Sandeep Pawar
Broker
Home / Sell / Listing agreement and costs
Your listing agreement and the costs of selling
What an Ontario listing agreement must contain under TRESA, and how commission and HST work. Then what your lawyer and lender charge, and what you will actually walk away with.
The short answer: since 1 December 2023, your listing agreement must be in writing. It must spell out its dates, how commission is worked out, the services provided and any termination terms. Commission is negotiable and has 13% HST added. Your other main costs are legal fees and paying off your mortgage, which can include a prepayment penalty.
What the listing agreement must contain
A listing agreement is a seller representation agreement between you and a brokerage. Under the Trust in Real Estate Services Act (TRESA) and its regulations, your agent must first give you RECO’s Information Guide and explain it.
| Required in the agreement | What to check |
|---|---|
| Start date and expiry date | The expiry date must appear prominently on page one, initialled by you, and there can be only one. |
| How commission is worked out | For the listing brokerage and for any buyer’s brokerage, written clearly. |
| When the commission could change | Each circumstance, how the amount changes, and whether another brokerage is paid. |
| How commission is paid | Usually from the sale proceeds on closing, through the lawyers. |
| The services provided | Photography, marketing, showings, offer handling. If it is not written, do not assume it. |
| Termination terms, if any | Whether and how either side can end the agreement early. |
If an agreement was made verbally, the brokerage must put it in writing and give it to you to sign. That must happen as soon as possible, and before any buyer makes an offer. You must be given a copy of any written agreement right away.
Questions to ask before you sign
- How long is the term, and can it be shorter to start?
- What is the total commission, and how is it shared with a buyer’s brokerage?
- What happens to commission if the buyer has no agent, or if I find the buyer myself?
- Is there a holdover period after expiry, and how does it work?
- What exactly will you do: photos, video, floor plans, staging advice, open houses?
- How will you handle a buyer who is also your brokerage’s client, and what consent would you ask from me?
- How will competing offers be handled, and will offer details be shared? (See comparing offers.)
- Can I end the agreement early, and what would that cost?
How commission and HST work
No commission rate is set by law, by RECO or by any real estate board in Ontario. Agents may not suggest that a rate is fixed or approved by any of them. It is a business term agreed between you and the brokerage. Part of it is often offered to the brokerage that brings the buyer.
Commission is subject to HST, which is 13% in Ontario. Always compare commission proposals on the same basis: the rate, the HST and the services included.
My commission: competitive and negotiable. I put my fee, exactly what it includes and your estimated net proceeds in writing before you sign anything. Book a free seller call and I’ll walk you through it.
Every cost of selling, in one table
| Cost | Who sets it | When you pay | What to do |
|---|---|---|---|
| Brokerage commission | Your listing agreement | On closing, from proceeds | Negotiate before you sign. Get it in writing. |
| HST on commission | 13% in Ontario | On closing, with the commission | Include it in your net figure. |
| Legal fees and disbursements | Your lawyer | On closing | Ask for an all-in quote for a sale, including the mortgage discharge. |
| Mortgage payout | Your mortgage balance | On closing, paid by your lawyer | Request a payout statement from your lender. |
| Prepayment penalty and lender fees | Your mortgage contract | On closing | Ask your lender for the exact figure, and about porting. |
| Property tax and utility adjustments | The statement of adjustments | On closing | Your lawyer credits or charges prepaid amounts. |
| Preparation and staging | You | Before listing | Spend on what buyers notice (see preparing your home). |
| Moving and any overlap | You | Around closing | Movers, storage, and bridge financing if you buy first. |
Land transfer tax is paid by the buyer, not the seller.
Want a net-proceeds estimate for your home?
What’s my home worth?Paying off your mortgage
Selling usually means discharging your mortgage on closing. Your lawyer pays your lender from the sale proceeds, and the mortgage is removed from title.
- Ask your lender for a payout statement as soon as you decide to sell
- Ask how the prepayment penalty is calculated. FCAC says it is usually the higher of three months’ interest or the interest rate differential (IRD)
- FCAC says lenders usually use the IRD if your rate is above today’s rate and your contract is under five years old. It can be far larger than three months’ interest
- Ask about any administration or discharge fees on top of the penalty
- Ask whether you can port the mortgage to your next home, which keeps your rate and terms and can avoid breaking the contract
I time the closing around your mortgage dates where I can, and put your lender’s figures into the net estimate. Buying as well? See upsizing.
