home sale today, it is normal for lenders and mortgage default insurers (such as CMHC) to include both the listing agent’s and buyer’s agent’s commissions in the lending value. That lending value, in turn, helps determine the maximum allowable mortgage amount.

But what about a case where the seller hasn’t offered to pay the buyer’s agent? How can the buyer’s agent’s fee be included in the mortgage (so the purchaser doesn’t have to pay it separately at closing)?

CMHC spokesperson, Charles Sauriol, tells us: “As has been our long-standing practice, CMHC will consider a purchase price which includes real estate commission, as long as the payment of that commission is included in the purchase agreement, and the total purchase price, including commission, does not exceed the lending value of the property.”

He adds: “CMHC does not accept the addition of fees, for example buyer agency fees, that are negotiated separately. CMHC expects the purchase price submitted by lenders to be exclusive of fees that are negotiated outside of the purchase agreement.”

purchase-agreementThis incentivizes buyers to convince non-commission-paying sellers to add a buyer’s agent’s commission in the purchase agreement. Otherwise, a lender won’t include that commission in the purchaser’s mortgage.

If the buyer’s agent won’t facilitate that negotiation, the buyer may choose to do it themselves. Sean Kirk from flat-fee service,, says, “The rule changes in October now allow the buyer to negotiate directly with the seller. Realtors are no longer required to present offers or negotiate terms.”

That said, there’s a lot to consider when you’re evaluating a listing that offers no commission to your Realtor. As a buyer, make sure you discuss this scenario with your agent in advance.

Rob McLister, CMT