Last month, an antitrust settlement between the National Association of Realtors (NAR) and the U.S. Department of Justice (DOJ) expired. Does that mean Realtor associations can go back to engaging in practices once deemed anti-competitive? And could that change the way modern real estate works, from how online brokerages display listings to the way consumers shop for homes on the internet?

Last month, on Nov. 18, a significant deadline for the real estate industry passed with little fanfare. The decade-old antitrust settlement between the National Association of Realtors (NAR) and the U.S. Department of Justice (DOJ) expired.

This settlement mandated that the trade group not discriminate against real estate brokers using VOWs (virtual office websites): websites that offer more detailed information on properties, such as days on market, price change history, and listing status.

It came about after the DOJ sued NAR because its Realtor associations and Realtor-owned listing services were engaging in allegedly anti-competitive behavior, including forcing brokerages with VOWs to limit the services they could provide consumers and thereby preventing consumers from benefiting from more choice, better service, and lower commission rates.

So now that the decree is gone, could Realtor associations go back to engaging in these practices once deemed anti-competitive? And could that dramatically change the way modern real estate works, from how online brokerages such as Redfin display listings to the way consumers shop for homes on the internet?

NAR, for its part, thinks the answer is a resounding “no.” The trade group recently re-iterated its pledge to keep multiple listing service (MLS) rules regarding VOWs as spelled out in the now-expired settlement agreement. However, NAR is still carefully keeping the door open for possible changes to its MLS rules later.

“Any future proposals for modification would be scrutinized to ensure that they are not only helpful to the industry, but also steer clear of any potentially anticompetitive implications,” Rene Galicia, NAR’s director of MLS engagement, said in a post on NAR’s website.

Rene Galicia, NAR director of MLS engagement. Credit: NAR

“Despite low usage of VOWs, MLSs must remain committed to ensuring that brokers seeking to establish a VOW are able to obtain timely access to MLS data,” he added.

The trade group also emphasized that its commitment to innovation and competition did not end there.

“The work of the real estate industry and MLSs should not end at meeting the minimum requirements of the VOW policy. Keeping the DOJ’s initial concerns in mind, we should commit to supporting an environment where innovation, competition, and cooperation continue to thrive,” Galicia wrote.

“MLSs can help by continuing to facilitate new technologies by increasing access to data and focusing on consumer experience through service offerings to the membership,” he added.

NAR’s framing of the expiration is in line with the pro-competition image it’s sought to project in the past couple of years. The nearly 1.4 million-member trade group has been eager to paint itself as an entity that embraces disruption since the selection of Bob Goldberg as CEO, even launching a new technology-focused conference, iOi.

Moreover, NAR is aware that the DOJ and the Federal Trade Commission have taken a renewed interest in real estate competition this year and, after ten years of being under the thumb of the DOJ, the trade group recoils at the idea of further government intervention and more intensive regulations.

And as Galicia’s post indicates, the settlement has expired — but that doesn’t mean the real estate industry’s data challenges are over. Some experts include agent professionalism and MLS data access among them.

What NAR couldn’t do before

The current VOW policy requires MLSs to allow brokers to display all MLS data fields online except confidential information and sold data in states with non-disclosure requirements. VOW sites require consumers to register with a password and sign in to see this additional data, unlike Internet Data Exchange (IDX) websites.

IDX websites, which likely number in the hundreds of thousands, pool brokers’ MLS listings together by mutual consent and allow agents and brokers to display virtually all of the listings in a particular market on their websites, though they generally display fewer fields than those allowed on VOWs. VOWs are much less popular than IDX sites, according to NAR.

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.

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 a consent decree in 2008 in which NAR agreed 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. The agreement did not affect NAR’s IDX policies.

The agreement specifically prevents NAR from adopting any rule that, directly or indirectly:

  • prohibits a broker from using a VOW or prevents a broker’s use of a VOW to provide listing information that the broker is allowed to provide by other delivery means, including by hand or mail
  • 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 could not change this “Modified VOW Policy” without the DOJ’s consent and had to report any complaints it received about its affiliated Realtor associations (or their MLSs) failing to comply with the policy or the settlement to the DOJ every quarter. Those are no longer requirements now that the agreement has expired.

The DOJ declined to comment for this story.

NAR no longer afraid of the internet

But that doesn’t mean that NAR is itching to change its VOW policy now that it can, according to Robert “Bob” Butters, formerly NAR’s deputy general counsel and antitrust trial attorney in the FTC’s Bureau of Competition.

