New real estate model is saving mid-town home buyers and sellers thousands
A Cedarvale home sold in February for $1,890,000, costing the sellers $94,500 in commission. This exorbitant amount is due to the fact that the traditional real estate model hasn’t changed in decades, despite skyrocketing home prices over the same period.
In fact, agent commissions have increased, while their workload has substantially decreased, thanks to technology and access to online information.
The average cost of a home in midtown Toronto is 28% than the city as a whole, with prices averaging $1,155,209.**
This means that with the current commission structure, the average seller in midtown paid almost $58,000 in commission.
Fortunately, alternatives are finally emerging. Since the start of the year, a number of new players have entered the GTA residential real estate market, promising changes to a stagnant industry.
Justo Inc., Brokerage is the first to disrupt the industry with a focus on fairness and transparency.
Sellers working with a Justo agent pay only 50% of the standard listing fee (typically 2.5%) taken by most brokers*. Justo also includes staging or virtual staging, 3D Virtual tours, professional photography and enhanced advertising for their listings – services that sellers typically pay for themselves.
Similarly, when Justo represents a buyer, they split their commission 50/50. The brokerage also covers the cost of a home inspection and lawyer fees.
On that previously mentioned Cedarvale home, if the seller had listed with Justo, they would have saved $23,625 in commission plus several thousand dollars more on marketing costs.
Had the buyer used a Justo agent, they would have received that same amount – $23,625 – in cashback on closing, and would have also saved around $2,000 on the inspection and legal fees.
“Everyone wants to be in midtown, but it’s expensive. We’re trying to help with that,” said Daphne de Groot (left), CEO and co-founder of Justo. “Buyers and sellers deserve better service and reasonable fees, and we’ve clearly hit on something with our new model, because demand is even stronger than we anticipated.”
Justo’s website lets visitors view all MLS listings and immediately see the amount of cashback they can expect for each property.
Other brokerages are also trying to level the playing field. The most recent entry into the Canadian market is US-run Redfin, which offers low listing rates for sellers – between 1% and 1.5%, depending on the market – and some cashback incentive for buyers.
UK-based Purplebricks is another option, mainly for sellers seeking to list on their own, offering assistance and guidance for an upfront, flat fee, usually around $3000.
There’s a lot to learn about these new options. As with other companies who’ve disrupted their markets, like Amazon or Uber, there will be some who embrace this new trend, and others who will take some time to adjust. But, as a result of so many great new options, early adopters in the residential real estate market now have more power in their hands than ever before.
*In addition to the listing fee, the seller also pays a buyer’s agent commission, set by the seller, but commonly 2.5% + HST. HST is applicable on all commissions. All commissions are negotiable.
**Based on MLS data for C03, C03, C09, C10 and C11