Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - June 2, 2008 NAR-DOJ Settlement By now you've heard that the National Association of REALTORS® (NAR) and the United States Department of Justice (DOJ) have reached a proposed settlement of the lawsuit brought by the DOJ against NAR in late 2005. Many of the reported accounts have presented this settlement in a manner that has raised a number of questions. We will attempt to give a straight forward account of what has transpired and what is to potentially come in the future. The civil action brought by the DOJ almost 3 years ago alleged that certain polices and rules of NAR "could" have the impact of restricting competition and consumer choice, and therefore constitute a violation of antitrust laws. The policies and rules that concerned the DOJ were those applicable to use of MLS listing content by MLS participants in conjunction with their virtual office websites (VOWs) and/or in conjunction with a former NAR policy relative to Internet listing display (ILD). It is important to note, that while the DOJ action specifically referenced the ILD policy, NAR had rescinded this policy on its own, prior to even the filing of the DOJ action, and replaced it with the current Internet data exchange policy (IDX). The proposed settlement states that the DOJ does not allege that the IDX policy, in its current form, violates any antitrust laws. Further, it is important to note that throughout this action, there has been no finding that any of the policies or rules has, in fact, restricted competition in violation of antitrust laws. The settlement agreement contains no admission of wrongdoing or liability because wrongdoing or liability has never been established. The entire action appears to be predicated on what DOJ thought "could" happen. So what is the story? Many of the summaries of the proposed settlement want to make this a matter of winners and losers between certain brokers, MLSs and NAR. They imply that NAR favors only certain business models. This is not true at all - NAR encourages innovation and fair competition. Virtually every conceivable real estate brokerage business model is represented in NAR membership. Or they seek to make this an issue about commission rates. This is also not true. We all know commission rates are established by each broker and are generally a function of services provided by the broker. NAR does not and cannot favor particular commission structures or amounts. In reality, this has been a good faith effort upon the part of all interested parties to create policies and rules relative to MLS participants' agreements and obligations to cooperate with one another, in the best interests of their respective customers and clients, both in the more familiar world of "bricks and mortar" offices (and face-to-face interaction) and in the world of business and relationships created via the Internet - virtual offices, if you will. The proposed settlement agreement between the DOJ and NAR appears to do an excellent job of moving REALTOR® cooperation into the business Internet world. It provides, among other things, that MLS participants will be subject to substantially the same policies and rules with respect to providing MLS content to customers and clients irrespective of the business model used - whether such content is provided on-line via a virtual office website or any other method of delivery such as personal, fax or email. Under the proposed settlement, NAR and MLSs will adopt DOJ-approved policies and rules for operation of a VOW that provide consumers with access to MLS provided listing data. These polices and rules are designed to enable a MLS participant operating a VOW to permit consumers to search real estate listing themselves, without the direct assistance of a broker or agent, while at the same time protecting this very valuable asset - the MLS listing data. For example, before a consumer can have access to the MLS provided data, the consumer must provide the MLS participant with the consumer's name and a valid email address. The consumer must agree to the Terms of Use, which provides that the consumer is using the data only for the consumer's personal, non-commercial use, that the consumer has a bona fide interest in the purchase, sale or lease of real estate, that the consumer will not copy, redistribute or retransmit any of the data, and more. The settlement agreement also strengthens the MLS membership rule. No longer is it sufficient to have a broker's license only to be eligible for MLS participation. A prospective MLS participant must also be actively endeavoring to serve sellers by listing real property or to serve buyers by accepting a listing broker's offer of cooperation and compensation. Brokers will no longer be able to join a MLS to scrape listings from other brokers. Rather the original intent of the MLS is preserved - helping real estate professionals find buyers for people who want to sell their homes. So what happens now? The proposed settlement will be published in the Federal Register, as required by law (it is also available right now at www.realtor.org). Any person may submit written comments to the DOJ within 60 days following the publication. At the conclusion of this comment period, the United States District Court for the Northern District of Illinois (Eastern Division) may approve the settlement by the entry of Final Judgment in this action. Assuming the Court does approve, MLSs will have approximately 90 days thereafter to repeal any existing policies and rules that are inconsistent with the terms of the settlement agreement, and to adopt the Modified VOW Policy of NAR. MLS participants will have 180 days after adoption of the Modified VOW Policy by their MLS to bring their VOWs in compliance with the new rules. To assist with these requirements, NAR will provide compliance training relative to antitrust law in general and the provisions of the settlement agreement in particular to MLSs throughout the country. In the end, the proposed settlement is in the best interests of REALTORS® and the customers and clients they serve. By putting this matter to rest, NAR can focus with on what is really important to consumers - re-energizing and strengthening of the housing market. 1.) Commissions - Miscellaneous Commission Issues Per current MLS rules and the Code of Ethics, once an
offer is produced an MLS offer of compensation may only be reduced with
agreement of the cooperating MLS broker. Note that recent changes
approved at the May 2008 National Association of REALTORS® Mid Year
Meeting by the Multiple Listing Committee will allow local MLS's to
adopt optional rules regarding notice of short sales in MLS listings
and the proportional sharing of commission reductions between listing
and cooperating brokers in short sale transactions. Contact the local
MLS regarding local MLS policy decisions. 2.) Contract Issues & Forms - Binding Acceptance QUESTION: Can an amendment initiated at the buyer's request to address an inspection (or any amendment to an offer to purchase) be prepared in duplicate and submitted to both parties (buyer and seller) at the same time? If both agree you would end up with two copies (exact duplicates), each with a signature. Can this method be used to facilitate a short time frame when dealing with an out-of-town buyer? ANSWER: Yes, Wisconsin case law recognizes that contracts may be signed in counterparts (that is, no one piece of paper has all the original signatures, but taken together, all parties have executed an exact copy of the same contract). It is the assent of the parties to the same terms and conditions that makes a contract. When counterparts are being used, it is prudent to include a statement in the contract explaining that the contract is being executed by the buyers and/or sellers in counterparts (multiple copies of the same offer). The agreement becomes binding, assuming no protest to the contrary, upon the delivery of the amendment with the other party's signature to the party who initiated the amendment. New Forms Mandatory July 1 The new WB-1, Residential Listing Contract, and WB-36, Buyer Agency/Tenant Representation Agreement, are mandatory July 1, 2008. Forms are available for purchase at http://www.wra.org/forms (WB01T and WB36T) or by calling 1-800-279-1972. Copies are available through ZipForm also. ZipForm users should note that the 1999 and 2000 versions of WB-1 and WB-36 will be removed from the program on June 25. Removal of the forms will be automatic for ZipFormOnline but requires a forms update for ZipForm Desktop users. An update notice will be sent by ZipForm to registered Desktop users. This Wisconsin REALTORS® Association Best of the Legal Hotline service is provided for you by the WRA's Legal Affairs Department. The service should be considered a general statement of applicable legal principles. Given this format, it is impossible to fully address all potential legal issues which might apply in any particular situation. A determination of any individual's legal rights in a transaction can only be obtained after complete analysis of the law and its applicability to the particular fact situation. Please contact the WRA Legal Hotline if additional information is needed, or private counsel, if legal advice is needed. Thank you for using the Wisconsin REALTORS® Association Best of the Legal Hotline service. Debbi Conrad |