National Association of Realtors Fighting Fires On Several Fronts

If officials of the National Association of Realtors are looking a little beleaguered these days one can hardly blame them. Not only are state real estate licensing authorities being sued by the U.S. Department of Justice in several states for various rules and regulations that may be protecting agent commissions, not only is the House Banking Committee asking a lot of questions about anti-trust and anti-competition, not only is the Justice Department threatening to sue the National Organization over its rules relating to Multiple Listing Services, but suddenly long time political allies are beginning to look a bit adversarial.

NAR has long been a major political player. NAR, with over a million members, is the largest trade association in the country. According to the Federal Election Commission, it is Number One on the FEC list of the Top 50 Trade/Member/Health Political Action Committees in terms of contributions made to candidates the last several years, contributing nearly $6 million between January 1, 2003 and June 30, 2004. And the organization has not been bashful about supporting its members when they seek public office. Congressman and Realtor Johnny Isakson, R-GA, was beneficiary of many NAR paid ads before the Republican primary when he ran for and won a Senate seat last fall. In my town the local Board of Realtors Office sited a huge Isakson for Senate sign on its front lawn. The current NAR President, a Utah State Senator, is one of many NAR members holding elective offices throughout the country.

But, for all its political savvy and clout, NAR has found its motives and practices increasingly questioned by a lot of other political players.

With the exception of an announced Department of Justice lawsuit, the current spate of news stories and events are not necessarily big problems. But they must be causing, shall we say, some instances of disquiet for a trade organization that has exercised strong control over its members and protected their interests on many levels. Think, for example, about NAR�s phenomenal accomplishment in branding its membership. Can you think of another organization that has been able to so strongly differentiate its associates from others practicing the same profession? The word �Realtor�� has become so synonymous with real estate agent that NAR has had to run adds pointing out that the two are not necessarily the same

We will talk about these �instances of disquiet� later, but NAR is facing a somewhat more immediate problem with the announcement on May 10 that the Department of Justice planned to sue the organization over policies that DOJ claims illegally restrict and harm online competition.

Specifically, DOJ is concerned with an NAR rule, adopted in May, 2003 and scheduled to take effect this July that will determine how real estate agents can utilize each other�s listings on virtual office Web sites or VOWs

THE WAY IT WORKS

For six or seven years home buyers have been able to log onto sites such as Realtor.com, and real estate website listings operated by AOL, IWon, Yahoo, and other web portals and check out every listed property by zip code, price, size, and style. While these sites are now pretty glitzy with multiple pictures, full descriptions and even virtual tours, originally they were frustratingly limited. Property addresses were usually not provided and descriptive information lacked depth and any degree of pizzazz. Still, customers flocked to them and by the early 90�s individual agents and offices were beginning to realize that the Internet was an ideal spot to display their own internet property listings online. It took only another few minutes before they realized that it would be even better to display their competitors' listings in order to snare new customers.

It was not technically difficult to download MLS listings onto an agent or office VOW and give customers a full menu of pictures, descriptions, even addresses of every MLS property in the area almost as soon as they were listed. VOW�s typically require customer registration to view the listings, giving agents access to a whole new data base (and not coincidentally opening the �previous relationship� loophole in �Do Not Call� rules.) Homebuyers, already spoiled by one-stop shopping for used cars, antiques, and Beanie Babies loved the ease with which they could stay abreast of the market.

So everybody lived happily ever after.

Not so fast. Listings, after all, are the property of the listing agent. When that agent joins MLS he agrees to cooperate with other agents in the marketing of his listings, but he is not necessarily agreeing to allow other agents the right to use his listings to build their web sites or to otherwise expand their advertising capabilities. Not every agent or every office wanted their property displayed on competitor�s websites. Recognizing this, the NAR policy gave agents the right to �opt out� that is to refuse to allow their listings to be carried on any or all competitors� Web sites.

A quick look at a major company�s VOW in the Northeast was instructive. The company (lets call it ABC Realty) probably has the lion�s share of listings in the particular town I searched, and each of those internet listings was identified on the search results page with the company�s name in boldface. There was no listing office identification for the other properties. Click and pull up a full listing sheet and ABC�s listings sport a banner with the name and picture of the listing broker and all contact information. Other listings carry, at the very bottom of the listing sheet, the competing office name in pale blue 10 point print. If one is not looking, it would be very easy to miss. Maybe it is understandable if an agent does not want furnish ABC�s web site with his hard-won listing.

Enter the Department of Justice which has alleged that the NAR �opt out� policy is anti-competitive; that NAR has illegally adopted policies that aim to restrict Internet competition and specifically discount brokers. DOJ has also objected to another part of the NAR policy that tries to restrict the use of contact information obtained by a VOW in connection with referrals of business to non-real estate brokerages.

Persons speaking out in defense of the VOW policy claim that DOJ is confusing MLS listings with advertising and does not understand the cooperative aspect of MLS memberships and the proprietary nature of shared listings.

NAR met with Department of Justice officials the day after DOJ stated its intention to sue and has announced that it will authorize its leadership to develop a single, uniform rule governing the display of Multiple Listing Servcie data on Websites. It will also postpone the implementation of its existing VOW policy until the beginning of 2006 to allow time to implement the new policy.

NAR may have, by the above actions, put out the VOW fire for the time being, but DOJ seems to have other things on its mind, as does the House Banking Committee. We will take a look at the issue of banks in real estate later this week.

CORRECTION

This article titled "National Association of Realtors Fighting Fires on Several Fronts" published earlier this week contained the following statement:

Persons speaking out in defense of the VOW policy such as Peter Miller and Blanche Evans, both regular contributors to NAR publications, claim that DOJ is confusing MLS listings with advertising and does not understand the cooperative aspect of MLS memberships and the proprietary nature of shared listings.

In fact both Mr. Miller and Ms. Evans are regular columnists for Realty Times which has no connection with the National Association of Realtors. Mr. Miller also states that "my concern with VOWs involves the ability of consumers to get a fair deal. I do not believe that online listing and buyer brokerage agreements can be universally completed with informed consent given their length, complexity and need to negotiate terms."

Online listing and brokerage agreements were not an aspect of the VOWs that we addressed in our original article.

We do apologize for any errors or misrepresentations.