The CMLS #LobbyCon Report

Obviously, posting has been very light — nonexistent, one might say. Part of the reason was that I was at the Council of MLS (CMLS) conference right here in Las Vegas last week. Well, the truthful way of saying that is to say that I was hanging out in the lobby bar of the Bellagio where the conference was being held – I did not attend the event itself.

Instead, I did what I usually do at real estate conferences, whether I’m attending or not: talk to people in the lobby, which we have come to affectionately refer to as #LobbyCon. This is where the real conversations are taking place anyhow.

This post, then, is simply a report of some of those conversations. All names are withheld since, well, that’s kind of the point of #LobbyCon. If people knew that they were going to be outed, they would say the things they would say on stage… which is to say the Grand Narrative of the POCO. (POCO = Purveyors of Correct Opinions.)

Starting with an Aside…

As an aside, I’d like to observe that at least in real estate, it might be a good idea to have a conference that has no sessions whatsoever. If people are just going to go on stage, on panel discussions, and just mouth the tried-and-true sophistry of the POCO… what’s the point? Nobody learns anything, no one tells the truth, and nothing of substance gets publicly discussed.

Have some inspirational speaker from outside the industry as a keynote, to fire up the crowd, inspire them to achieve personal or business goals, or whatever… then just break until the official cocktail reception. Then set up a series of lounges with open bars and whatnot, and real conversation will break out all over the place… just not in public view.

In fact, I might host such a conference. I have three companies who pledged sponsorship of such an event. We’ll see if they come through in the light of day after sobriety has kicked in.

Overall Mood

Since I didn’t attend the conference, I have no read on what the audience mood was like in the room. Social media is almost always useless for such a thing, since again, only the POCO-approved messages can be posted publicly.

But judging from the #LobbyCon conversations, the overall mood I think could be characterized as nervous frustration.

These are CEOs and board members of some of the largest MLSs in the country. These are major vendors in the space. And the overall mood is one of nervous fear — because that light at the end of the tunnel feels more and more like the headlight of an oncoming train — and of frustration — because nobody is actually addressing that light speeding towards us.

One senior executive literally said, “We’re simply not even talking about the important things.”

The only official session that saw universal acclaim was the one featuring two lawyers, both formerly with the DOJ and the FTC, who are now in private practice, who provided additional color and depth on what is going on between NAR, the US government, and various private antitrust lawsuits. I gather that session was actually filled with real insight.

The frustration rises from FUD: Fear, Uncertainty and Doubt.

Now, as my friend Greg Robertson (who I name, because he’s said this publicly many, many times) has long said, the death of the MLS has often been predicted year after year after year. Sometimes by yours truly, who pleads guilty to the charge. So it may be that FUD is the natural mental state of the MLS CEO. So we can safely ignore the FUD coming out of CMLS 2021 as just more of the same.

On the other hand, more than one MLS CEO did tell Greg, “Yeah, but this time, it’s different.”

Time will tell if this time is really different, but… if you’ve been reading this blog for any length of time, and you see that the DOJ is engaging in unprecedented actions, that the President has issued an Executive Order to the FTC to regulate the living daylights out of the industry, and that bigtime law firms with bigtime lawyers and bigtime budgets are winning motion after motion against NAR… well… maybe your heightened sense of FUD could be forgiven by the Stalwart Defenders of the Status Quo.

Things That Make You Go Hmmm… #1: MLS People Are Not Confident of Survival

In times past, an ancient time shrouded in misty wisps of memory when freedom was the norm rather than lockdowns, known as 2019… one would be pilloried as a conspiracy theorist/fear-monger for suggesting that the MLS might actually go the way of the dodo bird. Ask me how I know.

Today, even the most sober, most invested-in-the-MLS people like CEOs and Board presidents admit privately that they don’t think the MLS would survive the next five years.

The irony is that the theme of CMLS 2021 was “The Power of MLS.” Mere minutes after exiting the official sessions celebrating said power, the people who ostensibly wield that power were not confident that the institution itself would survive.

The very aggressive actions by our federal overlords are the reason. None of the people I spoke to — and admittedly, I couldn’t speak to everyone or even most attendees, but I did speak to quite a few who are among the smartest in the industry — thought NAR would prevail over the federal government.

One high-ranking MLS exec was the most optimistic, because his take was that the regulators would eliminate cooperating compensation (seller paying the buyer agent) but make up for it by allowing commissions to be capitalized into the loan amount particularly by Fannie/Freddie and other GSEs. Why they would do so and save NAR’s bacon, when it seems obvious to me that the DOJ and FTC have “NAR delenda est” as their current motto was not explained.

