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Fight erupts over online real estate listings

When you fish the Web for a house to buy, are you casting a wide net or merely dangling a hook? It's hard to know, and the National Association of Realtors has adopted a policy that keeps it that way.

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The Department of Justice's antitrust division has sued the Realtors over the policy, calling it anticompetitive. The Realtors counter that the rule protects their clients' privacy.

This complex issue exerts a multitude of effects on buyers, sellers, brokers and the agents who work for them. The impact on buyers can be boiled down to this: "You couldn't go anywhere online and see all the homes that are available," says Patrick Lashinsky, marketing director for ZipRealty, a discount online broker based in Emeryville, Calif. It makes home buyers "beholden to the agent to see that property," he says -- just as in the days before the Web.

Internet-based real estate companies say you should be able to conduct an online search of all of the properties in the local Multiple Listing Service. The Justice Department agrees. The National Association of Realtors says listings shouldn't appear on the Web if home sellers and their brokers don't want them there, for any reason.

MLS meets the Web
A Multiple Listing Service, or MLS, is a database of homes for sale. There are about 850 local MLSs. Only Realtors can add listings to the database, so it doesn't include homes for sale by owner. For decades, consumers couldn't search the MLS; Realtors did it for them. Along came the Web, and a new business model was born: discount real estate brokers who gave their clients password-protected access to the local MLS on the Internet.

Web brokers encourage home buyers to research homes on the Internet and drive by the properties they're interested in. This is intended to cut down on agents' workloads and reduce costs. If the client is still interested in a house after driving by, the buyer's agent arranges a visit. At settlement, the buyer's agent collects the commission and returns a portion of it to the buyer in the form of a check or a contribution toward closing costs.

According to the Justice Department's complaint, traditional brick-and-mortar brokers worry that "these Internet sites would inevitably place downward pressure on brokers' commission rates." The Realtors responded with two sets of rules governing Web listings. One policy would have allowed brokers to withhold their listings from selected rivals' Web sites and allow them on approved competitors' Web sites. The feds threatened to sue on antitrust grounds, and the two sides negotiated for a few months.

Opting out, opting in
On Sept. 8, the Realtors announced yet another set of rules called "Internet Listing Display," or ILD. The ILD policy doesn't let brokers selectively withhold listings from competitors that they dislike. But it does allow brokers to withhold listings from all rivals' Web sites. This rule, called "blanket opt-out," has been in effect for three years, without a peep from the Justice Department. But the ILD policy adds a twist: Even when a broker uses the blanket opt-out, a seller can ask to have a home listed on competitors' Web sites. That's called "selective opt-in."

Hours after the Realtors announced the new policy, the Justice Department filed the antitrust lawsuit in a U.S. district court in Chicago, where the Realtors association is based.

"NAR's revised policies continue to discriminate against brokers who use the Internet to more-efficiently and cost-effectively serve home sellers and buyers," the government alleges in its lawsuit, explaining that "the opt-out provisions provide brokers an effective tool to individually, or collectively, punish aggressive competition by any Internet-based broker."

Privacy issue
The Realtors say they're not punishing anyone; they're protecting home sellers from prying eyes. Listings still appear on the MLS, just not necessarily on Web sites that consumers have access to. The ILD policy "maintains the right of a homeowner not to have a property displayed, and to have it listed on the MLS," says Steve Cook, spokesman for the association. "A lot of people are concerned about privacy, about security." He says rich people and celebrities don't want information about their homes all over the Web, and neither do some elderly homeowners or parents of young children.

-- Posted: Sept.15, 2005




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