Should Brokers and Agents Charge Royalties For Property Listings?

In the wake of Abbott Realty Group’s announcement that they will no longer allow third party websites such as Zillow, Trulia and Realtor.com to use their listings, I think it’s time that brokers and agents begin to think differently about how the internet is affecting their control of property listings, which are the “bread and butter” of the real estate brokerage business. Like a songwriter with their songs, or an author with his manuscript, property listings are intellectual property created by agents and brokers.

is it time third party syndicates shared their profits?

There can be no argument that the internet has brought fundamental changes to the professional real estate industry. Today it’s much easier to expose properties to a national audience of buyers. But at the same time, brokers and agents are witnessing the loss of control of their listings, and their property information, to third parties like Zillow, Trulia and Realtor.com, who have been using this information to build their own for-profit businesses, at the expense of agents and brokers.

Those who are not licensees may not realize how expensive it is to operate as an agent or broker. There are school and licensing fees and hundreds of dollars in yearly dues to their local and national associations. They pay fees to their local Multiple Listing Service so that they can list their properties. They also pay additional money during their licensing period to cover required continuing education courses. And there are additional fees and penalties for failing to update the status of their MLS listings. They can even be penalized around $50 if their listing is cancelled due to foreclosure, unless they send their MLS written proof of the foreclosure notice.

There are also key fees for access to those fancy digital lock boxes agents use today, and those lock boxes are also pretty expensive as well. Agents also need “errors and omissions” insurance, to guard against lawsuits that may arise from errors in property listings, or other issues that they become liable for once they are licensed.

Realtors have to pay big bucks for licensing fees and dues. Courtesy of dannyfowler

On top of that, agents often pay for all of the advertising services provided for a property listing. You know those real estate books that are given out for free at restaurants and convenience stores? A single page in one of those books was about $1,200 when I became an agent back in 1996. And those nice big signs you see in front of many commercial properties are paid for by the agent, often at a cost of hundreds of dollars for a single sign.

The listing agent often has to split the property commission on the sale with the buyers agent, who may be brought in to represent the buyer, after the buyer spots the property listing on the internet.  After that 50/50 split, both agents usually have to pay their broker a share of their commission. In most cases that is another 20% or more.

So a listing agent spends hours prospecting for leads, then when they get one, they spend hours of their time and their own money to promote the leads trying to get the property sold. When it does sell, they often split their commission with others. They pay all of the expenses and get only part of the commission.

Signs like this don't come cheap either... Courtesy Diana Parkhouse

Once I was the listing agent on a property, and at closing the attorney informed me that the seller was not current on the property taxes, and that an additional $1,500 in property taxes had to be paid or the closing would be cancelled. The buyers agent and I agreed to pay $750 each for the property taxes, out of our commission, rather than lose the deal altogether.

When a third party listing syndicator like realtor.com, zillow or trulia comes along and publishes the property listing for their own site, they make big bucks selling ads to other real estate agents, mortgage companies, and other industry related advertisers, while those who created this valuable content are expected to be happy with “exposure”.

I think it’s time for brokers and agents to realize that yes, the internet does have value, but so do all of those  property listings. I can’t imagine a songwriter or musical artist allowing a radio station to use their song for airplay, and in so doing, allow the radio station to make big bucks from selling advertising, then accept the excuse that “it’s good exposure” for the songwriter or the artist. And an author who writes an article that is published in a magazine which makes money by using that content to attract readers and sell advertising, would certainly not be willing to allow those magazines to publish his work for free because it’s “good exposure” for the author.

Should realtors be happy with just 'exposure' for their listings (which are often wrong anyway)?

Brokers and agents have lost control of their intellectual content, by allowing the internet and third party publishers to profit from it, without any thought for compensating the creators of that content. In fact, some third party websites have created successful and highly profitable membership websites by using the property listing information created by licensees, without having to pay a dime for the use of that content.

Perhaps it’s time to come up with a new business model in which the creators and owners of property listings are compensated for their “original works” by creating a royalty system in which third party syndicators pay royalties to agents and brokers similar to the way it works in the music industry for songwriters and publishers. Agents are essentially the authors of property listings, and brokers are similar to publishers. This could allow for the use of property listings by third parties and make listings widely available, without taking unfair advantage of the creators of that content.
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Donna Robinson is a 16 year veteran of the real estate industry and a staff writer for RealtyBizNews.com. She began her career as a real estate agent, and today is an active real estate investor who also provides coaching and consulting services. Contact her at donnaconsults@reihelp.com or call her office at 888-915-9968 to inquire about coaching or consulting. 

Donna S. Robinson

Donna S. Robinson has been involved in the real estate industry since 1996. A licensed agent and real estate investor, she is a recognized expert on residential real estate investing. Her course, "Fundamentals & Strategies For Real Estate Investing" is approved for CE credit by the GA Real Estate Commission. She has authored several books on real estate investing, and consults with residential investment companies. She also offers coaching services to real estate investors. Follow on Google+

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