Multiple listing services are becoming tech investors and the nation’s largest MLS is about to join in.
During last week’s National Association of Realtors’ conference in San Diego, Art Carter, CEO of the California Regional MLS, was asked point-blank on stage: “What acquisitions are you looking at?”
“A couple,” he replied, speaking during a panel discussion at the event’s MLS Executives Session last Thursday called “Industry Acquisitions & the Quest for MLS Interoperability.” CRMLS has more than 110,000 agent, broker and appraiser subscribers.
“With as much money coming into the proptech industry, we’d be stupid not to partner with organizations,” Carter said. “We’ve been burned by situations where vendors that we’re relying upon may not be ultimately owned by organizations that our brokerage community feels comfortable with. So we’re trying to do everything we possibly can to safeguard ourselves against that.”
He mentioned that he’d been complaining to a venture capitalist a couple of days before that he was only given three weeks of due diligence to determine an investment.
“He laughed at me and said, ‘If I get three days, I’m happy’ … and that was for a $150 million-type level of investment,” Carter said. “So it’s crazy out there, and there’s going to be more change.”
Mega MLSs have increasingly come together to form new joint ventures in recent years. Most recently, four MLSs formed MLS Technology Holdings LLC in order to acquire real estate software firm Remine and for potential future investments, and a company owned by six MLSs, MLS Aligned, is prepping to launch a new showing service, Aligned Showings.
“I don’t think it’s a surprise to a lot of people in this room, but cooperation is going to be a key part of what we’re going to focus on as MLS is going forward,” Carter said during the session.
“If there’s any way that we possibly can make sure that our brokerage community has access to a complete set of data, but at the same time has access to technology of their own choosing, that’s exactly where we have to be.”
MLSs are also increasingly developing more of their own technology in-house.
“We’ve really transitioned ourselves into more of a development shop than we’ve ever been,” Carter said.
“We’re developing more and more of what it is that we do internally. Not focusing on the [user interface], so for all my friend vendors out there, don’t get freaked out. It’s really more about being modular on the back end, and really being able to plug in anything that is being done out in the industry.”
Inman caught up with Carter after the session. He said CRMLS was still in that three-week due diligence phase and would be making an announcement on an investment within the next couple of weeks, but that it probably wouldn’t be an acquisition.
“We’re open to everything, but at this point, the one that we’re focused on right now is more of an investment to get a partial ownership in the company,” Carter said.
He declined to say the kind of company, but confirmed that the product would be something agents can use.
“We’re not gonna provide anything that wouldn’t have direct benefit to our brokers and agents,” Carter said.
Regarding having been “burned” in the past, Carter said he was referring to Compass’s acquisition of offers tool Glide and Zillow’s purchase of showing management firm ShowingTime.
“Those are the ones that the members really kind of squawked at the hardest, but in all honesty, I don’t know that they’ve ever stopped,” Carter said.
“We’re still working through some of the concerns on that ownership structure. The difficulty we face in this industry is that we are never going to be developing everything from A to Z. There’s going to be money entering into this industry, through various sources, and some of them our brokerage community may not feel comfortable with.
“So we’ve gotta get our minds around making sure that we secure their data as much as we possibly can and they can feel comfortable.” He also wants agents to feel comfortable “with the technology too, because there’s some great technology out there that just because somebody may be providing intellectual capital to push them forward, doesn’t mean that that’s a bad thing.”
He said CRMLS’s investments would be funded by its reserves. Last month, speaking generally about MLS budgets, real estate consultant Victor Lund of WAV Group told Inman that MLSs keep a minimum of six months of dues but many MLSs have reserves and other assets that far exceed three years of dues.
“Moreover, these companies rarely have debt unless it is on their building,” he said via email. “You can assume that they have plenty of capital. The large MLSs may have more than $20 million in reserves.”
Carter said that while venture capital will be not be funding CRMLS’s investments, “there could be some venture capitalists that are involved in some deals that we’re looking at” in the sense that they would be fellow investors in a company.
Carter, who joked during the conference session that “Realtors have an extra anti-change gene in them,” said he wasn’t looking to invest in a firm like Remine, where one company provides several different MLS products, but would rather make an investment that gives agents choices about which products to use.
“Probably our biggest difficulty with the Remine investment is that it’s still a single channel and delivery of services through one company,” Carter said. “We’re focused on providing choice and [updating] our back-end platform. There are elements that I’ve got my developers working on to make sure that whatever cool thing comes out of a garage we can plug into our system.”
“It’s not to say that Remine can’t be innovative or can’t provide great products and services, but if there’s anything I’ve learned about my membership is they want choice and to provide that single track is something that, maybe long term we’ll end up there, but right now, the resources that we have are focused on providing choice, not limiting it.”
Asked whether the second investment he mentioned would be an acquisition, Carter said, “We’ll see.” He said that announcement would not come “for awhile” and would depend on direction from CRMLS’s board of directors.
“We’re working towards getting things done as quickly as we possibly can,” Carter said. “I could still take it to a board level decision and they could say no, but I think they’re willing and wanting to move strategically in directions that we already laid out and I’m doing my best to present those opportunities forward.”