What the real estate settlement could mean for Richmond homebuyers
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A landmark court settlement is set to bring about the biggest change in generations to the way Richmonders buy and sell homes.
Why it matters: In the short term, buying a house could get harder — and the out-of-pocket costs more expensive — especially for first-time homebuyers and people of color.
The big picture: A $418 million lawsuit the National Association of Realtors agreed to settle this month following allegations that it conspired to keep agents' compensation artificially high will likely mean lower costs for sellers, Axios' Emily Peck reports.
- The settlement could go into effect as early as July, and most observers believe real estate agents' standard 6% commission commissions will fall, possibly to as low as 2%-3%.
Buyers, on the other hand, will likely have to start paying out of pocket for a real estate agent for the first time, which will be much more challenging for first-time buyers, Laura Lafayette, CEO of the Richmond Association of Realtors, tells Axios.
- Black Richmonders — who are denied mortgages at twice the rate of their white neighbors while owning homes at significantly lower rates — will likely also be disproportionately affected by the looming changes. At least at first.
State of play: For decades, the residential real estate market worked like this: Real estate agents for buyers and sellers typically split a 5%-6% commission on the sale price of the home, all of which is paid by the seller.
- So under the current rules, if you sell your house for $400,000 — the most recent median sales price for a single family home in metro Richmond — you'd pay $24,000 in agent commissions at 6%.
- As the buyer, you pay nothing in real estate commissions — on paper.
- (Critics argue that the comparatively inflated 5-6% commissions resulted in higher listing prices).
It's unclear how buyers' agents will be paid once the settlement is finalized, but Lafayette thinks the most likely solution will be regulatory changes on the federal level to allow buyers to roll in the cost of an agent into their mortgage.
Yes, but: Coming up with money to pay a real estate agent is far from the biggest challenge facing homebuyers in the current market, Lafayette tells Axios.
- A persistent lack of inventory (Richmond has 1.2 months of housing stock vs. the needed 3 months), years of under-building (the region is short around 40,000 homes) and not enough homes in the $300,000 or less price point are all hurdles to Richmond homeownership.
- Plus, Richmond wages simply haven't kept up with the increasing home costs.
- "In our region, only one of the top five job sectors pays a wage that makes it affordable to buy or rent a house here," she says.
What we're watching: Lafayette said conversations are happening in the Richmond region now around how the settlement can transform all aspects of the local real estate market to ensure everyone who wants to own a home in Richmond can — at all income levels.