2.4 Commission and Compensation Rules

Commissions Are Negotiable

All real estate commissions in Virginia are negotiable. There is no standard, minimum, or maximum rate, and neither the Virginia Real Estate Board nor any trade association may set one. Each brokerage independently establishes its own fees.

Antitrust warning: Agreeing on, or even suggesting a uniform commission with, a competing brokerage is illegal price-fixing under federal (Sherman Act) and Virginia antitrust law. The 2024 national settlement reforms also separated buyer-broker compensation from the listing — buyer agreements must now state buyer-broker compensation in writing, and it remains negotiable.

When a Commission Is Earned

Under common procuring-cause principles incorporated into Virginia listings, a broker traditionally earns a commission by producing a buyer who is ready, willing, and able:

• Ready — prepared to contract now
• Willing — agrees to the seller's terms
• Able — has the financial capacity to close

In practice, the controlling document is the written brokerage agreement, which defines exactly when and how compensation is earned. A net listing is disfavored and the agreement must state the compensation clearly.

The Cardinal Payment Rule

Virginia Code Section 54.1-2112 and Board rule 18VAC135-20-280 set the controlling rule: a salesperson or associate broker may be paid only by the principal or supervising broker who holds their license.

A salesperson may not accept payment directly from a client, from another broker, or from another firm's salesperson. After leaving a broker, a salesperson may receive a commission earned while affiliated only with the former broker's consent.

Compensation Through a Business Entity

Virginia allows a salesperson or associate broker to be paid through a professional corporation, professional limited liability company, or other business entity they own, provided the arrangement is disclosed to and runs through the principal broker. The money still flows broker to entity — never client to salesperson.

Commission Sharing and Referrals

Permitted

• Sharing with another Virginia-licensed broker (the co-op split)
• Sharing with an out-of-state broker who is properly licensed in their own state, for referrals/cooperation
• Sharing among licensees within the same firm, paid by the broker

Prohibited

• Paying a referral fee or finder's fee to any unlicensed person for real estate brokerage activity
• Buying leads from unlicensed sources in exchange for a cut of commission
• Undisclosed kickbacks (also a RESPA Section 8 violation on federally related mortgage loans)

Handling Disputes

Broker vs. Broker (who earned it)

A dispute between two brokers over which one earned a commission does not delay the closing. The deal closes; the brokers resolve the split separately through negotiation, REALTOR arbitration, or court.

Buyer vs. Seller Over Escrow

When the buyer and seller dispute earnest-money/escrow funds, the broker must not unilaterally release the money. Under Section 54.1-2108 and 54.1-2108.1, the broker holds the funds and may, after proper notice, file an interpleader action, depositing the disputed funds with the court so a judge decides the rightful recipient. The broker is then released from liability.

Worked Scenario

Salesperson Imani co-ops a sale and the cooperating broker hands Imani a check directly at closing for her split. This violates Section 54.1-2112 — Imani may be paid only by her own principal broker. The correct flow is: cooperating broker pays Imani's principal broker, who then pays Imani (or her disclosed PC). Separately, the buyer and seller fight over the 10,000 deposit. Imani's broker must hold it and, if they cannot agree, file interpleader rather than pick a side.

Common Traps

• A salesperson cannot be paid directly by a client even if the client insists.
• Commission disputes between brokers never justify holding up a closing.
• Referral fees to unlicensed persons are prohibited regardless of how small.

Calculating a Commission Split

Math questions on splits appear regularly. Work them in order: total commission, then the co-op split, then the agent's split with the broker.

Worked example: A home sells for 400,000 with a 5 percent total commission. The listing and selling sides split it 50/50, and each salesperson keeps 60 percent of their side after the broker's cut.

• Total commission: 400,000 x 0.05 = 20,000
• Listing side and selling side: 20,000 / 2 = 10,000 each
• Listing salesperson keeps: 10,000 x 0.60 = 6,000
• Listing principal broker keeps: 10,000 x 0.40 = 4,000

Remember the cardinal rule overlays the math: the 6,000 reaches the salesperson only by passing through the principal broker first.

Net Listings

In a net listing the seller sets a net amount and the broker keeps anything above it as commission. Net listings are disfavored because they create a conflict of interest, and the brokerage agreement must still clearly state the compensation. Tested point: a licensee may not exploit a net listing to hide an inflated commission from the seller.

Antitrust and the 2024 Reforms

Following the 2024 national settlement reforms now reflected in Virginia practice, buyer-broker compensation must be set out in a written buyer agreement before touring, and offers of cooperative compensation are no longer published in the MLS. Compensation remains fully negotiable, and a buyer may ask the seller to contribute toward the buyer-broker fee through the contract.

Suing for a Commission

To sue for an unpaid commission in Virginia, the broker generally must show a valid written brokerage agreement and that the broker was properly licensed at the time the services were performed. An unlicensed person — or a salesperson trying to collect directly rather than through the broker — has no standing to sue for a real estate commission. This ties the compensation rules back to the licensing requirements.