When the NAR's proposed virtual office Website (VOW) policy was released a few weeks ago, many members weren't certain of the implications and implementations required. In key areas, associate general counsel Ralph Holmen, who does some anti-trust work for the NAR, explains some of the points for Realty Times' readers.

Question: Does this policy replace previous Internet data display policies, such as those governing (Internet Data Exchange) IDX?

Answer: It would be a policy in addition to the IDX policy. Those rules would govern that kind of Internet display, and this policy governs VOW display of MLS data.

Question: What is the difference, IDX is permission-based, and the VOWs aren't?

Answer: IDX is a system which allows advertising of listings, and in the real estate regulations of most states, a broker can not advertise another broker's listings without consent. Since IDX advertising of listings requires consent, that consent can be withdrawn, and that is the genesis of the ability to “opt out."

Question: Are VOWs advertising? Some states such as Wisconsin maintain that they are, so how would this VOW policy apply?

Answer: There are a number of issues. One of the most actively debated is whether VOWs are advertising or use of MLS listing data for purposes of delivering brokerage services. Some people argue that they are advertising, and therefore you may not put listings on VOWs without consent. As in IDX, the obligation to obtain consent implies the need to give brokers the right to opt out of having their listings appear on the VOW of another. Others assert that VOWs are not advertising but simply a use of MLS data in serving a brokerage customer, and because there are no provisions in MLS rules that limit how you can only use the data, no consent – and no opt out right - is required.

We have been told of two states - California and Wisconsin - where broker VOWs are deemed to be advertising by state regulations. In such cases, because state regulations say that a broker cannot advertise a listing without consent, consent for use on the VOW is required. Our current proposed policy doesn't require consent and doesn’t provide for opt out; in states that define VOWs as advertising brokers can operate VOWs but they have to get permission from other brokers to use the listing of those others.

Question: Can states that want more regulation over VOWs go back and amend their statutes or regulations to say that VOWs are advertising, and therefore require the consent of the broker?

Answer: State law can always be changed and is frequently.

Question: Could be next battle over VOW publication of listings be at the state level?

Answer: It could be, but it could also be fought in connection with efforts to amend this proposed policy before it is approved. The policy says you don't have the right to opt out except in states where VOWs are defined as advertising. This proposal will be considered by the MLS policy committee of the NAR and the board of directors.

Question: Why isn't a provision for broker opt-out included in the policy?

Answer: As described above, this proposed policy is based on the premise that operating a VOW is the delivery of brokerage services analogous to other ways that brokers deliver services, such as in person, over the phone, by fax or e-mail. There is no opportunity in those contexts for brokers to opt-out of having their listings distributed by other brokers in those ways.

Question: VOWs are used commonly used in advertising arrangements with companies that also have brokerage licenses but have core businesses based in advertising the listings. Some of these companies are actually serving as VOW technology providers to gain access to the MLS listings. In other words, they aren't engaged in the sale of homes.

Answer: The proposed policy doesn’t limit an MLS participants’ use of technology companies in a back office function, to operate the VOW. But the policy does expressly prohibit such a company from using the data for its own purposes.

Question: Some of these back office service providers are collecting referral fees.

Answer: The proposed policy also addresses, and prohibits, use of VOWs for purposes other than the buying or selling homes listed with the MLS. For example, let's assume adoption of the proposed VOW policy, which allows brokers to operate a VOW. It does not contain a prohibition against hiring a technology agent to do the back office work of actually running the hardware, software and servers where the VOW exists, but that wouldn't allow the service provider to use the data in other ways. Neither participants nor “back office” service providers can transfer the listing information to others for their use.

Question: The requirements to get consumer information and to provide disclosures are stricter for VOWs according to this policy. Could VOW registrations be used as evidence in Procuring Cause disputes, for example?

Answer: As it relates to Procuring Cause, a consumer’s registration on a VOW where he or she saw a property for the first time are facts the broker would likely point to in support of his claim that he is procuring cause entitled to a share of the commission. The fact that the consumer registered on a VOW is not conclusive of a broker’s or agent’s entitlement to a share of the commission, and he would have to prove other facts that support his claim to be procuring cause entitled to a share of the commission. It’s no different here than as it has been for decades: There is no single factor that is decisive on the question of procuring cause.

With respect to the registration requirements contained in the policy, whatever a broker must do when engaging a consumer he must do online at the time the consumer registers to use the VOW. The only change is that the broker must perform those responsibilities at the time the consumer registers, even if the law allows some disclosures to be made at a later time. In California, for example, I believe, agency disclosure may be given to the buyer at any time prior to signing a contract for sale. A broker can show homes without making agency disclosures. With a VOW, that broker would have to make those disclosures before giving access to the VOW.

Question: Since many VOWs are used in conjunction with third-party advertising arrangements, how does the advertising around the VOW listings make a difference?

Answer: The “clean copy” rule prohibits the VOW operator from showing advertising of another entity on the same page or screen where the listing of another broker appears. There was concern for objections from listing brokers about having their listings shown next to ads of another broker or third-party service provider. The policy says that a broker can show on the screen only the listing, and the VOW operator's identification information.

Question: In section I-5g it states that with some exceptions, a VOW participant may not distribute, provide or make any portion of the MLS database accessible to any person or entity. And, in 1-5k, it says a participant may not provide the identity of a registrant to any other entity for compensation. Referral fees are allowed between brokers so these third-parties get around the rules by acquiring brokerage licenses. Does this mean no referral fees to third-party advertisers?

Answer: A broker may not operate a VOW for the purpose of collecting names of consumers registering at the VOW and selling those names to other brokers of service providers. An exception is provided for “legitimate” referrals of leads to other brokers, that is, VOW operator is regularly engaged in providing brokerage services (other than making referrals) but doesn’t provide the kind of brokerage services the consumer is seeking.