Forbes, one of the populist hymnals to securities, is going after Realtors. It's in good company - The Wall Street Journal and SmartMoney like to take swipes at Realtors, too.

In case you're wondering why I'd use the word populist with regard to a publication that is only interested in the elite money managers and securities customers (if you are in the top three percent of wage-earners in the U.S.), it's the conspiratorial way the publications sneer when it comes to Realtors. The editors and article authors believe they are writing the populist view of Realtors as protectionist greedy moneygrubbers.

The pot calling the kettle black is the wrong tactic to take here (like anyone who has anything to do with stocks isn't just as protectionist and greedy.)

It's better to point out that in Forbes new article, "Will Zip Get Zapped?" the writer is either stone deaf or misinformed.

The cutline says it all - "Traditional real estate brokers are going after the Internet discounters."

The article makes the case, based on zipRealty's announced plans for a less-than-thrilling public offering and its "risks" to its business, that investors yawned but traditional brokers "weren't so blasé" because discounters could "transform the inefficient, antiquated $60 billion market for brokering residential real estate."

Yep, traditional brokers should be shaking in their boots, suggests a discounter and a real estate business school director.

Wasting no time, the National Association of Realtors, is "responding to the online threat," and "plans to put in place Jan. 1 new rules that could zap Zip and other discounters."

"The Realtors are pros at the protection game and have beaten back other interlopers, including the nation's biggest banks and Microsoft, which last year gave up a five-year effort to compile its own real estate listings."

Department of Justice to the rescue! The DOJ has delayed the new rules, says the author, but if the DOJ were really serious, "they should look as well at some of the other nakedly anticompetitive structures the real estate industry has long had in place."

Here's where the author really runs the rails off the track.

"The new rules aren't subtle. One would let a brokerage firm that participates in the local multiple listing service (MLS) prevent specific competitors from posting its listings on their online brokerage sites. Such discrimination could hit squarely at discounters like Zip, which notes that display of full MLS listings is a "key part of our business model."

"Zip uses the listings on its site to attract buyers to its "ZipAgents," who rebate 20% of their commission to buyers. (The customary 6% commission paid by the seller is usually split equally between the buyer's and seller's agents.) Home sellers who use Zip can save even more. And this crack in commissions could lead to even steeper discounts in the future.

Sorry, Forbes, but this argument is full of holes.

1. First, investors aren't stupid. They know a real estate company when they see one, and zipRealty, stripped of its online mantel, is a real estate company with the same challenges as any other real estate company. The fact that zip tries to explain these challenges to their profitability in such an egocentric way is transparent to a smart investor.

2. What's antiquated and inefficient about a $60 billion market? Obviously, people are hiring Realtors, and the market may see a record year again in 2004.

3. All real estate licensees have the right to say where their listings are advertised by state law because the listing broker owns the listing. If you don't believe the broker owns the listing, then where do listings come from before they get put into the MLS? zipRealty would like the MLS to own the listing, not the listing broker, so they can use it as a lead generator, which leads us to....

4. The NAR already has a program in place so that brokers can share their listings for online publication without killing each other. It's called Internet Data Exchange and it is a reciprocal Website feature provided by the MLS which doesn't strip the listing broker from the listing ad. The new rule, which the author seems incapable of distinguishing or explaining, concerns virtual office Websites which are publications of the brokerage. VOWs can be operated by any broker, not just brokers with zippy e-names, and utilize direct MLS data feeds. Direct feeds are not reciprocal in nature because the receiving broker can strip the listing broker from the listing ad like they can in the office when showing a faxed listing. That's why brokers have to give permission for their listings to be used as a lead generation tool for competitors. They aren't worried that a broker will take a faxed listing and use it on the street corner to bring customers in, but they can use it that way on the Internet as a lure. That's why it's different.

   Doesn't that make sense? If a broker can control whether or not his listings go in a magazine or newspaper, why wouldn't he be able to control whether or not his listings go into a competitor's magazine? Nothing dastardly about that.

5. Calling the right to control where listings go "discrimination" is inflammatory and inaccurate. Brokers have had this right for decades. The new NAR rules simply clarify this right in the online environment, which some brokers believe should magically be different because they designed their business models in hopes that these basic rights would disappear in cyberspace. They haven't and they won't, so tough noogies.

