Looks like Colorado’s two largest MLSs won’t be joining forces anytime soon. Information and Real Estate Services (IRES), the Centennial State’s second-largest MLS, has rejected a multimillion-dollar buyout offer from the state’s largest MLS, REcolorado.

  • Northern Colorado MLS IRES has declined a multimillion-dollar acquisition offer from its southern neighbor, REcolorado.
  • IRES said the offer did not serve its customers' interests and offered an alternative: discussions with MLSs throughout the state.
  • REcolorado said such conversations have already been taking place in the last 15 years and gone nowhere.
  • REcolorado informed IRES this week that it had decided to end a 14-year-old data share between the two MLSs, calling it "an impediment to our progress."

Looks like Colorado’s two largest MLSs won’t be joining forces anytime soon.

Information and Real Estate Services (IRES), the Centennial State’s second-largest MLS, has rejected a multimillion-dollar buyout offer from the state’s largest MLS, REcolorado.

Two days after IRES announced its decision, REcolorado informed its northern neighbor that on March 2 it would end a data share between the two MLSs that had been in place since 2003.

More MLS and Realtor association mergers are likely this year and can bring with them economies of scale and better services for the agents and brokers that belong to them.

But the discord between these two prominent MLSs illustrates why the road to consolidation is often slow and bumpy — if it leads there at all.

IRES says no

On Dec. 7, REcolorado made an unsolicited seven-figure offer to acquire IRES. REcolorado, based in Greenwood Village in the Denver metro area, has about 20,000 agent, broker and appraiser subscribers. IRES, based in Loveland in northern Colorado, has about 6,000.

On Jan. 30, IRES formally declined the offer.

Lauren Hansen

“Our primary reason for not accepting the offer was our customers,” IRES CEO Lauren Hansen told Inman via email.

“We are open to any number of possible paths forward, but our customers come first, and we did not believe this acquisition, as proposed, served customer interest.”

When asked why not, she said, “[W]e heard from hundreds of IRES subscribers, many of whom use both MLS systems (REColorado’s Matrix and IRES’s custom system) and users overwhelmingly wanted IRES to continue.

“Some of the comments were about our systems, and many others were about customer service and company culture.”

In a blog post, IRES also said, “We had concerns with the proposed ownership structure that excludes our current owners, limited representation for IRES brokers, and transition to the Matrix platform.”

REcolorado President and CEO Kirby Slunaker told Inman IRES didn’t reach out to REcolorado with any of its concerns.

“In the timeframe that we had the offer in front of them we reached out to them on numerous occasions and there was not a single piece of conversation that took place. They did not speak to us at all until we got a ‘no,'” he said.

When REcolorado presented IRES with its nonbinding initial term sheet, REcolorado expected IRES to negotiate, perhaps adding partial ownership to the table, according to Slunaker.

“We offered them board representation. We were prepared to offer them ownership as well. Their former members would only comprise around 21 percent of the combined base, but we were prepared to offer them ownership and take care of their employees,” he said.

When asked why IRES didn’t negotiate or counteroffer, Hansen said, “We looked at all merits of their offer and feel the issue is much broader than IRES and REcolorado.”

IRES offers an alternative

Hansen said IRES remains open to potential consolidation among Colorado MLSs, but believes talks shouldn’t just be between REcolorado and IRES.

IRES wants to start a “Colorado Conversation,” she said.

“We understand there are many models for consolidation, merger and cooperation throughout the MLS industry and we believe a solution that serves both the consolidating parties and the needs of all constituents should be the ultimate goal for all concerned,” IRES said in its blog post.

“To that end, we are willing to fund up to $50,000 for travel and other related expenses in order to facilitate in-person meetings among MLS organizations and encouraged REColorado to financially participate as well,” Hansen said.

“In the end, we want to do what’s best for real estate brokers and are happy to lead the conversation in order to come to the best possible conclusion.”

The funds will be primarily used to cover travel expenses for executives or administrators from other MLSs throughout the state to attend a meeting or meetings, she said.

“We may also determine that we want to bring in outside speakers (e.g., someone from Bright MLS) to share their experience. Details are being developed — and some of the direction will ultimately be decided by participants,” Hansen said.

‘Next steps’

REcolorado has yet to to decide whether it will participate in IRES’s proposed statewide conversations.

In a blog post about IRES’s decision, REcolorado noted that statewide MLS conversations have been taking place for the last 15 years.

“REcolorado has been an active participant. These conversations have produced thoughtful analysis and have been effective in identifying organizations that are open to the possibility of partnerships; however, they have also delayed our progress, allowing national portals to penetrate the market,” the post said.

Kirby Slunaker

The latest effort was a Chair Advisory Group formed by the Colorado Association of Realtors in which participants, including Hansen and Slunaker, met twice to develop a report on the pros and cons of MLS regionalization. That effort ended in March 2016, Slunaker said.

“Nothing came out of that. And that was just the most recent time when nothing came out of it,” he said.

