FTC targets real estate for alleged unfair practices

Agency files complaints against 2 Michigan MLSs, announces agreements with 5 others

Thursday, October 12, 2006

By Glenn Roberts Jr.
Inman News

The U.S. Federal Trade Commission today announced litigation against two multiple listing services and settlements with five other MLSs based on policies restricting a classification of property listings.

The five consent agreements resolve separate investigations against the MLSs over similar policies that prohibited the display of certain property listings on some home-search Web sites, and the litigation targets two MLSs in Michigan that have refused to withdraw similar policies.

Several other MLSs are also under investigation for similar policies, said Jeffrey Schmidt, director of the FTC's Bureau of Competition. But he did not provide specifics about how many investigations are pending, and whether the FTC would take actions against those MLSs.

Today's announcement marks the latest in a series of FTC and U.S. Justice Department actions against alleged anti-competitive practices in the real estate industry. The agencies have also opposed state measures that seek to establish a range of minimum service required for all real estate professionals, at least for some types of agreements for representation in a real estate transaction.

And the Justice Department is engaged in an antitrust lawsuit with the National Association of Realtors trade group over the association's policies for the online display and sharing of property listings information.

For most of the FTC actions announced today, the agency took issue with policies that prevent the display of property information at some home-search Web sites when MLS members entered into "exclusive agency" agreements with home sellers.

Under an exclusive agency agreement, property owners have the right to sell a property without extensive help from the listing broker and are not required to pay the broker if they directly locate a buyer for the property. Meanwhile, the MLSs did not place similar restrictions on the more popularly used "exclusive right to sell" agreement, under which sellers must pay the broker a commission when the property is sold.

According to the FTC, exclusive agency agreements are "often used by home sellers who do not wish to purchase the full range of brokerage services. Under an exclusive agency listing agreement, the listing broker often charges an up-front fee, but may receive a reduced commission, or no commission at all if the owner sells the property without the broker's further help."

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Derek Eisenberg, a real estate broker and creator of MultipleListingSystem.com in Hackensack, N.J., has opposed the exclusive agency restrictions. "The MLS position is without merit. Their assertions that they are doing it to avoid promoting FSBOs are absurd," as addresses are typically not published for listings submitted through MLSs in his market area and there are typically no notations in the public property descriptions that suggest that a property is an exclusive agency listing, he said. "Buyers finding an (exclusive agency) owner would be like searching for a needle in a haystack."

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