In the last two years, the Department of Justice has opened investigations into NAR policies regarding the regulation of virtual office websites' (VOW) datasharing from MLSs; sued the Kentucky Real Estate Commission over its consumer rebate regulations; and now it is "urging" the Oklahoma and Texas Real Estate Commissions to back off of proposed rule changes that would limit fee-for-service brokerage models.

Pardon the cynicism, but the DOJ hasn't examined the real estate industry this closely since it looked into MLSs over 25 years ago, say real estate insiders.

There's no memo, no smoking gun, of course, but it's awfully damn strange that all of a sudden the DOJ is going after every aspect of the real estate industry that weakens commission structures and licensing standards. If the DOJ has its way, any consumer should be able to search the MLS for free without an agent and sell their homes using professional tools without an agent. It will soon be at the point where no one will need a license to sell real estate, because there won't be fiduciary services anymore.

The NAR flatly denies this is true, but suspicions are mounting nonetheless.

Says Laurie Janik, counsel for the NAR. "I have met Hewitt Pate, (Assistant Attorney General in charge of the Department of Justice's Antitrust Division) and I think he is a man of integrity."

Adds NAR spokesperson Steve Cook, "I think what's really going on is that real estate is an important industry, and more and more people are aware of the significance of the role it plays, in building wealth and in society as a whole. Thirty-six percent of the nation's wealth is tied up in housing and we have clearly been the pillar holding up the nation's economy."

OK, Stockholm syndrome aside, let's recap.

1. The VOW investigation is going nowhere, yet hangs over the NAR like a sword of Damocles, causing the association to put off implementation of the VOW policy to save its subsidiaries time and money in the event that the rules must be modified in some way.

2. The Kentucky lawsuit may or may not be defensible, but the issue will be resolved according to whether or not the Kentucky Real Estate Commission overstepped the intent of the state legislature's licensing laws, which the commission enforces.

3. But when it comes to the limited service rules, and writing letters to the Oklahoma legislature and the Texas Real Estate Commission, the DOJ was warning the commission, in effect lobbying for limited service brokers.

So why would a powerful organization like the DOJ resort to lobbying instead of flat-out threatening the state commissions with a lawsuit? Because that's all they can do. If the state commission is clarifying a rule already passed by the state legislature, the DOJ has no power to sue, says Janik.

"They absolutely can not," says Janik, "and if you read the letters to the commissions, they are lobbying their opinions -- they can not sue the state. The limited service brokers are getting free lobbying at taxpayer's expense.

"Licensing laws by their very nature are anti-competitive," explains Janik. "Requiring a license to sell real estate is anti-competitive, if you want to get right down to it. Obviously they (DOJ) think it is good competition, but at some point you have to say the state has the right to regulate. A license, and that's anti-competitive right there, is the first restraint, because we expect minimum duties of competence. Without that, it would be more competitive, but that doesn't equate to better service for the public. That's why we insist on educational requirements and tests, continuing education and other demonstrations of competence. When the public is making the largest investment they will ever make (in a home) I think the state has an interest in assuring a minimum level of competence, minimum duties. That is what is at issue, and that is what the state legislature says, and the DOJ is arguing that these duties should be waveable."

"The real estate boards have been set up to do this," she says. "You don't want commissions to wander too far from legislation -- if the rules are founded in state law, then the rules are a good interpretation of statute, and they are immune from liability."

So what is the DOJ thinking? They're just doing their jobs -- protecting consumers. That's all the direction they need. All it takes is someone to shout "Look! Bad guys! They're Realtors! They're bullies! They're trying to put me out of business! Get 'em!" and the DOJ is off and running. With their protective instincts engaged, they are more likely to listen to complaints by a few limited service brokers, than to listen to the complaints of the industry that sellers aren't getting the help they need from their MLS-entry-only brokers.

Published: April 25, 2005

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