Reporters with organizations including Time Magazine, LA Times, New York Times and others have contacted Realty Times recently wanting to know about the virtual office Website (VOW) issue. Most are looking for a story with a slant that favors an underdog.

In this case, the underdog is one or two discount brokers raging against a big-broker-driven industry that they claim is stifling competition.

To 20 or 30-something writers, this notion has appeal. If they can use the information provided by an underdog to embarrass a big organization like the NAR or big brokerage organizations like Cendant, they'll look like heroes to their editors and to their readers - especially if the spotlight of their publications causes these organizations to retreat in some way. Or, they could choose to get the whole story....

So what is the story? The NAR leadership voted to put regulations in place concerning how VOWs can be operated and how MLS listings can be shared with the public without being monetized by individual brokers in a way that is unfair to the brokers supplying the listings.

That's not the story the reporters have been told to look into, however. They've been told that the NAR and its big-broker constituency have put regulations in place that stifles competition to discount brokers.

I know because the questions some of these reporters ask when they contact me circle around this premise.

When the reporters find their way to me, which is a credit to their research skills, they want two things - to understand the issues behind VOWs better and to get my opinion. I'm happy to oblige, but I'm worried about the bigger implications that putting this story before the public may have.

Why do so many big-name publications take an interest in this story? And if the reporters had all the facts, why do they think this is going to be of interest to consumers? Clearly, they got a tip - a tip that suggests that consumers are going to be hurt.

The thing is the VOW issue and subsequent NAR vote isn't about consumers. It's about business operating agreements between brokers through the MLS. Brokers have already benefitted the public (over their own self-interests, I might add) by agreeing to share their listings with other brokers using a cooperative called the MLS. If the listing is submitted to the MLS, then all brokers who are members of the MLS are invited to help the listing broker sell the listing for whatever compensation the listing broker offers. It doesn't get any more consumer-friendly than that, because if brokers wanted to, they have every legal right to sell their own listings, much to the inconvenience of consumers. But most don't. They join the MLS and share the wealth.

The VOW vote is about following the rules of this unique-to-the-real-estate-industry business courtesy. If Broker A puts her listing in the MLS, she trusts that her MLS is not going to enable Broker B to take her listing and use it against her - to threaten her business model, profitability, or image with the public. The VOW vote was about this trust.

Getting this across to reporters isn't easy. While some reporters are willing to listen to my perspective, others may have an agenda. They've already decided who's right and who's wrong.

I can tell by the nature of their questions that most of these reporters don't understand the VOW issue, and why should they? Most Realtors don't understand the issues, so how could outsiders understand?

So here is what I tell the reporters, and hope to heaven they understand and will report without bias what I'm trying to tell them.

VOWs are controversial because in the aftermath of the VOW vote some VOW operators are going to be unhappy. Any time there is a vote, it is because there is more than one choice, and people make choices. Someone will inevitably lose, just like some voters are unhappy after a presidential election.

Some VOW operators maintain VOWs are an office, and that VOW operators should have all the abilities to do business in a virtual environment that brick and mortar brokers do in an office building. If that is as far as the argument goes, they are absolutely right.

But, VOW operators and VOWs aren't the same thing. VOW operators are brokerages. If you look at the definition of VOW - virtual office Website, then you have to consider the word Website, too. Websites are publications. Therefore, VOWs are publications of the brokerage. If a VOW is a publication, then it is subject to regulations including copyright laws - one of which is that it can't be used by the operator to advertise listings that belong to someone else without permission.

Obviously, you can do things with a publication that you can't do with an office, and the real estate industry has every right to examine and vote on what those regulations should be - keeping in mind that the aggregate is mostly composed of other people's inventory.

VOWs depend on getting listings in the aggregate from the MLS to attract consumers, because they don't have a brick and mortar office to bring people in. There are only two ways to get listings in the aggregate. One is Internet Data Exchange (IDX,) an MLS-regulated form of MLS listings aggregation in which brokers agree to share their listings for other brokers to advertise on their Websites. The second way is an MLS-regulated form of MLS listings aggregation that is a direct download from the MLS of all listings, not just permission-to-share listings. (So far, there isn't a comparable term for direct MLS data download as there is for IDX, but one will appear soon, because without this term, confusion about VOWs, IDX and the MLS will continue.)

Some VOW operators argue that they should be allowed to download all the MLS listings and show them to consumers via an online password-protected agreement. Again, if that is as far as the argument goes, VOW operators should have every right to do that. And the NAR vote allows all brokers to do exactly that.

But there are some things brokers can't do with other people's listings anymore, not that they ever had permission anyway and that is use the listings to exclude a broker from an advertising relationship or charge back referral fees to the broker from the MLS listings.

Previously, some VOW operators took their MLS downloads and used them as advertisements to get new customers. They gave access to the listings to third-party advertising portals, which either directed the consumers to the VOW broker only, or charged referral fees to the listing broker for leads from her own listings of between 25 and 35 percent. Some VOW operators used the listings while advertising to consumers that full-fee commissions were too high, and that the VOW broker either charges less or can be the gateway to a affinity program that will result in lower commissions to the consumer.

Wait a minute. You want to use my listings to attract consumers so you can tell them I charge too much in commissions? When other brokers realized this was happening they rallied, and understandably so. Now those same VOW operators are whining that the other brokers are trying to put them out of business - like the VOW broker wasn't just trying to do the same thing? Give me a break.

