Emily Chenevert, the CEO of Austin Board of REALTORS and its MLS, ACTRIS, is one of my favorite people in the industry. We have known each other for years now from when she served as the Government Affairs Director for ABOR, and even then, I knew she was destined for greatness. Emily is smart as a whip, tough as nails and yet kind and gentle with people. She is a tremendous thinker and leader in the world of MLS and Associations.
She also has a podcast, Scratch That. I’ve been on it, and I follow the podcast because she consistently has intelligent perspectives on issues. You should subscribe. But while you’re at it, subscribe to Industry Relations, my podcast with Greg Robertson, as well.
Episode 17 is no different in terms of quality, thoughtfulness, and intelligence of the discussion. Emily brought on Stan Martin, COO, and William Burnham, MLS Supervisor to talk about NAR’s MLS Policy 8.0. I have written about that quite a bit, released a White Paper with David Charron that at least touches on it, and have spoken about it a fair amount. And NAR Convention, where the decision will be made, is next week.
I listened to the episode, and I think it’s safe to say that Emily and I differ on some things. That’s 110% okay, because smart and reasonable people can disagree on some issues. One of the things that listening to smart people who disagree is that you learn things, and at a minimum, their perspective brings up questions you did not have before.
Since they wrapped up the topic by saying that more conversation is necessary, let’s do just that and engage in further conversation.
The Gist of ABOR’s Position
I think it’s safe to say that given the people involved, this is not just Emily, Stan and William’s personal opinions, but the position of ABOR/ACTRIS. I’m sure there are parts of the podcast where the speaker does not represent the views of ABOR, but it seems fairly clear to me that ABOR opposes Policy 8.0 for a few reasons.
I’m going to try to capture the biggest ones I heard.
- ABOR did have a Coming Soon status in the MLS; it was difficult to enforce, created more confusion and more problems, and did not change agent behavior. As Stan Martin put it, instead of dealing with pre-MLS listing issues, they were dealing with pre-pre-MLS listing issues.
- MLS Policy 8.0 is not the right policy right now, but ABOR is happy about the deep conversation happening because of it.
- That MLS Policy 8.0 provides a path for “office exclusives on steroids” is a big problem.
- Prohibiting public marketing of Coming Soon leads to more Office Exclusives.
- If some consumer doesn’t believe in the value of the MLS, then he should be free to market the home how he wants. ABOR doesn’t want the MLS in between the agent and the consumer in that scenario.
Emily admitted that they don’t know what the solution is; they just know that Policy 8.0 is not it. But it seems to me that in the discussion, we get a pretty good idea of what ABOR’s proposed solution could be, as the three executives get into a great set of discussions that lay out their philosophy.
The Fundamental Reservation
The general impression I came away with is that fundamentally, Emily, Stan and William do not feel that they or the MLS should make any kind of a determination on the best way to market a property, because they are not brokers and agents who list homes. The deference to agents and brokers is at the heart of their reservation with Policy 8.0.
As Emily says at one point:
Am I as CEO of an MLS in a position to evaluate that the MLS is always in the best interests of the client. I don’t feel that I am. I don’t feel that we are. I think that that is the job of the agent, and his or her broker.
I don’t quite understand that reservation or that deference. Let me bring up the point that I made to Bill Fowler in my recent interview with him.
The MLS is not a government agency staffed by lawyers. It is a cooperative of brokerages, and in many cases, the MLS is governed by brokerages. When the MLS makes policy, it does so because the brokerages who sit on the MLS Board or Council or whatever come together and agree that XYZ should be MLS policy.
Emily and Stan and William do not make policy; they are charged with implementing the policy that the brokers and agents who sit on the Board make. So whether Emily feels that she is not in a position to evaluate that the MLS is always in the best interests of the client is kind of irrelevant, because the agents and brokers who make up her Board of Directors are in a position to do so.
Now, I have numerous problems with MLS governance, and much of my day job is dedicated to helping MLSs overcome governance issues. But even I don’t believe that this level of deference is appropriate, because MLS policy is created by brokers and agents, not by the staff.
