According to a survey of Virginia agents, the average real estate commission in Virginia was 5.23% of the sale price in 2021. But this number can also vary.
Read on to learn how commission works for real estate agents in Virginia and how you can start earning ASAP with online real estate courses!
Commission Rates Are Not Set By Law
You may have heard someone saying that the “standard” commission for selling a residential home is 6% of the purchase price, perhaps split two ways between the seller’s broker and the buyer’s broker.
While this is mostly true, we just discussed the average is only 5.23%, so what gives?! Simply put, commission rates are not set by law and must always be negotiable, so the seller can (and will!) try to get a lower rate. Otherwise, a brokerage might fall afoul of antitrust law or be accused of price-fixing. Another thing to keep in mind is that the commission in a Virginia real estate sale is typically split several ways — meaning you won't get it all for yourself.
So I Have to Negotiate My Commission?
In this context, “negotiable” doesn’t mean you’re expected to haggle with each individual client about how much commission you will charge, or take less commission than you are comfortable with (many clients are used to the idea of the “standard” 6%, and won’t ask for less). An individual agent can decide what they wish to charge and stick with it.
For example, if you don’t want to work for less than 6%, you don’t have to. That is, in itself, a negotiation. You are free to let the client know you won’t work for less than a certain amount, and they are free to choose another agent. Even if you don’t come to an agreement to work together, the client was allowed to negotiate, and another broker is free to charge less if they choose, and ultimately get the client.
When it becomes illegal is when you and that other broker decide together that the price for representation is 6%, and require that all brokers in town charge the same price. Then it becomes non-negotiable, and you are price-fixing.
Virginia Real Estate Agent Commission Example
Commission is typically split among four people: the listing agent, the listing agent's broker, the buyer’s agent, and the buyer's agent broker. Let's look at an example to see how this works in practice.
The average home price in Virginia is around $390,000 as of April 2022. Using the 5.2% average commission rate, the total payout on a $390,000 sale would be $20,280 – this is the amount that will go toward paying commissions. Now, let’s assume you’re the buyer’s agent, and you have a 60/40 split with your broker. We’ll also assume the listing agent has a 60/40 split with their broker.
First, the listing brokerage and buyer’s brokerage split the commission 50/50. Both sides get $10,140. Then, the listing agent's broker and the listing agent split their share 60/40. And, you (as the buyer’s agent) and your broker split your share 60/40.
The commission payouts would be as follows:
Listing agent's broker (40%): $4,056
Listing agent (60%): $6,084
Buying agent's broker (40%): $4,056
Buyer's agent (60%): $6,084
As the buyer's agent, you would receive $6,084 in commission from this deal.
Virginia Rules for Commission
There are some other laws on the books in Virginia about commission. While you’re here, why not brush up on them?
A license holder cannot offer valuable consideration to a non-license holder for services that require a license.
A sales agent cannot accept valuable consideration or financial benefit from anyone but their broker. A client cannot pay a sales agent directly, nor could a sales agent accept a finder’s fee for sending a client to an insurance agent or inspector.
A licensee can’t financially benefit from information gained as part of their job as a real estate agent.
It’s illegal to receive a commission or financial benefit without agreeing in writing to it first.
Net listings are illegal in Virginia. A net listing is when a seller client decides how much they want to make from a sale and tells the agent they can keep the rest of the money from the sale.
A licensee can’t be paid commission before the deal is consummated (closed).
The so-called “birthplace of a nation” has no shortage of gorgeous homes and estates and can be a lucrative place to start your real estate career.
Start your Virginia real estate courses online today!
Updated 9/7/22