The answer is… it depends.
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.
This is mostly true! 6% is what many brokers charge to represent a buyer client. However, commission rates are not set by law and must be negotiable. Otherwise, a brokerage might fall afoul of antitrust law or be accused of price-fixing.
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.
Homeowner: How about 5%?
You: No, I cannot do it for less than 6%.
Homeowner: Then I will go with Cheepie Brokers.
You: Okay, that is your decision.
See? Even if you didn’t come to an agreement to work together, the client was allowed to negotiate, and the other broker was allowed to charge less (and ultimately get the client).
When it becomes illegal is when you and Cheepie Brokers 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 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. So for example, a sales agent can’t give an unlicensed assistant part of their commission for helping with a sale.
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. For example, if a broker overhears a buyer talking about a renovation they wish to do after closing, it would be illegal for the broker to send their contractor friend to the buyer in exchange for a finder’s fee.
It’s illegal to receive a commission or financial benefit without agreeing in writing to it first. This is to prevent real estate professionals from surprising clients with fees they never agreed to.
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 Rules in Chart Form
Check out this helpful chart.
Want to learn more about being a real estate agent in Virginia? Check out our career center.