The elimination of the 6 percent commission paid to Realtors during a home transaction isn’t expected to have a big impact in Lebanon County, according to one local real estate agent.
John Tice, a Hershey-based Howard Hanna sales manager and associate broker, believes there will be few substantive changes once the dust settles on a $418 million nationwide class-action lawsuit against the National Association of Realtors.
“I don’t see it having the impact of driving down (home) prices like they’re saying on ‘The Today Show,’” said Tice, who sells homes in Lebanon County and has been a real estate agent for 46 years. “We’re going to see $30 billion in price decrease because of the fees of the agents? That’s just a ridiculous thing to say.”
Tice clarified that he could see fee reductions get into that estimated range but how it is accomplished is the “$64 question” that’s still to be answered. He said it is too early to speculate on how the March 15 settlement, yet to have final approval, will impact commissions paid to real estate agents. Final approval is expected to take effect in mid-August.
Four antitrust lawsuits were brought by home sellers against NAR over the commissions paid to brokers, who then share part of that money paid at closing, with the buyer’s agent.
The lawsuits claimed that NAR and several of the nation’s largest residential real estate firms had rules set in place that required the buyer’s broker fees at an inflated rate, in addition to their own agent. The law firm representing the case said in a statement that the real estate industry’s “anti-competitive rules” have financially harmed millions of Americans, according to published reports.
Jen Graaf, association executive for the Lebanon County Association of Realtors, declined to comment for this story and referred all questions to the state association in Lemoyne.
A video on the state association’s website notes their officials are still waiting to hear settlement terms before announcing how the case may impact the home-buying process in Pennsylvania.
“At the end of the day, we don’t really know what the impact is going to be on the market because it is going to take some time for buyers and sellers, listing brokers, buyer brokers to see what the new normal will look like,” said Hank Lerner, chief legal counsel, Pennsylvania Association of Realtors. “There will still be brokers, we presume there will still be buyer brokers and listing brokers and they will still need to get paid in order to provide their services.”
While agents may potentially still get a 6-percent commission on home sales, the new ruling further clarifies that commissions are negotiable, which has been the case in Pennsylvania for many years.
“Based on the terms of the (lawsuit) settlement, they will not be allowed to take whatever the listing broker is offering,” said Lerner. “There is going to have to be a firm fee, so X number of dollars or X percent of the sale price will be the fee. The fee can’t be whatever the listing broker is going to give.”
Tice said he doesn’t believe the lawsuit will have a big impact in Pennsylvania since buyer agency has existed since 1999.
“The reason I don’t see it having a big impact locally is because Pennsylvania got on this agency program way ahead of the rest of the country,” he said. “Pennsylvania has buyer agency, seller agency, agent contracts, buyer/agent contracts, that everyone is screaming about right now, for 25 years.”
Tice said that means the nationwide lawsuit won’t bring as many changes in Pennsylvania as elsewhere, adding the biggest impacts will be felt in the 28 states that currently do not have buyer agency services.
“We’re modifying a field or two in the multi-list because that’s the impact that the ruling will have locally,” said Tice. “But the claims that we’ll see half of the agents drop out of the business, that there’s going to be this drop in prices, is ridiculous.”
Lerner said PAR’s Standard Forms Committee will be reviewing and making changes to current forms to reflect the terms of NAR’s settlement.
Tice noted that buyer agency came about more than two decades ago following claims that buyers did not have adequate representation in the home-buying process.
“Buyer agency was created and enacted in Pennsylvania and it required two forms that were new to everybody,” said Tice. “The first one, and this applies whether you are working with a buyer or a seller, and that is the consumer notice, which is a state-required form. It’s not a contract but a disclosure stating that real estate agents have several roles.”
Tice said an agent can be a buyer agent and works as an advocate and a fiduciary to get the best price for their customer. There are also dual agents who work with both the buyer and the seller.
“Until then, a buyer did not have a fiduciary in the whole process,” noted Tice. “They were working with agents who were working for the seller’s interests solely. So we split the atom and now we have buyer and seller agents and a consumer notice.”
The second form is the buyer agency contract.
“The second form outlines the terms of engagement,” said Tice. “If you list your home for sale, we talk about the price, we talk about the length of the contract, and we talk about a commission rate.”
Terms of engagement include such discussions as where does the person want to live, what kind of home do they want and how the agent will show properties to their customer.
“The fees have always been negotiable,” said Tice. “The fees will be established between the party, what we pay the agent and whether something will be offered in the multi-list as compensation. Currently, we’re in that little gray area until July and those new rules kick in and there will be no offers of compensation through the MLS (multi-list service).”
Tice said one change will include how agents are compensated. An executive summary of impacts to the MLS can be found here.
“It will simply outline how you and I will look at homes, will I be paid any money upfront, will I be paid for services along the way or will I work in what I’ll call the classic combination, which is a commission on the final sale,” said Tice. “As much as everyone says that agents might be overpaid, they don’t get paid at all until everything is done.”
This is applicable whether a homebuyer sees one or 100 homes.
