The History of Realtor.com and NAR
by Eric Stegemann
on Jun 10, 2013
Listed in Business

A friend and colleague, Todd Carpenter, wrote an interesting piece brainstorming on what might happen with Realtor.com.  It’s important and hopefully the Board of Directors read it and are educated to make an informed decision:

If you haven’t heard, the National Association of Realtors Board of Directors will be meeting in a few months to decide what to do about their agreement for the site.  There is so much hubub about the topic that Wall Street analysts have been calling NAR BoD members and asking what they think will happen.  Being that Realtor.com relies on it’s agreement with the National Association of Realtors to make money, any change in how NAR operates with the company would likely mean dramatic increases or decreases in the stock price.  This is a high stakes chess game.

For 4+ years, I’ve read almost every quarterly and yearly filing from Zillow, Trulia, and Move, Inc (The parent of Realtor.com) trying to discern where things were going.  (Required disclosure: I currently have no investments in any of the three companies.)

Realtor.com History

Let’s take a little history lesson of NAR’s consumer facing listing website, NAR had spent millions on a project to build a precursor of Realtor.com called the Realtor Information Network. It was a debacle. So NAR Leadership decided it was better to find another partner to help them, along came RealSelect / Homestore (which later changed it’s name to Move after their CEO was found guilty of cooking the books and insider trading).  The leadership wanted to get something out there fast, and the company made contractual promises about what the site would be, what it would do, and most importantly how much monthly traffic they would receive.  Being promised 500,000 visitors to a site in the 1990s was a great feat, but today, compared with Zillow’s 10s of millions of visitors, it’s obviously peanuts.

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But leadership saw a great way to get their listings out there to these 500,000+ visitors – and crafted an arrangement so that Move would be locked into it.  The agreement?  It’s evergreen.  That means that unless one of 4 things happen, NAR can’t get out of the deal.  That’s right, there is no expiration date, no renewal date.

The 4 Ways That NAR Can Get Out of The Realtor.com Deal

  1. The acquisition of Move, Inc or RealSelect {the subsidiary that operates Realtor.com) by another party without the NAR’s consent
  2. Traffic on the REALTOR.com® site falls below 500,000 unique users per month
  3. A substantial decrease in the number of property listings on our REALTOR.com® site
  4. A breach of any of Move, Inc’s other obligations under the agreement that they do not cure within 30 days of being notified by the NAR of the breach

Source: Securities and Exchange Commission – EDGAR Move, Inc 10K Filed 2/14/2014

So Move, Inc set out to build a site, they began by selling the ads they were allowed to sell, mostly to non Realtors to begin with.  Then, the company really started to recognize the pocketbook of the Realtor.  Enhanced listings, ownership of zip code banner ads, websites, CRMs, and more all started to flow out of this agreement and the data they had access to.  And of course Move was very happy with the arrangement until Zillow and Trulia came along.  Slowly, but surely, they began to eat into the pocketbook of Realtors.  They began to get more traffic.  Their monopoly on national real estate listing data was gone.  So of course they got mad.  They started asking NAR for more and more rights to be able to compete with these sites.  And that leads us to where we are today: Move asking for more rights and NAR saying maybe we need to rethink this whole thing.

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The Future of Move, Inc. and the National Association of Realtors

Move, Inc LogoI think to have a reasonable discussion on what they might do, you have to discuss how they would go about doing anything that would be detrimental to Move.

(Disclosure Time: I’m not an attorney.  I’m also not suggesting that the Board of Directors do anything I might suggest below.)  These fates have been discussed for some time – take Rob Hahn’s post from August 2008, (yes 5 years ago!) it ponders the same question: NAR, Move, and Realtor.com

I’m merely laying out a how NAR might execute a way to get out of their deal:

