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A Bolt From the Blue for the FTC

I have to agree with the FTC ‘s initial action but for all the wrong reasons. And I don’t agree with them now pursuing the case further. A few days ago a Judge bold from the bluedismissed the complaint filed by the FTC against a Detroit area Multiple Listing Service. The position of the FTC was that it was “hurting consumers” for Realcomp to deny brokers using an “exclusive agency listing” the right to be on Realtor.com and other public websites. The brokers who were up against the FTC decided it would be easier to just stop doing it so the judge dismissed the complaint. The FTC officials plan to pursue the case further (making a “Federal case out of it).

From Inman on December 13th:

This policy, which was adopted following the FTC’s complaint against Realcomp and other MLSs, provides an exception that allows MLSs to ban the transmission of listing information if the listed property’s street address or a graphic display of a property’s location is publicly displayed and the seller displays a for-sale-by-owner sign on the property or another sign or notice that indicates that the seller is seeking direct contact from buyers.

Meanwhile, Albert Hepp, a flat-fee broker who serves as president of the American Real Estate Broker Alliance, a national alliance of flat-fee brokers, said he is disappointed with the judge’s decision and NAR’s stance on the issue.

“We are disappointed in the ruling and urge the FTC to appeal,” he said. “Anyone who truly understands the MLS knows that this is a clear-cut case of an MLS hiding the listings of discounters to harm consumer choice. Once again, the NAR has unfortunately chosen to fight competition while claiming to promote it.”

For example, an attachment to the judge’s decision details an agreement by Realcomp and the FTC over a contested “search function policy” adopted in 2003 that defaulted to a search of exclusive-right-to-sell listings and required MLS users to specifically search for exclusive-agency listings to view those properties. That policy was changed in April 2007, and the agreement provides that Realcomp “shall … cease and desist from adopting or enforcing any policy, rule, practice or agreement … that treats exclusive agency listings, or any other lawful listings, in a less advantageous manner than exclusive-right-to-sell listings with regard to the search function in the Realcomp MLS.”

I disagree with Albert Hepp’s self-serving statement as well. I think the problem that the brokers at that MLS had – and stupidly tried to fix by attempting to downgrade the way “exclusive agency listings” were handled has nothing to do with harming consumers or discriminating against brokers who charge less.

The original purpose of the MLS was to offer compensation to other brokers for bringing an acceptable offer to them on their listing. Period. This is still what it should be about today. Having “listings” that offer no real compensation to a cooperating broker or are nothing less than an attempt to list a for sale by owner property so the owner can sell it directly to a buyer himself or “listings” from brokers who are not really going to be doing anything but having entered the listing into the MLS – this is the kind of crap those brokers were attempting to solve. But because of the busy-body, know-best lawyers at the FTC it seems they can’t just come out and say that. I can. That is the real problem. These people are parasites and contribute precisely nothing. The industry does not have “a problem” with brokers who charge less. Charge whatever you want but if you are going to list properties in the system don’t try and shove your work over to the other agent and cry out “we want to help consumers”, because that just makes you a damn liar. You want to help yourself. I don’t believe any of the altruistic blather that spews forth from any of those people.

I’ll tell you why I had to agree with the original motion. All of my listings are exclusive agency listings. They have been for the past fifteen years. I give all of my sellers the right to sell their home themselves and pay nothing and also to fire me at any time. Therefore, all of my listings are exclusive agency. Letting all other agents know that in the event they write an offer on my listing they could (in a hot market) be competing with the seller. In all the years we have had this policy we have had very few problems. Very few. I believe all listings should be exclusive agency. The idea that people are “stuck” to each other, who don’t want to be stuck to each other isn’t an arrangement I want to promote. Thankfully, the people who sit on the board of directors for ARMLS never even thought of doing anything as stupid as the Detroit MLS.

If it had been necessary for me to take legal action I would not have thought of that kind of discrimination as “anti-consumer”, it isn’t. It is anti-agent. Having certain types of listings not show up – as a default – in the MLS probably IS anti-consumer. But not having them on the “public websites” has nothing to do with “offering compensation to brokers”, as it is in fact advertising. Advertising is not the purpose of the MLS.

Just because someone working at the FTC had to sit through all those classes in law school is no reason they shouldn’t be able to grasp this simple concept.

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  • 8 comments

    8 Comments so far

    1. Greg Tracy December 19th, 2007 2:47 am

      Go Russell- Go Russell!!

    2. Glenn in Naples December 19th, 2007 6:38 am

      Well said Russell and excellent points.

    3. Bob in San Diego December 19th, 2007 8:51 am

      “Advertising is not the purpose of the MLS.”

      Maybe not originally, but it is today. It is the MLS that made it that way by uploading all listings to Realtor.com, and in San Diego, the local papers.

      If it was now only about compensation, then the distribution of listing data beyond the MLS would be the sole responsibility of the listing broker.

      The fix for that in San Diego was simple. All listings in the MLS must offer compensation to a buyer agent.

    4. Christina Ethridge December 19th, 2007 9:46 am

      Russell: I see where you are coming from. We simply do an ‘exclusive right to sell’ agreement with an addendum to the contract allowing the seller to cancel our services at any time (and other variances to the agreement).

    5. Kris Berg December 19th, 2007 10:11 am

      >The fix for that in San Diego was simple. All listings in the MLS must offer compensation to a buyer agent.

      Yes, but in the glory days of the early ’90s, we saw a lot of $1 offers of compensation. There will always be a loophole.

      Love the post Russell.

    6. Bob in San Diego December 19th, 2007 1:01 pm

      Yes, but in the glory days of the early ’90s, we saw a lot of $1 offers of compensation. There will always be a loophole

      Builders did the same thing, knowing that the buyers would see the listing on Realtor.com, the local paper and via a gazillion agents’ IDX. They did this because it was the best exposure (advertising) they could buy.

      It goes to the point that the MLS is now an advertising medium. When E Realty sued ABOR, it changed everything forever. The result was IDX, which is nothing more than an advertising medium that we all benefit from. We use the MLS via IDX as a way to find buyers.

      This is the Achilles Heel of the MLS, and why the DOJ has a case. The only real solution at the end of the day is what Greg has been screaming from the mountain tops – the divorce of commissions.

      Of course that means that the MLS will then ONLY be an advertising medium. Its demise will follow very quickly.

      The irony here is that the business models that will bring forth the demise of the MLS will also have killed the very host on which they survive.

    7. Ken in Chicago December 19th, 2007 2:06 pm

      If the MLS’s would get their noses out of marketing properties life would be much easier. Marketing is the job of the listing agent, not the MLS.

    8. Russell Shaw December 20th, 2007 7:54 pm

      >We simply do an exclusive right to sell” agreement with an addendum to the contract allowing the seller to cancel our services at any time (and other variances to the agreement).

      Which is exactly what I used to do, as well. My broker pointed out to me that what I had WAS an exclusive agency listing and that I should simply say so. I agreed. :-)