Inherent Value of the MLS
Having said that, I think there is something really important here. Basically, Emily’s position is that whether the MLS is or is not in the best interests of the client is not for the MLS to decide. It should be entirely up to the individual agent and his or her broker to decide. Okay, let’s roll with that idea.
Furthermore, let’s look at what Emily, Stan and William agree is the proper approach to the issue. Here is Emily speaking about the way forward:
If I think about other businesses that have faced significant challenges in their business structure or their value proposition over time, I don’t see them trying to write a rule that says, “By God, you’re gonna hang out here or not.” I don’t see that as an entrepreneurial or an innovative response to when a challenge comes our way. So I feel like the conversation has been, if we don’t do this, we’re all gonna die on the vine. Every MLS is gonna crippled, all the markets are gonna crash. It’s like Y2K for MLSs.
I guess what I’m saying is, #1 the sky is not falling, and #2, if I’m to take lessons from other businesses that have been successful in serving people over and over and over again and reinventing their value proposition to their consumer, I don’t see them finding ways that hamstring the consumer. I see them finding real innate value in the way that they serve them. I don’t know exactly what that looks like for the MLS, I don’t know what that looks like for an MLS that might not have all the data forever, or that may not have all the sold prices forever, or may not have whatever the future holds for us.
But I just generally think that my approach to the way we survive and thrive is not fear-based, but is based on identifying value that is inherent and known and needed by the consumer we serve. The consumer we serve is the agent first, but really by virtue of that, it’s their consumer. That’s our challenge with this policy. Their consumer does not have the maximum flexibility that he or she deserves.
Combine the two and what we have is a philosophy of deference and a philosophy of carrots not sticks. It isn’t about policy, about rules, but about identifying value that is inherent and known and needed by the customer. Apparently, that deference and that inherent value approach extends to the entire question of cooperation itself, as Emily says at one point:
When I hear the proponents of the policy talk about the threats against the MLS, there are many, as we have said in our email, and I believe that to be true. But if our value is inherent, a forced participation should not be necessary. And what are the implications of forcing that participation and forcing cooperation, especially in a way that leaves a carveout that still provides for more value outside the MLS and not in it?
Well, as the self-appointed lead prophet of doom, let me lay out the consequences of this deference and this philosophy of inherent value.
The Sky Is Not Falling, But the Oceans Are Rising
What I have written in the past, and then in the MLS Path Forward white paper, is that the consequence of not dealing with Coming Soon and Off-MLS marketing is that residential real estate will look like commercial real estate. From the MLS Path Forward white paper:
The consequence of failing to deal with these threats is simple: residential real estate will look like commercial real estate.
Commercial real estate famously does not rely on the MLS and there is no unilateral offer of cooperation and compensation. The norm in commercial real estate is for all prime properties and prime leases to be done as pocket listings and kept within a small circle of brokerage firms. The only time a property or a lease vacancy hits the open market is when there’s some kind of a problem.
As the saying goes, “If it’s on Loopnet, it’s got hair on it.”
That modus vivendi might work in commercial real estate, where the clients are businesses and corporations. However it runs into major problems in residential real estate with its fair housing laws and regulations and consumer protection concerns.
No consumer anywhere has ever said, “I really wish I could search a dozen different websites and talk to seven different agents from seven different brokerages instead of needing to contact just one agent who has all of the inventory at her fingertips.” (Just ask consumers in NYC.)
That might not be the sky falling in, but it is at least the sea levels rising: slow, steady and not a problem… until it is a problem.
Brokers and agents might not immediately cancel their MLS memberships, so whew, the sky is not falling. But under Policy 8.0 (as pointed out by Emily and gang) and under Emily’s deference at all costs philosophy, the MLS does become the secondary marketplace for properties that did not sell. Not today, not tomorrow, but eventually and for certain.
Let me spell out what that means, again.
- Large firms would form private networks both inside the firm (which helps recruiting) and with other large firms outside the firm (which also helps recruiting, as it limits the competition to other large firms).
- Top producers would form networks with other top producers, and anybody who wants access to the prime deals had best get in good with those top producers.
- Pocket listings become the default for all properties; only those which cannot find a buyer at an acceptable price and terms get posted to the MLS or to the internet.
- Small firms, individual practitioners who don’t go network with the Big Boys, get cut out of all but the crappiest deals that the big firms and big players don’t want.
