Ahead of a scheduled meeting this week between the National Association of Realtors' legal team and the Department of Justice's investigators looking into the NAR's virtual office website policy (VOW), a leak informed the Wall Street Journal (WSJ) of the DOJ's possible intent to file an anti-trust suit against the NAR.

If this is true, the real estate industry is facing a catastrophe. The NAR will have to stand and fight, but if its members lose heart for such a fight and withdraw from their local MLSs in order to avoid the DOJ's scope, the MLS industry could literally collapse overnight.

While it does little good to argue with the popular media, that the NAR is not attempting to squash its own discount broker members, but rather is proposing guidelines to fairly and publicly share listings with all members. Explosive, damning and leading statements such as, "[The NAR] would allow its more than 1.2 million members to withhold their property listings from online brokers if they chose to do so" may backfire on the discount brokers who want those listings so desperately.

1. The NAR isn't allowing 1.2 million members to withhold property listings from online brokers. This statement implies that "online" brokers are somehow different, but they are also members of the NAR, and subject to state regulations, as are full-service listing brokers.

2. All brokers -- not just discounters -- can operate virtual office websites, where they can market listings, agents and services, take consumer inquiries, inform consumers about market trends, and conduct other aspects of business.

3. A virtual office website is a tool operated by a brokerage. It's a website. It isn't the brokerage, any more than a computer is a newsroom. But some brokers would like to have the DOJ, WSJ, and all consumers believe that their choice to operate online only, without brick and mortar offices, somehow entitles them to some special treatment by their competitors.

4. Brokers who operate websites want listings to attract consumers, because that's what consumers want to see. These brokers, along with many full-service brokers, choose the online medium because it is cheaper to operate than a brick and mortar office, but they realize without listings, it's harder to attract and engage consumers.

5. Some "online" brokers have bamboozled the DOJ, the WSJ, and many consumers into believing that because their business model doesn't work without other brokers' inventories of listings, that somehow they are entitled to use those listings without the listing brokers' permission. Further, they want to be allowed to disparage the full-service brokers models and pricing, while using these other brokers' listings as bait to lure consumers away from them.

Allowing other brokers to display one's inventory of listings is a courtesy, not a right. Why should a broker be forced to give his/her listings to a competitor who uses them to attract consumers to an advertisement (the website) that attempts to convince the consumer that the listing broker, who so generously supplied the listings, is a greedy crook who charges too much in commissions?

Brokers have always been allowed by their own state laws to control where they market their listings. The NAR's VOW policy simply reinforces what states already allow. If a broker goes through the time, effort and expense to acquire a listing and an agreement from the seller that the listing will be marketed as the broker sees fit, that contract between the broker and seller gives ownership of the listing to the broker. That contract is inviolate, and the listing becomes the broker's to market as a temporary asset of the broker's company, in exchange for the marketing expenses, liability risks, and other costs the broker faces representing the seller.

But the WSJ, The New Republic and others would have readers believe that a discount, or new broker, has the right to use the fruit of another's labor to advertise for customers while condemning the listing broker's pricing model.

That's like forcing Neiman-Marcus to pool its dresses with Saks Fifth Avenue's online, and allowing a third-party discounter to have the advertising rights to show and sell the dresses at a discount while buying little or no inventory themselves. They then have the right to say that if you buy the dresses directly from Saks or Neiman's, you'll pay more.

Who in their right minds would do business that way? Saks and Neiman's wouldn't and neither would full-service brokers.

If a discounter is allowed to take the inventory generated by others and use it to attract consumers, why would any listing broker put up with that? That completely negates the point of cooperating in an MLS, which brings the discussion to the potential catastrophic damage to the real estate industry this could cause.

It would be very easy to foresee the day when Cendant chairman and CEO of Cendant's Real Estate Services Divisions Richard Smith or RE/MAX's founder Dave Liniger declare the hell with this. If the MLS is going to be regulated by the DOJ instead of the states, then they'll simply pull all their listings in-house, and we'll see the end of the MLS system.

Says Mark Panus, spokesperson for Cendant's Real Estate Divisions, "I couldn't speculate on the outcomes if there is pending litigation, we wouldn't comment on that, but I can tell you to look to our previous comments on the issue."

Richard Smith, chairman and CEO of Cendant's Real Estate Services Division, has commented on the issue before. In Realty Times' 2003 story "Cendant Will Pull Brand Listings If VOWs Remain Unregulated," Smith said in no uncertain terms that a Cendant-run MLS could exist someday.

"We are not handing our business off to someone who doesn't add value," Smith told Realty Times. "If this is a battle call, we're ready. We aren't going to sit back and watch this go in the wrong direction."

In a white paper addressed to the NAR in 2003, Cendant expressed concerns that "listings are the property of the real estate broker and not the MLS." In the absence of any opt-in or opt-out requirements associated with VOWs, "there is a likelihood that local brokers will seek to avoid sharing listings with the applicable MLS in order to prevent otherwise unauthorized incorporation of the listings into third-party VOWs."

The situation, the paper points out, "would weaken and ultimately cause the failure of local MLSs."

Cendant approves of the general creation of VOWs, but leaders would like to see VOWs operate only with opt-in/opt-out options given to participating brokers. They also don't want to see VOWs used to charge referral, advertising or other service fees to other brokers. And lastly, they don't want VOWs to be used in exclusive advertising relationships with other brokers, including third-party broker-portals.

In short, Cendant does not want to see listings out of the listing broker's control.

Published: May 10, 2005

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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. For more articles by Blanche, click here.