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Unlicensed FSBO Flat Fee MLS

December 14th, 2009

There appears to be a growing movement within the flat-fee MLS marketplace that businesses selling “flat fee MLS online services” do not need to obtain the requisite licenses in order to comply with applicable state brokerage licensing laws. For a listing broker, flat-fee MLS has become a giveaway business that, at best, should only be used to capture additional revenue from alternative sources. So, why can’t this popular segment within the real estate industry generate enough in profit margins to sustain itself?  The answer is quite clear: unfair methods of competition, resulting from unlicensed activity. This inappropriate intrusion into a regulated industry operates to the detriment of legitimate licensees, many of whom have become insolvent due to unlicensed activity. The extent of the damages to the industry is unknown. One could easily argue, however, that this behavior makes entry into the market place more difficult and has had a profound effect on sustainability.

These individuals engage in the performance of real estate services in that they maintain websites that offer consumers a host of different real estate brokerage services that include,  listing property in a local MLS ( Multiple Listing Service) for a flat fee through the cooperative efforts of licensed real estate brokers with whom they have established written referral agreements.

They unlawfully collect and retain a portion of the fee charged for listing the real property in the MLS. This takes market share away from legitimate, licensed real estate brokers in that licensed brokers are deprived of listings, revenue, and revenue growth, among other things. These listings would otherwise be posted on the MLS through the licensed brokerage community using legitimate forms of conduct and compliance with all relevant licensing laws.

Furthermore, these business models unlawfully procure the involvement of third party licensed real estate brokers, who, in addition to being licensed, must hold participatory rights to numerous MLS’s throughout each state. These individuals accomplish this by establishing a network of licensed brokers and sales associates divided among different regions throughout each state with whom they have written MLS referral agreements. As a result of these unlawful referral agreements, these individuals engage in an unfair method of competition, and violate licensing laws, among other things, thereby gaining market share as a result of selling MLS packages to consumers/sellers who make payment directly to them.

Finally, the revenues derived from the sale of these MLS packages, combined with all other derived benefits, such as all private property listings created as a result of tying ( bundling ) these services together, clearly indicate how these MLS referral agreements serve to increase market share, which in turn harms the industry.

This scheme of networking with licensees throughout the country as an attempt to circumvent the licensing laws, not only violates those laws but harms each licensed broker who has lost revenue, revenue growth, and market share as a result of these unfair methods of competition. Similarly, the scheme is designed to enrich the violator, and serve as a means by which the violator can sustain its operation and continue to fund portions of its costs for research, web traffic growth, and increased search engine rankings, among other things. The violator’s business model produces significant revenues from these unlawful practices to grow and stay in business.

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