A controversy is underway that could change the national landscape of real estate services to consumers as we know it. It boils down to one issue - how brokers' MLS listings are being used on the Internet by virtual office Websites (VOWs.) Some feel that brokers should be able to do anything in the virtual environment that they can do in an office including sharing MLS listings with consumers, while others feel there are security and economic issues attached to wholesale release of MLS listings to VOW operators.

One group, the Cendant Real Estate Division, has publicly stated that if the NAR proposed policy on VOWs, to be voted upon by leadership in May, doesn't include certain protections for listings brokers, that the company will not only pull all NRT (Cendant-owned brokerage) listings at the local level, but start a national Cendant MLS as well. What has Cendant fuming is that brokers are paying referral fees either through exclusive revenue arrangements between VOW brokers and advertising portals such as Yahoo! or giving third-party portals like Realestate.com their listings and paying 35 percent referral fees to Realestate.com's partner Lending Tree. Cendant, on a mission to help brokers increase their profitability through the diversified revenue streams of title, mortgage, relocation and affinity services, would like to see those revenue streams remain in-house. Other franchise firms or brokers who operate title companies and mortgage brokerages may agree as some third-parties offer not only rebates to consumers, but discounts on services such as title policies.

VOWs have been defined a number of ways, but the simplest is to describe them as a virtual real estate office, an environment to do business with consumers - without bricks and mortar. Any office is a meeting and work space including online, and according to existing National Association of Realtors guidelines, VOWs are subject to the same rules and regulations as traditional brokerages that share sensitive listing data with consumers across a desk.

But regulating VOWs has proved tricky - as VOWs are capable of doing something dynamic never done before in any medium. They can display real-time listings straight from the MLS database. Because of this electronic capability, VOWs are able to use MLS listings in unprecedented advertising and referral fee-based arrangements.

Keeping in mind that a VOW isn't the broker, but merely an online tool used by the broker, it is easy to see both sides of the issue. New business models would like to take advantage of the online environment to deliver cost savings to consumers, giving them a marketing advantage over traditional brokers. But, VOWs don't transact, hold anyone's hand, or offer opinions. Like the Internet which is capable of displaying large amounts of information and providing a means to communicate with consumers simultaneously via e-mail, VOWs can also do more than one thing at a time.

The controversy

To say that VOWs are a wonderful consumer-friendly tool for brokers would be an understatement. VOWs are used by many brokers to service their existing clients by allowing those with whom they have established relationships to see real-time listings - the equivalent of letting a "good customer" take the MLS listings book home for the evening a generation ago. There is also the potential for new brokers and traditional brokers to meet new prospects using VOW gateways to the MLS listings as a lure to capture consumer contact information.

Where the controversy comes in is when VOWs are used in exclusive advertising arrangements with third-party portals or when they are used as traffic generators for third parties to demand referral fees from brokers from their own listings.

Because VOWs can be displayed, they can also be advertised, which crosses the line according to some states with rules that one broker may not advertise another brokers' listings without permission. To make it easier for all brokers to share listings online and use them in lead generation efforts, the NAR created a voluntary data display policy called Internet Data Exchange, or IDX. Brokers participate through the MLS to share their listings with brokers who agree to cooperate. VOWs, by contrast, do not post permission-based listings, but the entire real-time MLS database of listings.

VOW proponents claim that IDX and VOWs are very different and should not be subject to the same rules. IDX listings are clearly to be displayed in advertising arrangements through broker Web sites and third-party agreements, as brokers are able to opt-in or opt-out according to their MLS's rules. But VOW proponents say that as the virtual office for some brokers, VOWs should be able to display and share the entire real-time MLS database just as any broker is able to download individual listings for any client. The statutes were first put to the test in Texas when an ebroker and the Austin Board of Realtors got into a battle over the ebroker's display of MLS data via its VOW. The case was settled out of court and the company was allowed to continue its VOW (with user agreement access by any consumer to the Austin area MLS.)

NAR caught in the middle

Caught between demands by some brokers to regulate VOWs and concerns of possible anti-trust violations and lawsuits by more ebrokers, the NAR has created a new proposed VOW policy that meets legal tests, but not all issues associated with VOWs were addressed. Insiders say these issues are still under discussion.

For example, Cendant wanted an opt-in/opt-out provision in the new policy, but continuing anti-trust concerns have that option under review because while MLS participants are volunteers, they are also competitors and therefore can't impose anti-competitive rules on other competitors. Instead, the NAR ruled VOWs as exempt from brokers' permission to exhibit their listings, but did clamp down on those VOWs ability to service consumers without consumer/broker relationships established. The new policy also imposed stricter requirements on consumers to give accurate contact information before being allowed to view MLS listings.

NAR addresses the referral fee controversy by suggesting that participants operating a VOW may not "provide the identity of a Registrant (consumer) to any other entity for compensation", nor may they "distribute, provide or make any portion of the MLS database accessible to any person or entity," except as provided elsewhere in the policy.

While the comment period from members is over, the NAR policy is still somewhat under review and new information could generate amendments to the policy before it goes to a vote by NAR board members in May.

Published: March 19, 2003

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.