Eliminating MLS and Broker Conflict

Gregg LarsonThis summer I was invited to speak about REDPLAN at several national franchise broker-owner meetings and The Realty Alliance CTO gathering in September.  I was surprised to learn of the high level of frustration between the larger brokers and their MLSs.   Some brokers said the MLS was their #1 source of angst this year, even ahead of the usual suspects like banks, NAR, and ZTR.  The intensity of the brokers’ anger is what shocked me – combined with the fact that I wasn’t hearing about this from Clareity’s MLS customers and clients.

When I was invited to sit on the panel about eliminating MLS and broker conflict at CMLS last week, I accepted knowing this would be a feisty session.  I met with Craig Cheatham, CEO and Jon Coile, board officer and head of the Fair Display Committee, during Inman in July right after their board of directors meeting.   The Alliance had just finished compiling, in collaboration with MLS executives, a set of “Fair Display Guidelines” for MLS public-facing web sites.   These guidelines were created at least in part based on the huge frustration with NAR and the MLS Policy process around “MLS core services” during the mid-year meetings in May in DC.  It’s clear to me now that this frustration has been percolating all summer and led up to the panel at CMLS.

My congratulations to Greg Manship and CMLS for getting this topic on the agenda because it provided the chance to get the “dead elephant in the room” out in the daylight and discuss it.   Craig Cheatham provided a list of MLS practices that create or increase conflict with The Realty Alliance members.  Members usually have more than 1000 agents in their firms, so one could say these are the collective concerns of large brokers.  While this is true, some of these items reflect the concerns of any size broker and based upon my meetings this summer, several of the national franchisors as well.

The week prior to CMLS, Craig Cheatham asked his members to submit their concerns with the MLSs they deal with locally.  Keep in mind, some of these firms belong to multiple MLSs, which can be a source of aggravation in itself with different data, rules, and rules enforcement.  One member reported belonging to 47 MLSs.  Can you imagine how that can contribute to that company’s pain and expense?  Craig distilled 48 pages of comments he received to compile the list below.  The brokers mentioned many items below more than once.  Craig read off a bunch of items during the CMLS panel, but here is the complete list from The Realty Alliance:

MLS practices that are likely to create/increase conflict between MLSs and participant firms (this list is not an accusation that the CMLS audience does all of these, but is meant to give real specificity to general complaints that have been heard for years):