“NAR is not going to revert to its pre-2001 VOW Policy because to do so will only invite further DOJ investigation and potential litigation. It would also be a waste of time because the industry has ‘moved on’ from its early 21st century fear of losing control of listing content,” he told Inman via email.

Robert “Bob” Butters. Credit: Robert Butters.

NAR’s approach to distribution of MLS data is very different today than it was 10 years ago, according to Butters.

“I think the DOJ litigation experience was ‘educational’ for NAR about the risks in permitting its MLS policy to be used to quash innovative uses of technology to distribute MLS data,” Butters, now a partner at Saul Ewing Arnstein & Lehr, said.

“A decade ago NAR’s leadership was afraid of the ‘unknown’ power of the internet, and fearful that it would undermine legacy brokerage models and erode commission levels,” he added.

“While that attitude still persists among some brokers, NAR’s leadership now understands that it cannot as an organization stop or even influence technological change.”

Furthermore, Realtors’ customers and clients now expect immediate electronic access to information, according to Butters.

“[B]rokers and agents today have been forced to become much more technologically ‘savvy’ and to adapt to the behaviors and preferences of ‘millennials’ and Generations X, Y and Z for e-commerce and social media,” he said.

“In my opinion, the industry has moved beyond the notion that MLS data is the industry’s ‘secret sauce’ that must be guarded from any public disclosure. Listing data is now everywhere,” he added.

MLSs and brokerages allow ‘too many agents’

The challenge for the industry today is to overcome the inefficiency caused by too many agents chasing a finite number of annual transactions, according to Butters.

“This oversupply of agents leads to wasted resources spent on the marketing of real estate and a chronic lack of professionalism among the rank and file agent population,” he said, echoing sentiments expressed by prominent MLS leader David Charron in September.

Butters blamed the agent oversupply on brokers’ use of independent contractor agents, which he said allows brokers to add agents with minimal overhead expense and discourages brokers from actively supervising them. Butters also blamed the legacy MLS structure, which he said leads to “economic inefficiency and unreasonably high commission levels.”

“The MLS enables new entrants and unproductive agents/brokers to remain in business by having the chance to sell other broker’s listings when they do not have a listing inventory of their own,” he said.

That results in inefficiency because it allows agent supply to exceed demand for service, instead of letting less productive companies go out of business as in a “normal” industry, according to Butters.

“When the finite number of transactions per year that generate commission income opportunities are spread among an agent population that includes many unproductive agents, it necessitates the maintenance of higher than ‘competitive’ commission levels,” Butters said.

“If the industry population was reduced to the more productive agent base, the agents could make more money by charging lower commissions and increasing the number of transactions they close per year.”

“NAR’s challenge for the 21st century is to figure out how to reform its 20th century legacy structures to make the brokerage business more efficient. A more efficient industry will lead to fewer, but more productive agents, and lower commissions. But even with lower commission levels, the productive agents will earn more income,” he added.

MLS data still too hard to get

NAR’s Galicia noted that MLSs are an “essential partner” for brokerages seeking to innovate. “Ensuring fast and efficient access to quality, reliable, standardized data will allow brokerages and their technology partners to innovate and shape the cooperation landscape of the future,” he wrote.

Marilyn Wilson

Marilyn Wilson of WAV Group. Credit: WAV Group

But that kind of access is not currently a reality much of the time because most MLSs make it “REALLY difficult” for a tech startup hired by a broker to figure out how to get an MLS feed, Marilyn Wilson of real estate consulting firm WAV Group wrote in a blog post.

“Go to your local MLS site as a non-member without logging in and pretend you are new to the market and need to get help with a data feed. You’ll see that most MLS sites FAIL on a variety of fronts to invite a new company,” she wrote.

“We may not be doing it consciously, but our industry is definitely stopping innovation dead in its tracks by making it nearly impossible to learn how to access MLS data.”

Most MLSs make it hard to find the right MLS website to go to for a data feed, don’t provide information to learn about or apply for a data feed, and don’t identify a specific MLS support person to reach out to, according to Wilson.

“This challenge is not limited to start-ups either. I was speaking to a well-established technology company that has accessed data feeds in nearly 300 markets. To this day they struggle with who to talk to, fee schedules and the unclear definitions of the types of data feeds that are available,” she wrote.

“Couple that with ever-increasing data access fees and it’s easy to argue that we are making it nearly impossible for tech companies to provide data-dependent services to brokers.”

“Sometimes the devil is in the details when it comes to supporting broker innovation. Here’s one simple, but very important way every MLS can help the cause,” she added.

Email Andrea V. Brambila.

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