Net proceeds: a worked example
Hypothetical example. Every figure is an assumption for the arithmetic only. Your legal fees and penalty will be different, and your commission and its 13% HST come off as set out in your listing agreement.
| Line | Assumption | Amount |
|---|---|---|
| Sale price | Hypothetical | $1,000,000 |
| Less legal fees | Assumed $1,500 all-in | −$1,500 |
| Less mortgage balance | Assumed $500,000 | −$500,000 |
| Less prepayment penalty | Three months’ interest at an assumed 4.5% on $500,000 | −$5,625 |
| Estimated net before commission | Before commission and HST, adjustments and moving costs | $492,875 |
If this mortgage were charged an interest rate differential instead, the penalty could be much larger. That is why the lender’s payout statement comes before the pricing decision, not after.
Tax on the sale
- Principal residence: if the home was your principal residence for every year you owned it, the gain is usually not taxed. You must still report the sale and designation on Schedule 3 and Form T2091(IND).
- Rental or investment property: the gain is generally taxable. If you rented part of your home, the rules on change in use may apply.
- Flipping rule: for sales on or after 1 January 2023, a home owned for less than 365 consecutive days is generally taxed as business income. Exceptions include death, relationship breakdown, serious illness and involuntary job loss.
General information, not tax advice. Ask an accountant before you sell, especially for rental, mixed-use or recently bought property.
Mistakes I see with agreements and costs
- Signing a long listing term without reading the termination terms.
- Comparing commission quotes without comparing the services behind them.
- Forgetting the 13% HST on commission.
- Setting a price before knowing the mortgage penalty.
- Assuming no tax applies to a home that was partly rented.
More in seller mistakes to avoid and the full selling plan.
Questions sellers ask about agreements and costs
Is real estate commission negotiable in Ontario?
Yes. No law, RECO rule or real estate board sets the rate, and Ontario’s rules bar agents from suggesting one is fixed or approved. Commission is agreed between you and the brokerage and written into the listing agreement. The agreement must set out how the brokerage’s pay, and any cooperating brokerage’s pay, is worked out.
Do I pay HST on real estate commission?
Yes. Commission is a taxable service, and the HST rate in Ontario is 13%. Ask for the commission and the HST shown separately in your net-proceeds estimate.
Does the seller pay land transfer tax in Ontario?
No. Land transfer tax is paid by the buyer. Your main costs as a seller are commission plus HST, legal fees, and paying off your mortgage, including any prepayment penalty.
How much is the penalty for breaking my mortgage?
It depends on your contract. The Financial Consumer Agency of Canada says it is usually the higher of three months’ interest or the interest rate differential. Your lender can give you the exact figure in a payout statement.
Can I cancel my listing agreement?
Ontario’s rules require the agreement to state its termination terms, if any, and one clear expiry date. Read those terms before signing. If you want flexibility, ask for a shorter term or a written cancellation clause at the start.
Do I pay capital gains tax when I sell my home?
Usually not, if the home was your principal residence for every year you owned it. You still report the sale on your tax return. A home sold within 365 days of buying it can be taxed as business income under the flipping rule. Ask an accountant.
What must the listing agreement include?
Under Ontario’s rules it must include the start and expiry dates and how commission is calculated, could change and is paid. It must also list the services provided and any termination terms. The expiry date must appear prominently on page one, with your initials beside it.
Sources
- Ontario e-Laws: O. Reg. 567/05 under the Trust in Real Estate Services Act, 2002 (sections 13, 13.4, 13.5, 13.7 and 23: information guide, contents of agreements, copies, remuneration not fixed or approved)
- RECO: TRESA explained
- CRA: GST/HST rates by province (Ontario 13%)
- Financial Consumer Agency of Canada: mortgage prepayment penalties
- CRA: principal residence and other real estate
- CRA: residential property flipping rule
See your net figure before you list
Get an instant estimate, then I will put the commission, HST, legal fees and your lender’s payout into one clear net-proceeds sheet.