Real Estate Listings Little Impacted by DOJ Settlement

Several years ago, it looked like real estate brokerages might be marginalized by “Virtual Office Websites” (VOWS) that grabbed multiple listings service listings from the Web, using a licensed agent. They then acted as cut-rate sales agents to home buyers.

At the time, it was envisioned that major online entities such as Yahoo! might use VOWs as a loophole for getting into the tent. Worse, there was a fear that banks would use VOWs to facilitate a sneak attack on the industry (if restrictions on their participation eased).

The response by The National Association of Realtors in August 2005, was to draw up new rules that would deny the VOWs access to the listings, making it difficult for them to stay in business. Penalties were imposed on members that assisted VOWs.

It seemed to be clear that NAR’s cartel-like actions wouldn’t hold up in court. But that didn’t matter. Mostly, it would buy time for the industry to develop better Internet positioning – like deliberately fouling Kobe Bryant to make him miss a basket and hope he doesn’t make his foul shots from the line.

That’s almost exactly how it has worked out. Almost three years after The Department of Justice sued NAR to overturn its policies in October 2005, the two sides have settled. For NAR, it has been time well “bought,”, if you want to have that perspective. In the interim, the market has greatly evolved vis a vis the ready access to information allowed by the Internet, and changes brought on by bad market conditions.

Under terms of the settlement, the NAR is unable to prevent VOWs from gaining access to listings from its members, or to punish members who cooperate with VOWs. At the same time, NAR gets to narrowly define what a VOW is (i.e. someone who is actively engaged in selling real estate).

The DOJ issued a statement that the settlement will help innovative real estate practices and help reduce commissions paid by consumers. “Today’s settlement prevents traditional brokers from deliberately impeding competition,” said Deputy Assistant Attorney General Deborah A. Garza. “When there is unfettered competition from brokers with innovative and efficient approaches to the residential real estate market, consumers are likely to receive better services and pay lower commission rates.”

The reality is that the settlement means very little to most players – although it will be reassuring to investors of cut rate brokerages that saw their lifelines being cut off. It has been an especially tough marketplace for them.

During the intervening years, brokerages have pre-empted many of the advantages of VOWs. They have widely opened their listings to third party players such as Zillow and Trulia; or discount sites such as RedFin. They have more broadly participated in Internet Data Exchange –some had boycotted it — and they have become less reliant on one size fits all sites such as Realtor.com — although it remains the largest real estate-oriented site, by far. At the same time, cut- rate brokerages such as ZipRealty have generally been able to gain access to the listings that they need.

To be sure, the real estate industry has major changes ahead of it as the market continues to shake out and the role of agents and brokerages continues to shift. But as the market has shifted, very few people currently use VOWs. Certainly, this settlement is not going to bring in a new era of VOWs competing against the big (and little) guns of real estate.

3 thoughts on “Real Estate Listings Little Impacted by DOJ Settlement

  1. This is a case of an industry that is struggling to adapt to the age of technology. Although, if you ask any Realtor, you can bet they are all using services like Craigs List, and other online classifieds to sell houses. And every one of them has a website.

    So, by leveraging automation and increasing efficiencies, the process of selling a house has gotten much easier then it was in 1990. And, so like any other industry, when the product becomes easier to manufacture and deliver then the price should come down. For the most part, Realtors are not getting paid for their value… they are getting way OVER paid for it. With the exception of those highly professional agents that cater to a unique market, or luxury market where the expense of time and money to sell a house is a considerable risk… those agents are truly providing value.

    But the agents that are selling the median priced homes and arent doing anything other than list the house in the MLS… what value do they really provide? Not enough to warrant a 6% sales commission.

    Besides, the agents that understand this have already adapted to technology and are ok with a 2% commission because they are making up the difference 10 fold in volume by leveraging tech.

  2. I agree with the prior comment. Technology is moving faster than the Realtor organization can keep up. Maybe more correctly the organization is fine but the individual Realtors are finding it harder to keep current. Blogs work for some and are completely foreign to others.

    The net also makes it so more investors can market directly to buyers and sellers. While it is not legal to broker deals it is legal to buy and sell to make a profit on the deals.

    Technology change is similar to other business arena where a change in the rules knocks the entrenched king off his thrown. Change or be changed.

    The suit went away because it mattered little now. It was a great delaying tactic in the mean time.

    I am an investor and not an agent. I am a buy and hold investor so not one that is trying to make my money flipping deals. I do find it easier today to find deals given all the great web resources (maps, satellite images, public record info) than when I stated over 20 years ago. I also find I can coach new investors as the web helps us exchange details on individual deals. Agents who can add value are welcome but how they add value keeps changing.

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