What new rules around real estate agent commissions mean for Hampton Roads buyers and sellers

Hampton Roads agents say they don’t expect drastic shifts in how real estate commissions work after a major national trade group announced several changes to its current system.

The changes are expected to take effect mid-July as the National Association of Realtors announced a $418 million settlement with homeowners on March 15 to resolve lawsuits, pending court approval.

The national industry practice is that home sellers pay a commission of about 5%-6% of the sales price, which the selling agent splits with the agent who brings a buyer, according to reporting by The Associated Press. The cost is shared by the buyer as part of the sales price.

Selling agents were required to advertise a predetermined cut of the commission for buyer’s agents on properties in the association’s affiliated multiple listing service database. But lawsuit plaintiffs argued that rule tipped the scales in favor of higher commissions, since buying agents could pick and choose the listings with the highest advertised commissions.

As part of the proposed settlement, the National Association of Realtors will prohibit posting upfront compensation offers for buyer’s agents on the listing services and will require buyer’s agents to get written agreements from buyers before using the databases.

The association also emphasized in a recent announcement that commission fees have always been negotiable. The association said agents can still negotiate splitting the commission outside the database, although buyer’s agents can also be paid directly by buyers or from seller concessions.

Americans pay some of the highest real estate commissions in the world. Fees in the United Kingdom top out about just 1.3% and only about 1.85% for the Netherlands, according to the National Association of Realtors. Analysts told the AP the changes could lead to lower agent commissions and lower costs for buyers and sellers.

Greg Garrett, a Newport News-based real estate agent and CEO of Garrett Realty Partners, said commission rates already have been trending downward, especially for high-end homes. But he added, “I don’t expect this settlement to be a catalyst for any game-changing commission reductions.”

Garrett, who has been in real estate for more than 40 years, said buying and selling agents will still collaborate on deals. He didn’t think buyers paying their own agents’ commissions would become a normal practice, either.

“The biggest change is Realtors will have to call other Realtors to find out how much commission is being offered,” he said.

Garrett doubted the changes would be enough to affect home prices, which continued to increase in Hampton Roads last year because of a low supply of homes on the market, according to a recent Old Dominion University report.

Real estate agents, particularly part-time agents, leave the industry all the time, Garrett said. However, he said the settlement changes could be the last straw for some who would have left anyway for other reasons.

Jake Maines, a Virginia Beach real estate agent, said in a text message he hoped the changes would lead to more transparency in the industry but doubted big shifts were coming.

“Sellers have always had the power to negotiate the amount of commission they pay,” Maines said. “It’s just going to be more clear how it’s allocated.”

One unique Hampton Roads wrinkle: Maines said buyers who use the Veterans Affairs home loans program are not allowed to use it to pay toward their agent’s commission.

“So if a seller chooses to not offer a buyer’s side commission, they could be missing out on a large amount of potential buyers,” he said.

Cavelle Mollineaux is the principal broker and owner of Onyx Realty Professionals in Virginia Beach. He also hoped the commission changes would help usher in a new era of transparency for the profession.

If the changes are finalized, some sellers may choose to not pay for the buyer agent’s commission or may pay less than before, Mollineaux said.

The changes could add to affordability issues for first-time homebuyers, he said, because they also potentially might need to pay a commission in addition to a down payment and closing costs.

Just like before the proposed changes, some buyers and sellers may opt to not use an agent, Mollineaux said. However, he said many who do this at first will later end up using one to help them navigate the market, negotiate and field phone calls during the workday.

Mollineaux said the industry would work through these changes and the increased transparency around commissions. Buyer’s agents, especially, will need to “have a very important value proposition,” he said.

“I don’t see the industry as being in jeopardy or anything like that,” Mollineaux said.

A spokesperson for the Hampton Roads Realtors Association did not comment on the settlement and directed questions to the Virginia Realtors, the state-level trade association.

A Virginia Realtors spokesperson said that the organization was still working through the proposed settlement, which still must be approved by the court.

“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, Virginia Realtors 2024 president, said in a prepared statement.

Trevor Metcalfe, 757-222-5345, trevor.metcalfe@pilotonline.com