There have been many postings in recent days questioning NAR's actions and motives in its technology ventures with Homestore. Constructive dialog on these issues is healthy to the organization. As this dialog progresses, it is important to keep in mind an old saying: Great men discuss ideas, average men discuss events, and lesser men discuss people. Let's be sure to keep our focus on the ideas.

Four years ago, which is light years in Internet time, there were no standards for real estate data on the Internet. There was no protection of Realtor® data and no one had a clue as to what would be a good business model for the Web.

NAR began its technology quest with one overriding objective--to ensure our members remain in the center of the real estate transaction. That was clearly the correct objective and certainly continues to be so today.

In 1996 when the 700-plus members of the NAR board of directors decided on a direction for our member's presence on the Internet, they did not believe that NAR should raise every member's dues to achieve our objective. To find a single solution that would please everyone and also cover the cost of operating the system would have been impossible in a democratically-run membership association like NAR five years ago -- and today it would still be impossible -- with a multitude of MLS providers and over 800 differently designed MLS systems to serve our 760,000 members.

Instead, the board voted for a different approach -- the support of a website, Realtor.com®, that protected our members and their data. These safeguards included protecting the integrity and ownership rights of members' data, a ban on FSBO ads, and no charges for basic listings. Some Internet service providers agreed and some definitely did not agree to meet our standards, but it was NAR who drew the line in the dust and forced the issue. The Realtor safeguards adopted by Realtor.com caused other Internet service companies providing service to our members to offer similar protections.

Realtor.com is the official web site of the National Association of Realtors®. We own it and endorse it exclusively. NAR agreed to provide this exclusive endorsement to the operator of Realtor.com, a subsidiary of the company that became Homestore, for three reasons.

First, it agreed to operating controls embracing the standards described above. On a daily basis, NAR monitors the operation of Realtor.com to ensure that the controls are enforced.

Second, we knew it would take a massive amount of capital to build and maintain an effective Internet site. We are a nonprofit association without access to that kind of cash and we have many other commitments to our members. We needed a corporate partner who could access capital markets to take on this assignment.

Finally, the operator agreed to provide revenue back to NAR and to the data providers, the MLS's. (And a number of wise MLS's share this revenue with the brokers who supply the listings to the MLS.)

NAR's strategy was incredibly successful. Not only did we create the category leader in on-line real estate and the most effective vehicle in existence to bring together Realtors and customers, but we have fended off the FSBO boom widely predicted by Bill Gates and other Internet seers and put NAR on the soundest financial footing we have ever known. Today we are the envy of the association world. "Realtor.com is arguably the most successful association-sponsored Internet company," says the March issue of Association Management magazine.

Though we exclusively endorse Realtor.com, we do not endorse other Homestore web sites, companies, subsidiaries, products or services. There never was and never will be an NAR requirement that any board or member use one Internet provider or the other. When a sales person calls upon Realtors to buy I-Lead or to use IPIX, they should know that as far as NAR is concerned, they are free to negotiate the best deal possible in the marketplace. We wholeheartedly support competition because it results in fairer prices and greater innovation, and that's best for our members.

NAR currently owns a little more than 4 percent of Homestore's stock. NAR owned more stock, but sold approximately 10 percent of its total holdings in early 2000. The NAR Board of Directors placed these proceeds in what they labeled a Strategic Initiatives Fund, to be used for the benefit of all members. NAR could sell more of its Homestore stock, but it is important to note that a certain level of NAR ownership must be maintained if NAR is to retain the substantial controls it has over the Homestore subsidiary that operates Realtor.com.

Homestore and NAR have different missions. Like every company, Homestore's first duty is to its shareholders. Like every association, NAR's first duty is to its members. Like every relationship between two organizations, both parties don't always agree. That's why the operating agreement contains a number of very specific powers that NAR has over the operation of Realtor.com.

The operating agreement with Realtor.com provides that basic property listings, including photos, are free to Realtors for life; that NAR remains the sole owner of the Realtor.com site and trademark, which it licenses to Homestore; that the use and presentation of property listings remain under the control of the Realtor Organization; that Homestore cannot market any property data or information derived from the data without the approval of the entity supplying the listings, such as conducting any form of real estate brokerage; that banner and other types of advertising are strictly controlled; that no Realtor's listing will ever contain a banner from a competitor; and that advertisers are limited on the amount of space they can occupy on the site at any given time.

Concerns have been raised about Homestore's acquisition of Cendant's web site, move.com by some Realtors who compete with Cendant. This deal was a good example of how NAR protects members' interests in our relationship with Homestore. We insisted that great care be taken in structuring the Homestore acquisition of move.com to assure that no preference was given to the Cendant real estate brands.

For example, neither Cendant nor any of its brands will receive any special pricing on products or services they purchase from Homestore that is not available to other Homestore customers. Nor will Cendant have early access to technology or receive any other special preferences. Cendant received absolutely no control over Realtor.com. Cendant received one seat on the Homestore board but Cendant is required to vote its Homestore shares on all corporate matters in proportion to the voting decisions of all other shareholders and Cendant's board member owes fiduciary duties to the Homestore corporation, not to Cendant, thereby effectively neutralizing Cendant's presence as a shareholder.

One recent posting implied that NAR made concessions to Cendant in return for dropping its lawsuit against NAR. The truth is that Cendant never sued NAR. Any dispute that existed between Cendant and Homestore was resolved long before the move.com deal.

Despite the success of NAR's early technology vision, time and conditions change. No one can foresee all the issues that will become important to Realtors, especially in the fast-paced world of information technology. Recently NAR officers and senior staff issued a new technology vision for the future. It speaks to the importance of competition, of maintaining Realtor and MLS control of data, of the potential for Internet Data Display, and that technology should always serve Realtors, not vice versa.

Nothing could be more important than open and candid debate among Realtors on these critical issues. As we debate these issues, please keep in mind why Realtors began this technology initiative five years ago, the substantial controls in place on the Realtors' website, and the members' ultimate freedom to use whichever vendor they choose. Let's listen to each other and work together for the good of all Realtors.

NAR's View of Technology For The Future

Four years ago NAR began its technology quest to ensure our members remain in the center of the Real Estate transaction. That was clearly the correct objective and certainly continues to be so today.

Clearly the landscape of technology has changed. The future and significant needs of our members have also changed.

Leaders and senior staff of the National Association of Realtors want to be explicitly clear about what we believe is in the best interest of our members regarding the technology of the future.

• WE BELIEVE that NAR must take a leadership role to assure that technology is friendly to REALTORS and their business.

• WE BELIEVE that a competitive market place that provides many technology products is in the best interests of our members. In short, we believe competition is good and productive for the industry and our members. We also acknowledge that there may be limited circumstances in which exceptions are warranted.

• WE BELIEVE that the REALTOR brand and our members' brands should be protected and should not be subordinated to any other brand without the members' permission.

• WE BELIEVE that today's leaders and the future leaders of the association must remain diligent in listening to and monitoring our members' needs for technology applications. We must do everything possible to assure that technology is Realtor-friendly.

Published: April 25, 2001

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Richard A. Mendenhall is the 2001 president of the National Association of Realtors. A veteran with more than 25 years of experience in the field and the fifth generation of his family in real estate, Mendenhall is the owner of RE/MAX Boone Realty, in Columbia, MO. This commentary reflects the views of Mr. Mendenhall only, and not necessarily the views of any organization, association, or website.