As the saying goes, "those who ignore history are doomed to repeat it." Apparently, the people in charge of Realcomp II, Ltd., the largest MLS system in Michigan, can be pretty ignorant, or at least obstinate. According to an article from Inman News (subscription required), the Federal Trade Commission has expressed its displeasure with Realcomp II’s policy of not allowing Exclusive Agency listings to be displayed on its sites that are viewable by the public. Exclusive Agency is a type of listing that allows the seller to find a buyer without utilizing or paying a commission to the listing broker. By restricting the display of Exclusive Agency listings, those listings cannot appear on Realtor.com, any Realcomp II public MLS search site, or in the IDX data that is displayed on the websites of its members. The FTC has previously approached other MLS systems about the same type of policy, and they complied with the FTC’s request to change the policy. The most recent MLS to face a formal complaint was in Austin, TX.
It would appear that Realcomp II is going to test their luck against the FTC, since they formally rejected the FTC’s settlement proposal. According to the Inman article, Realcomp says that it will use its errors and omissions insurance to assist with legal costs that it would incur from fighting any lawsuit by the FTC. I wonder if they ran that by the E&O provider yet? I can’t imagine that their E&O provider is exactly thrilled about the prospect of footing the bill for the defense of a lawsuit by a Federal agency. . .
Realcomp’s reason for rejecting the FTC proposal is summed up in the statement they released:
"We have an obligation, first and foremost, to our REALTOR® customers,"
said Karen Kage, CEO, Realcomp II Ltd. "The purpose of our MLS is to
facilitate the sale of properties between listing and selling agents and, in
turn, ensure compensation for both parties. To change our rules and
organizational structure, established by our Board of Governors and agreed to
by our broker members, would entirely compromise the purpose of the MLS and
the core service we provide to our REALTOR® participants who pay us to
represent their best interests."
Kage continues:
"The changes to the rules demanded by the FTC could result in
the sale of properties between buyers and sellers with no obligation to
utilize or compensate broker members, which is completely outside the purpose
of the Multiple Listing Service. The FTC complaint makes absolutely no sense
and we reject any proposal that would result in such a scenario."
I’m not positive about this, but I don’t think that telling the FTC that they make "absolutely no sense" is the most tactful way to respond to their proposal, especially since the FTC convinced 4 other MLS’s that it was making pretty good sense.
Both of these quotes serve to solidify my opinion about MLS systems in general, although that isn’t what I want to focus on right now. What bothers me about this situation is that the listings that are being restricted are listings being entered into by owners and REALTORS. The problem that the FTC seems to have with these policies is that the MLS is restricting the display of perfectly legal listings that are created by its very own members. To the FTC, it doesn’t seem fair for an MLS to restrict the public display of perfectly legal listings of its very own members. It is true that Realcomp II is not forbidding the listing of Exclusive Agency agreements, merely the display of such listings to the public. I do not, however, agree with their assertion that, in so doing, they are representing the best interests of their REALTOR participants. The interests that are being represented are those of the REALTOR participants who do not sign Exclusive Agency agreements. The REALTOR participants who do sign them are left out in the cold.
It is true that there is the possibility that displaying such listings to the public could result in a transaction in which neither buyer or seller utilizes a REALTOR; but what about the buyers out there that DO want, or already have, representation through a REALTOR? Why shouldn’t they be allowed to view the properties?
The following paragraph from the Realcomp II statement made me chuckle:
"Moreover, a recent survey performed by the National Association of
REALTORS® showed that consumers benefit financially when they employ a
licensed real estate broker," said Kage. "Such individuals can make up to 16%
more on the sale of their homes than ‘For Sale by Owner’ properties."
Additionally, through the survey, two-thirds of ‘For Sale by Owners’ indicated
they would use a REALTOR® the next time.
I find it funny because the FTC doesn’t care if people make more money by using a REALTOR. The FTC isn’t there to protect the possibility of a consumer making more money by making one choice as opposed to another, the FTC is there to protect the consumer’s ability to choose. Sites like Zillow and Redfin exist based on this fact. The FTC is concerned with preserving competition and choice, not preventing stupidity. I would hope that Realcomp II’s lawyers wouldn’t cite the results of an NAR survey as a legitimate defense of the policy.
It would seem that Realcomp II is willing to ignore the history of MLS companies that have tried to buck the FTC. We all know what happens to people who choose to ignore history. In this case, the price of ignorance could be a high one, literally. If Realcomp II thinks that the reward of keeping the policy is worth the risk of going "tete a tete" with the FTC, more power to ‘em. That’s what the legal system is for.
