Ruling broadens online real estate listings
By Holden Lewis • Bankrate.com

Home sellers should be able to market their houses on the Web, even if they hire real-estate agents who provide limited services, the Federal Trade Commission says.

FTC officials say they forced the Austin, Texas, Board of Realtors to reverse an anticompetitive policy governing which listings are shown on Web sites. For about a year and a half, Austin-area sellers couldn't get their listings displayed on Realtor.com, AustinHomeSearch.com and some other Web sites if they hired limited-service real-estate brokers, according to the FTC. All listings will be displayed on Web sites as a result of a consent agreement between the FTC and the Austin Board of Realtors, which operates the Austin area's Multiple Listing Service.

As a result of the agreement, more sellers are likely to use limited-service, real-estate brokers, and buyers shopping on the Web will have more houses to choose from. The impact probably won't be limited to the Texas capital. The FTC says Austin's Multiple Listing Service isn't the only one that discriminated against what the FTC calls "nontraditional listings," and it plans to go after others unless they change their policies.

"It's definitely a victory for consumers and my niche in the industry," says Aaron Farmer, owner of Austin-based Texas Discount Realty. "I think it'll have a big effect nationwide. It doesn't affect just Austin."

Farmer testified last fall at a Department of Justice hearing on competition within the real-estate industry, and keeps an eye on developments nationwide. He says he has heard that a number of local real-estate boards have adopted rules similar to Austin's, and he expects at least some of them to rescind the policies.

Focus on exclusive agencies
Limited-service brokers offer to list a home on the local multiple listing service, or MLS, in exchange for a fee of a few hundred dollars. In Austin, this is called an exclusive agency agreement, and the consent decree focused on these.

Sometimes the seller wants only to get the property listed on the MLS. In other cases, the broker charges fees to perform other duties, such as writing newspaper advertisements or reviewing purchase offers.

State Realtors' associations have been gunning for limited-service brokers, who are seen as a threat to the traditional real-estate commission structure. In 10 states, including Texas, state Realtors' associations have successfully pushed for minimum-service requirements on real-estate brokers. Farmer, of Texas Discount Realty, says the regulation forced him to raise the fee for his most popular package of services from $495 to $1,995.

According to the FTC, the Austin Board of Realtors opened another front on the war against limited-service brokers by restricting the way homes are listed on publicly available Web sites. Under rules that went into effect in early 2005, a seller could get a home shown on the Web only after signing "a traditional style of real estate broker listing agreement, typically associated with a non-discounted commission," the FTC says.

In other words, if you paid someone $495 to list your house on the Austin metro MLS, potential buyers couldn't find it by searching the Web. Only real-estate brokers could see it, on the MLS's private network. Technically, the house was listed on the MLS, but buyers wouldn't find it if they searched Realtor.com or Austinhomesearch.com.

"That had the effect, because of the importance of being able to display listings on these popular Web sites, of causing consumers, home sellers, to opt for a more traditional form of agreement rather than a nontraditional form of agreement," says Jeffrey Schmidt, director of the FTC's Bureau of Competition.

The FTC, he adds, "is not trying to say which form of brokerage agreement we think is best for consumers. We're simply saying that consumers should be allowed to make that decision for themselves."

'Minimum service' clash
In April 2005, the FTC and U.S. Justice Department asked Texas not to impose a minimum-service requirement. The state did anyway. The next month, the Austin Board of Realtors adopted the rule restricting limited-service MLS listings from appearing on Web sites. This one-two punch knocked limited-service listings out of the ring: The FTC says 18 percent of sellers used limited-service brokers before the rules were imposed, and that share shrank to 2.5 percent afterward.

This year the FTC filed a restraint-of-trade complaint against the Austin Board of Realtors, saying that the MLS rules restricted consumer choice, forced consumers to pay for services that they didn't want to buy, and restrained competition among brokers.

The FTC says the Austin Board of Realtors agreed to withdraw its Web policy in the consent agreement. But that's not what the Austin Board of Realtors says. Its president, David M. Foster, says in a news release that the board withdrew the Web policy in August 2005, just three months after it went into effect.

"The rule was initially established to ensure that our consumer Web site was used to promote listings to benefit members," Foster says. "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."

Help for sellers?
He notes that the board does not admit any wrongdoing. Nor was it fined.

The agreement between the FTC and Austion Board of Realtors says "you can't segregate listings based on brokerage type," says Patrick Woodall of the Consumer Federation of America. "I think that's beneficial to consumers, both as sellers and as buyers."

It helps sellers because they can market their property to a wider audience, Woodall says. It helps buyers searching online because "if you're not seeing all the properties, you might not be getting the best property that's available for you."

FTC officials say they expect more Austin sellers to choose limited-service brokers as a result of the rule change.