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
"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
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.