It’s not always clear or obvious to Fairfax home buyers and sellers exactly how real estate agents get paid. While most of us are laser focused on the fees and expenses in a normal real estate transaction, the entire experience can easily overwhelm.
Almost all real estate agents are paid by commission, which is calculated as a fraction of the final property sales price.
Your Fairfax real estate agent can only be paid by their Principal Broker. A real estate salesperson in Virginia must work under the supervision of a Broker for at least three (3) years before progressing.
When you choose a Fairfax real estate agent in the sale of your home, that agent represents their Broker. The Broker lists the property under their name. Your agent is essentially a sub-agent of the broker.
Your agent has a Fiduciary responsibility to their client, meaning they must act in your best interest. To ensure there is no confusion about this requirement, not only do agents only receive payment through their broker but there’s a list of ways they can’t accept money, gifts or kickbacks:
The normal commission on Fairfax real estate transactions is 6% of the selling price – for every $100,000 in home value the transaction will cost $6,000. This is not a fixed price, but haggling may not be in your best interest.
This 6% commission is divided between the sellers agent (listing agent), and the agent representing the buyer. It might be split equally – 3% to seller and buyer, or it might be a greater split to the seller than the buyer. A 3.5% split to the seller, and 2.5% to the buyers broker is very common in the Fairfax real estate market.
In a competitive market buyers agents may be less inclined to show properties where they receive a diminishing commission split. Marketing your home is not just about finding the right price point for your buyer, it’s about attracting buyer agents as well.
The seller will show the total commission on the listing agreement. This is usually an exclusive agency listing agreement between the seller and the Broker. The agreement will further detail the commission split between the seller and buyer.
As noted above, it’s important that the seller be engaged in the commission split decisions as it is a very important factor when marketing the property.
While the commission split is detailed between the buyer and seller on the listing agreement, it’s normal practice for the seller to pay the entirety of the commission from the sale proceeds.
It seems counter intuitive that the seller would pay the buyers agent for professional services to your customer. However, it is implied that the pricing of the home has allowance for fees and commissions.
The commission is distributed by the processing title company or overseeing attorney upon settlement. The selling broker practically receives no compensation until the final closing.
The fee for professional real estate services may be considerable, but you need not pay commissions out of pocket before closing. However, the listing agreement does obligate the seller to pay the selling broker their commission upon delivery of a willing and qualified buyer.
Fairfax real estate agents get paid by their principal broker at the conclusion of this process. After marketing themselves as a reputable agent, connected with a motivated seller or buyer, advertised the listing, hosted the open houses, shown the properties, secured the financing, cleared the inspections, steered all interested parties through escrow, put out the fires, talked nervous stakeholders off the edge, and patiently sat through closing, does the agent earn any commission.
Experienced Fairfax real estate agents demand 100% of their commissions through their Broker, and pay office or desk fees. However, lesser experienced agents may receive 40-50% of the Broker share of the commission proceeds. The premium charged by some brokers is to cover the time invested in training and developing new recruits. It’s a form of apprenticeship.
Agents in Fairfax mostly work on a 100% commission basis. The potential of their earnings is limited only by their energy and determination to organize and service as many people as possible. The longevity of their success comes down to their integrity, and quality of service. There are no guarantees, and they must approach every day with optimism in order to get paid as a real estate agent in Fairfax