The Realty Alliance, a network of 60 real estate companies whose members include HomeServices of America Inc., is urging the National Association of Realtors to repeal a policy that allows national franchisors to index property listings displayed on their affiliated brokers’ websites.

NAR’s board of directors approved the new policy — which greatly expands the pool of listings national franchisors are able to display on their consumer-facing websites — at the group’s annual meeting in November.

Supporters of the policy change included Realogy Franchise Group, parent company of Century 21 Real Estate, which in January announced it was the first national real estate franchisor to implement indexing and display of Internet Data Exchange (IDX) listings.

Before the change was approved, brokerages entering into IDX reciprocity agreements could display the listings of other participating brokers in their market on their own websites, but they could not share other brokers’ IDX listings with their franchisor.

That meant there was no easy way for franchisors like Century 21 to incorporate listings represented by other, nonaffiliated brokers, on their national property search sites.

Consumers have come to expect that listings sites will provide access to all of the listings in the market they are interested in, not just those represented by a particular company. An expanded set of listings data also helps boost search engine rankings.

In amending the IDX policy, NAR said that as long as franchisors obtained permission from their own affiliated brokers, they could index and display IDX listings from those markets on their national websites.

"Opening up IDX to any entity that is not actively engaged in local real estate business violates foundational IDX principles and creates a very dangerous precedent," said Joe Horning, chairman of The Realty Alliance’s board of directors, in a letter to NAR.

Horning, the president of Wisconsin’s largest brokerage, Shorewest Realtors, told Inman News that the new policy could lead to misuse of listings data, creating legal liability issues for brokers.

Providing nonbrokers with access to listings data conflicts with past legal opinions by NAR staff, and could lead to lawsuits by brokerages and regulators, Horning said.

Brokerages "hold the liability, they have the contract with the consumer, and now the association is allowing (listings) to go outside of their control, when we are the ones responsible?" Horning said. "It’s absurd."

Members of multiple listing services are subject to strict rules regarding data quality and usage, The Realty Alliance argues. The most franchisors stand to lose if they are caught using listings data improperly is that they will temporarily lose their access to the data, the group said.

NAR spokesman Lucien Salvant said that so far, The Realty Alliance is the only group that’s protested the policy. The group’s letter will be on the agenda for NAR’s Multiple Listing Issues and Policies Committee agenda when it meets next month in Washington, D.C., Salvant said.

In recommending the new policy to NAR’s board of directors last year, the committee stipulated that franchisors displaying IDX listings information provide consumers a link back to a detailed, "full view" listings display that complies with MLS disclosure and display rules.

Franchisors can comply with that requirement by linking back to their own affiliated brokerages’ IDX websites, even if that brokerage is not representing the listing.

A brokerage that’s affiliated with a franchise can elect to block its own franchisor from indexing its IDX listings. But brokerages cannot stop other IDX brokers in their market from allowing their franchisor or franchisors to index and display IDX listings.

If brokers don’t want national franchisors to have access to their listings, their only option is to withdraw from the IDX system altogether — depriving their own websites of other brokers’ listings.

Horning said brokers are willing to participate in IDX because they are doing business with other brokers — not the brokers’ franchise.

"Our intent is that the listings belong between brokers," he said. "I’m not transacting with Parsippany, N.J., or anywhere else but the broker in my community, who is often independent."

A spokesman for Realogy — which is headquartered in Parsippany — declined to comment. Century 21 did not immediately respond to a request for comment.

The Realty Alliance claims to represent nearly 100,000 licensed agents and brokers, and nearly one-third of its member companies are affiliated with a franchise. Horning said some of those franchisees are also dissatisfied with the IDX indexing policy.

"There is overwhelming support from The Realty Alliance board" on the request to repeal the policy, Horning said.

Robert Moline, president and chief operating officer for HomeServices of America, serves on the board of The Realty Alliance. HomeServices — which Real Trends ranks as the second-largest brokerage in the U.S., behind Realogy’s NRT LLC — did not immediately respond to a request for comment.

Real estate consultant Robert Hahn, who in a Nov. 10 blog post foresaw many of the issues raised by The Realty Alliance in its letter, said he sees little chance of NAR rescinding the policy.

"Anybody who doesn’t have that (franchisor) status is at a fairly significant disadvantage," Hahn acknowledged.

But in Hahn’s view, NAR "can only expand this, they can’t pare it back. All the franchisors would throw a fit," noting the apparent site traffic benefits for Century 21.

While brokerage companies could challenge NAR’s policy on franchisor IDX indexing in court, Hahn thinks they’d have a slim chance of success.

In its letter to NAR, The Realty Alliance argues that regulators and lawmakers in several states have enacted laws and rules that limit "certain activities to those who are licensed to practice real estate."

Allowing companies that aren’t MLS members to display IDX data "puts real estate licensees in violation of state laws (and) regulations that require their control over advertising and certain required disclosures," the letter said.

But Hahn thinks courts are unlikely to take issue with real estate franchisors displaying property listings, "especially since consumers already think (companies like) Coldwell Banker is a broker — that’s the whole point of a franchise."

Hahn also discounted The Realty Alliance’s contention that the policy "opens the door to the creation of ‘straw broker’ franchisors" meeting the Federal Trade Commission’s definition of a franchisor without being "bona fide franchisors in the spirit of this new policy."

The process for meeting the FTC’s definition of a franchisor is too cumbersome and expensive to be undertaken lightly, Hahn said. It would take several years and $1 million or more in legal fees to complete, he estimated.

Another, more drastic course of action would be for brokerages to drop their NAR affiliation and form an offshoot group, Hahn said. While that might sound far fetched, Hahn said there’s considerable dissent over NAR’s proposal to raise annual dues by $40 a year to boost the group’s expenditures on political campaigns.

"Six months ago, I would have said The Realty Alliance is out of options," Hahn said. "Given how the Realtor Political Party Survival Initiative is playing out, there is nothing standing in their way from creating their own NAR."

Asked whether that’s an option, Horning said Realty Alliance has not decided on any particular course of action if NAR is not responsive to its concerns about franchisor IDX indexing.

"There’s a lot of groups talking about taking back control of our industry — that could go in many directions," Horning said.

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