Big broker group issues ominous-sounding warning to MLSs

NAR will revisit policy allowing MLSs to categorize public-facing MLS websites as 'basic' service

BOISE, Idaho — The head of a group made up of dozens of the largest brokerages in the country lobbed something of a ticking bomb into a room of some 500 multiple listing service executives Friday.

“You’ve got 10 days,” Craig Cheatham, president and CEO of The Realty Alliance, told the attendees of this week’s Council of Multiple Listing Services (CMLS) conference.

Caveman skit image via Shutterstock.
Caveman skit image via Shutterstock.

Cheatham wouldn’t elaborate, but suggested that CMLS shouldn’t book their next conference too far into the future.

“I’m very limited in what I can say today, but they (brokers) have had it. They have lost faith in the system,” he said, speaking on a panel titled “Eliminating MLS and Broker Conflict.”

Although the apocalyptic tinge of the “10 days” deadline subsequently generated many jokes among attendees and even a countdown clock, it lent a new sense of urgency to a question that had surfaced repeatedly during conference sessions: What is the role of the MLS?

At the National Association of Realtors’ midyear meetings in May, a proposed MLS policy change ignited a debate over the role of MLSs and the services they should and should not provide.

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NAR ultimately adopted the policy change, which allowed MLSs to categorize public-facing MLS websites as a “basic” service that an MLS can charge all members for.

I hear this all the time. This narrative of 'us versus them' is boring, --Greg Robertson

Proponents of the change say MLSs are better equipped than many of their members to build and operate the kind of sophisticated real estate search site that can compete with third-party websites like Zillow and Trulia for consumer traffic.

But some brokers — particularly large ones with websites that command a significant share of local Internet traffic — object to MLSs playing that role. Opponents say MLSs should limit themselves to their traditional mission — providing their members with information about each others’ listings, and offers of compensation to cooperating brokers — through websites that are accessible only to members.

The debate over NAR’s policy change is not over. MLS Policy Statement 7.57, “Categorization of MLS Services, Information and Products,” will be re-examined once again at NAR’s annual conference in November, Cathy Holefelder, CMLS’s 2013 president, told conference attendees.

The Realty Alliance — which two years ago led the charge to repeal a NAR policy that briefly allowed national franchisors like Century 21 to display MLS listings from markets where they had affiliated brokerages — was one of the main opponents of the amendment.

At the CMLS conference, Cheatham said the amendment and the process by which it was approved — focusing on whether MLSs should have public-facing websites rather than on whether MLS members should be forced to pay for them — was “one of the final straws” for Realty Alliance members.

“They have lost their sense of trust in NAR (and) its method of making policy. They have lost the sense that they can work within the system we have today and survive and thrive in the future,” Cheatham said.

“What I feel is a sense of resignation, that they have given up,” he added.

Fellow panelist Gregg Larson, president and CEO of Clareity Consulting, said that feeling could be dangerous for MLSs.

“Some of the nuclear weapons they (brokers) might launch are things you wouldn’t even expect because you wouldn’t think your brokers could or even would do that,” Larson said.

He said it’s time to rethink the role of the MLS and “reset.”

“There’s something brewing here that really makes me think that the people in this room need to rethink their role,” Larson said. “Some of you may be in denial. You don’t know that there’s a big broker or two in your market set on burning down the house.”

Clareity is currently working with The Realty Alliance to tally up a list of MLSs that are following the group’s fair display guidelines for public-facing MLS websites.

Larson advised conference attendees to immediately reach out to their largest broker members upon returning home.

Cheatham concurred, though that’s when he said, “Take your time. You’ve got 10 days. That’s all I’m going to say about that.”

Later Cheatham told Inman News that the 10 days referred to the time left until The Realty Alliance’s fall meeting — not to the launch of any industry bombshell.

“If they are going to talk to their brokers, they should do it before our fall meeting,” he said.

The Realty Alliance does have something in the works, but Cheatham declined to say exactly what, other than it has something to do with “real estate content,” and would be “bigger than listings.”

“There’s one big initiative that, if successful, opens a hundred doors that are not open today. That one initiative does not endanger MLSs or vendors who are not swimming upstream,” he said. By “swimming upstream,” he meant “going against the most natural and efficient flow in the real world and in the real estate business.”

“That’s intentionally cryptic,” he said.

Cheatham said that big idea, which is “not definite,” will be considered by The Realty Alliance and other industry players over the next few months, and that it will be a business decision, firm by firm, whether to participate.

He said The Realty Alliance had him speak at the conference because the group wanted “to give it one last try” before flipping the switch. Cheatham plans to circulate a list of grievances, many of which he read on stage, that Realty Alliance members helped him compile.

The list includes, but is not limited to: agent websites; public websites; continuing education; agent-level mobile apps; agent rating systems; sending data from the MLS to third-party websites; having huge reserves; not giving brokers data feeds they are entitled to; ignoring NAR MLS policy; inconsistent data standards across the MLSs; advertisements for competing brokers next to listings; blocking pocket listings from being entered into the database; revenue share that brokers never see a penny from; too many MLSs; and courting agents so they are loyal to the MLS rather than their broker.

Cheatham said MLSs have supplanted NAR and third-party websites as his members’ biggest source of frustration. He compared the MLS to an employee taking over someone else’s business or an outfielder on a baseball team taking over the pitcher’s mound.

“(Realty Alliance members) think the MLS is part of the team, but perhaps the MLS is out of position,” he said.

Brokers, he said, think we’re in an MLS “bubble” with an ever-expanding menu of services that compete with the services brokers want to offer their agents and consumers, and sometimes forcing those brokers to pay for MLS products, services and programs that they do not want and do not use.