  1. Tying MLS participation with products/services that should be optional and go beyond the founding MLS principles (data, cooperation/compensation) … unfair, and likely illegal.
  2. Creating and promoting public-facing listings advertising websites that compete with broker websites.
  3. Forcing brokers to participating in and/or pay for the creation, maintenance and promotion of MLS public-facing websites.
  4. Operating a public-facing listings website not in compliance with the “Fair Display” guidelines.
  5. Subsidizing associations by over-charging for MLS services and passing extra revenue to associations.
  6. Offering continuing education that covers topics not specific to MLS functionality.
  7. Hosting agent-rating programs for the public to view and rank.
  8. Amassing excessive reserves.
  9. Withholding feeds of any kind to which the participant firms are entitled.
  10. Making the default position for products/services offered by the MLS be “opt out” instead of “opt in.”
  11. Having a governance structure that is not authentic and equitable (based on market activity).
  12. Withholding sold and/or pending data and/or any other set of legitimate data from VOW feeds.
  13. Pushing NAR to add as many items as possible to the list of “basic” MLS functions to force participants to pay for them, whether they want them or intend to use them or not.
  14. Inconsistent data standards across MLSs in a day and age where all should be up to date.
  15. Not curating authentic involvement in buy-in and governance, using both formal and informal means.
  16. Assuming that an agent on an MLS board truly satisfies representation of that agent’s broker.
  17. Advertising competitors (including competitors of participants’ affiliates), especially around listings.
  18. Blocking sold data from “pocket listings” from being used for comps, forcing data of less quality/amount to be used instead.
  19. Making unsubstantiated claims to ownership/copyright of data.
  20. Not protecting MLS data from piracy.
  21. Not consolidating the total number of MLSs.
  22. In effect courting the loyalty of agents and cutting in on the relationship between broker and agent.
  23. Forcing brokers to opt out of IDX if the broker wants to opt out of syndication.
  24. Picking and choosing which NAR MLS policies to follow or not to follow.
  25. Selling MLS-wide initiatives with the promises of revenue shares brokers never see (either in reduced fees or in payments).
  26. Utilizing lawyers who work to help MLSs figure out how to not do anything more for participants than they absolutely have to.
  27. Resisting programs broker participants want to utilize for the reason that the MLS doesn’t think it appropriate for the broker to earn revenue (somehow the broker is to operate like a non-profit and the MLS is to operate like a for-profit).
  28. Failing to “over” communicate, knowing this is essential and falls to the MLS when it comes to MLS plans and programs.
  29. Using old technology, while spending time and effort on non-core products/services.
  30. Not accepting data uploaded from a broker or its designated source, and instead insisting on data entry through the MLS’s system.
  31. Pretending that the MLS does not or cannot provide the capability to accept data from a broker’s system instead of MLS entry.
  32. Not solving the issue of allowing “firms” that are not legitimate industry participants to be MLS participants and exploit MLS data.
  33. Allowing consultants to steer them to being overly entrepreneurial.
  34. Claiming that broker participants somehow do not have the right to produce and sell valuation products, when creating valuations using all MLS data is and has been a core benefit of MLS participation.
  35. Refusing services/feeds to a broker for a project because a vendor is being paid to assist that broker participant with that product.
  36. Denying a broker a service/feed to provide a product because the MLS feels the broker just doesn’t work hard enough in the process to earn income from the product/service the broker is trying to offer.
  37. Providing agent-level websites to all agents.
  38. Providing CRMs to all agents.
  39. Providing property marketing tools and prospecting tools to all agents.
  40. Sending data directly from the MLS to third-party listing sites that compete with firm sites.
  41. Contracting with showing/appointment systems for the entire MLS if brokers object.
  42. Contracting with transaction management systems for the entire MLS if brokers object.
  43. Extrapolating the requests/opinions of a few of a broker’s agents to decide that the broker’s perspective is invalid or that the broker isn’t “in control” of his/her agents.
  44. Viewing its customer as the agents or the consumer public.
  45. Denying a broker participant a feed/service because the MLS itself has an exclusive agreement with a vendor, when the MLS’s obligation to provide its participants feeds/services has nothing to do with what the MLS as an entity has agreed not to do itself with other vendors.
  46. Being overly aggressive with fining participants.

General attitudes that indicate the MLS may have lost its way:

  • Bias against participant requests while having openness to outside (vendors, public) requests.
  • Feeling that, as technically a for-profit, no one should tell our MLS what we can or cannot do.
  • Operating in such a way that “more than just an MLS” would be an accurate tag line/slogan.
  • Thinking of the MLS as a service to consumers instead of a business-to-business enterprise.
  • Having a bias against participants that make up a significant percentage of market activity and skewing benefits toward those with a smaller percentage of market activity.
  • Smugness and/or false confidence that “we’ve heard all these complaints before, but nothing ever comes of it.”
  • Using weariness of the “same ol’” conversation as an excuse not to address the gap that exists.
  • Pretending that the issues don’t apply for non-Realtor MLSs.
  • Living in denial that, despite the convergence of low technology costs and cleaner data, a broker-owned/run initiative simply isn’t feasible.
  • Thinking it is the MLS’s proper role to compete with third-party listing websites.
  • Assuming vendors should be lining up to pitch their products to MLSs, not to brokers.
  • Resisting constructive criticism.
  • Feeling “this is my MLS” and “I know better” than my brokers (for whom I am supposed to work).
  • Ignoring the obvious conflicts of interest of MLS executives serving on NAR’s MLS Issues and Policies Committee when motions are made that pit MLS entrepreneurial dreams against the fiduciary duty of MLSs to their broker participants.

General Comments from The Realty Alliance:

Is there any other industry in which business pay significant dollars to an entity that then turns around and uses that money to provide services to that business’s competition – especially services that business may already have bought for itself?

