California Regional MLS CEO Art Carter says he spent “tens of hours” negotiating with Compass CEO Robert Reffkin and the brokerage’s attorney earlier this year, believing the two sides had reached a workable agreement in June.
But those negotiations ultimately gave way to litigation after Compass sent demand letters to MLS organizations in September, threatening legal action unless they changed their rules governing publicly marketed listings.
“I think the codifying event, or the event that brought everybody together, was a letter from Compass in the early part of September,” Carter told Inman. “That was a line in the sand.”
CRMLS and OneKey MLS are now plaintiffs in a federal lawsuit against Compass, while seven other MLS organizations are pursuing a separate action challenging the brokerage’s demands. The latest addition, Northern California’s MLSListings, joined the second lawsuit in an amended complaint filed Oct. 30.
In a conversation with Inman, Carter discussed the breakdown in negotiations, the industry’s response to Compass, the possibility of a settlement and his concerns about the consequences of withholding listings from the broader marketplace.
Carter also addressed Compass’ separate demands involving MLS data supplied to recruiting platforms, which have become the subject of a broader dispute over data licensing and brokerage rights.
The following interview has been edited for length and clarity.
Inman: We’ve seen a growing number of MLS organizations become involved in litigation with Compass. Was there a particular moment when the MLSs began coming together in a more coordinated way?
Carter: I think we’ve all been faced with the same set of demands out of a couple of different brokerages — Compass more immediately. I had spent tens of hours on the phone with Compass and Robert Reffkin and their attorney trying to broker some path forward that would make them happy and not, in our minds, undermine the cooperative that I run. We thought in June that we had come to that solution.
I think the codifying event, or the event that brought everybody together, was a letter from Compass in the early part of September. It put, I think, 14 or 15 MLSs in Compass’ crosshairs, saying that they would sue them unless they did some very specific things. And I think most MLSs are not willing to do those things. That was a line in the sand. I think all of us recognized that it’s either not cross that line or have some issues further on down the road.
Knowing our conversations with them and all of the movements we made in our rules and things that we did, my biggest fear was that they would just keep on coming back asking for more. At some point, you’ve got to say, this is a cooperative, and all brokers who agree to enter that cooperative do need to behave in a way that fosters cooperation, not undermines it.
You were at the Council of Multiple Listing Services conference in Florida when Reffkin addressed MLS executives. What was your impression of his appearance?
My observation was that he didn’t come across as somebody who was willing to work and willing to have dialogue. I think that was the primary takeaway that most people sitting in that room had. He was presenting a “my way or the highway” approach, and the MLSs needed to answer to that.
In all honesty, I think he probably knew it was not going to be well received. He came to deliver a message, and he delivered that message.
Given those earlier discussions, do you still believe there’s a possibility of reaching a settlement with Compass?
There’s always room for settlement. Obviously, Northwest [MLS] and Compass came to a settlement, and CRMLS and OneKey, in our case, could come to a settlement with Compass as well. There’s nobody on the CRMLS side — I can’t speak for OneKey — but nobody on the CRMLS side wants to enter into litigation. We never did. We never do.
It is a last-ditch attempt to solve an issue that really should have been solved between rational individuals and a discussion. We just didn’t feel that was going to occur.
Much of the debate has focused on MLS rules, private listings and competition between brokerages. But what are some of the larger implications for buyers and sellers that might be getting overlooked?
We’re fast, fast speeding towards an appraisal crisis. So much of the listing inventory is not available to appraisers, much less the automated models that [Fannie Mae and Freddie Mac] are more and more relying on.
I just bought and sold a house, and neither one of them had to appraise with a regular appraisal. They went through an automated process. Without underlying data, how do those systems even work? How does an appraiser get the comps that they need to accurately give lenders those pieces of information? I think it’s going to become increasingly difficult.
I talk to people who work on the commercial side of the business, and appraisals on the commercial side can take four to six weeks. That’s because there’s no real comps other than tax data to get by with. I think that’s the underlying truth that people aren’t really seeing.
We do believe the consumer is disadvantaged in a position where they don’t have access to the full marketplace. At the end of the day, what’s this all about? It’s all about putting a buyer and a seller together in a successful transaction, getting a buyer into the home of their dreams and getting a seller either into another home or whatever wide variety of reasons sellers are moving on from their current property.
I don’t think most buyers and sellers give a damn about any individual company’s bottom line. They want to buy and sell a house. That’s what they want to do.
What about the impact on real estate agents, particularly given the challenges facing the housing market?
It’s a tough market, probably one of the toughest markets we’ve had. I think it probably even surpasses what we saw in 2007, 2008 and 2009. Although we had the price depreciation and things along those lines, the transaction levels are not supportive of the agent base that we have right now.
There’s a lot of angst, and there’s a lot of anger. I get it. The MLS is a convenient place to place some of those pieces of angst and anger, but at the end of the day, we’ve got to start refocusing on the people who are the consumers of the product.
It just seems to me that we’ve gotten so far afield from that.
You’ve also commented on the recently announced Open Real Estate initiative, or OpenRE. Do you see that as a response to Compass or as a way to facilitate more cooperation across the industry?
I’ve said this to the principals who have put OpenRE together: They’re building this plane while they’re flying it at 20,000 feet. I don’t know what the end process is going to look like.
But CRMLS, for 15 years, has had it on our strategic plan to allow our brokerage community to insert data into the database outside of our add-edit functionality. At the end of the day, that’s not the cooperative. Just because I’ve got an add-edit module is not the cooperative.
The cooperative is a set of rules, a set of regulations that each broker agrees to. However they deliver the data into the multiple listing service is not the important part. The upholding of the ideas of cooperation and transparency — that’s the important part. The technology pieces can be figured out later.
