Redfin Forced To Shut Down House Reviews While CBS and NAR Fight On

There is some additional news and a bit of a sidebar to the story about the 60 Minutes feature on Redfin a week or so ago and the strong reaction of the National Association of Realtors to that story. The run-up can be read here.

First the sidebar. This really has nothing to do with the CBS story (well nothing overt at least) but the controversy provides a neat little "peg" as they say in the news business to hang a new Redfin story on.

It seems that the latest feature of some on-site real estate sites is consumer reviews. Persons who visit a house or claim to have done so are invited to rate that house. When we first heard about this a few months ago our only thought was "Oh, oh." It seemed like a situation that was ripe for mischief in all directions. A seller could log on or have an army of family and friends do so and wax enthusiastic about a property. On the other hand, an agent with a competing property or a vindictive neighbor could do a lot of damage with a few malicious comments. The danger was far more in the negative direction than the positive. As Anne Kates Smith writing in Kiplinger.com said about the innovation "one person's backyard "private oasis" is another's "unsightly swamp" and advised that these ratings should be viewed with a more critical eye than directed toward opinions about a TV or a toaster."

It seems that Redfin, which had not been mentioned in the Kiplinger article, had thought reviews would augment its site as well but did it a little differently. The company employed a team of 15 freelance reviewers who toured open houses in Seattle and San Francisco and then posted comments about the properties. According to Realtor Magazine Online, "Although some reviews were flattering, others were scathing."

Redfin Seattle is a member of the Northwest Multiple Listing Service which covers the western part of Washington State. Northwest was not, to say the least, happy about the situation. Although action by the MLS apparently happened in April it just made Realtor Magazine Online last Monday. Citing that such reviews, regardless of their content, are not allowed by the MLS under a rule preventing brokers from advertising details of homes listed by rivals, Northwest MLS fined Redfin $50,000, a fine Redfin is appealing. Some agents also independently complained to the MLS that the reviews made it harder to sell their homes. In addition to putting the kibosh on the reviews, the MLS also told Redfin to stop posting information about the number of days a property has been on the market, saying that such information without explanation could be "misleading."

Realtor Magazine quoted Redfin Chief Executive Glenn Kelman as saying he was disappointed by the disciplinary action. "The goal of the reviews," he said, "is to disseminate different perspectives on homes from what one might receive from a real estate practitioner."

Redfin has also suspended its reviews in the San Francisco area even though that is out of the jurisdiction of Northwest MLS.

We found that ZipRealty at least is still inviting comments on its MLS listings. Readers are invited to rate properties from one to five "houses" overall and on curb appeal, interior appeal, and neighborhood and to make written comments as well. After looking at around 100 listings in several locations we found three reviews on the "house" scale and no comments. As all three were for houses in the same price range in the same town it is probable that one person had rated all of them. Two of the three were positive.

We don't know whether other local MLS services are more accepting of these reviews than Northwest or just haven't caught on yet. Or maybe Redfin just raised its profile too high to get away with everything it wanted to do.

Since the initial 60 Minutes story CBS and NAR have traded shots several times. After the initial criticism by NAR, CBS responded on May 18 by saying they thought the story had been fair as it cited the advantages offered by traditional agents and interviewed one. The network said that they had summarized the Department of Justice lawsuit against NAR and the latter's response so as not to make the story solely into a legal one and that they had not interviewed any DOJ representatives just as they had not interviewed anyone from NAR. CBS also charged that there is no good, reliable data on actual commission percentages to prove or refute the 6 percent commission claim and that their characterization of NAR as the "governing body" of the real estate industry to which NAR had strongly objected, mirrored both DOJ and NAR's own descriptions in the court case.

The letter, signed by Richard Bonin, Producer of 60 Minutes, said that the salient issue regarding MLS is not the sheer number of multiple listing services (which NAR said indicated competitiveness) but the extent to which NAR policies govern the conduct of those boards. In conclusion Bonin offered to affix an editor's note to the CBS website amplifying on the commission and governance issues.

NAR fired back the next day, claiming that the statement about governing the industry arises out of the NAR code of ethics which is unique in the business world because it "does indeed address business practices as they affect relations between REALTORS and with consumers." Stephen Cook, VP of public affairs and strategic planning for NAR asked, "Does the National Association of Broadcasters "govern" CBS? Perhaps "represents" would be a more accurate term."

Cook asked for several revisions to the editor's note presenting its own rationale for commission figures and information that Realtors rather than the NAR control multiple listing services because they own them.

The changes requested by NAR have not been made but, before the comments section was closed (apparently it is always shut down 72 hours after the broadcast) viewers had posted 153 pages of comments.