This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Eli Residential channel. Enjoy!
Question: What is the normal commission rate for a Realtor who represents a buyer in Arlington?
Answer: There has been a long-held belief that real estate agents should avoid public discussion of commissions because of antitrust laws and ethics violations, but now that many public-facing real estate websites (e.g. Zillow and Redfin) are publishing buyer-side commissions, not to mention recent efforts by the National Association of Realtors and our local MLS (BRIGHT) to open-up transparency. I’ll make an annual column out of the data on buyer-agent commissions.
The data and charts below represent the buyer-side commissions published in the MLS for transactions in Arlington, sans any subjective commentary that could get me in trouble. I don’t have access to listing-side commission data, so you’re only seeing commission data for one side of the transaction.
How Are Commissions Determined?
In most cases, commissions are set in the Listing Agreement between the seller and the seller’s real estate agent. A total commission fee is established, with a disclosed amount going towards the agent/broker representing the buyer of the home. That buyer-side commission is published in the MLS. Buyer agents may establish minimum commissions or other fees in their Representation Agreement between them and the buyer (PSA for buyers: be sure to ask about these minimums or fees when selecting your agent or reviewing your Agreement).
Buyer Agent Commissions Down 12% Since 2015
In 2015, buyer agent commissions averaged 2.89% across all transactions in Arlington. As of 2022, the average buyer agent commission in Arlington dropped by 12%, to 2.54%. The average commission dropped by 6% from 2017 (2.81%) to 2019 (2.65%).
Buyer Agent Revenue Flat for Past Decade
Setting aside the historically high volume of real estate transacted in 2021, revenue (calculated by sales volume multiplied by the average buyer agent commission percentage) to brokerages covering buyer-side transactions in Arlington has remained fairly flat since 2015 (and earlier) because higher sales volume (driven by higher prices) has been offset by lower commission fees.
Broker/Agent revenue in 2023 will drop as significantly as it increased in 2021 due to low sales volume in 2023.
3% Buyer-Side Commission, It Was Nice Knowing You!
In 2015, 79% of buyer agent commissions in Arlington were 3% (blue bars in chart below) and 17% were at 2.5% (orange bars in chart below). Fast-forward to 2022 and the numbers have reversed, with 12% of buyer agents receiving a 3% commission and 80% receiving 2.5%.
Since 2015, 97% of buyer agent commissions have been between 2.5% and 3% and over 99% have been 2%-3%.
Closing Thoughts
While I don’t have data for the listing side (agents representing sellers), my guess is that the trends would be similar if we could aggregate market-wide listing commission data like we can for buyer-side commissions.
So what does that all mean? Well first and foremost, it means consumers are paying a lot less for representation than they did just 5-6+. Second, I think this is mostly technology driven. New tech and consumer/agent platforms allow agents and consumers to operate more efficiently in the real estate market and the result of that in any competitive marketplace should be the consumer benefitting with lower costs for a similar or better level of service/product.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at [email protected].
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Video summaries of some articles can be found on YouTube on the Eli Residential channel.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C A