One of the most common questions we hear — when working with first time home buyers — is “How does a real estate agent get paid?” It’s not a discussion that is very typical to be heard out in the open, but we thought we’d bring a little light to the subject!
According to the National Association of Realtors, 88% of home buyers used a real estate agent when buying a home and approximately 91% of homeowners used a Realtor to sell their house. Those are numbers we like to see, because when a buyer or seller is represented by a really great Realtor, it means their rights are represented and the very stressful process of buying or selling becomes much easier to manage for YOU, the client!
In our market (Northern Virginia), the seller most typically pays all real estate commissions. That means if you are a buyer, you get to choose a Realtor to represent your interests at … virtually no cost to you!
Realtors do not get paid until settlement / closing.
When a Realtor works with you – – as a buyer – – to find you a home, they know that they will not make a dime unless you purchase a house and use their services to do so. It’s not enough to simply get a contract signed. Real estate agents have to stick with the transaction and make sure that it makes it to the closing table, or they will not get paid. The seller will pay the Realtor fees out of the proceeds from the sale of their home (if there is enough equity). If the deal falls apart before making it to closing, the Realtors will typically never get paid for their work.
Buyer Representation Document.
It is Virginia law that buyers sign a representation document when working with a Realtor. This agreement protects all parties involved and is called an Exclusive Right to Represent Buyer document. You can work out the details regarding the length of the time for the agreement, and you want to make sure that you are comfortable with the terms (how the broker will release you from the agreement, should you choose to), etc.
A standard percentage for a real estate transaction in Northern Virginia is between 5-6% for both sides of the deal. This is usually split equally between the buyer’s Realtor and the seller’s Realtor. The percentage is figured on the total sales price of the home (or the base price on a new construction home, not including any options or upgrades) and is disbursed by the settlement company (title company / attorney’s office) after all parties have signed the appropriate paperwork.
Something that varies from brokers office to brokers office is the “split”, the percentage that the Realtor receives, after any agreement that Realtor has with their broker. The question “how does a real estate agent get paid” is not necessarily an easy one to answer, as it depends on what that split is. A Realtor who has a higher split with their brokerage will earn more, however they may have fees to pay in exchange for that split.
The bottom line is, as a buyer, most often, you do not pay for that commission! Be sure to confirm this with your Realtor.
You may be required to pay a minimal admin fee at the time of settlement, often less than $500. Be sure to request that your Realtor identify any fees that you are responsible to pay, at the time you sign your agreement.
How Hard Does Your Agent Work?
Just because you are not paying your Realtor’s commission, doesn’t mean they shouldn’t work extra hard for you! They have only YOUR interests at heart, and they should work to the best of their ability in order to ensure that you are protected, and have all of the education you need to make an informed decision along the way. Your Realtor will work hand in hand with the agent for the seller to ensure that all paperwork is completed on time, deadlines are met and that both parties amicably reach the settlement table.
Any questions on how a real estate agent gets paid? Reach out and let us know! We’re happy to help!