“If I show you one house, write one contract and we go to closing, I get paid a fee,” said Tice. “If I show you seven homes, write seven contracts and it takes 18 months, I get paid one time a year-and-a-half later. It’s a commission job, so you kind of roll the dice and you work with those terms in a commission world.”
Additionally, agents should be paid for the work they perform on behalf of their clients and changes coming as a result of the lawsuit won’t change that dynamic.
“Does that mean now that everyone is going to work for free? Of course not,” said Tice. “Who’s going to work for free? It’s just a ridiculous argument in a market where the agents have never worked harder to get a buyer into a home.”
Lerner said compensation will change.
“How that happens may be a little bit different since compensation won’t be offered through the MLS anymore,” said Lerner. “But listing brokers can still offer compensation to buyer brokers. Sellers can still offer concessions to buyers to pay their broker fees. Most of the things that are going to happen in the future, were already happening. There may be a little more variation on how that happens in the future.”
Tice said he’s worked with a number of buyers for as long as 18 months over the past two years before making successful transactions on behalf of his clients.
“Every contract that they wrote in a more normal market would have been signed because they were all beautiful contracts – this isn’t low-balling or anything else, these are great deals,” he added.
Tice said he feels few changes will occur because prices have not changed since the lawsuit settlement was announced in March.
“Prices are driving up right now even with this being in the news – at least they are locally and that’s what I care about because real estate is local,” added Tice. “In the case of Lebanon County, we’re seeing tremendous gains in value.”
Tice said low inventory across the Lebanon Valley is keeping prices at all-time highs. (It is estimated that there is a shortage of 5.5 million homes nationwide, according to a NAR statistic provided to LebTown by PAR staff.)
Tice shared Howard Hanna’s market report for Lebanon and it indicates that the median estimated home value as of March 31 was $286,000, an increase of 15.52 percent over the past year, a gain of 23.8 percent over two years and a 46.02 percent uptick since March 2021.
“We’re seeing gains that I have never, ever documented in Lebanon County – especially for a multi-year period,” said Tice. “Maybe for a quarter you’d see a big number. Right now, Lebanon County and many markets are really on a roll.”
The current market has been positive news for the City of Lebanon.
“It used to be about location, location, location,” said Tice. “As long as I’ve been around, people have made a fuss, ‘’Oh, I won’t move into the city because of the taxes or the school district.’ But that doesn’t come up at all. … It’s less of a challenge today than it has ever been in my career. It just doesn’t come up because people want to buy a house.”
Tice agreed with LebTown when asked if low inventory has led to the local real estate market being like the Wild West. He said the market is a situation where the home-buying process is anything goes since people are willing to make major concessions when purchasing a home.
“There aren’t a lot of property inspections taking place right now,” said Tice giving one example of how the market has changed. “I wrote a contract the other day and they waived everything – and they were the No. 2 buyer. The (eventual) buyer waived everything and paid more money or was willing to pay more money.”
Tice called the current real estate market “dynamic,” adding that properties are only listed for a few days before selling. One of those dynamics Tice referenced includes individuals purchasing homes with “cash.”
“They might not necessarily be (all) cash, but they are not subject to an appraisal or a loan approval because they are waiving that,” he said. “In our world, that turns into a cash contract, meaning that people don’t have hundreds of thousands of dollars, but they’ve removed that contingency, so you are seeing the cleanest contracts and people are accepting more stuff than I ever thought they would.”
Cash purchases is something homebuyer Holly Houser ran up against on numerous occasions over an 18-month period beginning in August 2021 when she decided to purchase a home.
“I made at least four other offers, maybe a little more, but I was always outbid,” said Houser. “And then he (Tice) would come and say they paid in cash. I thought to myself, ‘How do people have that much cash?’”
Houser, who eventually bought a home in Fredericksburg in October 2023, was seeking a rancher with at least three bedrooms, a basement, two bathrooms, an attached garage and a location close to where she works. In other words, your “typical” American home.
The length of the home-buying process led Houser to become discouraged but she relied on her faith to see her through those trying times.
“I’d go see a house and think this one is perfect, but I found that we were outbid or they had cash, and so I would pray about it and say, ‘OK, God, this is not where you want me to be,’” said Houser, who added that she lives with her mother and wanted a home of her own. “I had some people helping to pray to find me a house because I really wanted a house.”
Houser’s dream of living in her own home will finally be fulfilled by the end of the year as she continues to do renovations prior to moving in with her son and her mother. The call from Tice that her bid was accepted came as a surprise.
“I was, like, ‘Are you serious?’ and he said, ‘Yes, she took your bid,’” recalled Houser. “I was shocked, totally shocked because I didn’t think I would get it.”
As far as the future of the real estate market in Lebanon County and the anything goes mentality accompanying it, Tice doesn’t see it changing anytime soon.
“When owners cut loose on some of these rentals that they’ve had out there or Airbnbs or whatever they’ve been doing with them and they see the high water mark in the market and decide to get out of this, that’s what will bring change,” said Tice. “But I don’t see that happening anytime soon.”
Individuals interested in learning more about the lawsuit and the latest news concerning changes to commissions as they evolve should visit facts.realtor for more details.
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