  1. Suggest that Realtor owned MLSs stop feeding to Realtor.com – By reducing the listings on the site not only would they invoke item 3 from above, but the search engine optimization of the site would decrease as well, thereby pushing the total visitors below 500,000 potentially. Flaw: This may be an Antitrust violation and something I’m certain that Move would ask the DOJ to look at.  It’s a risky business strategy to more or less ruin a company over night and something I previously discussed in my piece of requiring Trulia and Zillow to provide canonical links back to the listing broker.
  2. Buy Move, Inc – By buying the site, now NAR can control every aspect of Realtor.com  They can choose what to do to help their members best and can merge in the RPR team and technology (currently a major loss as a line item on NAR’s books.) Flaw: The problem here is cash on hand.  I don’t believe it’s public how much cash NAR has, but as of today Move’s stock values them at $477 million.  Unlike most other companies that are larger (remember NAR has a brand that alone is worth over $1billion), NAR wouldn’t have stock to be able to give to Move shareholders.  So NAR would have to pay cash for the purchase. So the only way to do this, is to offer corporate bonds to be able to make the purchase (or bring in outside investors).  Possible, but unlikely in my opinion.
  3. Make Difficult Rules for Realtor.com To Follow – The trump card in changing the agreement is that NAR has multiple board seats on both Move, Inc and the subsidiary that operates Realtor.com.  Any all major decisions of the company require approval by at least one of NAR’s board of director members.  If NAR can create tough enough rules, it would hamper Move into either renegotiating the agreement or getting out of it entirely.

What’s The Other Option?

Do nothing.

Anything outside of the above 3 strategies, that would help NAR reclaim Realtor.com is really a do nothing in my opinion.  If they allow them to change around how content is displayed, or add additional resources, all that would happen is that the site would continue to languish behind Trulia and Zillow.  Take for example the ability to allow Realtor.com to add content from Houselogic – what would that really do?  Very little.  Houselogic is a great site for clients and agents alike but would it really increase traffic to Realtor.com?  Consider how many longer form content pieces that Zillow puts out.  Do you know what on their site gets the most engagement from consumers outside Zestimates and listings?  Their photos asking users to select which bathroom they prefer, or the celebrity home purchase / sale announcements.  Those sites have gone out and made deals with Google, Yahoo, HGTV / Frontdoor, and more.  Trulia, through their MarketLeader acquisition now have deals with Century21, Better Homes and Gardens, Keller Williams, and a little birdy says perhaps Re/Max is jumping on board with them later this year.

But doing nothing is probably the most likely scenario and still allows Move to continue to monetize Realtors.  I don’t know about you, but I sure got fed up with all of the sites saying, we’ll put your listing at the top for only $x and since everyone did it, everyone’s listings were at the top and there was no benefit.  It was just another fee everyone had to pay.  NAR has the ability to do something about this.  The Board of Directors and NAR leadership have the ability to reclaim the space, they rightfully own.  The question is: Will They?

Eric works with real estate technology companies and brokerages across the country to see what's next for the future of the industry and directs our internal development projects here at TRIBUS.

3 Comments
  1. hometourjay

    I hope the board of directors for NAR does something positive for Realtor.com to promote it over Z and T…if not, Z and T may take over….

    Posted on 6.10.13 at 6.38 pm
  2. Randy Haney, Principal Associate Broker, American Associates, Inc. REALTORS

    All Realtors need to require a minimum amount of information to be published with their listings. It’s the Realtor’s listing, so require everyone, Zillow, Trulia, Realtor.com and all vendors receiving the IDX feed to put at a minimum the listing agent’s company name, logo, picture of agent, phone number of company and agent and links to their website and email. If this were the standard requirement for all vendors who get the listing IDX information. All of the vendors could sell all the banner and other special placement ads they wanted, but every Realtor would have at a minimum their leads from their own listings. This should be a requirement, who’s listing is it anyway? Why do we give it away and buy it back. We let them have it, now it’s time to change the rules since we have the listings and they are nothing without them. They will still make plenty of profit at Realtor.com and make the playing field equal with the Zillow and Trulia.

    Posted on 8.28.13 at 5.29 pm
  3. Donna Johnson

    Wow- how did the NAR’s attorneys let them sign such a binding and never-need-to-renew contract with RealSelect/Homestore? I understand the internet was just taking off back then and promises of 500,000 visitors seemed irresistible, but that’s actually even more reason to have written into the contract criteria for renegotiation at certain tiers, etc. NAR’s members have good reason to complain…

    Posted on 9.23.13 at 1.58 pm
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