If you’ve ever been in the market for a home, chances are you’ve used the Multiple Listing Service. The MLS is a bulletin board maintained by the National Association of Realtors or its local operators governed by rules promulgated by the NAR. Official policy of the NAR is that that MLSs must make all types of listings available to the websites of participating brokers. However, a revised policy past last week at the NAR’s annual convention allows individual brokers or their firms to exclude certain listings in the MLS from their own websites.
Recently, the Federal Trade Commission has been scrutinizing MLSs that have excluded certain kinds of listings on brokers’ sites and national sites, such as Realtor.com. The FTC’s scrutiny has generated awareness of Realtor’s exclusionary practices, but will have little economic impact on the prices paid for housing or the commissions paid to brokers.
The revised policy was a response to the FTC’s scrutiny. Under the revised policy, brokers must use “objective criteria” to exclude a listing. Listings by “discount” brokers can be excluded under the “objective criteria” rule, if the brokers provide fewer or limited services in exchange for lower fees.
Discount brokers and consumer advocates argue that any exclusion is anticompetitive and harms consumer choice. Exclusion is anticompetitive because small brokers and discount brokers cannot display their listings. Consumer choice is harmed because some sellers’ properties wouldn’t be displayed and buyers can’t see all listed properties.
Full service brokers counter that creating an attractive and useful website can be a costly and time-consuming exercise. Forcing full service brokers to display the listing of those who cannot or will not develop their own websites provides a “free ride” to discount brokers that is subsidized by full service brokers.
For home sellers, the revised policy has more “sound bite” impact than actual impact. Excluding a listing would entail identifying the listing broker and determining the broker’s commission and service levels. As such, it is more difficult and costly to exclude a specific listing than to simply serve all available listings. Thus, it is unlikely that widespread site-by-site exclusion would actually occur. Ultimately, the revised policy will have little economic impact on the display of listings.
That said, buyers should ensure that their agents investigate all available sources of listings. With the growth of listings on Craigslist, eBay, and for-sale-by-owner (FSBO) sites, buyers may miss out on buying their optimal property if such sites are ignored.