DOJ & NAR Settlement

The National Association of Realtors has settled its antitrust case with the Department of Justice, and has given online realtors full access to the industry-standard Multiple Listing Service (MLS) Databases. The MLS is a comprehensive listing of homes that are are available on the housing market, and until this point the NAR has restricted access to online brokers.

These online brokers have been offering fees that are significantly lower than traditional realtor rates, and rather than adapt as an industry, the NAR choose a more childish route and withheld the essential data. The Department of Justice took issue with this stance, and filed suit in September 2005.

The deal is especially important for disruptive online-only companies like Redfin, which rely on being able to access current home listings. If the case had gone the other way, Redfin CEO Glenn Kelman says that the company would have died a “slow, grisly death” (SeattlePI). Redfin aims to make the home-buying process more efficient, while saving consumers money in the process (it has been able to save the average home buyer $10,000, which doesn’t sit well with most traditional realtors).

Unfortunately, the settlement isn’t a complete victory for online sites, which will be subject to restrictions on the comments users can leave on each home. If a home-seller asks that a comment be taken down, websites are obligated to comply (consequently, you probably won’t be seeing many negative reviews). Instant customer feedback is one of the most valuable assets of online retailers - to deny consumers access to such information is both annoying and foolhardy on the NAR’s part. The NAR should be supporting traditional brokers by emphasizing personal interaction and service, not by handicapping the competition.

The NAR tried to put a brave face on this development, but consider:

1. Anyone finding a property via an internet listing will pay the Internet service whatever they charge, and the listing broker will get at most a co-broke (half a full commision, which is what they'd normally get if another broker brought the buyer). That's a big reduction in income to brokers in aggregate

2. This development will erode the stranglehold of the MLS. Why pay 3% if you can get good exposure via the Internet and feel competent to show the house and negotiate a sale? Or if you want a third party to handle the negotiation, having your attorney do it would in the great majority of cases be cheaper than the co-broke fee. The Federal government estimated fees could drop from their current level of 5% or 6% to 1%.

First we had the real estate downturn, and now this to thin the ranks of residential brokers. Source