You Save Real Estate Blog

May 29, 2008

EDWARD IWATA, USA TODAY
In a win for online discount real estate brokers, the Justice Department and the National Association of Realtors have announced a settlement that will let Internet brokers use the same for-sale home listings used by traditional brick-and-mortar brokers.

The Justice Department says the proposed antitrust settlement will create more competition among traditional and discount brokers, while giving consumers more choices.

“Today’s settlement prevents traditional brokers from deliberately impeding competition,” said Deborah Garza, deputy assistant attorney general in the Justice Department’s antitrust division.

The settlement is encouraging to online real estate firms such as Redfin, a Seattle-based startup that CEO Glenn Kelman calls “the E-Trade of real estate brokers.” Before the settlement, Kelman says he wasn’t even sure that Redfin would continue to exist. Now, though, there’s potential for future growth for his firm and others, he predicts.

“We’re relieved - we’ve been thirsting for this data for a decade,” Kelman says. “If this lawsuit had gone the wrong way, we wouldn’t get the data we need, and that data is our lifeblood.”

The Justice Department filed a civil lawsuit in 2005 against the NAR, alleging that the trade group prevented online brokers from offering lower costs and better services to consumers.

Under NAR policies, online brokers could not gain access to home sale listings offered by the more than 800 NAR-affiliated “multiple listing services” around the country. Some consumers prefer online and discount brokers, who may charge less than the 5 percent or 6 percent commission of traditional brokers.

In one undisclosed market, an online firm was forced to close its popular Web site after all of the traditional brokers followed a questionable NAR policy and withheld their house listings from the site, according to prosecutors.

The NAR does not admit or deny liability in the 10-year-long settlement, which must be approved by a federal judge in Chicago.

The trade group, which represents 1.2 million residential and commercial brokers, called the settlement “a win-win” for its industry and consumers.

“Today I can say with clear knowledge … that the real estate industry is dynamic, entrepreneurial, and fiercely competitive,” said NAR President Richard Gaylord in a statement.

Under the settlement, the NAR and its affiliated multiple listing services must repeal their anti-competitive rules, and not treat online brokers differently than traditional brokers. Traditional brokers cannot withhold their for-sale listings from online brokers.

In the three years since the government sued the NAR, most traditional Realtors also have embraced the Internet for sales and marketing purposes.

“They realize they have to provide it and if they don’t, their competitors will,” says Robert Butters, an attorney at Arnstein & Lehrs in Chicago who has represented online real estate brokers. “All of this will make for a better consumer experience.”

Last year, a report by the Federal Trade Commission and Justice Department found that blocking the online discount brokers’ access to Internet home listings was hurting consumers.

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