Department of Justice vs. NAR......

I received the following email last evening:

"Can you explain what the suit of the National Association of Realtors by the Department of Justice is about?" I can explain this in one term; anti-trust.

Here is the long and short of it. Traditionally, a property listing is "owned" by the licensed broker of the real estate firm. As each real estate agent works as an independent contractor under the broker's license, the broker has the final say as to how a property is marketed, etc. With the advent (and subsequent near collapse) of the discount brokerage business model, the internet presence of these brokerages became important since their incomes did not support mortar and brick offices.

As these discount brokerages started to flounder, they sought ways to increase their business numbers by showing the general public that they were still popular. Their solution? Begin advertising other brokerage listings on their websites, thus leading the public to believe they actually "owned" more listings than they did. Their defense in this strategy was that these properties were listed on MLS (Multiple Listing Service) and could be accessed by any brokerage at any time anyway. Plus, they contended, they were offering the public a way of searching the MLS through their own websites and consumers who utilized this service were going to see these properties anyway - don't we all want to make a sale? And doesn't everyone benefit from this? The answer is no.

The National Association of Realtors stepped into the forray and issued a policy allowing brokers to opt-out of Virtual Office advertising of listings by competitors. This means that the broker has the right to say that he does not want his listings accessible by the public through another broker's website. At first blush, this may seem like it's unfair to the seller. Doesn't the broker want his listings exposed in as many arenas as possible and isn't the restriction hurting the seller. No again. In fact, this policy is protecting the public trust.

Imagine you are a seller and you are researching firms to handle the sale of your home. You obviously start with the internet. You pull up ABC Realty and see that under their "listings" tab, they advertise over 1800 listings. Hey, they must be really good! Then you pull up Large Franchise Real Estate's website and see that they offer only 210 listings for sale. It must be because LFRE charges a higher commission than ABC that more people are opting to work with ABC. Wrong. ABC may actually only have 5 listings of their own and are advertising 1795 listings from their competitors. But you decide to work with ABC and find down the road that you are paying to advertise your own property, you are handling phone inquiries about the home, you are manning the open houses, you are negotiating the contract and you can't reach your broker by phone.....but you're only paying 2% commission for this luxury! When you realize the folly of your decision, you want to cancel your listing contract with ABC Realty, but find that you have to pay them a fee to withdraw your listing! Of course they are working against you! They've tricked you and taken advantage of your trust.

I work hard not only to obtain but maintain my listings and I don't think it's fair for a discount broker to take the credit. I don't believe this is against the interest of public trust, and by no means limits competition. Let ABC Realty go out and get their own listings by telling the consumer all of the services they offer...oh, that's right; they don't offer ANY! So they have no confidence in their own business model, want to use the fruits of labor of other companies, and want to sit back and collect their commission check at closing without having to get their hands dirty! Sounds like anti-trust, but on the part of the discount broker.

So now the Department of Justice has filed a suit against the National Association of Realtors saying they have limited competition by not allowing blanket permission for anyone to advertise any listing on his/her website. Please recognize that the Department of Justice is also involved in the petition of the federal banking industry to enter the real estate business by offering brokerage and property management services. While the law sides with the real estate industry in blocking this permission, it seems to me the DOJ has found a way to make the industry look like a villain by saying " Mr. and Mrs. Public, do you SEE that the association of realtors wants to control the Multiple Listing Service? It should be a public utility!" Well, my answer to that is, if the public wants access to the MLS, they should pay for access just like I do! The MLS was created as a way for brokers to have access to up-to-the-minute listing information instead of waiting for the MLS book to be delivered each week. It is a tool we as an industry developed and use as a convenience to ourselves. I certainly believe that my listings should have as much exposure as necessary, but with my permission. I take pride in the services I offer my clients, and I want to ensure that any company promoting my properties will offer the same level of service.

So the public will have to decide. As the discount brokerage business model fails because the public has already decided - that they want actual service for their dollar - they are clinging to the lifeboat for help. I strongly support free enterprise and competition, but the competition should be real; not perceived.

I enourage you to tell me what you think. This could be a fantastic discussion forum. I promise to respond to each opinion.