The Austin, Texas, Board of Realtors illegally restrained competition by preventing consumers from putting certain types of home listings on public Web sites, the Federal Trade Commission charged today.
The 5,000-member Realtor board operates a multiple listing service in the Austin metropolitan area. The group’s rules make property listings information available for public Web site searches only when a home seller enters into a traditional style of real estate broker listing agreement, typically associated with a non-discounted commission, according to the charges.
Home sellers who enter into low-cost listing agreements are allegedly blocked from having information about their home shown on Web sites such as Realtor.com, the board-owned Austinhomesearch.com, and other sites operated by board members.
The FTC charges that the MLS rules restrain competition among central Texas real estate brokers and are a joint action by a group of competitors to withhold listing information from publicly accessible Web sites.
The Austin Board of Realtors agreed in a settlement not to interfere with members’ ability to enter into any kind of lawful listing agreement with home sellers, the FTC said. Under the agreement, the board also is prohibited from adopting or enforcing any rule that gives one type of property listing agreement an advantage over another.
The Austin board consented to the agreement without admitting or denying wrongdoing.
“As an association that supports members of all business models, we feel the approach outlined in the FTC ruling is correct,” David M. Foster, president and CEO of the Austin Board of Realtors, said in a statement.
However, Foster said the FTC’s announcement misrepresented the purpose of the board’s rule.
“The rule was initially established to ensure that our consumer Web site was used to promote listings to benefit members. We realized, however, that the rule was confusing and did not work as well as we’d intended, which was why it was rescinded so quickly,” Foster said.
According to the Realtor board, a rule preventing homes under “exclusive agency listings” from being displayed on Austinhomesearch.com was established on May 31, 2005 and rescinded on Aug. 31, 2005.
The FTC and the Justice Department have been critical of other industry practices, which the agencies allege restrict competition from low-cost and Internet brokerage services. The DOJ last year filed a lawsuit against the National Association of Realtors, charging that the trade group’s policies for displaying property listings online restrain competition.
The FTC and DOJ also have criticized and opposed various state bill and rule proposals that would require brokers to perform a minimum level of services, effectively eliminating bare-bones agreements in which a broker performs minimal tasks at lower prices.
In today’s charges against the Austin Realtors, Jeffrey Schmidt, directory of the FTC’s Bureau of Competition, said: “ABOR’s Web site rules create significant roadblocks for real estate brokers to offer consumers alternatives to full-service brokerage agreements.”
Schmidt added that the federal agency “is not saying that one form of brokerage agreement is better than another. We are just saying that the consumer should be able to decide.”
John Roberti, an attorney at Mayer, Brown, Rowe & Maw LLP and former staff attorney with the FTC, said today that it is very unusual for the agency to host a press conference for a consent agreement, which it did this morning.
“I would look at this as a wake-up call for the MLSs,” Roberti said, adding that this could be a signal that the FTC is placing priority on real estate competition enforcement. “If I were running an MLS with a rule like the one in the consent order I would spend some serious time thinking about whether this rule is necessary,” the attorney said.
Inman News reported in September that the FTC contacted the Austin Board of Realtors to inquire about the local MLS policy that prevents the display of some for-sale property listings at some home-search Web sites.
Specifically, the Austin policy places restrictions on exclusive agency listings, which allow an agent to list and market a property for sale and also allow the seller to personally seek out a buyer for the property. If the seller finds the buyer, the seller is not obligated to pay a commission to the agent. Because these listings can function as a for-sale-by-owner property listing, some MLSs have adopted or considered restrictions to the online dissemination of the listings.
In North Carolina, several discount real estate companies complained to the Attorney General’s Office in June about a similar proposal by the Raleigh Regional Association of Realtors’ Triangle Multiple Listing Service, though the association backed away from the proposal pending any action by the Justice Department.
Heartland MLS in Kansas and the Monmouth-Ocean MLS in New Jersey are also among the MLSs that adopted policies restricting the online distribution of exclusive agency listings.
The Northern Ohio Regional MLS in November 2004 amended MLS policy to provide that home sellers cannot place a “for sale by owner” sign at their home or advertise the home in any medium as “for sale by owner” if they participate in an exclusive-right-to-sell listing. Under this type of listing agreement, home sellers have the right to sell their own home but must pay the listing agent regardless of how the home is sold.
Realtor groups have said that such MLS policies seek to eliminate confusion over whether a property is a for-sale-by-owner property or whether the home seller is working with an agent, while opponents have said that such policies seem to target discount real estate companies that allow home sellers to take on a lot of personal responsibility in the real estate transaction.
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