 No threat intended … the role played (on the panel at CMLS) was that of a weatherman, warning that conditions in the very near future were very favorable for a storm.

 Brokers appreciate the hard work that MLS executives do, and to some extent, understand the challenges.

 Both sides have work to do, and brokers realize fixing the gap is a two-way street.

 Brokers perceive they are under attack by industry associations, MLSs and vendors, feeling as if these entities want to take from them all they do for agents and customers and leave the brokers with nothing left to do but pay the bill and assume the liability.

 The 10-day goal for communication was a strong suggestion because The Realty Alliance only meets twice a year (fall meeting is Oct.14), and feelings are strong enough on the broker side that MLSs could benefit from checking in in advance of that group’s important time of discussion and decision-making. Why wait when MLSs now know such a gathering is coming up so soon? However, any project of significant size takes a lot of time and gets implemented in several pieces and phases, so the sky will not fall if MLSs do not sit down with their largest constituents in advance of October 14. But what if nothing comes of the current industry movement? Is that reason not to try to bridge the current gap?

 The ideas being tossed around for possible implementation are broad-based, not restricted to The Realty Alliance, but have been incubated by a number of global networks and brands representing firms of all sizes and business models, of which The Realty Alliance is just one segment.

Clareity’s Conclusion

 1)  We encourage MLS executives to pick up the phone this week and touch base, CEO to CEO, (or as high up as you can get) with your largest members, whether they are members of The Realty Alliance or not.  Try again to open communications and bridge the gap.  Don’t use the excuse that they don’t return your calls – try them.  Go visit them. Invite them to your office.  Don’t hide behind email only.  Get belly to belly as high up in the firm as you can.  And listen.  And don’t use the excuse that the MLS represents all brokers, not just the big ones.  That’s very true, but if you were running any other business and your largest customer, comprising 10, 20 or even 30% of your annual revenue, was extremely frustrated and told you they were thinking of leaving, wouldn’t you as a business owner take the time to hear them out and see what you might do to stop them from walking out the door forever?

2)  Hit the reset button and reexamine the role of your MLS (or Association) for 2014.  A common theme heard throughout The Realty Alliance list was related to the mission of the MLS and its enterprising attitude.  Clareity and half a dozen other consultants, along with numerous vendors, are guilty of introducing seductive new technology and services that the MLS can license for all its members.   MLSs and Associations, in their well-meaning attempts to deliver value to their members and maintain relevance themselves, may have gone over the line by expanding their menu too widely.  As I mentioned during the session, consider applications and services that benefit from the power of the network.  These are services that everyone benefits from and which add efficiency to the MLS marketplace.   Things like RETS, data standards, common forms, lock box, showing scheduling (where not conflicting with existing showing systems) fit in this “network” category.  Products like CRM, mobile apps, flyers, productivity tools for agents and so on might be better left to the agent to select from the free market.   Some brokers offer these types of tools but they’re fine with their agents picking  whatever tools they want, as long as they’re not subsidized by the MLS.

3) Don’t take Craig’s warning of a perfect storm brewing lightly.  And don’t joke about the 10-day deadline – that was not scripted by Craig, but rather in response to my comment that over the next month every MLS executive in the room should plan to meet with all of their large brokers.  I mentioned during the panel that several “nuclear options” that have never been available before might be possible by 2014.  The Realty Alliance and some other large brokers and franchises have invested money in R&D on a project that could dramatically affect MLS and several vendors that were in the room know the details of this project but are under NDA so they are not talking about it.  And no, technology is not a hurdle.  Clareity has not been involved in this research, but has some insights to its viability.  My advice is don’t take it lightly.  When your largest customer is spending money to find a way to leave you, it’s time to sit down and talk.

The brokers realize that every item on The Realty Alliance’s List can’t be fixed overnight, but some of them, including opening communications, can be started today.

 

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8 comments on “Eliminating MLS and Broker Conflict
  1. Thomas Wissel says:

    Well said, as always! Clareity gives clear and timely analyses of the industry.

