Editor’s note: This is the second part of two stories examining the regulatory crossroads of traditional and new real estate business models. The first story looks at what state agencies are doing to implement minimum real estate service requirements that can impact new business models, and the second story focuses on local policy changes taking place.

Editor’s note: This is the second part of two stories examining the regulatory crossroads of traditional and new real estate business models. The first story looks at what state agencies are doing to implement minimum real estate service requirements that can impact new business models, and the second story focuses on local policy changes taking place. (See Part 1: Debate rages over minimum-service standards in real estate.)

Donald “Donnie” Plunkett Jr., president of Congress Realty, said he was surprised to learn that he would have to pay double to continue to participate in the Kingman/Golden Valley Multiple Listing Service in Arizona because he was not a member of the association that owned the MLS.

He tried to join the association and then was informed that he needed to have a physical office in the area of the association to be an association member.

“I’m getting fewer services than association members and yet paying double for it,” said Plunkett, whose company is a flat-fee listing service that also offers the option of full real estate services. Congress Realty participates in 15 MLSs in Arizona and Nevada, and Plunkett said his experiences have mostly been good and the recent development with the Kingman MLS is an aberration. “I haven’t had a lot of problems.” The rule changes at the Kingman MLS impacted only a handful of its members.

Clashes between alternative real estate business models and their local associations and MLSs are not unique, and there are numerous reports of local rule changes that most impact this new segment of real estate companies that offer reduced-service plans and lower commissions than traditional full-service brokerages. Typically, the supporters of these policy changes say the changes were necessary to eliminate confusion among agents and homeowners and home buyers, and to protect consumers. Those who oppose such policy changes, on the other hand, question whether the new policies are unfair to new business models and limit consumer choices.

Frank Lessing, association manager for the Kingman/Goldman Association of Realtors and MLS, said the association board doubled its MLS monthly fees from $70 to $140 in August, and the annual fee also increased for those MLS participants who are not association members. Lessing said there are about 232 members of the association, and about three MLS-only members. David Cooley, president of the association, did not respond to a request for comment about the rationale for the policy changes.

In the Cleveland area, the Northern Ohio Regional MLS enacted a change this month to the definition of an “exclusive right to sell listing,” which is the most common form of property listing. Under this type of listing, the owner of a home agrees to pay the listing agent a commission on the sale of the home, regardless of how the home is sold. Owners maintain the right to sell the home themselves but must pay the listing agent.

The new definition adopted by the MLS states that “any listing broker acting as the agent of the seller(s) or lessor(s) under the Exclusive Right to Sell contractual agreement cannot market the listing within the MLS as an Exclusive Right to Sell if a ‘for sale by owner’ sign is to be displayed at any time, or the property is advertised either electronically or by printed medium as ‘for sale by owner,’ and/or if the listing broker gives the cooperating broker(s) the authority to present offers to purchase/lease directly to the seller(s) or lessor(s).”

Carl DeMusz, president and CEO for the Northern Ohio Regional MLS, said the rule change was a response to agents who complained that some homes had for-sale-by-owner signs posted but were listed as “exclusive right to sell” in the MLS, which was creating confusion. “Some people were putting listings in under the definition of exclusive right to sell although they didn’t fit that description. We received a number of complaints from agents,” he said.

“There were cases where buyer agents found themselves forced into a dual-agency situation because the owner of the property wound up not being represented.” The buyer’s agents in some cases felt like they were “being forced to explain things to the seller,” he said, because property owners were not able to complete the transaction themselves.

Exclusive-right-to-sell-listings are the only listings that the MLS offers up for display on public Web sites viewable to consumers, such as Realtor.com.

About three years ago, the MLS had adopted a similar policy regarding “exclusive agency” listings, a form of listing that gives brokers the exclusive right to list the property for sale but allows owners to sell properties on their own without requiring them to pay a commission for the sale.

Randy Calhoun, general manager of FSBOAdvertisingService.com and NuWayMLS.com, said the policy changes at the MLS seem to put flat-fee listings at a disadvantage.

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And Sharon Y. Jebavy of HomeWise Real Estate Services in Columbus, Ohio, said the policy changes have certainly not made business any easier for alternative real estate companies. “I’ve been a Realtor for 15 years and it’s been a constant battle with the big companies trying to get one-upmanship on the little companies.”

She said the search system on the Northern Ohio Regional MLS system is set up so that the default search is set up for exclusive right to sell listings, which leads some agents to overlook other types of listings. DeMusz said that members have the option of searching for “all listings” in the MLS.

Ed Davis, Internet director for Fisher Team Realty, a flat-fee listing business based in Prairie Village, Kansas, said there were policy changes at Heartland MLS, an associated-owned MLS in the area, that affected the posting of exclusive-agency listings on Realtor.com, among other sites. “Customers were contacting me, stating, ‘Why am I not on Realtor.com,'” he said.

Davis said that his company has changed its marketing efforts in response to the policy change, and he said such policies cannot reverse the Internet’s impacts on the real estate industry. “Dinosaurs still die,” he said.

The Monmouth-Ocean MLS committee and board of directors in New Jersey approved a similar change in exclusive-agency listings policy. The new policy provides that “exclusive agency listings no longer be available on the public sites or the IDX sites,” which includes Realtor.com, MoMLS.com and MonmouthOceanMLS.com.

***

Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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