(Wisconsin State Journal, The (KRT) Via Thomson Dialog NewsEdge) Apr. 16--When a group of Cincinnati real estate agents got together for the first time in the 1880s, they probably didn't know they were about to make history.

The agents decided to ignore competitive advantages and to share their home sale listings with each other regularly, hoping to enlarge the pool of potential buyers. That arrangement created the first multiple listing service (MLS) in the nation.

Today, about 900 multiple listing services across the country are the backbone of the real estate industry.

But MLS is under attack these days from Internet technology, for-sale-by owner services and the federal Justice Department, which filed a lawsuit last fall charging the National Association of Realtors with limiting competition by restricting Web-based brokers from listing MLS homes for sale on their sites.

Do you need MLS? Do you need the MLS to sell a house? It depends on whom you ask. Realtors say yes, while for-sale-by-owner services like FSBOMadison say no.

"I think it depends on the house," said Sheri Meland of MadCityHomes.com, a for-sale- by-owner company that offers MLS listings among its services. "There are certain areas or certain neighborhoods that are very popular and buyer-driven where the MLS might not be important. Other areas need MLS exposure."

The South Central Wisconsin MLS currently has more than 10,000 homes listed for sale, said Kevin King, executive director of the Realtors Association of South Central Wisconsin. Nearly all of the data for the listings are entered by the real estate offices, which each pay a quarterly fee for membership.

Homes for sale in the South Central Wisconsin MLS and other MLS areas in the state are listed on the WisconsinHomes.com Web site. Realtor.com, a Web site sponsored by the National Association of Realtors, has more than 2.5 million listings nationwide.

These listings include a brief description of each home, which is only a fraction of the information available to Realtors through the MLS. Realtors also get links to documents such as deeds and helpful information about showings such as the best times and whether to watch out for an unfriendly dog.

Realtors used to receive a data sheet for each MLS home. Now, it's all on the Internet, which also provides alternative ways to buy or sell a home.

The online trading site eBay offers homes for sale. This spring, the Internet search engine Google introduced the beta version of a real estate feature that combines maps with ZIP code searches of homes for sale across the Internet.

Other sites A Web site called Zillow.com provides estimates of home values using comparable sales -- the same method used by Realtors. For Madison-area homes, the site currently relies on 2003 data.

King said the Internet is a great tool, but no substitute for the expertise a real estate agent can provide for a buyer or seller.

"The Internet doesn't give you knowledge -- it gives you information," he said.

Madison is ahead of many other cities around the nation when it comes to for-sale-by- owner services. The New York Times profiled MadCityHomes.com and FSBOMadison.com in separate articles earlier this year.

"Around here, we don't need the MLS," said Mary Claire, founder of FSBOMadison. "There are people who need Realtors and the MLS is their tool. The MLS could dry up and go away if there was another source. Around here, FSBOMadison is that source."

Claire said FSBOMadison has listed nearly 10,000 homes since it started eight years ago.

Pam Lindauer of Dodgeville said she listed her mother's house with FSBOMadison in November. She had open houses every Saturday and had a lot of people look at the East Side home, but no buyers. After six months, she decided to list the home with Badger MLS, a flat-fee brokerage started in January by former legislator Bill Lorge.

"I liked (FSBOMadison)," Lindauer said. "It seems like a good company, but I'm not so sure you're getting the visibility you need."

Lorge, a licensed real estate broker since 1987, said he charges $300 to $400 to list homes on the MLS, depending on what other services his customers want. He's listed about a dozen homes since starting the business in January.

In traditional real estate sales, sellers pay 6 percent of a home's purchase price to sell their home -- 3 percent for the buyer's agent commission and 3 percent for their agent. Flat- fee brokers like Badger MLS and MadCityHomes charge sellers upfront fees for the MLS listing, but the sellers must pay 3 percent for the buyer's agent commission if they accept an offer from a real estate agent.

"I just really felt that the system was overcharging," Lorge said. "The way things have been changing, Realtors are going to have to work a little harder for a little less."

Prognostications Paul Brown of First Weber Group, president of the South Central Wisconsin MLS, said he sees a bright future for the system despite competitors like FSBOMadison.

"Overall, I think that the future of the MLS is going to continue to be strong," he said. The value of "all the companies putting their information into the system is going to continue to make the MLS the viable system (for Realtors and consumers)."

Brown said the real estate industry is similar to the travel industry. Both face competition, but Internet travel booking services haven't put all travel agencies out of business. He said about 20 percent of home sellers always want to do it themselves instead of hiring a real estate agent.

Francois Ortalo-Magne, an associate real estate professor at the UW-Madison Business School, said he doesn't believe Internet services ever will replace real estate agents.

"There's definitely room for high-value services," he said. "A good Realtor can help people define (a buyer's) preferences. How do you know the tradeoffs of proximity to a job, parks or schools? A Web site won't help you."

Ortalo-Magne is researching the differences between MLS and FSBOMadison listings. Preliminary findings indicated that owners of expensive homes seem to gravitate toward FSBOMadison, he said. That might be due to 6 percent Realtor commissions, which amount to $12,000 for a $200,000 home and $60,000 for a $1 million home.

About 63 percent of Realtors surveyed this spring by the National Association of Realtors said they believe public MLS sites like WisconsinHome.com compete with them. Most also support consolidating smaller MLS areas into statewide or large regional markets.

About 77 percent of the 950 respondents ranked information security as important and some said they feared that MLS agencies may evolve into public utilities with the data open to everyone.

UW-Madison real estate professor Steve Malpezzi said he expects the MLS system to survive its competitors and other technological advances.

"Over the next few years, we're going to see more changes in the brokerage market," he said. "I'd be very surprised if the MLS becomes obsolete because of the Internet. It's one of those things that we're going to see how it plays out."

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