    I am reminded that long ago NAR published a CD resource about MLS described as “A Unique Culture of Cooperation,” that would infer a broker to broker focus for the business model, where did that go? MLS is certainly a business selling a product and without being an anti-trust attorney, I often wonder how close it now exists to being a monopolistic enterprise.

  2. Matt Fagioli says:

    Thanks for the overview. Very informative. Sounds like both sides have a lot to talk about.

  3. I would agree with #2 (where the MLS competes with the brokers) and #18 (blocking comps if sold outside of MLS).

    But I would encourage the MLSes to not only talk to the big brokerage firms. I have a smaller firm and also don’t like a public facing website that uses my money to compete with my website that I built from scratch, with much expense.

    Frank LL0SA
    Broker Frankly Real Estate Inc
    Owner FranklyMLS.com

  4. Very insightful coverage, Gregg.

    I think that “mobile” as a category is more nuanced in whether it ought to be considered a core or optional service. (As an obviously biased party, everyone should naturally take what I’m about to say with a grain of salt.)

    In the same way that every agent should expect to have access to the MLS as a core service – to search, add, and edit listings – I think it’s reasonable to think that MLS service to agents on a mobile device is arguably a core service in 2013. Over 92% of agents have a smartphone. According to a recent Inman conference, the most productive agents spend less than 15 hours a month in their office, where they won’t have immediate access to a laptop or desktop computer. With all of the business rules that go into adding / editing listings, it would make sense that an MLS decide on a solution (or even two) to offer their agents as a core service – for agent access only to the MLS on a mobile device.

    Where mobile is not always a core service is when it comes to consumer access. The same arguments as to whether or not an MLS should have a consumer facing website with listing information applies in the same way to mobile.

    And similarly, some MLSs are now offering all agents free branded apps that they can give out to consumers. Given that our company has a number of Realty Alliance members as clients, I can say with certainty that large brokers don’t see this as a welcome gesture.

  5. Nice coverage Gregg. I was trying to write my travel report today for my board and your summary was spot on with what I was trying to articulate. Out here in the field you can sense an atmosphere of uneasiness but until the CMLS conference it was hard to get my mind around it.

    There have been many superficial leadership discussions at the recent NAR functions about a rift of sorts occurring in our industry, but I don’t think I’ve received a better idea of its genesis than I did at this conference.

    Not being in the MLS realm for my whole career sometimes places me at a historical disadvantage, yet clearly these are some very old wounds that appear to have reopened and need to be tended or the host will suffer irreparable harm.

    Thanks again for your astute coverage.

  6. Carl DeMusz says:

    Great job Greg, I also appreciated your comments on the panel discussion.

  7. Steve Wiley says:

    From a business prospective I certainly understand and even agree with what the big brokers are thinking and doing to curb costs and competition from MLSs through reduction of non-essential MLS activities.

    However – what this really comes down to is not what services (beyond “essential” ones) MLS entities should or should not provide . . .

    Rather, it comes down to if the MLS entity is accountable to the individual dues paying agent or to the broker.

    Due to MLS membership rules, it is usually the broker who commands accountability due to their aggregate voting power for their associated agents.

    But yet it is each individual MLS member (agent) who normally pays their own MLS dues.

    Does this sound like a form of taxation without representation? Due process, anyone?

    Agents who would rather be agents than brokers will forever serve, not own or control, and shall never know the value of their vote nor the sweet taste of freedom.

    Let each reap what share their broker decrees, and cry no foul.

    And, as for MLS entities, I think the end game is equivalent and equally certain.

    • Larry Scaduto, broker-associate says:

      Steve Wiley put it best-taxation without representation. We all know that ” . . . The broker owns the listing” but it always rankled me that I paid all the fees as well as my fellow agents, not the broker and my concerns and input were dismissed as insignificant . Without the agent paying the fees, there is no income or reason for the MLS. So my point is that agents should very much be at the table in any of these discussions. The high-handed way in which some brokers dismiss the concerns of their agents is unacceptable. This discussion is going to need the collective input of all parties in a meaningful way.