I can predict this because this is exactly how things work in commercial real estate, which does not have an MLS, does not have offers of cooperation and compensation, and is dominated by a few large firms with inside knowledge and long exclusive relationships.
If anyone can come up with a reason why residential brokers and agents would behave completely different from commercial brokers and agents, given that human nature is what it is, I’m all ears.
Now, if the agents and brokers who make up the ABOR Board of Directors decide that they want the MLS to be the secondary marketplace, well, so be it. It’s their MLS, so if that’s what they want, then that is what they should get.
But they should explicitly debate that question, and really understand what that world looks like, before they do so. They should not slide into that decision because deference above all, and don’t act out of fear, and find inherent value and so on.
Which is why I have long said that the real question to be answered is a simple one: Is the MLS the primary marketplace for residential properties, or is it not? Should it be, or should it defer?
My position is clear, but I don’t run or operate an MLS. I merely advise those who do.
How Far Does Deference Extend?
I do have some questions, however, based on the fairly extreme level of deference embraced by Emily and team. All of them are trying to explore the limits of this deference that the MLS should show to agents and brokers.
Unilateral Offer of Compensation
Section 1 of the NAR MLS Handbook says that the offers of compensation made by listing brokers is unconditional. (The exception is if a court of law reduces the commission amount.)
Why shouldn’t the MLS defer to the brokers and agents who might feel that conditional offer of compensation is in the best interest of the selling client? Were I a listing agent, I could easily make the argument that a compensation based on performance is really the way for me to fulfill my fiduciary responsibility to my client. What if the buyer agent is a moron who nearly torpedoes the deal? Why is my client paying him the full amount? What if the buyer agent did no work beyond the initial offer, which was full of mistakes, forcing me to pick up the slack? Why is my client paying the full amount?
But the MLS is forcing me to offer unconditional compensation.
Does deference to the agent and broker extend to this requirement?
Mandatory Submission of Listings
Every MLS has a rule that requires that is participants submit active listings to the MLS, absent a choice by the seller to exclude it from the MLS, which means excluding it from all syndication and IDX feeds.
Does deference extend to this rule? Surely, the agent and his or her broker who is working with the seller is best able to determine if, when, how, and for how long to submit a listing to the MLS. This is essentially Coming Soon and Off-MLS in a nutshell. If I as a listing agent determine that the best way to serve my client’s interest is to market the property on Zillow, Realtor.com, Homes.com, email lists, Top Agent Network, and whatever until none of those turn up a buyer, then put it into the MLS, who is the MLS to get between me and my client?
So rather than mandatory submission of listings, we really ought to have discretionary submission of listings. That seems particularly apt here since Emily says she is not in the position to say that the MLS is always in the best interests of the client; the agent is.
Fantastic! Let freedom ring! Make listing submission optional and let the agent and his or her broker decide if and when to enter a listing into the MLS. If the MLS has inherent value, everyone will enter the listing automatically anyhow. So the mandatory submission of listings policy needs to be looked at.
Mandatory Fields
Every MLS I know of has required mandatory fields when one submits a listing. Things like number of bedrooms, bathrooms, listing price, square footage, etc. are all required.
Why?
Maybe my seller client and I have decided that the way to really market the property is by leaving off the listing price, forcing buyers and buyer agents to contact me so I can start negotiating right off the bat:
“What’s the listing price?”
“Hm, I don’t know, what is it worth to your client?”
Why have mandatory fields when the agent and his or her broker know best how to market a property for the client? If there is inherent value in the MLS to the listing agent to enter accurate information, he’ll do so. If now, he won’t. But the MLS is certainly not in a position to
That analysis can be extended to listing photographs. Isn’t it my decision as the listing agent how many photos to include, and of what, and frankly, whether I want to use accurate photos or photos of some other house, if I determine that I best serve my client by putting in photos of a much nicer house down the street to generate buyer interest, who is the MLS to get between me and my client?
Inherent Value of the MLS: Lawgiver
I can go on with increasingly ridiculous examples of a listing agent determining that it is in his client’s best interest to break whatever current rules there might be. If the MLS truly needs to defer to agents and brokers on how best to market a property, then it truly needs to become optional across the board.
