Opinion ID: 214064
Heading Depth: 3
Heading Rank: 1

Heading: Realcomp and the Real-Estate Market

Text: Realcomp is an association of local real-estate boards and associations located in southeastern Michigan, with a membership composed of real-estate agents and brokers. [1] Realcomp is affiliated with the National Association of Realtors (NAR), and its bylaws require it to abide by NAR's rules. Realcomp's approximately 14,000 member brokers compete with one another to provide residential real-estate-brokerage service to home buyers and sellers. Any licensed real-estate broker who is a member of a Realcomp shareholder board, including brokers who offer discount services, may become a Realcomp member. Every Realcomp member, including those who offer alternative business models, pays the same quarterly membership fees. Realcomp's primary service to its member brokers is its operation of the Realcomp MLS, the largest MLS in Michigan. An MLS is a database of information about properties for sale (exclusive of FSBO [For Sale By Owner] properties) that can be viewed and searched by all other local brokers who practice in the area and participate in the MLS. Pet'r App. Vol. II at 68 (Initial Decision (Dec.) ¶ 14). By disseminating detailed listings, the Realcomp MLS facilitates the sharing of information among brokers representing buyers and brokers representing sellers. Real-estate listings on Realcomp's MLS, which include property details and offers of compensation, can be viewed by Realcomp members through Realcomp's online system, but not by the general public without the access of a member broker. The Realcomp MLS also disseminates listing information to selected public websites that can be searched by members of the public. Thus, in addition to access to and advertisement on the MLS database itself, the Realcomp MLS offers its members internet advertising on the approved websites to which Realcomp provides information. Approved websites include MoveInMichigan.com, Realcomp IDX participant websites, and Realtor.com. To disseminate listings, Realcomp provides an IDX (Internet Data Exchange) feed each day which can be loaded onto websites of member brokers and which assembles selected MLS listing data from all brokers who have requested that their listings be distributed. Through Realcomp's IDX feed, brokers are able to display listing information from the Realcomp database on their individual websites so that consumers can search available properties on those websites. The Commission contends that technological developments like the MLS data feed are enabling consumers to self-supply certain services and are exerting competitive pressure on the traditional model for brokerage services. Under the traditional model, home sales involving the use of real-estate brokers incorporate both a listing broker, who works with home sellers, and a cooperating broker, who works with home buyers. Although representing one party in a particular transaction, brokers do not often specialize as either a cooperating or listing broker and may represent either buyers or sellers. The agreement between a listing broker and home seller, called a listing agreement, specifies the duration of the contract, the types of services to be provided by the listing broker, the compensation to be paid to the listing broker, and the offer of compensation to be paid to any cooperating broker who secures the home purchaser. A listing broker is compensated either by a flat fee paid up-front at the time of the listing agreement or by commission based on the selling price of the home, or by some combination of the two. The home seller also compensates the cooperating broker, either directly or through payment to the listing broker. There are two common types of listing agreements governing the bundle of services provided by and compensation paid to residential real-estate brokers: Exclusive Right to Sell (ERTS) and Exclusive Agency (EA) agreements. Under an ERTS listing agreement, the listing broker is appointed as the seller's exclusive agent for a specified period of time to sell the property on the owner's stated terms, and is provided the same compensation when the property is sold even if the owner or another broker, and not the ERTS listing agent, secures the property's sale. A cooperating broker, in contrast, typically is not paid directly by either the home seller or the home buyer, but instead is compensated indirectly by the home seller through the listing broker, who makes an offer of compensation carved from the listing broker's own compensation to any cooperating broker who finds the buyer that ultimately purchases the home. A common ERTS compensation structure includes a 6% commission to the listing broker and an offer of compensation of 3% by the listing broker to the cooperating broker. There are also flat-fee ERTS listings that provide higher fees to the listing agent than do flat-fee EA agreements. Under an EA listing agreement, the listing broker acts as the exclusive agent of the home seller, but is paid less or no additional compensation if the property is sold without further assistance from the listing broker. Cooperating brokers are paid directly by the seller. EA contracts may offer a la carte, or unbundled, brokerage services, with a compensation structure characterized by an up-front fee to the listing broker rather than a commission, and a 3% offer of compensation from the seller directly to any cooperating broker. In a commission-based ERTS transaction, if the home is sold to an unrepresented buyer, the listing broker retains the compensation that otherwise would have been paid to the cooperating broker, and the cost to the home seller remains the same. Under an EA agreement, in contrast, if the home is sold to an unrepresented buyer, the compensation to the listing broker remains the same, and the compensation that would have been paid to the cooperating broker is retained by the home seller. ERTS agreements typically govern a traditional package of full brokerage services, while EA agreements and flat-fee ERTS agreements are conducive to providing discounted, limited brokerage services. The traditional set of services provided by a listing broker to the home seller include showing and marketing the property, presenting and evaluating offers to the seller, and negotiating counteroffers. Full-service listing brokers in Realcomp's area typically charge commission rates around 6% and are compensated through commission-based ERTS contracts. The discount, limited-service brokerage model exemplified by EA listings offers a lower-cost alternative to the traditional full-service model. A listing broker in a limited-service listing may provide any, but not all, of the services provided under a traditional brokerage model, according to the preferences of the home seller as consumer. As described by the ALJ, unbundled brokerage services meet a consumer demand for lower cost brokerage services where consumers are willing to carry out some of the home selling tasks themselves that otherwise would be performed by real estate professionals. Pet'r App. Vol. II at 75 (Dec. ¶ 73) (internal quotation marks omitted). Home sellers may purchase a subset of the full range brokerage services (such as listing in an MLS), while self-supplying other services such as show[ing] the property, hold[ing] open houses, negotiat[ing] with buyers, or clos[ing] the transaction . . . without broker assistance. Id. (Dec. ¶ 72). The expansion of the market share of limited-service brokers since 2003 has been attributed in part to the role of the internet in making it easier for brokers to market directly to home buyers and in enabling consumers to self-supply services. The development of the internet and MLS databases, the increase in the number of broker websites, and data feeds provided from the local MLS to public websites have enhanced the ability of brokers to share real-estate information and of members of the public to access it. As a result, the traditional brokerage model faces competitive pressure arising from the technological developments that enable consumers to self-supply certain services and from limited-service brokers who discount their fees in response to these developments.