1. Where Real Estate Is Headed: The Adoption of a Comprehensive Internet Display Policy Colorado Association of REALTORS Colorado Springs, Colorado October 23, 2002

2. Ten Years After the Lions The Customer Is Driving Industry Change …

3. REALTORS Are Doing Things In Business Today That They Would Never Have Dreamed of Doing Five Years Ago? Customers are arriving at the office with listings downloaded from the Internet. Customers are expecting REALTORS to communicate with them via e-mail. Agents are dealing with customers they never see. REALTORS are using interactive on-line forms. Brokers and agents are investing in agency web sites because sales are being generated from them. Brokers are offering more and more on-line services.

4. Why Is The Pressure of Change Increasing? The New Customer!

5. A Word About Our New Customers… the N-Geners 80 million in U.S. alone (largest ever). First time in history that children have become an authority on a central innovation Thrive on collaboration and innovation. First point of reference is the net. Mind-set of immediacy.

6. Why are N-Geners Important? Chicago Title Survey 1999 Average First-time Homebuyer 32 years old

7. “The Internet is the greatest marketing tool in the history of real estate.” Lennox Scott John L. Scott Real Estate

8. But, My Broker’s WebSite Contains Only 9 Residential Listings

9. My Broker’s Site

12. Framing National Aggregator Sites The Initial Attempt to Incorporate the Listings of Other Brokers

14. Broker Reciprocity (IDX) Is Born …

16. IDX Success Consider This … That same month a national aggregator site reported 3 million unique user visits. In March 2001 an RMLS Broker’s Site recorded 400,000 unique user visits.* *Courtesy of : Brian Larson, CEO

17. Did the National Aggregator Site Provide More Value to the Broker? Broker’s Market = 1% of National Market 3,000,000 X.01 = 30,000 Visits for broker’s listings 30,000 aggregator site v. 400,000 broker site

18. Another Benefit of IDX … IDX creates “stickier” agency WebSites since these sites now offer more listing data.

19. “Stickiness” … the longer a customer “sticks” with the broker’s site, the better the opportunity to build a relationship. Before IDX 5 minutes* After IDX 20 minutes* RMLS data (courtesy of Brian Larson, CEO)

20. Houston Association of REALTORS Began Offering IDX Solutions to is Members In July of 1999

21. What is the Explanation for the Success of IDX Sites? Local Advertising!

22. With IDX: The consumer sees the local broker as the source of virtually ALL listing information and is not guided to the broker’s competition (no photographs or logos of the listing agent and no phone numbers or e-mail links). Brokers get branding without branding their competition.

23. Mill Creek home page

24. Mill Creek, pick your county

25. Mill Creek, search criteria

26. Mill Creek, thumbnail results top

27. Mill Creek, thumbnail results bottom

28. Mill Creek, full result, top

29. Mill Creek, full result, bottom

30. IDX Concerns Many Associations failed to explain the benefits of IDX to their brokers before launching the program and some even adopted an “opt-in” policy. Brokers holding major market share often “opted-out” of IDX. Some brokers were prohibited by Local MLSs from displaying the fields they wanted to display on their sites. Other brokers were told they needed to incorporate separate searches on their sites of the listing data of other market area MLSs to which they belonged. Many MLSs were slow to act and missed the January 1, 2002 deadline.

31. Enter … Virtual Office Websites

32. The Theory Behind Virtual Office Websites … An alternative delivery mechanism for the information distributed by brokers to clients with whom they have a broker/consumer relationship. A website displaying all active listings of MLS Participants (no opt-out) except for listings withheld from Internet display by the seller. A site that displays listings to qualified buyers interested in the listings but prevents unqualified, general access to this information through a password barrier also known as a “firewall”.

33. Additional Issue for VOWs Some VOW brokers have argued that because their sites are not advertising sites they do not need to identify the listing agency.

39. IDX v. VOW By Comparison

40. Internet Data Exchange (IDX) courtesy of Jerry Matthews An IDX website is where the public can enter and conduct searches of available listings. The Participant can only display listings allowed by other participants. Limited listing information details are displayed subject to rules by the MLS, listing broker and displaying broker. The visitor remains a visitor. IDX is an advertising site.

41. Initial VOW Theory … A Virtual Office website is where the public can enter but must first register, establish a lawful customer/broker relationship and agree to a “Terms of Use” agreement before conducting searches of active MLS listing data. The VOW is a business site, an extension of the bricks and mortar office and an alternative delivery mechanism for communication between the broker and her customer.

42. VOW Work Group Report Washington, DC May 16, 2002 There Are Some Very Important Issues to Consider Regarding the Display of Data on the Internet

43. Internet Marketing Work Group Objective: To Strike a Balance Between … Affording MLS Participants the opportunity to take full advantage of the new technology available to serve their clients. Preserving the viability of the MLS as an efficient means by which Participants serve their clients and through which consumers benefit from the accuracy of MLS data and the cooperation of MLS Participants.

44. Work Group Concerns: #1 Data Security It is faster and easier to take listing data off the Internet. Few of today’s VOW sites are employing the data security steps one would take in the office.

45. #2 Broker Rights Should the listing broker have the right to control what happens to listing data beyond basic MLS offers of cooperation and compensation?

46. #3 Listing Agency/MLS Identity Should MLSs be allowed to require the identity of the listing firm? Can MLSs require data obtained from other sources (FSBO, other MLSs, etc) to be searched separately?

