Real estate stands apart from other sectors of the economy because it is built on a model that encourages competing businesses to work together, said Ralph Holmen, former associate general counsel of the National Association of REALTORS®. He spoke April 5 in Washington, D.C., during a panel session on competition in the residential home sales industry.
Ralph Holmen speaking on a panel addressing competition in the residential real estate industry.
That unique arrangement, which is facilitated by multiple listing services in real estate markets across the United States, allows consumers to easily access listing information for the vast majority of for-sale properties in an area where they are considering buying a home—without impeding their ability to work with any licensed real estate brokerage and agent they choose, Holmen said during the program, which was hosted by the Information Technology & Innovation Foundation, a nonpartisan think tank.
“MLSs form cooperative relationships between competitors to do business,” Holmen said. “It’s an activity which is really not common in other industries.”
The discussion, which focused on how technology is impacting competitiveness in the real estate business, took place as the industry is anticipating the expiration in November of a settlement agreement reached in 2008 between NAR and the U.S. Department of Justice that pertains to a specific NAR policy regarding how listing data is shared. That policy relates only to companies that provide actual brokerages services using a website—not just listing information.
These companies are known as virtual office websites, or VOWs, and are distinct from online portals where consumers can go to search listings. Portals may refer users to third-party real estate professionals, but do not engage in providing brokerage services.
Holmen said there are relatively few VOWs because establishing an online brokerage relationship with a consumer can stand in the way of quickly providing access to listings to consumers who are shopping for a home.
Brian Larson, a senior business consultant to the law firm of Larson Skinner who has advised the MLS industry, said during the forum that by sharing listings with each other so that each of them can provide buyers with access to information about as many homes on the market as possible, real estate brokers empower consumers to make informed choices when selecting properties to consider purchasing. “Practically speaking, the data is everywhere. Nobody is really seriously arguing that consumers can’t get access to listing data right now,” he said.
Larson added that the robust data-sharing agreements that underpin the MLS industry—which operates in accordance with NAR policies that lay out how brokerages can provide listing information to other firms—help new players enter the real estate market. He said MLSs allow companies that want to help people buy homes to access a nationwide database of listings for a fraction of what it would cost to collect that information directly from millions of individual sellers.
Larson also noted that although there are about 200,000 real estate brokerages in the U.S., listings representing about 80 percent of the residential real estate market are handled by only about 133 MLSs, which makes it highly cost-effective to get access to the information. “I can’t think of an industry where you can set up a business in all 50 states with inventory from all 50 states for under $2 million” other than real estate, he said.
The Federal Trade Commission announced on April 5 that it will hold a workshop in conjunction with the DOJ on June 5 to look into the competitiveness of the residential real estate brokerage industry.
Speaking at the ITIF event, Jessica Drake, an attorney in the FTC’s Bureau of Competition who has played a role in multiple investigations related to real estate platforms, said despite the role the MLS industry plays in aggregating and providing access to listing information, she did not think the government would seek to regulate the industry as a public utility. “I think when you look at some of the MLS cases, it’s fair to say that [MLSs] are seen as essential to competing in the brokerage industry in a localized market,” Drake said, emphasizing that she was speaking for herself, not the FTC.
—Sam Silverstein, REALTOR® Magazine
