A property rights battle is escalating -- online.
The clash is not about setbacks or property lines. It is over intellectual property. The question: Who owns the rights to the listings of homes for sale that you see on Web sites such as eRealty.com or zipRealty?
The dispute has already been the cause of litigation in the federal courts in Texas and the subject of testimony last fall before the Federal Trade Commission. It will get more attention this year when the National Association of Realtors publishes its Multiple Listing Service (MLS) guidelines for the online services, called "virtual office" Web sites.
Local real estate associations across America claim that they own the rights to the MLS listings. But eRealty Inc., zipRealty Inc. and other similar sites say they have the right to access the data just like other real estate agents. They are dues-paying members of local real estate groups and other agents are allowed to copy the listings and e-mail or fax them to customers.
It is not clear what the affect of this dispute could be on the sites -- or consumers.
If the forthcoming industry policy debate does not go its way, Houston-based eRealty may be in federal court in Washington, seeking to protect its cyberspace real estate sales business.
In the past two years, dot-com businesses in general have stagnated as Internet-based residential real estate searching has soared.
"This is something we've been measuring over time," said Walter Maloney, a spokesman for the National Association of Realtors (NAR). "We've looked at what sources buyers have used in the search process. When you look at the use of the Internet, it has grown dramatically."
In 1995, NAR research showed, 2 percent of home buyers used the Internet to look for houses. Two years later, 18 percent did. By 1999, it was 37 percent, and in 2001, it was 41 percent.
"It's a very important resource," Maloney said.
The NAR is preparing a new study about the impact of the Internet on residential real estate sales for release in the coming months, as well as exploring policy for virtual sales offices, Maloney said.
ERealty's founder and chief executive, Russell Capper, met in Washington last month with NAR leaders and said he was "pleased" with the discussions. But the newcomers and the old guard have not settled the dispute.
A draft of the NAR online-listing policy was circulated this month among the association leaders. An NAR spokesman, Steve Cook, acknowledged that the guidelines had been written but would not say what they contained.
Online residential real estate listing services, though going mainstream now, were born after a court battle.
In late 1999 and early 2000, just as the Internet commerce bubble was bursting, Internet real estate companies started marketing their services heavily. The competitors included the NAR's Realtor.com, which was operated by Homestore Inc.
ERealty, which was rapidly expanding nationally, was sued in federal court by a real estate board in Austin, which claimed that by publishing MLS data online, eRealty violated copyright law.
Chief U.S. District Judge James R. Nowlin ruled in March 2000 that eRealty did not violate copyright law because it was a licensed real estate sales company and home buyers who used its online service had to register as eRealty customers.
The evidence presented in court showed that conventional real estate agents conveyed MLS data to their clients by mail, e-mail and fax. ERealty did nothing more than use its Web site as the medium of distribution, the court indicated. "The public has a greater interest in faster, more efficient and lower-cost real estate services," Nowlin wrote.
After prevailing in that legal battle, eRealty expanded rapidly. It made a deal to make its listings available to registered customers on Yahoo. Offices were opened in the Washington area and in Florida, Colorado and California.
"It sent shock waves through the industry," said Mark Hayden, an eRealty director.
The objections raised in the Texas case were raised elsewhere. Capper last fall testified before the Federal Trade Commission on the matter.
There is still concern in the industry that virtual office Web sites create the impression that they are larger than they are, and thus may be engaging in unscrupulous marketing practices.
ERealty and zipRealty have very little local presence: agents in home-based offices in Maryland, Virginia and the District.
When Patricia Gaynor bought her four-bedroom, single-family house in Arnold, Md., through one of the online firms, she said that the personal touch of the agent was as important as the online listing. She said the real estate agent provided intelligence and insight that was not solely available from the online listings. "She knew the neighborhoods," Gaynor said of the agent.
The Internet real estate companies concede that everything cannot be done virtually.
"Customers want an agent for the negotiations," said Pat Lashinsky, vice president of marketing at zipRealty. "But they want more of a say in which house will be their home."
There are other concerns in the industry about the impact of online real estate listings, including whether sellers want information about their house so widely disseminated.
During her home search last year, Gaynor received regular e-mail updates with listings of homes in her price range. Her requirements included a particular school district, so her children could walk to school. "I was able to weed out what I didn't want to buy," she says.
Some of the Internet firms pay a 1 percent rebate on home purchases.
"The rebate was very attractive," said Manish Pradhan, who with his wife bought a townhouse in Chantilly last fall after an extensive online listings search. "It was one of the reasons I went with them."
Though the rebates mean smaller commissions, the online firms aim to double the productivity of their sales teams, Hayden said.
Realtor.com is the highest-rated real estate Web site overall, in terms of listings viewed, according to Neilsen/Netratings. HomeBuilder.com, an affiliated site of Homestore, says it gets 500,000 visitors a month.
In terms of overall sales transactions, eRealty and zipRealty together handle only about 1 percent of real estate sales in the states in which they operate.
But eRealty maintains that its rebate offering will change the industry and that concern about the rebate is what is driving some of the concern about online real estate services from traditional real estate agents.
Most prospects insist on seeing the house before buying -- no matter what kind of home it is.
But, this being Washington, there are exceptions for people in high government service. "We've had people who were foreign diplomats who bought completely online," Lashinsky said. "They never saw the home -- except for the pictures on the Net."
Before the advent of the Internet, many foreign officials and overseas executives bought their houses in the Washington area sight unseen. The difference now is that they can see pictures of houses for sale, online.
Will the majority of home buyers ever conduct entire searches and purchases over the Internet? Probably not, the evidence so far suggests.
Most sophisticated users are likely to employ online listings, as well as in-person, personalized service, before closing transactions.
"You call up the agent and say, 'Here's what we saw on the Web. Here's what we'd like to go see,' " Maloney said.