47. Reactions to the Work Group Recommendations “Sound policy is essential in order to insure cooperation among participants, safeguard the reputation of the industry, secure MLS data from fraudulent use, spur competition and introduce consistency across the many Associations and MLSs. … Unfortunately, the proposed policy falls short of meeting the reasonable and pro- competitive standard.” Richard B. DeWolfe

48. Reactions: #1 Data Security Concerns To the extent that some VOWs offer less security, MLS rules could be implemented to require better security measures (identification, verified passwords, limited searches, and anti-scraping software). MLS. ing software). With the exception of broker confidential information, individual brokers should be able to decide what information they display on their VOWs.

49. Reactions: #2 Broker/Seller Rights Each MLS participant has the right to all of the compilation’s data. All listing information should be available for download to the VOW site since this same information is already available at the office. Brokers must not be allowed to “opt-out” their listings from VOW participation. “Opting out” of VOWs is anti consumer and would send the real estate industry backwards.

50. Reactions: #3 Identity Issues Any requirement to force the inclusion of the listing firm’s name on another firm’s VOW would be inconsistent with office policies that exist today. Co-mingling of data from multiple MLSs is necessary.

51. A VOW Vision … “Imagine a firm that can fully verify its customer’s identity, qualify her and understand her needs in great detail, that enables her with electronic forms and signature capabilities and that facilitates her transaction through online channels. These capabilities exist today, and VOW Web sites enabled with full MLS data are required to deliver them.” Richard B. DeWolfe

52. Internet Marketing Work Group Additional Considerations Friday, September 27, 2002 & Monday, October 14, 2002 Chicago, Illinois

53. #1 Rules to Create a Legitimate VOW? First establish a lawful customer/broker relationship before accessing MLS data: Satisfy all applicable state legal requirements such as agency, non-agency and other disclosure obligations. Affirmatively acknowledge entering into a lawful consumer/broker relationship. Confirm by return e-mail.

54. Legitimate VOWs … Identify the “Registrant”: Obtain name, address, phone number and e-mail address. Verify the validity of the e-mail address. Establish and maintain (until 30 days after expiration of Registrant’s password) a record of the unique user name, the password and registration information of each Registrant and make this available to the MLS if requested for security reasons.

55. Legitimate VOWs … Terms of Use Agreement: Require registrant to open and affirmatively express agreement (by mouse click) to a “Terms of Use” agreement acknowledging: MLS copyright, intended for personal/non-commercial use, legitimate interest in purchase/sale of property, will not copy or redistribute, and that he/she has entered into a lawful consumer/broker relationship with the Participant.

56. Legitimate VOWs … Provide Security: Must protect MLS data by employing reasonable efforts to monitor and prevent “scraping” or other unauthorized accessing, reproduction or use of MLS data. If data is obtained through a persistent download MLS may require appropriate security protection, such as firewalls, not greater than those employed by the MLS.

57. Legitimate VOWs … MLS may not make available for search by Registrants the following data without the listing broker’s affirmative permission: Expired and withdrawn listings. Broker compensation. Type of listing agreement. Seller/occupant name, phone or e-mail. Remarks intended for cooperating broker.

58. Legitimate VOWs … Additional Requirements: Data fields may not be changed. MLS fields may be augmented with additional data, the source of which is clearly identified. Notice must be posted on all data displayed that it is deemed reliable but not guaranteed by MLS. Sellers may withhold listings or property address from display or distribution on the Internet. Participant must refresh data at least once every seven days.

59. Legitimate VOWs Requirements to be determined by MLS: MLSs may require display of the listing broker’s name. May determine to permit non-principal brokers or sales licensees to operate VOWs with Participant consent. Assess to VOW users a fee related to actual cost of adding downloading capacity. Permitting searchable “Sold” data on VOWs.

60. Legitimate VOWs MLSs May Not: Adopt additional restrictions to those allowed by the approved policy. Refuse a Participant’s request for basic downloading of active listing information sufficient to operate a VOW.

61. Issues Outstanding … Can MLSs preclude a broker from operating a VOW if that broker opts-out of IDX?

62. VOW Time Line … Policies are effective upon adoption by NAR Board of Directors. Policies must be adopted and implemented by MLSs no later than July 1, 2003. Participants have up to an additional 180 days from date of MLS adoption to bring existing VOWs into compliance.

63. Where Do You Come In? Need For an Implementation Plan … Education: Study these complex issues so that you will be prepared to vote in New Orleans. Help the member understand and adapt to these changes so she can remain profitable. Consider Implementation Issues: rule adoption, technical issues, enforcement and should the Association become a IDX/VOW service provider. Become pro-active with the State Real Estate Commission.

64. “So the real problem with the new rules is that is causes the boards and their members to reexamine how they want to cooperate with each other on the net. That in turn forces the members to decide what they think their competitive advantage is or is not. And, if you throw into the pot the AE who cannot win because it is going to be hard to read what individual members want to do on the issue - it all adds up to some really tough decisions.” A Final Thought …

65. “Given that we as a human race don't like change - it puts more fuel on the fire. I have seen it before when I was a young boy and my parents and other members fought about whether or not there should be an MLS. But in the middle of all the chaos I have faith that the really good AEs and members will step forward like they always have throughout history and provide the leadership that gets us through all of this. They will find the right models and help tweak and improve what ever rules are put into place so that over time we all do what is right for our markets.” Richard Mendenhall May 24, 2002

66. Thank You …