Inman

A blueprint for statewide MLSs

Editor’s note: This story has been corrected to refer to Connecticut Multiple Listing Service Inc. as "CTMLS" on second reference. An earlier version of the story included several references to "CMLS," a competitor of CTMLS that has not joined the statewide MLS.

The nation’s roughly 900 multiple listings services could provide greatly improved products and services for members if they consolidated into 50 statewide MLSs, according to a white paper that details how that feat was accomplished in Connecticut three years ago.

In the white paper, Cameron Paine, CEO of Connecticut Multiple Listing Service Inc., estimates that brokers and agents waste $100 million a year on excess fees that are a result of the duplication under the current system of overlapping MLSs.

In Connecticut, consolidation of six Realtor association-owned MLSs into a single, statewide MLS resulted in "greatly improved efficiencies and economies of scale" that in turn allowed for "greatly improved" products and services, he said.

Paine warns that in the long run, resistance to MLS consolidation is likely to lead the National Association of Realtors and state and local Realtor associations losing control over the process of compiling and distributing listings data.

"For the first time, the technology barrier to creating, running and promoting an MLS is so low that, for some, there may be literally no reason why they would want or even care if an MLS (has) an affiliation with NAR," Paine warned.

The system of MLS governance is broken, Paine argues, with NAR standing "at a distance for too long while MLSs suffer the consequences from lack of direction in the industry, lack of understanding of the threats facing our industry, and lack of leadership in forging the consolidation our industry needs to thrive."

NAR’s rollout of its Realtor Property Resource national property database, Move Inc.’s "Find" natural language search tool, and CoreLogic’s offer to pay MLSs for historical listings data, all demonstrate that technology can allow third parties to provide services that MLSs do not, Paine said.

"MLSs are the source of listing data only because brokers choose us to compile it," Paine warns in the paper. "If a model comes along that is better, cheaper and faster for the broker, what possible reason would there be for a broker to continue paying an underperforming MLS for service?"

The fact that more third parties are now courting MLSs for listings also highlights the need for consolidation, Paine argues.

MLSs need to be able to negotiate from a position of strength, he says — not just say "yes" or "no" to businesses that want their listings data. With size comes negotiating strength, he notes, because, "If companies don’t negotiate, they’ll have a state-sized hole in their data."

Resistance to consolidation

Realtor associations have gone to great lengths to avoid MLS consolidation, constructing "enormous, expensive, incredibly elaborate" systems for sharing incompatible listing data, "simply to avoid releasing control," he argues.

There are currently an average of 20 MLSs per state, which lack minimum standards of practice and accountability to members, Paine says.

The reason third-party listing sites like Realtor.com, Zillow and Trulia came into being in the first place is because many Realtor associations and MLSs fought the idea of making listings available to the public, Paine says, creating an opening for others to meet that demand.

"We forced (consumers) to go looking for a website with the data they want, and when they did, they found … not us," Paine muses.

The ability of MLSs to gather information on a large scale, he says, "is valuable both to our membership and to other industries, yet our enormous size gives the illusion of a unity and power we do not have."

Consolidation is the industry’s best chance to regain power over the distribution of data, and the only chance to retain control of the process of compiling listings, Paine argues.

What’s preventing Realtor association-owned MLSs from consolidating is the fear of losing the income from running their own MLS, Paine argues. Most associations operate their MLSs as separate, for-profit corporations. Many use income from the MLS to support their nonprofit association.

Because they can rely on this financial support from their MLS, many associations operate well beyond their means, and are resistant to making changes or adding benefits for members, according to Paine, who says the six Realtor organizations that banded together to form the Connecticut MLS are now better able to focus on providing education, training, and leadership on local and state political issues.

The need to provide those "core" association functions is one reason Paine doesn’t envision mass layoffs if local Realtor associations give up ownership of their MLSs.

Since the incorporation of the Connecticut MLS in 2006, the six Realtor associations that gave up ownership of their local MLS have become "service centers," and all have recovered from the initial drop in income that resulted from the change. No Realtor associations went under or were forced to merge with others, and no Realtor association or MLS executives lost their jobs, Paine said.

The Connecticut Statewide MLS is able to serve 11,000 members with just 10 employees by leaving it up to Realtor associations to operate a dozen service centers around the state.

CTMLS pays the service centers a set dollar amount per member. That revenue did not completely offset the loss of income the Realtor associations saw when they gave up ownership of their MLSs, but allowed them to concentrate on "core" association issues, Paine said.

Core services

Connecticut’s statewide MLS became operational on Feb. 1, 2007 — about three years after initial discussions of the concept began. The MLSs’ public-facing site was unveiled in March 2008.

Other examples of statewide consolidation include Maine Real Estate Information System Inc. (MREIS), the Rhode Island Statewide MLS, and the Northern New England MLS (NNEREN) which covers Vermont and New Hampshire.

The California Association of Realtors recently agreed to merge its fledgling statewide MLS, calREDD, with Pomona, Calif.-based Multi-Regional Multiple Listing Service Inc. — a move that could speed up an effort that’s moved forward in fits and starts (see story).

The fragmentation of the rest of the marketplace, which is served by hundreds of MLSs means that "the public is subjected to inferior service, capabilities and information from their Realtor simply by an accident of geography," Paine says.

Realtors in one town may belong to an MLS that provides tax data, broker data downloads, statistics, and other capabilities like access to the MLS through mobile devices and free syndication of listings. Realtors in the next town over may not be able to provide the same level of service because they belong to another MLS.

The savings achieved from consolidation come not only from eliminating the duplication in MLS facilities, staffs, contracts, vendors and services, but from improved economies of scale. Consolidation at anything less than the state level, he maintains, "burdens brokers, and ultimately the public, with less comprehensive, inaccurate, stale, and more expensive listing data."

In the white paper, Paine details a long list of "core services" he believes any statewide MLS should be able to provide as a result of improved efficiencies and economies of scale, including:

  • Seven-day-a-week tech support
  • Statewide tax data
  • Statistics and graphs
  • A public website
  • Free IDX feeds
  • Lockboxes and keys
  • Listing syndication
  • Online and in-office training
  • Data-checking software

In addition, brokers should have the ability to download the entire MLS database for statistical or internal office use. A statewide MLS should also have a RETS (Real Estate Transaction Standard, a standard for the exchange of real estate data) manager, to ensure that RETS data is properly distributed to vendors.

Brokers should have the right to opt out of sending listings to the public website, and all leads should go back to the broker or listing agent — not the MLS, Paine maintains.

CTMLS has published an "MLS Bill of Rights" that spells out the minimum services it is obligated to provide to members.

Blueprint for consolidation

Paine cautions MLSs not to "step on the toes" of their own brokers by offering services they may wish to provide only to their own agents in order to give them a competitive advantage.

Additional services MLSs may want to consider providing include in-depth demographic information, an online showing and appointment management system, document and transaction management, online forms, reciprocal agreements with neighboring MLSs, and a social networking site for members.

Paine offers political and technical blueprints for Realtor associations to follow on the path to consolidation.

In Connecticut, the movement for a statewide MLS was led by some of the largest brokers in the state, but included brokerages of all size. All let it be known that "the status quo was unacceptable," Paine said, and that they were prepared to form their own MLS, separate from the state’s Realtor associations.

It took years for "a few forward thinking" state and local Realtor association executives to persuade and cajole others who "fought tooth and nail against a statewide MLS," Paine said.

Under the system of governance employed by CTMLS Inc., brokers own their own listings data while the MLS owns the compilation of listings. Each brokerage has equal representation on the CTMLS board and pays the same membership fee.

CTMLS remains an association-owned NAR member, because staying in compliance with NAR’s bylaws and rules and regulations ensures equal service to all members, Paine said, and also affords protection under NAR’s errors and omissions insurance umbrella.

But Paine warns that NAR shouldn’t take it for granted that MLSs will always choose to operate under the group’s authority. MLSs "have no unbreakable tie" to NAR as a governing entity, he says, and the fact that NAR provides the same benefits to non-Realtor-owned MLSs weakens their position.

The white paper examines several approaches to data sharing. They include reciprocal access using single-sign-on (SSO) technology between MLSs that use different front-ends — which does not address the problem of duplication of costs and services — to a shared MLS vendor using common front-end software and the same back-end database.

Paine dismisses data-sharing approaches that fall short of consolidation, in which several MLSs pool listings in a common database or otherwise make them accessible to all participants. Such efforts are bound to be plagued by inaccurate data, bloated expenses, and inequalities between partners, Paine warns.

The advantages of consolidation include having one common MLS infrastructure, staff, and fee; one set of MLS rules and regulations; one IDX feed with RETS access for brokers, and the assurance for users that all properties in a marketplace are in the system.

Some opponents of MLS consolidation argue that competition between MLSs is good, because it drives innovation and the provision of new and better capabilities. But Paine maintains that there is no competition between MLSs in many markets. Brokers can’t leave one MLSs for a competitor because the competing MLS will not have complete listing coverage in their market.

Consolidation, he says, will lead to standardization of listings data, which will, in turn, allow efforts that are now expended on dealing with a fragmented market to be redirected into research and development.

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