What is an MLS?
A Multiple Listing Service is a cooperative of brokers. For many years, the MLS’s core services were defined as Cooperation and the Offer of Compensation. It was an agreement between competitors who understood the fractured nature of the real estate market: millions of sellers, each with one unique product, trying to reach millions of buyers, each looking for a single property. Without an agreement to share access to the products equally with other cooperative members, it is a difficult, if not impossible, task.
Over the last 100 years, the broker cooperative has grown and matured, becoming the most efficient engine in the world for helping agents connect buyers and sellers, and making the “American System” of real estate the envy of the world. The broker cooperative became ubiquitous. No active or retired real estate agent or broker in the United States has ever lived in a world without a functioning MLS, so we take its benefits for granted.
We don’t think about the rules that make the cooperative function unless we unwittingly violate a rule, but rules matter. In the case of the broker cooperative, it ensures that the market’s interests and consumers’ needs are served, even when this is inconvenient for individual members’ business interests.
When the offer of compensation was uncoupled by the Sitzer-Burnett class action suit, there was a lot of conversation about “doubling down” on cooperation, without explaining what that actually meant. And therein lies the problem. We need to be clear about why we have an MLS and why cooperation is necessary for it to work.
Cooperation Means Equal Availability and Access
To offer cooperation, all listing agents must inform all other members of the broker cooperative that their seller wants to sell the property (i.e., that the property is listed). For the cooperation to be effective, all buyers represented by agents in the broker cooperative must have simultaneous access to the property. For the system to work over the long term, it must benefit every agent equally, so everyone is incentivized to follow the rules. Although an agent or a single firm might think they benefit from excluding a highly desirable property from the MLS, doing so would ultimately undermine the long-term value of cooperation, which is what makes the MLS work. The hope that a buyer will find you without the MLS mechanism so you or your company will benefit shouldn’t outweigh the value of the efficient marketplace the MLS creates.
The MLS has worked historically because members agree to do the right thing, not the easy thing, or the thing that generates a little more commission for themselves or their firm. And they agree to be accountable for doing the right thing, with consequences if they don’t follow the rules. Like everything else that makes us better, it’s worth enduring some friction.
When is a Private Listing Network Not a Private Listing Network?
There was a lot of furor when MRED decided to align itself with Robert Refkin, who is famously interested in Private Exclusive listings, by providing what it called a National MLS with a Private Listing Network component (which it has had in its MLS for several years). Robert Refkin amplified the news when he announced he would subsidize membership for the first 100,000 Compass agents who joined MRED. Illinois Realtors announced shortly after that they would provide access to MRED’s MLS. This was an incredible propaganda move for Compass and what seemed like a huge win for Refkin’s almost evangelical support of Private Exclusives as a marketing pillar of Compass’s three-stage approach to real estate marketing.
Their PLN is not Private Exclusives; however, it’s just poorly named – it would be better called the “Broker Only Network”. In the MRED PLN, according to CEO Rebecca Jensen, every member has access to property listing information and full access to the property, on an equal basis with the listing broker. That is cooperation, not an office-exclusive or Private Exclusive. The MLS doesn’t have to be about advertising. It has to provide information and equal access to all members of the cooperative.
Private Exclusives Vs. Coming Soon
It isn’t a secret that I am not a fan of pocket listings, office exclusives, Private Exclusives, or Company Exclusives, because they inherently limit access and hide availability. I don’t believe they result from “Seller Choice,” though I accept that they are indeed a “Seller Decision.” The difference between “choice” and “decision” is who brings it up. If the seller starts that conversation, it would be choice, but surveys have shown that the topic is more often brought up by the agent, who is trying to guide the seller to make that decision.
The term “pocket listings” is so old that it literally means keeping the listing in your pocket instead of submitting it to the MLS for cooperation. Back then, this was also called sandbagging a listing. An agent did it because they thought the property was so desirable or so well priced that they could double-end it (the practice goes back to a time when only the seller was represented in the transaction, and even co-op agents worked only for the seller). It was frowned upon because it violated the spirit (and indeed the rules) of the broker cooperative. The office exclusive and the Private exclusive are just versions of the same thing. I am the only one who can sell it; becomes “only my office can sell it”; and that becomes “only my company can sell it” in each iteration, but the philosophy is, without doubt, still opposed to the concept of the broker cooperative.
Here Comes the Judge(s)
These issues are so obvious that several State legislators, and even the Federal government, feel compelled to weigh in and are creating legislation to protect consumers by limiting the practice or forcing a more informed consumer. Obviously, whether you like the practice or not, you have to recognize that legislators don’t legislate things that they view as benign. Their negative view of the practice might be worth considering before you choose to go in that direction. Of course, proponents of this business practice hail these regulations as a clear path to promoting the practice, so, as always, we end up with different strokes for different folks, and everyone is entitled to their legal business practices whether I agree with them or not.
