Why some brokers are suing the nation’s biggest real estate trade group

One group for real estate agents has filed a lawsuit against the National Association of Realtors (NAR) and two California NAR associations.

The May 11 lawsuit swirls around a NAR policy, the Clear Cooperation Policy, approved by the trade group’s board of directors in November 2019, requiring members to report all homes for sale to official listing services called Multiple Listing Services (MLSs). One competitor, the Top Agent Network (TAN), claims that the NAR, which has about 1.4 million members, is trying to monopolize listings by using the new rule.

Under the Clear Cooperation Policy, agents have one business day to list a publicly marketed property on the local MLS, the standard marketplaces that Realtors use for selling and buying homes in their local markets. Agents who repeatedly violate the rule risk up to a $15,000 fine and expulsion from the MLS.

“NAR specifically designed the Policy to target TAN and discussed this goal during its internal deliberations before formally adopting the Policy,” said the complaint by TAN, a San Francisco-based private listing and networking service for about 10,000 verified top-producing agents.

“We believe this lawsuit has no legal basis and will vigorously contest it in the interest of consumers on both sides of the home sale,” said Mantill Williams, NAR vice president of communications in an emailed statement.

TAN also claims that some local NAR chapters, which govern and support NAR members on a local level, are banning agent conversations and one-on-one emails about homes for sale that are not reported to the MLS in one day. Official national NAR communications originally sanctioned private conversations.

“If somebody within a brokerage firm just calls up somebody or emails somebody in particular and tells them about this property, that's not marketing to the public,” said Greg Zadel, broker and chair of the MLS committee, in a recent webinar.

But local chapters are inappropriately interpreting the NAR rule, according to the complaint against the NAR, the California Association of Realtors and the San Francisco Association of Realtors. Bright MLS, which represents 43 associations in six East Coast states and Washington D.C., is not a defendant in the suit but has also allegedly implemented an “extreme” version of the NAR policy, according to the complaint. Bright MLS did not respond to a request for comment.

“The rule scares agents — not that it’s even real. What are they going to do, tap our phones? Put a mole in the office?” said TAN founder and CEO David Faudman.

Faudman says that the NAR wants to maintain control of data through its MLSs, which brings in $200 million in dues annually from subscribers. Over 89% of residential homes for sale are listed on an MLS, according to the NAR. And the MLSs are “mostly” owned by NAR-associated local organizations, according to the complaint.

The San Francisco Association of Realtors has “explicitly stated” in “numerous webinars and documents” that “no matter what TAN says or how it functions, if an agent uses TAN’s services in connection with a property, the agent must place the property on the MLS within one business day,” according to the complaint. SFAR did not respond to a request for comment.

“It is fairly obvious that they’re worried about losing control of the data. They want to have everything in the MLS first,” said Faudman.

TAN is accusing the NAR of using its large market reach to monopolize information and edge out competitors. NAR counsel allegedly said in November that allowing off-MLS sales would “devalue the MLS,” according to TAN’s complaint. The NAR did not directly respond to a request for comment on this particular allegation.

Anti-competitive allegation

Faudman accuses the NAR of trying to stifle the competition. Under the Clear Cooperation Policy, real estate agents must choose between MLS use and other services. Even non-NAR members must agree to follow and be bound by NAR rules to participate in MLSs which are associated with NAR, if they want to widely market their properties.

Faudman says his organization is being specifically targeted, and even requested a restraining order and a preliminary injunction against the major U.S. real estate trade organization on May 13.

TAN says that the new rule will make their business obsolete, and they are not the only group that disagrees with the rule. The Austin Board of REALTORS® & ACTRIS MLS wrote a letter against the rule when it was up for vote in November.

The client’s best interest

But NAR claims that its rules are helping home sellers and that selling a home off the MLS disadvantages the seller from getting the best market price. The NAR also said it promotes fair housing access to all listings. Faudman called these claims a ruse.

“The National Association of REALTORS® continuously looks at policies to determine what is in the best interests of consumers. The Clear Cooperation Policy ensures greater transparency and competition between real estate listings and between brokers, while still addressing privacy concerns. This is meant to balance personal interests with greater consumer interests,” said Williams.

NAR’s policy would also prevent pocket listings, a listing that an agent “keeps in their pocket” to get commission from both the buyer and the seller, a conflict of interest that allows agents to make twice the money, according to NAR.

But Faudman says sometimes, the seller wants privacy. NAR has stipulated that brokers do not have to list on the MLS if they have a certified waiver from the seller, saying they do not want to make their information public. Sellers may also want to “test the waters'' while keeping the option to pull the home off the market without the stigma of delisting a property.

“It’s like they’re offering a right, like the right to breathe — we don’t need their permission,” said Faudman. “If you go on MLS and don’t sell quickly, it’s egg on your face… This is about consumer choice on how the seller chooses to market the property… Sellers never asked for this [new policy].”

Sarah Paynter is a reporter at Yahoo Finance. Follow her on Twitter @sarahapaynter

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