Va. real estate industry weighs in on $418M Realtors settlement

UPDATED MARCH 21, 2 P.M.

A landmark, $418 million proposed court settlement from the National Association of Realtors over allegations of a conspiracy to boost agent commissions could have seismic implications for the residential real estate industry, with some national experts going so far as to call it one of the biggest changes to the U.S housing market in 100 years.

But in Virginia at least, industry experts are taking a more measured — if not sanguine — response to the news.

“If the court approves the settlement — a process that could take several months — we do anticipate it will lead to changes in the real estate industry, but adapting to change is a strength of Realtors,” says Richmond Association of Realtors CEO Laura Lafayette, who also oversees the Central Virginia Regional Multiple Listing Service.

“As an association, we are doing our due diligence to ensure that our members will be educated and able to comply with the terms and spirit of the settlement agreement,” Tom Campbell, 2024 president of Virginia Realtors, the state’s largest trade association, said in a statement.

In a news release, Virginia Realtors CEO Terrie Suit pointed out that Virginia has already had in place one of the major changes coming as a result of the court case — requiring buyers and their agents to enter into a written brokerage agreement — for almost 30 years. “Virginia was the first state to formalize buyer agency at the behest of our association, because we believe it is in the best interest of buyers to be represented in what will likely be the largest financial decision of their lives,” Suit said in a statement. “We have and will continue to advocate updates to the law to ensure that the needs of consumers are being met.”

Over the course of a 21-year career, Sean Rooney, co-founder and president of Norfolk-based OWN Realty, said that he’s watched the industry weather several storms — including the 2008 Great Recession and the COVID-19 pandemic, both of which were predicted to decimate business — and that this will be no different. “We all were fearful of the big changes that might come,” he said, but “as an industry, we’re pretty resilient and we learned how to navigate it.”

On March 15, NAR proposed the settlement, which would end the industry’s longtime practice of allowing sellers to set commission rates for buyers’ agents as soon as mid-July. In October 2023, a Kansas City, Missouri, jury awarded $1.8 billion to Missouri home sellers against the NAR and large brokerages in an antitrust lawsuit alleging that the Realtors association and real estate brokerages had conspired to keep commissions high, and the NAR faced similar legal actions in other states. In a Chicago antitrust case that appeared to be heading for trial, possible damages could have climbed as high as $40 billion, according to The Wall Street Journal.

Under the traditional system, brokers representing the buyer and seller of a home split a commission of 5% to 6% that was baked into the price of the home. This practice, critics have complained, encouraged brokers to push clients toward more expensive homes and made it so that buyers were unable to negotiate fees, resulting in inflated commissions that are higher than in other nations. NAR would pay out the $418 million in damages over four years to about 50 million recent home sellers.

Whether or not federal courts agree to the settlement, the NAR has agreed to put in place rule changes that will radically change how homes are bought and sold, potentially resulting in buyers contracting directly with buyers’ agents, who could change fee structures to models such as hourly or flat fees that would cost less than current commissions. Experts say the changes could result in significant savings for both sellers and buyers.

Some national experts have predicted that the settlement agreement and potentially lower compensation could result in as many as half of Realtors quitting the workforce and the rise of artificial intelligence bots handling real estate agent duties.

“I do not believe we will see a 50% reduction in agent count,” said Rooney, who oversees 160 agents at OWN Realty. “You see people commenting about reductions in commissions. There may [be, or] there may not be, but we will figure out how to help our clients as best as we can and move forward from there.”

Jonathan Everett, assistant professor of practice at Virginia Tech’s Blackwood Department of Real Estate, stressed that commissions have always been negotiable. What would change under the settlement is that the commission the seller will provide for the buyer’s agent will no longer be posted on the MLS.

“Arguably debunking the age-old assumption that the seller will shoulder full burden of commissions, this change may also … allow buyers and sellers more control and flexibility in determining who paid what commissions as an additional lever in their negotiating tactics,” Everett said.

In a statement, Chris Kelly, executive vice president at HomeServices of America, parent company of Fairfax-based Long & Foster, one of the nation’s largest real estate companies, said that, in addition to the court needing to approve the settlement, there will also be “a subsequent objection period by class members, as well as potential interest by the Department of Justice. It is too early to determine the impact that these amended business practices will have on the compensation arrangements with consumers and those available via the myriad of brokerage business models that already exist in today’s market — from full-service brokerages to discount brokerages offering basic services.”

Going forward, Everett said, it will be important for buyers and sellers to approach commissions with pragmatism.

“While buyers and sellers can and certainly should negotiate,” he said, “it is important to remember that buyers and sellers are essentially making a job offer to the broker. The broker does not have to accept the offer, especially if it’s not representative of the services and expertise the broker brings to the transaction.”

Virginia Business Editor Richard Foster contributed to this story.

Editor’s note: This story was updated to include statements from Virginia Realtors, the state trade association.