That cannot be any kind of a way forward. It especially cannot be the way forward for the MLS, because one of its inherent values of a marketplace is rules. Any actually functioning marketplace, voluntary or otherwise, always has to provide rules so that marketplace participants know what to expect. It is why Ebay has rules, as does Amazon, as does any flea market in your local town.
The MLS in particular, because it is a marketplace cooperative of competitors, must provide rules and policies to set expectations of its participants. Unlike Ebay or a flea market, we don’t have buyers and sellers in the MLS; we have companies who are all competing against each other. Sometimes, they’re buyers; other times, they’re sellers. And in all times, they’re all trying to recruit each other’s agents away, or take listings and buyers away from each other.
I do not think it is a mistake to say that one of the inherent values of the MLS is its rules and policies. The MLS is the lawgiver that allows brokerages who are busy trying to cut each other’s throats to cooperate in a fairly narrow piece of the competitive puzzle.
As the lawgiver, the MLS needs to be strictly neutral between the parties, but neutrality and disinterestedness does not mean deference.
Options are good, and options are great, and I am 100% with Emily when she says that fear-based moves are not the best way to go for business strategy. And I am an on-the-record non-proponent of Policy 8.0 for some of the reasons that Emily and gang mentioned. But what we’re talking about here is not about options or proper deference. We’re talking about the need of the MLS to establish that it is the primary marketplace, and as the marketplace, it provides and enforces rules of the road so participants in that marketplace know what to expect.
Deference is Misplaced
Fundamentally, this is why I believe that deference by the MLS on this issue is misplaced. It isn’t about telling agents and brokers how to best market a client’s home; it’s about setting clear rules of the road so that everyone in the marketplace knows what to expect.
You don’t like the rules of that marketplace? There’s a simple solution: find another marketplace.
People who don’t like the rules of the NYSE can list on NASDAQ. Don’t like those rules? Try Toronto. Dubai. Paris. London. There are dozens of exchanges all around the world and you are free to find the marketplace whose rules you do like.
But the marketplace has not only the right but the duty to set the rules of that marketplace such that it is fair, neutral, but clear and well understood.
Some of the brokers (like Compass, in whose “pre-litigation letter” complains about the market power of the MLS) who protest make no sense at all. “You have so much market power because you have all of the buyers and all of the listings, so we need a rule that allows us to keep listings off of your exchange” doesn’t pass basic tests of logic.
Every single situation that Emily brought up, of some client who for whatever reason doesn’t see the value of the MLS, can be handled with waivers whose purpose is not to tell an agent or his or broker how to serve that client but to make sure that the client fully understands what he is waiving.
The Debate This Week
So, as the various MLS executives, volunteer leaders, and various members of NAR’s MLS Policy Committee and the 900+ Directors of NAR gather this week in San Francisco, I’d like to urge them to debate the real question, the real issue: Whether the MLS is or should be the primary marketplace or not.
I suspect that they will debate MLS Policy 8.0 instead, and focus on the flaws and details about 24 hours vs. 72 hours or whatever, and try to wrangle over definition of “office exclusive” and so on. There will be a lot of talk about what is practical for the MLS to enforce, about non-disclosure states, about local option vs mandatory rules and so on.
All of that is useful, but all of it sort of miss the point.
Either the MLS is primary, or it is not. If it is not, then we definitely don’t need to spend a whole lot more time and energy and money worrying about the MLS. Commercial real estate gets by just fine with Loopnet and CoStar (which is one company). I’m sure residential real estate that emulates commercial real estate will get by just fine with one or two national portal-databases as secondary marketplaces as well.
-rsh
13 thoughts on “The Innate Value of the MLS? Thinking Through a Podcast from Austin Board of REALTORS”
“You don’t like the rules of that marketplace? There’s a simple solution: find another marketplace”
This is one of the main problems. The MLS is stopping the agents and the brokers from finding another marketplace . As an evidence to that is,they are banning from coming/pocket listings to be listed elsewhere. Some brokers will not have their listing on Zillow or and other 3rd party portals. Shall I tell you why? I think you know why.
Let`s agree that we do not agree. The MLS is a monopoly.Anyone who in this business who has some brain in his/her box knows that.
