It's been six months since the National Association of Realtors adopted rules for Virtual Office Websites (VOWs), Internet areas which allow the creation of real-world agency relationships. But whether such online contracts are good for either consumers or brokers remains an open question.

Some of those asking such questions were real estate regulators from the U.S., Canada and other nations who gathered in Portland last week for the annual conference of the Association of Real Estate License Law Officials (ARELLO). All business, the regulators attended a series of lengthy sessions and seminars over several days which looked at the most pressing issues now facing real estate.

VOWs came up repeatedly, and the two most basic questions were these: When can agency relations be created online? Why is it necessary to create online agency commitments in the first place?

In basic terms, real estate licensees are allowed to post ads for their own listings online. Members of local MLS systems may post listings from the system, including listings held by other members, on their sites under what is called "IDX" or Internet Data Exchange. With IDX, information concerning individual listings is limited, a consumer is not required to register to see listings and MLS members may elect not to participate in the IDX system.

With VOWs, consumers can obtain more extensive information than with IDX, but they must register with the licensee who owns the site. In some cases, "registering" is also an opportunity to create a client agreement with the broker. As with IDX, broker participation is not mandatory so it's possible that not all locally-listed homes will be included.

In effect, revealing your identity is a condition of seeing VOW listings. Hiring a broker online to provide professional services is also possible and, in many cases, surely encouraged.

One regulator reported encountering an online agreement with a 20-year term. This means if the property is sold during the next two decades the licensee might be able to claim a commission -- at least if such an agreement held up.

Other regulators wondered why consumers would sign-up with a VOW when tremendous volumes of information with no sign-up or contract required are already online with local brokers, national sites, association sites, agent sites and franchises.

Real estate departments, commissions and agencies are set up to "protect the public interest." And while commission members are often brokers and real estate attorneys, they take their public obligations seriously.

Judging from regulator comments, there was no lack of cynicism regarding VOWs. How many consumers understand the concept of "agency" or fully comprehend that by signing an online form they might be obligated to pay thousands of dollars? Are online disclosures meaningful? Comprehensive? Understandable? How can consumers negotiate listing and buyer brokerage agreements if completed forms were already online? How could brokers be certain that a consumer is real and not a victim of spoofing or identity theft?

How big a problem is identity theft? According to a survey released in September by the Federal Trade Commission "27.3 million Americans have been victims of identity theft in the last five years, including 9.9 million people in the last year alone. According to the survey, last year’s identity theft losses to businesses and financial institutions totaled nearly $48 billion and consumer victims reported $5 billion in out-of-pocket expenses."

The FTC said that "in the past 12 months 3.23 million consumers discovered that new accounts had been opened, and other frauds such as renting an apartment or home, obtaining medical care or employment, had been committed in their name. In those cases, the loss to businesses and financial institutions was $10,200 per victim. Individual victims lost an average of $1,180."

Listening to the discussion, the word and concept which kept repeating itself in my mind was Concorde. The super-sonic Concorde -- which stopped flying last week -- was a marvelous example of both technology and design, a wonderful achievement, faster than any other commercial plane, but a plane which was ahead of its time in the marketplace and thus needed to be stopped.

In a similar sense, VOWs are a wonderful example of technology, but like the Concorde they're 20 or 30 years ahead of their time.

The view here regarding VOWs is split: If licensees want to require registration and gather names to see listings, data and information on a site they have developed and directly operate then that should be permitted within the bounds of clear and understandable privacy policies.

But online listing and representation agreements that can be accepted with the instant click of an online button should be banned. Consumers don't know what they're "signing," broker's don't know for sure who is online, and no one can prove that an "I accept" button was not pushed by accident.

At the very least, no online agreement should be regarded as binding until a signed, written copy is delivered in person or by the Postal Service. Consumers, for their part, should have a right to say "no" without penalty, a lengthy rescission period after delivery and no right to waive either provision.

An agreement discussed in person is perceived differently when compared with an online document. Presented in person, there are opportunities to ask questions, relate to the licensee, argue, debate, haggle, change terms, consider, wait, add amendments, consult with an attorney, discuss local issues and see if this is the person and brokerage you want representing your interests in a major financial transaction. Presented online the same agreement is a tombstone -- stone cold, silent, immutable, unalterable and untouchable, a piece of technology with too many opportunities for misunderstanding.

It would not be surprising if regulatory agencies soon begin to halt the use of instant online agency and transaction agreements because, like net listings, there is too much opportunity for consumer abuse. Judging from the discomfort and comments raised in Portland, the outstanding question is which jurisdiction will be first.

For more articles by Peter G. Miller, please press here.

Published: November 4, 2003

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .