Technology

NAR committee endorses public-facing MLS sites as ‘basic’ service

Proposed policy amendment must be approved by NAR's board of directors

WASHINGTON — Multiple listing services should be able to charge all members for the costs of establishing and promoting public-facing websites, a National Association of Realtors policy committee has ruled.

NAR’s Multiple Listing Issues and Policies Committee today approved a hotly debated policy amendment to NAR’s model MLS rules that added language including the “establishment, maintenance or promotion of public-facing websites” under services an MLS can define as “basic.”

The amendment also included some changes that covered previously unforeseen antitrust issues in certain states.

The committee’s policy recommendation now goes to NAR’s Executive Committee who can then approve or amend the policy and send it to NAR’s board of directors for a vote on Saturday.

The amendment lays out which MLS services can be defined as “core,” “basic” or “optional.” The original draft of the amendment struck out a list of services and products that could be considered basic services that MLSs may charge all members for, regardless of use. Today, the committee brought back the list, following feedback from some MLS executives that the list had provided “guidance” on what services come under the basic services umbrella. Services that may fall under that umbrella are not limited to those on the list, according to the policy.

Greg Zadel, chairman of the committee’s MLS Technology and Emerging Issues Advisory Board that drafted the amendment, compared the basic services list to what a consumer gets when purchasing a car.

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Someone can buy tires for a car separately, he said, but when they buy a car, they expect the tires to come with the car.

“If the MLS is a product in itself, then the pieces of MLS are there” on the list, he said.

Optional products are those that are clearly a different product from MLS, such as lockboxes, he added.

The committee also voted to add “establishment, maintenance or promotion of public-facing websites” to the list after feedback from several MLS executives and brokers.

Bob Hale, president and CEO of the Houston Association of Realtors, noted that the association’s brokers “benefit greatly” from the association’s public-facing website, HAR.com, in terms of click-thrus and leads, and provide a defense against the dominance of third-party websites such as Trulia and Zillow.

In a recent HAR member survey, 98 percent of respondents said the top value they get as a member of HAR was its public portal, Hale said.

“Don’t do anything to hurt the MLS public website, he said.

Hale and others suggested the committee add the ability to promote an MLS public website in the language of the amendment, which previously made allowance only for using dues or fees to establish or maintain a site. The committee later approved the language.

Cameron Paine, CEO of Connecticut MLS, said he was surprised that a website is not considered a core service of the MLS.

“What agent getting into the business today can survive without a website? If the MLS is not the entity that gives them an online presence … that means they have to create their own websites and compete with Zillow and Trulia,” he said.

Just under 70 percent of his market is comprised of medium and small brokers, he said.

But not everyone agreed.

Broker Ken Hanley said he opposes public websites for MLSs.

“There are plenty of real estate websites out there today. I’m not sure that MLSs need to provide websites to their members,” he said.

“I think we leave it up to the brokers. Let them be the business to consumer, and let MLSs be business to business.”

But if an MLS does use dues for a public site, that MLS should be transparent about how much that site costs to maintain and promote, he said, “so everybody can see where that money is going.”

Another broker, Steve Brown, agreed with Hanley.

“As someone who is paying a significant amount to promote our own websites, I don’t want to have to pay more to promote MLS websites to have them send my business back to me,” he said.

Bill Lublin, the committee’s vice chair, noted that the committee’s advisory board did not intend to either promote or impede the use of public-facing websites, but rather to allow MLSs to make decisions on a local basis.

Antitrust

The revised policy amendment included changes suggested by NAR’s general counsel, Laurie Janik, this week regarding antitrust issues.

Multiple listing services have a monopolistic role in the marketplace, meaning real estate licensees can generally not do business without belonging to one, Zadel said. As such, there are laws in place about whether and in what circumstances an MLS can tie the purchase of MLS membership to the purchase of another product, he said.

The current policy requiring MLSs to categorize lockbox services as optional — meaning they cannot require members to pay for them unless they use them — was written that way in part to avoid antitrust, said Leslie Walker, NAR’s associate counsel.

To categorize lockboxes as a basic service that all members must pay for regardless of use mean the MLS would be using its market power “to expand into a second market: lockboxes,” she said.

However, in most areas of the country, MLSs can avoid an antitrust claim if they realize no economic benefit from providing lockboxes as a basic service. This means that the MLS cannot be the seller of the lockboxes or receive a commission, rebate, profit or markup on the cost of the lockboxes.

Most U.S. circuit courts have handed down decisions adopting this “economic interest” element, Walker said, but three have not. The 2nd District has rejected it, and the 1st and 8th districts have neither accepted nor rejected it.

This means that states in those districts may not treat “optional” services or products as “basic.” These states and territories include Arkansas, Connecticut, Iowa, Maine, Massachusetts, Minnesota, Missouri, Nebraska, New Hampshire, New York, North Dakota, Puerto Rico, Rhode Island, South Dakota and Vermont.

MLSs in the remaining districts may treat optional services as basic provided that the MLS does not receive an economic benefit from the arrangement, according to the amended policy. This does not prevent MLSs from charging for the lockboxes, but fees cannot exceed the cost of providing the service.

Lockboxes may also continue to be offered as an optional service that members only pay for if they use.

The only change to “core” services was a clarification that MLSs provide “active” listing information. The previous wording had said “current” listing information.

Hale said he agreed that brokers should not have to pay if they opt out of participating in an MLS’ public-facing website. “I don’t know how that would work if it’s basic,” he said.

After the committee’s vote, Hale said he was very happy with the decision.

“We think it’s the right thing for the industry,” he said.

The committee voted that the policy should be effective immediately upon approval by the board.

Editor’s note: This story has been updated since publication to include additional context.