“If your motto or your tagline is ‘More than an MLS,’ that’s a good way to get the conflict (between brokers and MLSs) going,” he said.

Realty Alliance members feel MLSs have a bias against their own broker participants, Cheatham said.

“We would want MLSs to position themselves to be enablers … of real estate firms, that they could support them, enable them, and that would be the primary goal and purpose. We don’t think that would be swimming upstream,” he said.

“Why would (MLSs) be biased against the most active big players? I hear that all the time. We live in a democracy where most votes win,” he added.

Brokers would like “authentic and equitable governance” of MLSs, Cheatham said. For one thing, MLSs need to do a better job communicating with their biggest brokers. For example, he said, some Realty Alliance members have been shocked to find that their MLS has created something like a mobile app without consulting them.

The smallest member of The Realty Alliance has more than 1,000 agents. Therefore, “there is no member of The Realty Alliance that is not significant enough that (an MLS’) chief of staff should not be in communication with them,” Cheatham said.

And while many MLSs have agents from big brokers on their board, that doesn’t mean those agents necessarily represent the brokers.

“That’s why I used the word ‘authentic,’ ” Cheatham said. MLS boards “should aim as high as they can get” in a firm for board candidates, he added.

Ultimately, Cheatham maintains, MLSs need brokers’ buy-in on their mission, their products and services, and their finances. MLSs are turning into bloated bureaucracies, he said, and will be scrutinized as such.

“If your MLS is the primary revenue stream for your association, that’s about to become a big issue. They’ll be looking at budgets,” he said.

Brokers have a problem with “MLSs amassing huge reserves; associations receiving major percentages of their funding from upcharges on MLS fees; and revenue shares from programs the MLS sold to its participants based on a revenue share, which often never shows itself in the form of reduced fees, dues or a check,” Cheatham added.

“The brokers are watching.”

And so are, apparently, federal regulators.

“There are two agencies with overlapping jurisdictions at the federal level” who have contacted The Realty Alliance regarding the tying of MLS websites, and possibly other products, to MLS participation, according to Cheatham.

“We are fending them off. We don’t want them to solve our problem; we want to solve our problem,” he said. “But they are extremely interested in this concept.”

When asked by Rob Hahn, a consultant for real estate firms, why he wouldn’t push that “red button,” Cheatham said MLSs can manage data better than anyone.

“They’ve got systems and structures to keep everyone honest. I think it’s worth preserving,” he said.

Some conference attendees noted that this is not the first time they’ve heard similar warnings from big brokers.

“I hear this all the time,” said Greg Robertson, co-founder of W&R Studios, an MLS vendor. “This narrative of ‘us versus them’ is boring, it really is.”

On Twitter, Robertson characterized Cheatham’s stance as “bullshit posturing.”

Bob Hale, president and CEO of the Houston Association of Realtors, which operates one of the most popular public-facing MLS websites in the country — said big brokers have previously threatened to pull their listings from MLSs, start their own MLS and launch their own website.

“The problem is you have to let people know you have a website,” in order for them to visit, he said. For that reason, it’s “not beyond the scope of reason right now” to think that perhaps The Realty Alliance could ask Trulia or Zillow to run an MLS for them, he speculated.

Alon Chaver, vice president of industry services for Trulia, responded by saying, “That’s not going to happen.”

Several MLS execs pointed out that The Realty Alliance represents large brokerage firms, but MLS members belong to firms of all sizes and MLSs must serve all of their members.

“(The Realty Alliance) has a philosophy that the strongest should survive and everybody else shouldn’t. But we have the strongest and the weakest as members of our organizations,” Hale said. “We’ve heard that (MLSs) shouldn’t be helping everybody — if you’re not strong enough to survive on your own, you should go away. (That MLSs) should listen to the giant majority.”

But bigger brokers pay the same amount per head as smaller brokers, he said. And smaller brokers subsidize bigger brokers.

“The large brokers are saying that they shouldn’t pay for something if they don’t use it. But what about the 50 percent of our members that don’t use anything” but still pay for the services that others use, Hale said.

Cameron Paine, CEO of Connecticut MLS, noted that large brokers are 35 percent of his market.

CTMLS’ board consists of five brokers from big offices, five from medium-size offices and five from small offices, and therefore large brokers have the opportunity to have a voice in the MLS’ governance, he said.

In CTMLS’ market, there was one large broker that objected to the MLS operating a public listing search site, but the vast majority of the other members approved. That large broker, he said, has turned down several invitations to serve on the CTLMS of the board of directors.

Russ Bergeron, CEO of Lisle, Ill.-based MLS Midwest Real Estate Data (MRED), said communication was a two-way street. “It can’t just be us buying lunch,” he said.

More than one conference attendee noted that even as brokers complained about a disconnect between MLSs and brokers, there seemed to be friction between brokers and agents as well.

Jim Branscombe, president and CEO of BAREIS MLS in Northern California, pointed out that one of the main reasons MLSs offer services to agents is because agents ask for them.

“(These are) agents that don’t want to use their company’s software,” he said.

Brian Larson, CMLS’ general counsel, tweeted :

“Big brokers are ready to drop the H-bomb? Pity all their agents live in the towns where they’ll be droppin’ em.”

Cheatham said he would take back the input he received from MLS execs to his members.

He acknowledged “that achieving authentic equitable governance is a two-way street. If we’re going to demand it we need to back that up by actually participating at the local level,” he said.

“And (we should) also be mindful that the position of the brokerage is not always 100 percent reflected by the agents.”

One thing was clear as conference attendees geared up to go home Friday: There will be a lot of MLS execs getting in touch with their largest brokers on Monday.


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