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The Honolulu Advertiser
Posted on: Friday, October 28, 2005

Real-estate industry worried about its image

By Mary Umberger
Chicago Tribune

CHICAGO — The real-estate industry has taken a pounding from federal regulators and the media lately. But its internal strife — and a federal antitrust lawsuit — aren't likely to be the centerpiece when the National Association of Realtors holds its annual meeting in San Francisco this weekend, said association spokesman Steve Cook.

The public emphasis on unity comes at a time when the nation's largest trade group is grappling with charges from within the industry and from the federal government that its rules squash competition from online real estate companies.

In September, the Justice Department sued the 1.2 million-member group for antitrust violations, charging that its rules that permit brokerages to withhold their listings from online competitors keep consumers from having full access to information they need, and artificially hold prices down.

The pressure has been building: In August, a Government Accounting Office investigation concluded that real-estate competition appears to be based more on reputation or level of service than brokerage fees.

And in recent months, federal officials have been looking at some of the dozen states that have passed or are considering Realtor-backed "minimum service" real estate laws that critics say require consumers to sign on for services that they might not want or need, at a commensurately higher price.

The issue surfaced publicly this week when the Federal Trade Commission and Justice Department held a daylong hearing on competition in the industry — a gathering at which numerous discount firms complained loudly that the trade group was working to shut them down.

Defenders of the Realtors' association counter that there's room for all in the business — probably to a greater extent than ever before — and that its policies work to the benefit of consumers. They also view the lawsuit as unwarranted federal interference.

"All you'd have to do is a five-minute investigation, and anyone would find that it's one of the most competitive industries around," said Bruce Theobald, owner of Lakefront Realty Group in Chicago. "A very wide variety of choices is available to consumers. How could anyone say it's not a competitive industry?"

Industry consultant Steve Murray, who has studied the competitive climate on behalf of the Realtors' association, says that's true, to a point. "Within the existing industry, I would agree on that, it's very competitive — but only within the existing industry.

"(The NAR) is trying to shut down new forms of competition, trying to inhibit them."

Some in the business worry that media coverage of their disputes is blackening the eye of an industry — Newsweek recently labeled it "a cartel" — that already struggles for respect.

"The image is under assault," said David Hanna, chief executive officer of the Prudential Preferred Properties franchise in Chicago. "We used to be swell folks, now we're bad people. (Our image) has taken more of a hit than the average real-estate agent realizes."

The Realtors' group says, to the contrary, that its members look better to the public than ever before.

"We just finished a survey that we've done for about seven years now of 1,000 consumers," Cook said. "It shows that our image is higher than ever."

Some aren't convinced.

"Quite frankly, (the controversies) all make us look like a terrible industry," said Stephen Baird, chief executive officer of Baird & Warner Real Estate in Chicago. "We look terribly anti-consumer, old-fashioned, like we're trying to protect our old ways."