How Cashback Rebates on Real Estate Commissions Help Homebuyers Save Thousands

When Mehrdad Khayeri purchased his dream home in the Greater Toronto Area, he scored a significant perk: nearly $35,000 cash back from his agent. This rebate came from negotiating a cashback agreement, a move that is becoming more popular as homebuyers seek savings on rising real estate commissions.

Khayeri shared that he and his wife did most of the property search themselves using online tools like HouseSigma and MLS, making the agent’s role smaller. Yet, his agent still earned a standard 2.5% commission on the sale, returning three-quarters of that amount back to Khayeri.

Growing Trend in Real Estate Commissions

In Canada, real estate commissions are usually paid by the home seller, covering both the buyer’s and seller’s agents. However, some agents are now willing to share part of their commission with the buyer, effectively reducing the purchase cost. This cashback rebate depends on the agreed commission percentage and the final purchase price. With average home prices in Toronto and Vancouver exceeding $1 million, these rebates can lead to significant savings.

Alex Kvitnitsky from brokerage Justo offers up to 50% of his commission back to buyers. He explained that this cashback can offset costs like land transfer taxes, legal fees, or even renovations. For him, the cashback incentive brings in more clients, from first-time buyers to experienced investors.

“Buyers today are more knowledgeable; they want to be part of the buying process,” Kvitnitsky said, noting that many do their own property research before approaching an agent.

Shifting Real Estate Industry

Real estate commission rates vary across Canada and aren’t fixed, despite common industry standards. Tom Davidoff, a real estate expert at the University of British Columbia, believes cashback rebates are consumer-friendly and supports negotiations on commission fees. “These commissions are generous, so it’s good for consumers if they can be adjusted,” he said.

Most agents in Canada are allowed to offer cashback under the Canada Real Estate Association’s code of conduct, as commission rates are at the agent’s discretion. Some, however, oppose this trend, arguing that reduced fees could affect service quality.

Davidoff suggested that resistance to cashback might stem from agents trying to preserve their income. However, he emphasized that skilled agents still add value to the transaction.

For buyers interested in working with cashback agents, Davidoff advised checking the agent’s experience and transaction history. “Do your homework,” he said.

New Business Models

In the Greater Toronto Area, Mike Zhou, a 26-year-old agent, started Robin Hood Properties two years ago. His approach is to charge a flat fee of $5,000, plus $35 per showing and $100 per offer. After these fees, the remaining commission is given back to the buyer. “We take a hands-off approach—ideal for buyers who are comfortable finding properties themselves,” Zhou said.

Some buyers, like Jenny Korotkyi, a mortgage agent in Barrie, Ont., feel confident using cashback agents because they do their own research. She recommends putting cashback agreements in writing. Korotkyi saved $20,000 on one purchase and $6,000 on another, making it a worthwhile choice.

Khayeri also expressed satisfaction with his cashback agent, saying, “This is likely the biggest purchase of your life, so every bit of savings helps.”