In response, Hansen said that the CAG was designed to only gather and provide a limited set of resources. Taking “next steps” was beyond the scope of what the state association wanted to accomplish, she said.

“It’s yet another reason for the ‘Colorado Conversation’ — to explore those next steps,” she said.

“One example mentioned was a statewide survey to gather facts on how many brokers belong to multiple MLSs — and even perhaps why. That would give us all insight to keep moving forward.”

“As important, not all MLSs were represented on the CAG. We hope to have broader participation,” she added.

IRES has gotten interest from other MLSs in the state to join consolidation discussions, according to Hansen.

“But remember this isn’t just about consolidation. It’s also about sharing information (e.g. RPR View) and perhaps even gathering facts through a statewide survey,” she said.

“It ultimately boils down to what serves our brokers best.”

Consolidation may not make sense everywhere

REcolorado said it’s not trying to form a statewide MLS and that consolidation “may not make sense in every part of the state.”

“The real estate market in some of our resort communities is very unique [and] not similar to the Denver metro market,” Slunaker said.

Consolidation is the “right approach” for Denver and northern Colorado because growth “has caused overlapping market disorder,” the blog post said.

“As a result, real estate professionals are forced to use two different MLS systems, which is cumbersome and costly, at best. These market conditions have created the need for consolidation, which is why REcolorado made its offer to purchase IRES. It is also why we will continue to urge IRES to reconsider our offer.”

“Colorado real estate professionals are ready for REAL change NOW. We have heard this from you — brokers, agents, and appraisers from the Wyoming border and throughout the Denver front range — loud and clear,” the post added.

“[W]e do not intend to allow fear of change and politics to continue to slow progress that will bring great benefits to you.”

REcolorado ends data share

Turns out REcolorado already had a move in its back pocket. According to Slunaker, on Nov. 1, REcolorado’s board of directors voted to end a data share between the two MLSs.

REcolorado deliberately did not tell IRES until now “in hopes of working a deal,” he said.

When asked whether REcolorado hopes that ending the data share will make IRES reconsider, Slunaker said, “I don’t know that there’s a direct connection between us shutting off the data share and hoping that IRES will come back and re-engage with us.”

In another blog post, REcolorado said it had made its decision because “brokers, agents, and appraisers receive very little benefit, if any, from the [data share] agreement.”

“In fact, data sharing has held us back from developing long-term solutions that will truly move us forward due to its many limitations. At best, it has been a stop-gap measure and at worse, an impediment to our progress,” the post said.

REcolorado cited missing or incomplete MLS fields, incomplete reports, the inability to share data on each other’s IDX websites, and different MLS rules and regulations among the flaws of data sharing.

REcolorado also contended that the vast majority of brokers operating in the northern border area of Denver are already members of both REcolorado and IRES.

‘Disappointed and concerned’

In a separate blog post, IRES said, “IRES is very disappointed and concerned with the termination announcement from RECO, especially since the impetus of data sharing was a result of broker requests.”

IRES has formally requested that REcolorado reconsider.

“The need for providing more information in the hands of real estate professionals has grown, not diminished. Data sharing has been a solution for more than 10 years, and given that Colorado today is one of the hottest and fastest growing real estate markets in the country, the need for such collaboration has only increased, not decreased,” the post said.

If REcolorado discontinues the data share, the post added, some agents, brokers and appraisers will have to:

  • Pay fees to belong to both MLSs
  • Enter their listings twice
  • Sort through duplicates from two systems
  • Negotiate cooperation and compensation

“REColorado has stated they believe that data sharing is simply a ‘stop-gap’ solution to industry consolidation and that is why they are stopping the practice,” IRES said.

“While we also support industry consolidation, this decision is not based on technological barriers. Our ability to data share is already in place and could be expanded and improved.”

When asked why REcolorado wouldn’t just keep the data share, Slunaker said, “I don’t know that I agree that something that’s that flawed, that imperfect, is better than nothing.”

He compared it to keeping an old flip phone. “You’re going to stay with that because it’s in place and you’re comfortable with it. You don’t want to make the jump to the modern world,” he said.

“We think [ending the data share] is hopefully going to create the kind of impetus to make changes in the marketplace to make things better for brokers and agents,” he added.

In all this morass, is there hope?

David Charron, one of the leaders behind the nation’s newest mega MLS, Bright MLS, thinks so.

“I like the reaction from IRES. It’s definitely a ‘no’ but with a caveat that says ‘let’s talk,'” Charron wrote in a comment on the Vendor Alley blog.

“Tom [Phillips] and I encountered this in the Mid Atlantic. Each of us/all of us have the best system. Why should we give up what we have worked so hard to create?

“But when we all (9 MLSs representing 43 Associations) sat down together, we determined we had so much in common. Definitely some awkward moments, a few uncomfortable bells rung. But we stayed focused on the larger issue of broker and agent profitability and relevance.

“Smart people will find a way to get there. Kirby and Lauren are very smart.”

Email Andrea V. Brambila.

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