Coming Soon listings and Delayed Marketing Strategies are completely different from these private exclusives. A coming soon listing is shared with all members of the broker cooperative. In its most common form, access to the property is granted to all of the clients of all of the members in an even-handed and equitable manner. No one gets in first, no one is excluded, and any consumer working with a real estate professional who belongs to the MLS has access to the information and the property as soon as it is listed. Frankly, I like coming soon as a marketing strategy because it can build consumer interest, especially when you set a specific date and time for everyone to see it. It’s like announcing the “drop” of a new product, movie, or show online. To me, the big difference between coming-soon or delayed marketing and private exclusives is that everyone gets access to information and the property at the same time, and the broker-cooperative remains the best source of information for active buyers and sellers.
Cooperation Is More Important Than Advertising
In a world of lawmakers, hyperbole, and public virtue signaling, the broker cooperative and its byproducts seem intertwined when, frankly, they are not.
The IDX feed, a mechanism designed to allow every member of the cooperative to advertise all of the listings of the cooperative (unless the seller asked not to ) is the core of internet property advertising. But today web traffic has become hyper-competitive and is a battleground of Mega Brokers, franchises, and Portals. In the struggle for online prominence, where a listing appears first has become a major concern and topic of discussion among real estate professionals. Compass, which has led the charge for Private Exclusive listings, is driving exclusive “coming soon” marketing through its partnership with Redfin, while taking a loud, public position that its agents will happily cooperate with any broker in their MLS who wants to show the property. That is a very Pro-MLS position for a company that has had such a tumultuous relationship with Multiple Listing Services across the country. Zillow, which has publicly opposed Compass’s strategy, has responded with its own pre-marketing listing program. It’s getting hard to tell the players without a scorecard.
But putting the Portal wars aside, as I said at the start of this post, the MLS is a Broker Cooperative. It is not a public utility. It is not a consumer service. It is not a third-party advertising service. The data is aggregated by the Broker Cooperative through its members, by its members, and for its members (with apologies to President Lincoln). Once the data is aggregated, if the organization and its members (through its ruleset) want to provide consumer-facing information, sell the data to third parties, or allow its use for advertising, then that is their prerogative.
What’s Important to Whom?
Cooperation is essential to the MLS, while advertising is only essential to the Real Estate Portals. In a recent meeting I participated in where MLS issues were being discussed, I made a statement that I think is simple but gets to the core of the marketing issues that are being discussed nationally: “If every portal on the planet disappeared tomorrow, the MLS would survive. If the MLS disappeared tomorrow, the portals would follow shortly” (I admit it’s a bit exaggerated, but I was trying to emphasize a point.)
Without the portals, the internet would still be a primary advertising and marketing vehicle for the real estate industry. Currently, most consumers constantly surf multiple real estate portals and websites, and that probably wouldn’t change – after all, many of those consumers are either no- or low-intent consumers. They’re curious about prices in an area, or they’re just nosy and won’t be buyers for many months or even years. While portals claim all these visits as traffic, and each one is a unique visitor, these casual viewers aren’t the consumers brokerages and agents reach out to, or the ones who actually need the MLS to facilitate an efficient, competitive marketplace for buyers and sellers.
What is the True North of the MLS
The MLS, as a side effect of being a broker cooperative, creates a large, trusted, and efficient dataset that has an incredible number of uses beyond the broker cooperative. Perhaps the most crucial one is that appraisers need access to complete, public property data through the MLS to facilitate financing for all the properties we list and sell. But the creation of that dataset is crippled without a strong ruleset that requires every listing to be submitted to the MLS as soon as it is listed by a participant, and ensures that all participants have access to the property at the same time, so fair housing issues do not arise, and the cooperative validates its mission to allow all of its members access to all of the inventory listed by its members.
More important than the portals, or advertising opportunities, or our company or franchise websites, our agents need to have access to all of the listed properties through the MLS – not through public-facing websites. If the paradigm changes from agents bringing properties to their agents, to agents once again being focused on finding properties for their clients, that’s ok – it’s merely an adjustment. Remember that under the post-Sitzer settlement, Buyers need an agent to see a property anyway, and the listing agent has a fiduciary responsibility to their seller that the broker cooperative facilitates. And while that’s enough, let’s not forget that most agents work with both buyers and sellers. In both cases, they benefit from and need cooperation.
We don’t need the add-ons offered by an MLS or its affiliated vendors. We may like those things and enjoy them, and they may have value to both the industry and the consumers we serve, but what we truly need is a mechanism to make a fractured, inefficient marketplace as efficient as possible. Let’s stay focused on the future of the MLS, and keep business model conversations, ownership concerns, and litigation fears separate from the existential issue facing the MLS. We don’t have the strongest real estate market in the world by accident. We have it because our industry has an efficient real estate market created by the MLS system. That system has always worked best when agents prioritize equal, shared access over private listings and short-term wins. Let’s work hard to protect it.