Actually, the MLS is no longer a monopoly. The other market is the one where we don’t have to share the listing commission, namely Zillow and the sites that emulate it.
The MLS is a monopoly sorry pal.Every 10 years old kid will tell you that.
Lots of great arguments here. I’d like to get your opinion on whether the proposed policy form NAR steps in between the fiduciary responsibility the listing agent/broker has to their client (the seller). A licensee is supposed to follow instructions of the seller, and promote the seller’s best interest with the utmost good faith, loyalty, and fidelity in the sale of the property (basically state law everywhere). If the seller tells their agent to first try marketing the property off MLS, because if the agent finds an unrepresented buyer, the seller will pay their listing agent 4% instead of 6%. So the seller nets more (expense reduced from 6% to 4%) and the listing agent nets more (3% to 4%). What does the listing agent do, turn down the listing because they feel bad for leaving a buyer’s agent out of the deal even though their seller could net more proceeds, or accept and move forward with the seller’s instructions? Seems like an awkward conversation to have. And yes, I get that the best chance of selling a home is to reach the largest base of home buyers possible, but that does not guarantee a higher net for the seller. Those are two different things.
The mandatory fields argument seems weak. You’re talking about hiding or misleading basic facts about the property (for example: number of bedrooms) versus what medium the seller wants to market his/her property (MLS, Zillow, Facebook marketplace, etc). It’s not up to the agent to decide how many bedrooms are in a property, but rather the local housing code determines what is and isn’t a bedroom. These are facts about the property.
I’m not familiar with all 50 states, but I do know that in certain states a listing price is required by state law to be present in your listing agreement with the seller (as well as other things like a start date, termination date, etc). You cannot market a property with a TBD listing price. Hiding a listing price is misleading, which the licensing authority of (pick a state) probably won’t be happy with the licensee for misleading information or omitting information that is essential to a real estate transaction (maybe even material fact? I’m not an attorney).
What about those people that sell homes privately, without agents. This happens all the time. Is it fair to the rest of the buyers out there in the same market that they weren’t offered the same fairness to potentially buy a property that two private parties exchanged without anyone’s knowledge? The use of an agent shouldn’t change the consumers right to make their own decisions, right?
Big fan of the blog and your insight. Looking forward to your thoughts.
Thanks Steven.
I think my take on the whole “fiduciary relationship” thing is much clearer in the white paper linked to above. It’s a free download, so feel free to look through.
Having said that, generally speaking, I think every situation that really raises that fiduciary relationship issue can be handled via waivers. The change I would make is that the MLS has the right (and I might argue, the duty) to contact the seller to make sure that he knows the pros and cons and wants his agent to do things his way.
So in the example you provide, if the seller truly believes he’ll net more by having his agent go pocket listing as he’ll save on cooperating compensation costs, I don’t have a problem with issuing that waiver. I do have a problem with issuing that waiver based on the agent’s say-so without verification. What’s the saying? Trust but verify. I go with that.
As for the mandatory fields thing… I don’t think you’re wrong there, as I said above that I can go on with increasingly more ridiculous examples… but I will point out that every MLS I’m aware of has disclaimer language all over the place that mirrors what the California Association of REALTOR’s Model Rules say:
“Based on information from the ___________________ /Association of REALTORS® (alternatively, from the ____________________ MLS) as of _____ (date the AOR/MLS data was obtained). All data, including all measurements and calculations of area, is obtained from various sources and has not been, and will not be, verified by broker or MLS. All information should be independently reviewed and verified for accuracy. Properties may or may not be listed by the office/agent presenting the information.”
So yeah, # of bedrooms might be a local code issue, but whatever is on the MLS is “deemed to be accurate” and the buyer/viewer is told to independently verify. So there is that.
As for this:
“What about those people that sell homes privately, without agents. This happens all the time. Is it fair to the rest of the buyers out there in the same market that they weren’t offered the same fairness to potentially buy a property that two private parties exchanged without anyone’s knowledge? The use of an agent shouldn’t change the consumers right to make their own decisions, right?”
