Trade group addresses worries over real estate competition
The National Association of Realtors’ 2008 settlement and consent decree with the U.S. Department of Justice, which mandates that the trade group not discriminate against brokers using VOWs (virtual office websites), expires in November, leaving some to question whether the way online brokerages such as Redfin — and the way consumers shop for homes on the internet — could soon change. But NAR says it will play nice with online brokerages, even when it’s no longer under the thumb of the DOJ, according to a post on NAR’s website Wednesday.
Authored by NAR General Counsel Katie Johnson, the post says NAR “has no plans” to change how it treats listing display by online brokerages upon the settlement’s expiration.
Katie Johnson
Some background: VOW policy requires MLSs to allow brokers to display all MLS data fields except confidential information and sold data in non-disclosure states, such as days on market and showing instructions. Unlike IDX websites, VOW sites require consumers to register with a password and sign in to see this additional data.
In 2003, NAR adopted a VOW policy that allowed brokers to opt out of having their listings displayed on other brokers’ VOW sites; barred VOWs from referring consumers to other real estate professionals for a fee; and forbid VOWs from displaying an ad for a competing broker next to the listing of another broker, Johnson wrote.
The DOJ deemed those three aspects of the policy anticompetitive and began a two-year investigation that lead to the federal agency filing an antitrust lawsuit against NAR in 2005. That lawsuit resulted in consent decree in 2008 in which NAR agree to repeal its 2003 VOW policy and replace it with a modified policy that treats brokers offering services through the internet the same as brokers offering services through brick-and-mortar businesses.
Specifically, Johnson wrote, the agreement prevents NAR from adopting any rule that:
- Unreasonably disadvantages or discriminates against a broker’s use of a VOW
- Impedes brokers using a VOW from referring customers whose identities are obtained from that VOW to other people
- Imposes unreasonable fees or costs upon any broker who operates a VOW
Under the settlement, NAR cannot change this “Modified VOW Policy” without the DOJ’s consent and must report its compliance with the policy to the DOJ every quarter. Those will no longer be requirements after the agreement expires.
“NAR has no plans to alter the Modified VOW Policy when the 2008 settlement agreement expires on November 18, 2018,” Johnson wrote, adding:
“Since we do not know how many VOWs are in operation today, we cannot know how many brokers are affected by the Modified VOW Policy. Therefore, there has been no real discussion that we are aware of about making any changes to the Modified VOW Policy when the settlement agreement expires. If NAR determines that some modifications to that policy are helpful and lawful, we may consider implementing them but would do so very judiciously and with careful consideration to avoid any potentially anticompetitive implications of such proposed changes.”
Online brokerage Redfin was “pleased” to see Johnson’s post confirming NAR has no plans to change the policy, Redfin spokesperson Jani Strand told Inman via email.
“The settlement was absolutely foundational in establishing the competitive marketplace we have today, where alternative brokerages have raised more than a billion dollars, and that we expect MLSs to continue to follow the expired guidelines as a matter of habit and to avoid new government action, but also due to (what seems to be) a consensus that has emerged over the past decade that brokers will compete online and in person, via price and service quality,” Strand said.
“If this turns out to be naive, we will fight, privately first, in public if we have to. We’re certainly open to quibbles now.”
THE RULE THAT IS UNDER DISCUSSION
The NAR-DOJ settlement includes a rule that, though not required, allowed MLSs to limit access “to only those brokers engaged in real estate brokerage; that is, those actively endeavoring to list real property or to accept offers of cooperation and compensation made by listing brokers or agents in the MLS,” Johnson wrote.
Called the “Participation Rule,” this policy did not include requirements for what “actively endeavoring” means, such as a minimum number of closed transactions, thereby leaving some MLSs to struggle to interpret and enforce the rule.
Asked whether NAR would modify the participation rule after the settlement expiration, Johnson said, “We do not have specific plans to do so, but the participation rule is one aspect of the policy that is discussed. Few, if any, express concerns about the concept underlying the rule, but its application can pose challenges for MLSs.”
NAR’S THOUGHTS ON REAL ESTATE COMPETITION
In part because of the settlement’s expiration, the DOJ and the Federal Trade Commission will hold a joint workshop on real estate competition sometime in the spring.
Much of the discussion surrounding the upcoming workshop surrounds the recommendations included in a November report from the Information Technology and Innovation Foundation, a nonprofit, nonpartisan think tank. ITIF called for federal regulators to investigate MLSs restricting listing data from third-party websites and technology companies for antitrust and urged state lawmakers to require brokers to provide free, unrestricted access to real estate listings.
Asked for NAR’s response to those recommendations, Johnson said, “In most cases MLSs do not ‘restrict listing data’ from third-party websites but instead leave the determination of what third-party sites will receive and display to the individual MLS participants whose listings are included in the MLS.”
ITIF Vice President Daniel Castro has suggested the real estate industry get ahead of possible regulation, possibly by creating its own listing database and making the factual information free while charging a licensing fee for photos.
NAR has “no such plans” to create such a database or take any other steps to self-regulate in an effort to shape any future government regulation, according to Johnson.
“There are thousands of websites where real estate listings are readily and widely available, so we believe such a website is superfluous and unnecessary,” she said.
“NAR asserts that the real estate market is vibrant, healthy, and vigorously competitive. Realtors serve the best interest of consumers and provide them with more real estate information today than has ever been available,” she added. “Having one property database with ‘free and unrestricted access’ as the white paper envisions may be unrealistic, as Mike Wurzer pointed out in his blog in response to a recent Inman article on this. And such free and unrestricted access could lead to a degradation of information, or a tragedy of the commons, as argued by Redfin’s Glenn Kelman and Chelsea Goyer in their response to the paper.”
Castro argues that making listing data more accessible would spur innovation in the industry, by allowing third parties to build tools off of the data and making it easier for them to scale up when they only have to get data from one database rather than from all 700 MLSs across the country.
But NAR believes tech innovation in the real estate industry is “ripe,” Johnson said.
“And the notion that listing data is not readily available is unsubstantiated. To the contrary, a wealth of listing data is available to consumers and technology companies from a multitude of sources. Further, the notion that providing such data to technology companies without any restrictions would spur innovation is unsupported,” she said.
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Article image credited to Photo by Chris Brignola on Unsplash
