Editor’s note: Looking ahead to 2010 we are optimistic that the real estate world will be better, but we also expect radical change. Paul Saffo, at the Institute for the Future, once said that in a two-year period less happens than we would have thought, and in a 10-year period more happens than we could ever imagine. This four-part series is a fun look at what the future may hold for the real estate industry. The predictions are not fact. (See Part 1: Where will we be in 2010?; Part 2: The mortgage debit card debuts and Part 4: Visionaries pull back curtain on real estate future.)

The bid-rigging scandal with the REM (The Real Estate Marketplace) in 2009 was probably the most tumultuous event in the history of the real estate market, next to the savings and loan crisis of the 1980s and the breakdown of the MLS in 2006.

In 2005 and 2006, big real estate brokers, small brokers and the local MLS organizations broke out in full-scale war, obliterating a pact that had withstood the test of time. In the early 1900s, two San Diego real estate brokers sat across the room from each other and agreed to share and expose each other’s property listings. A 100-year tradition was up in smoke.

From that brawl in 2005 and 2006, the most famous lawsuit was Crystal Real Estate v. MLS of the North, which went all the way to the U.S. Supreme Court in 2008, and once and for all defined who owned the real estate data. It was San Francisco lawyer David Barry’s last lawsuit against the real estate industry before he retired. The case was another piece in the puzzle that led to action on the REM. Industry leadership realized that the real estate business was changing and it had to give up on some of its arcane practices, including protectionism that shunned innovation and excluded new business models.

Tell us your prediction for real estate over the next 10 years and you could win one free admission to Real Estate Connect 2005 in New York City.

Too many lawsuits, investigations and conflict in the industry led to an enlightened form of cooperation. It was a brilliant period in the history of the industry. Cathy Whatley, Richard Mendenhall and National Association of Realtors CEO Joel Singer (former CAR CEO) earned much of the credit.  But frankly, the entire industry united around an entirely new vision.

Except for the hiccup with the bid-rigging scandal in 2009, the Real Estate Marketplace (REM) is the envy of the world. It is an online realty market place that resulted from collaboration by the traditional real estate industry and the new online companies, a commerce work of art. It was akin to the creation of the 30-year mortgage, the mortgage interest deduction policy and the creation of FHA. It accounts for the explosion of property sales that has occurred since the severe real estate downturn in 2006. 

The marketplace is a collectively owned enterprise with 10,000 seats, like the New York Stock Exchange, which controls the direction of the REM. The marketplace backbone is a private-labeled version of eBay, in which individuals, institutions and private parties contribute home listings data and everyday consumers submit bids for homes. The National Association of Realtors contributes some of the listing data and is the certified policing agent for quality of data, truthfulness, fair housing and currency.

Business on REM is facilitated by threemillion Realty Merchants (must like the old eBay merchants). Many Realtors became the most prolific RMs, stewarding property listings, managing bids and serving as REM designated fiduciaries in the 11 million transactions REM conducted last year. The RMs handle escrow accounts, ID the property and manage showings. They also assist new buyers and sellers on the system and serve as surety agents for pricing the property.

Sophisticated cascading AVMs establish home price indices and an integrated package of GPS, aerial photography and digital video provides a virtual labyrinth of all property in the United States, and now globally.

The U.S. Government’s Homeland Security technology from the terrorist craze five years ago has contributed to the plethora of  technology and data that was made available. Several high-tech security firms established a beachhead, partnering with title companies to a create three-dimensional real estate database.

The REM home sale bidding system on property is uniform, fair and real-time, creating a confident marketplace for both sellers and buyers.

There are the low-cost Realty Merchant leaders like Can’t Fail Real Estate, the industry’s equivalent of Charles Schwab, that franchises a big share of the REM RMs, but the boutiques found a niche with high-end sellers.

In fact, it was a gang of programmers at Fartell Realty, a high-end boutique that engineered the bid-rigging scandal on nearly 52,000 properties last year. They broke the code on the pre-bid price setting and were able to manipulate the bids and engineer artificial bids, unfairly pushing up sales prices. Their system was quickly uncovered, but the REM was down for four days, testing the confidence of the system, which was still in its embryonic stage. But it gave critics a sounding board and resulted in the dumping of the REM executive board and CEO.

I remember years ago hearing Paul Saffo at the Institute for the Future say that in a two-year period, less happens than we would have thought, and in a 10-year period, more happens than we could ever imagine.

As I look back on the industry over the last 10 years, I realize how much has changed. A true global real estate marketplace in part accounts for the home-ownership rate rising to 86 percent in the United States and to nearly 20 percent across the globe.

I also realize how important the conflict in the early part of the decade was to the industry and the creation of the REM marketplace. The turf wars, the broker/agent vitriol, government investigations and the private and public lawsuits all had a purpose: they broke the back of a tired old system and created the pressure and opportunity for change.

The good news is that real estate is still a very local business, which it should be, with no one controlling it and no one manipulating it. The marketplace works.

Tomorrow: Industry luminaries reveal their real estate forecasts.

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What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

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