MLSs are one step closer to becoming free public utilities, if the Federal Trade Commission has its way. Using its considerable resources to bring pressure against individual MLSs who don't have the financial means to fight back, the government agency is forcing brokers to include listings in MLS feeds in which sellers have contracted with listing brokers to bring their own buyers. The FTC doesn't see this as milking the cooperative cow through the fence, but many brokers see it as the stealing it is.

Why should sellers use the MLS as a cheap advertising resource if they have no intention of paying cooperative brokers to bring a buyer?

To stop this abuse, many MLSs have instituted rules that exclude any listing obtained by any other agreement than the exclusive right to sell (which insures not only payment to the listing broker, but to the cooperating broker as well) from being included in MLS feeds.

But the FTC has swooped down to rule that what's good for consumers, especially letting them into the MLS back room, is equally fair for brokers.

But that doesn't make it right.

It's the nature of competition that there will always be someone who uses price to undercut other companies. Witness the number of brokers such as Redfin who are popping up offering rebates to buyers and sellers. To compete against known brands, they have to use discounts which is made up in volume to make their numbers.

As brokers and associations have recoiled from agency representation of client sellers, the opportunity for price cutting has grown to the point that new brokers are in business not to provide brokerage services, but to provide a slip-under-the-tent entry for consumers into the all-powerful MLS. These MLS-entry brokers are providing a service that consumers want, but let's look at it another way. If an employee of a store allowed customers to poke around the stock room, and then sold them what they wanted at a discount, would the store owners' have a right to be mad?

By using the MLS broker cooperative as a marketing tool for sellers, the intent of cooperation is circumvented into something that was unintended -- giving a distinct advantage to one business model at the harm of others.

The FTC thinks it's done something wonderful by helping these new business models best their competition in the name of the consumer, but there will be an unintended consequence.

If cooperation is being replaced by farmers who milk the MLS cow through the fence, doesn't it make sense for the cooperating brokers to move the herd? The obvious unintended consequence of this persecution by the FTC is that some brokers may simply decide that disclosure of what services the seller is actually getting is the only way to make sure everyone gets an equal share of milk. That way they can privately decide whether it's worth their time to show buyers homes that they'll try to turn around and buy through the seller.

The worst that can happen is that some brokers, particularly those with significant market share, may decide that being part of an MLS that allows such behavior simply isn't in their best interests.

Look at how MiRealSource handled its recent go-round with the FTC. MiRealSource, operated by feisty CEO Virginia Bratt and a first-class IT team, has just settled an administrative complaint by the FTC to change the MLS's policies. From now on, MiRealSource will accept all lawful listings permitted under Michigan law, revoke its requirement that members maintain a physical business address in Michigan, and revoke its rules setting minimum broker service requirements.

Bratt and company compromised by requiring that all members be licensed in Michigan, comply with all Michigan real estate licensing laws, and fully disclose for each listing the services being provided by the listing broker.

Further, MiRealSource will continue its permission-based system of broker participation in such services as Broker Data Sharing, Realtor.com, Google.com, etc. with the default set to "NO" participation. Brokers have to OPT IN, if they want their listings sent over the Internet. That means that each member can select the websites on which their listings will be displayed. In a nod to NAR's compromise with the FTC, MiRealSource members can also select which participating brokers listings are displayed on the member's Website.

This takes the heat off of broker opt-out, and allows cooperating brokers to know who and what they're dealing with it comes to a listing and its level of representation (if the FTC approves the final agreement.)

Says Bratt, "The buyer will not know the difference, but the seller will know the difference because he/she will be signing an addendum that spells out the services that the agent is saying that he/she will be providing. The disclosure is really for the other agents so they know what they are dealing with when they pull up a listing … just what services the listing broker is providing -- and they can decide if they wish to proceed."

"We have agreed to settle because we do not want to waste our members money fighting a battle that we will never win -- and the FTC is not going to let go of this -- they are on a mission. They have deep pockets and we don’t."

She adds, "Actually some of the changes that we are making to our rules will prove to be favorable to our members -- we are going to be requiring disclosure on all listings to show just what services are offered on that listing. This way the agents know what they are dealing with going into it. I think that they will be happy with that."

Published: December 4, 2006

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

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.