I think what you’re confusing here is that the MLS is not the government. It is a private network made up of brokerages. Those people who sell homes privately might not be fair to the rest of the buyers, but that’s not the MLS’s problem to solve; that’s for the duly elected government and its duly appointed officials to solve. The MLS has to solve the problems of those companies and individuals who have chosen to join it and chosen to agree to abide by its rules.
So no, the MLS shouldn’t concern itself with private transactions. It only needs to concern itself with the behavior of its subscribers and Participant brokerages. So using an agent doesn’t change the consumer’s right to make his or her own decision, but that agent may need to decide whether to stay in the private club that is the MLS or not. Plus, see above about waivers: if the consumer really wants things done a certain way, then I think a waiver handles all of those legitimate scenarios.
Obviously, where the local authorities have passed laws and regulations that the MLS has to obey, then it has to obey those like any other law. I don’t think that’s what is at issue here.
Hope that clarifies things.
It seems fairly simple to me.
Industry participants should be free to innovate and offer the consumer whatever strategy works for the consumer and can be implemented by the listing broker. It is not the responsibility of the utility (the MLS) or the professional Association (the NAR) to interceded with regulations that hinder that process our those marketing strategies.
It is especially not in the best interest of the industry participants for these outside utilities to regulate the industry participants in order to assure their future well being and then to pretend that it is “for the good of the very consumer” they propose to regulate.
If the NAR and the MLS somehow now believe that they must now “regulate the industry to protect the consumer” then I would suggest that they should immediately revisit the standards that they presently apply to define an industry participant. At least to the extent that they allow a licensee to be branded a Realtor.
This change in industry preferences should not be met with a “do or die” policy from organized real estate. There are work arounds that would allow the integrity of the MLS data to be preserved but they will clearly need to be met with a more flexible environment that is designed with compromise in mind in order to preserve the membership.
Finally, it is evident that the NAR and the MLS is “governed” by the industry “members” but it equally as clear that the great majority of those members who all have an equal vote represent a minority of the business actually done this industry. Therein lies yet another absolute hinderance to allowing innovation and change to be realized.
Emily and her people are correct. And I applaud her for recognizing that, contrary to what most of this industry thinks about change, adapting to the needs of her members is in the best interest of all parties concerned.
Okay. I’ll bite. What I don’t agree with is that if my client doesn’t want it listed in MLS…..why should we list it in MLS? They very clearly understand the idea of putting it out there for everyone to see on MLS…..and the pros and cons of that…..lots of my clients simply don’t want that. They don’t like the privacy invasion, etc. Simply put…if the Seller doesn’t want to be in MLS, I don’t want to have NAR tell me I have to put it in MLS. 60% of what I sold last year wasn’t in MLS. I don’t think those that are discussing this really understand the benefits being off mls can have. If you’re selling a $400k home in suburbia…..absolutely, MLS is the way to go…..all day, every day. If you’re selling a $10mm home unlike any other…..it’s a whole different game. So tell me Rob, why you think being in MLS is the best thing. I got lost in all your words above. sorry.
Cord – if the client doesn’t want it in the MLS, that’s easily handled via waivers. Since the client doesn’t want it in the MLS, do you have a problem with the MLS reaching out to your client to make sure he understands the pros and cons before issuing the waiver, rather than just taking your word for it?
Absolutely not! If they want to reach out that’s perfectly fine. The only thing I’d suggest is by doing so, it somewhat undermines my relationship with my client….like my big brother is saying “are you sure you know what you’re doing. We don’t believe the agent explained this properly….are you sure?”
Most of my clients are a lot wealthier and a lot smarter than me. They know what they’re doing…and they certainly see and understand the contract they’re signing.
Want a waiver…no problem. Want to call and verify….on, but why? Do you think I forged it? What’s the point of doing that?
And I still don’t feel like you’re addressing the bottom line of this….there are advantages of not having your home in mls.
Cord shiflet,
I agree with you. But can you please explain what are the advantages of not having your home in mls?
I want to learn more on this subject and would love to hear others opinion.
Thank you!
The client should get to decide. No matter what! How about we cancel the contract with Zillow-that feeds our leads to our highest paying competitors?
Why do you have a contract with Zillow, that feeds your leads to your highest paying competitors? I agree that your brokerage, the entity that owns the listing, should cancel that contract.
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