Local players in the lucrative real estate sector are watching, with great interest, how National Association of Realtors’ (NAR) settlement of a landmark US$418-million antitrust lawsuit in the United States will play out.

At the same time they have stressed that Jamaica’s Fair Trading Commission (FTC), in response to queries from the Realtors Association of Jamaica (RAJ), has assured that the RAJ is not in violation of local laws.

The RAJ is an affiliate of the NAR. It is guided by its code of ethics and its members are allowed to use the NAR’s trademarked term ‘realtors’ to market themselves. As agreed in a March 15, 2024 settlement, as of mid-July this year about one million of the NAR’s members in the US will have to change the way they now do business.

The settlement is expected to be approved by the courts later this year, but the NAR has already advised members they will no longer be allowed to use the Multiple Listing Services (MLS) platform to show the commission being paid on property listed for sale. MLS is essentially a search engine that makes it possible for buyers and sellers, landlords and renters to access property online, and it is a major component of the real estate industry worldwide. Information on commission paid is only visible to practitioners on the back end. Listings are location-specific so Jamaica has its own version.

The lawsuit against the NAR has essentially accused it of price fixing in setting commissions, which critics say pushes up real estate prices. The
New York Times has Norm Miller, professor emeritus of real estate at the University of San Diego, describing the suit as the biggest change to the housing market in a century.

“It’s important to note that one of the terms of the settlement is that NAR is admitting no wrongdoing because their position is that they are not price fixing,” RAJ first vice-president and attorney Gabrielle Gilpin-Hudson told the Jamaica Observer.

The NAR and realtors worldwide, including the RAJ, have long insisted that they do not set commission rates, though there are standard rates that organically emerge within the sector. In the US, commission on property being sold is between five per cent and six per cent. In Jamaica, it is between three per cent and five per cent.

“There is nothing preventing somebody from charging more or less than that on any given transaction or for any particular service once they’re duly licensed,” stressed Gilpin-Hudson.

The NAR has repeatedly said that the US lawsuit was only settled as a way to stave off bankruptcy that was possible if it continued to do battle in the courts.

In a fact sheet on its website, it assured members that they will still be able to receive commission.

“There will continue to be many ways in which buyer brokers could be compensated, including through offers of compensation communicated off MLS — as we have long believed that it is in the interests of the sellers, buyers, and their brokers to make offers of compensation — but using the MLS to communicate offers of compensation would no longer be an option,” the NAR said.

“The types of compensation available for buyer brokers would continue to take multiple forms, depending on broker-consumer negotiations, including but not limited to fixed-fee commission paid directly by consumers; concession from the seller; [or] portion of the listing broker’s compensation. Compensation would continue to be negotiable and should always be negotiated between agents and the consumers they serve,” it added.

While the more than 1,000 members of the local RAJ are not legally required to adopt the changes made in the US, it is still possible they will go that route.

“If NAR decide to update their rules, we will need to make a decision whether or not we’re following their rules. It’s very hypothetical. So there’s a chance that nothing will change and it may just be business as usual,” Gilpin-Hudson said.

She summed up the changes outlined in the settlement, stressing that it is still pending court approval.

“Basically, they don’t want any reference to any commission on any MLS platform. Whoever is getting paid, they want all of those discussions to happen offline on the phone,” she explained, adding that this will make realtors’ jobs a bit more tedious.

“They’re [also] saying that now buyers must agree with their agent what that agent is getting paid to do. But it’s not really a new thing, because right now, a buyer’s agent understands how the agent gets paid,” Gilpin-Hudson added.

Stressing that the RAJ’s current operations have been given the green light by local regulators, she said industry players simply need to know the value they bring to the table. She pointed out that, like any profession, licensed players in the real estate industry offer a certain level of expertise and knowledge acquired by investing in continued education and building up their network.

“The Fair Trading Commission has said that there’s nothing wrong with what we’re doing, because we’re not forcing people to have a commission. You need to recognise your value that you bring to the transaction and charge for it. People can always negotiate. If you personally have a figure that you don’t want to go below, nobody can force you to go below that, nobody can force you to go higher than that. That is what having a free market and capitalism is all about. The people who are good agents, who know the business and provide value, will continue to rise to the top and get paid,” she said.

“It was already competitive before this, and it will get even more competitive after this with AI [artificial intelligence] and everything. We just have to continue improving the quality of service so that we can continue making a living. That’s just the reality,” Gilpin-Hudson added.