Nobody gave the VOW brokers permission to advertise other brokers' listings to help the VOW brokers bolster their discount or referral fee business models. That's advertising, no matter how you slice it, and by most state laws, they didn't have permission to do that, and so the NAR policy makes it clear what is and what is not acceptable use of MLS listing data in the VOW environment.

Are the listing brokers trying to hurt competitors? No. They are trying to protect themselves, and that's a big difference. It should be the listing broker's choice to give her listings to any competitor. The fact that the VOW operators may be discount brokers or referral fee-based brokerages isn't relevant, because the first breach was that the listings were used without permission in an advertising environment. But the red herring that the discount VOW operators would like the popular press to pursue is that the issue is all about discounts. It isn't. It's about entitlement.

If the right or wrong of advertising other brokers listings without their permission is still in question, consider this: In the brick and mortar world of real estate of only a few years ago, nobody worried that when an MLS produced the weekly MLS listings book, that Broker A would take the book to the town's newspaper, get all the listings published, and then have the newspaper route all inquiries on the listings to her. If that had ever happened, there would have been an outcry from the other brokers. They would have forced the MLS to get some regulations in place that would prevent any broker from capitalizing on the aggregate of MLS listings in that way.

Well, that's exactly what the brokers did over the VOW issue. When they realized that their listings were being advertised without their permission, they complained to the NAR, and the NAR agreed that VOWs needed to be regulated so that all brokers could operate VOWs if they choose to, but no single broker would be able to use the listings to charge referral fees back to the listing broker or to monetize the MLS listings in exclusive advertising arrangements.

Naturally, some VOW operators weren't happy with the outcome of the NAR vote. They never wanted the MLS listings to be regulated, but regulation was inevitable for the simple reason that the listings don't belong to the MLS - they belong to the listing brokers. Listing brokers went to the time, trouble, expense, and heavy competition to acquire those listings. Why should they be forced to let other brokers advertise the listings if they don't want to?

Some of the brokers squawking the loudest about the VOW vote had built their business models using inventory they had no permission to use, which makes them clever, but they certainly aren't underdogs, not with what they were trying to pull off. They just have a bad case of the entitlement syndrome - that they have rights to things they don't have rights to. All the VOW vote did was assure that all brokers have a level playing field to compete.

But this opinion may not satisfy all the reporters. Consumers are being hurt, they were told.

The unhappy VOW operators are now complaining that the new regulations are going to hurt consumers, as access to listings will be more restricted. (If you really want to get the popular press excited, all you have to do is invoke the holy name of the consumer.)

In an announcement following the VOW vote, the NAR stated that just the opposite would happen - that because of the clarity of the regulations, all brokers would be allowed to operate VOWs, making more listings available to consumers than ever. The difference is that some VOW operators just won't be able to monetize the MLS listings for personal or third-party gain anymore.

After carefully explaining this to one reporter, I was asked a question that told me that the reporter didn't listen to a word I had told her. She asked me, what if a broker, say one with 25 to 40 percent market share, doesn't want a certain other company to advertise their listings, then wouldn't that hurt the other company's ability to do business?

No, I replied. It only hurts their ability to advertise the other broker's listings without their permission. It doesn't affect their ability to do business one iota.

Well, if it hurts them, she persisted, isn't that anti-competitive?

No, I said. If the VOW broker designed his business model based on using other brokers' listings without their permission, that's his problem. The only broker who has any rights to advertise the listing is the listing broker. There is no law, regulation, or reason to compel a broker to give a listing to a competitor to advertise against her will.

You see, I tried to explain patiently, the MLS is a cooperative - a private club of sorts. It's for brokers, not consumers. The MLS doesn't exist to make listings available to the public. It exists to make listings available to brokers so they can make money selling the listings. See the difference? Consumers benefit because more brokers have access to more listings to sell, but it is not the purpose of the MLS to give an advertising advantage to any single broker to attract consumers or to enable consumers to use the information without working with a broker.

Brokers voluntarily share their listings with other brokers to help them get homes sold. They announce compensation to the other brokers in the MLS. That is all the MLS was meant to do. But in the brave new world of online real estate, some brokers feel it is the MLS's job to provide them with a marketing advantage that they can use against the very brokers who supply the listing inventory to the MLS. If they were allowed to do that, then other brokers would have every reason to withdraw their listings from the MLS. And that would be bad for consumers because then the consumers would no longer have access - through a broker - to all the listings in the marketplace suitable for their purchase.

It is clear from questions like these that I'm not getting through.

These reporters are doing their jobs which includes writing angles that stimulate questions from consumers. That's fine, and it is to be expected, as long as all sides get to have their day in the people's court. It takes skill to tell an exciting story that shows the conflict between two sides - without taking sides.

The part that scares me when talking to these reporters is that most of them appear to already have a bias. They slant their questions to build a case for the underdog VOW operator and against big old mean NAR. They don't want to hear that the underdog may have taken an asset that didn't belong to them with the intention of gaining a competitive advantage, and that all the NAR did was tell them they couldn't do that anymore. No harm, no foul.

Defending underdogs always makes good press. I just hope that these reporters see that a better story is out there - that despite its internal conflicts, that the NAR, an organization of independent business people known as real estate brokers and agents, has taken steps to make more listings available to all consumers, and that by instigating new VOW regulations, it has also protected the integrity of the MLS and brokers' ability to publicize listings to the public as we know it.

Published: June 13, 2003

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