Lawsuits that target two of the nation’s multiple listings services may prompt many MLS member brokers to take a new look at an old policy: tying MLS participation to membership in the local Realtor association.
Realty boards in their infancy typically required brokers to join the local Realtor board as a prerequisite of MLS membership. But courts in six states have banned such practices, and Realtor associations in Kentucky and Spokane, Wash., face lawsuits that claim such policies violate antitrust laws. Recent events at other Realtor boards and MLSs have called into question the wisdom of the cozy policies.
MLSs originally were small and largely uncontroversial operations. The local Realtor board would set up the MLS, establish the rules, publish and distribute the MLS book, and stash any extra cash from MLS dues in the board’s coffers. The board and the MLS shared the same territory, the same membership, and the same officers and directors.
But times have changed. Realtor boards and MLSs today are big businesses that often have separate ownership, separate (and often quite large) territories, and separate (and at times conflicting) interests. Is it time for all of them to have separate membership rules and rosters as well?
The undeniable success of the MLS system may have inadvertently been the undoing of some dual membership rules. States where such rules have been banned view the MLS as a necessity of the realty brokerage business that should be open to anyone who holds a state realty license and pays the MLS dues. The argument is that the Realtor membership requirement forces real estate licensees to join a private-sector trade group even if they don’t want the group’s services or if they dislike the group’s policies or politics.
And yet, Realtor groups naturally still own many of the MLSs throughout the country. Realtor groups invented the MLS, and Realtors have invested vast sums of money to build MLSs into the successful networks they are today. Indeed, MLSs likely wouldn’t exist without the support of Realtors and Realtor associations.
The argument on this side is that just as property owners should be able to control their property, MLS owners should be able to control their MLS. When the Realtor association owns the MLS, the association should be able to establish whatever rules it wants. But even property rights have some proper limitations, and even private members-only clubs are subject to certain restrictions on their rule-making. Should the same be said of the MLS?
The flip side of the owners’ control argument is that dual membership rules can promote an unhealthy coziness between the MLS and the Realtor association. Conflicts of interest naturally arise in matters that involve both the MLS and the Realtor group. When associations and MLSs were tiny, not much was at stake. But today the potential rewards, and consequently, the temptations, of self-dealing or self-serving decisions are significantly greater.
Proponents of dual membership rules might note that Realtors are required to comply with the National Association of Realtors Code of Ethics and that the Realtor membership requirement for MLS members forces those members to subject themselves to the ethics code. It’s not a bad argument, so far as it goes. But it would be a stronger argument if the Realtor ethics code were rigorously enforced and if it contained some form of recourse for the public.
And of course, MLS members could join the Realtor association and comply with its ethics code even if such membership weren’t an MLS requirement. And MLS members could adopt the code or higher ethical standards for themselves even if they weren’t dues-paying Realtors.
The bottom line may be that Realtor associations philosophically shouldn’t depend on the subsidy of MLS dues and rather, that Realtors-by-choice should foot the bill for the association’s products and services apart from the MLS. If the Realtor association couldn’t survive without the MLS subsidy, what would be the rationale for the association’s existence?
A few intrepid brokers have challenged dual MLS and Realtor association membership rules. Whether those brokers are brave or foolhardy remains to be seen. Either way, it’s unfortunate that these disputes can’t be resolved without lawsuits because in the end, only the lawyers will win.
Marcie Geffner is a real estate reporter in Los Angeles.
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