   My kids made lemonade with my sugar and my lemons and a key part of their lemonade stand business model was taking my groceries and not paying me back. The zipRealty business model isn't much different, according to many of the traditional brokers this author has so much contempt for. The kids at zipRealty believe that publishing MLS data is a right not a privilege because this is the only competitive advantage they could think of, but they conveniently ignore the fact that the MLS data has an origin - competing brokers.

6. Who says the average commission is 6 percent? Where has this author been the past few years? Commissions have sunk to an average of less than 5.1 percent.

7. I guess nobody at zipRealty bothered to tell the author that zipRealty raised its commission rates recently, along with eRealty. zipRealty charges only slightly less than 5.1 percent, making it the low end of normal, hardly the discount juggernaut the author believes will ""transform the inefficient, antiquated $60 billion market for brokering residential real estate."

Curiously, no traditional real estate brokers were included in the article to voice their side. The author has named trads as the bogeymen, but I guess they are so scary, he didn't want to call any for his story. Instead only sources that support the author's hypothesis were allowed.

This is impartial journalism at its best.

But, the author's most egregious error is this statement: "Another new rule the Realtors plan would prevent firms with online brokerage sites from funneling customers to agents for a fee. This aims to head off future inroads by companies such as LendingTree, a division of Barry Diller's InterActiveCorp., which use the Internet to match real estate customers with agents. LendingTree collects a fee from brokers, which it then rebates in part to customers."

According to National Association of Realtors spokespersons, there is no such rule, and even if there were, all brokers operate by the same rules. There's not one rule for zipRealty and LendingTree and another for all their other competitors.

"Third-party referrals have gone on for years," says Steve Cook, spokesperson for the NAR. "There is no pending rule having to do with referrals."

What the heck is the author talking about then?

NAR is as baffled as I am.

"We didn't think it was a very good article because the reporter didn't have the opportunity to to get his research put together well nor did he have a good understanding of real estate," says Cook.

What's the most ugly is the way the author has taken sides by discounting any input by traditional sources: "In a statement, the Realtors association defends the proposed rules as "lawful and appropriate," and says they will help maintain "the viability of the MLS system." The real estate brokers wouldn't want to block all Internet access to MLS listings, since 70% of home buyers now go online when looking for a house. But real estate powers such as Re/Max and Cendant, whose brands include Century 21, Coldwell Banker and ERA, insist that listings belong to brokers and that online disclosure must take place with "proper safeguards," as Cendant puts it. In other words, in a way that won't cut into their fat commissions."

As if it were a conspiracy hatched only to prevent companies like LendingTree and zipRealty from doing business, the author writes: "LendingTree and Zip can't even offer rebates in a fifth of states, where rebates to buyers are illegal."

Did he ask anyone why they are illegal? "State licensing laws restrict the ability to provide referral fees to unlicensed personnel," explains Cook. "The rebates they get would be considered referral fees in those states."

Last time I checked, this was the United States of America, and states can enact any number of laws that neighboring states don't have. In some states, you have to have an attorney close real estate transactions instead of title agents - why doesn't the author squawk about that?

What's missing from this diatribe is any sense of fairness that the restrictions and risks to its business model that zipRealty lists are also restrictions and risks for all brokers. In other words, zipRealty isn't special. The fact that zipRealty based a business model without knowing what the rules and laws state-to-state would be is their problem, not their competitors.

It's not a conspiracy by Realtors against online competitors. How can you compete against yourself? The author obviously doesn't realize that most traditional brokers operate Websites and accept and pay referral fees and do everything else the newcomers do under the same "restrictions."

The bottom line is that zipRealty is in a quiet period pre-IPO, and the author probably didn't have access to getting all his questions answered, but this article is proof that even if he had, the agenda was to take sides. He didn't make the article fair, although people who hate Realtors are bound to be impressed.

The lesson to be learned here is the same one my kids learned when I took the cost of the lemons and sugar out of their grubby little hands, giving them their first painful business lesson - if it's not yours, you can't take it.

There are laws written to keep John Q. Public from practicing real estate without a license, or sharing referral fees, and compliance with laws is simply a cost and risk of doing business for all real estate companies. And if finding out that you can't take other brokers listings without their permission is a risk, then so be it.

That doesn't make traditional brokers anti-competitive.

Published: August 4, 2004

Use of this article without permission is a violation of federal copyright laws.

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.