What’s more, even assuming that mercy is granted, it isn’t clear to me how many buyers would be eager to borrow $12K in transaction fees, pay interest on that commission, just to have a real estate agent help them. Technology is rapidly making most of what an agent does not worth that kind of money, and what an agent does do that is worth real money (e.g., advice, negotiations, etc.) can be paid on an hourly basis.

So one of the things that make you go hmmm… is that even MLS CEO’s are not sanguine about survival… not in 10 years or 20 years… but in 3-5 years.

Things That Make You Go Hmmm… #2: Brokers Are PISSED

Another thing I picked up is that under the surface, the brokers are pissed off at the MLSs generally and by extension pissed off at NAR. I gather a lot has to do with some of the data proposals that brokerages like Realogy and Realty Alliance have made, but more generally, it seems to have to do with (1) lack of progress by the MLSs, and (2) general arrogance of the MLS.

This is a problem that has been around for as long as I’ve been in the industry. I wrote this post in 2013, after the famous “You’ve got ten days” speech by Craig Cheatham of the Realty Alliance. Like the COVID mandates, where we are living through the longest 15 days to flatten the curve, those ten days are stretching into 2021 and beyond.

Back in 2013 I wrote:

As I’ve written before, I don’t think the conflict is about that one issue, or any one issue. I think it’s about settling the question of Who Shall Rule. Keep in mind that the fracture came into view a couple of years ago, when Realty Alliance and Leading RE came out strongly against Franchise IDX. I do know that there were serious meetings being held and plans being laid down during that fight, but the brokers mostly won that round, so I thought they had stood down. Well, maybe they never disarmed, but used the intervening years to tool up more completely.

So what has really changed in 8 years? BPP was launched, Project Upstream came and went, and… what really has changed?

I’ve heard over and over from people who ought to know that the brokers — especially the big ones — are pissed off and are at the brink of something significant and real.

Yes, we’ve heard that before… especially in 2013. But who knows? Does make one think, doesn’t it?

Things That Make You Go Hmmm… #3: NAR Might Be the Walking Dead

Probably as a direct result of #1 and #2, I don’t know that I have ever heard more people — again, sober, respected stalwarts of the industry whom no one would confuse with yours truly — say flat out that perhaps it is time that NAR be left behind in some way or another.

As a longtime advocate of the divorce between the REALTOR Association and the MLS, I am personally much encouraged to hear such sentiments from folks who can make that a reality… but man, it was a bit surprising to hear no one mount a defense for NAR.

Basically, the theme appears to be that brokers are pissed that NAR with its layers upon layers of bureaucracy and committees isn’t going along with some of their proposals. The MLSs are pissed that their affiliation with NAR, which mandates acceptance of NAR MLS rules, is exposing them to potential liability from various litigants and drawing the Eye of Sauron upon them. There was a bit of talk about how the broker-owned MLSs like Northwest and FMLS have a much freer hand in determining their own rules.

Maybe we will finally see a mass exodus of the MLS from NAR’s control. This was long a dream of various MLS people, and for a while, there was the thought that CMLS would be the vehicle that allowed the MLSs to govern themselves and navigate their own destiny. Well, then NAR threw a lot of money at CMLS and made it into something like an adjunct super committee. Perhaps the time to unwind that is not too far away. I’m thinking there are others, who might or might not be public companies, who would be willing to fund CMLS….

Frankly, with the DOJ and the FTC breathing down its neck, it might be the smart play here for NAR to get out of the MLS business altogether. NAR has its own legislative and regulatory agenda to pursue, and being an enemy of the federal government is not good for either of those things.

What might at first glance appear to be a lose-lose could be a win-win in the end.

Things That Make You Go Hmmm… #4: The MLS Fears CoStar… Mistakenly…

The final observation I’ll make is that a number of high-level MLS executives who are smarter than the average bear are absolutely worried about CoStar. But it isn’t clear they know exactly why they fear CoStar.

As you know, I wrote a 100-plus page paper on CoStar’s entry into residential real estate (which happens to be on a 40% off sale! #pitch) in which I outlined what I think the strategy is. I remain confident and convinced that CoStar will do nothing threatening towards the MLS at all. If anything, I think CoStar will try to be the MLS’s Bestest Friend Ever!

Because CoStar is not looking to destroy the MLS. No, CoStar is looking to ride to the rescue and pick up the pieces once the federal government destroys the MLS.

Yet, multiple MLS people (directors, CEOs, senior executives) voiced fears that CoStar would acquire an MLS (which would be a neat trick since most MLSs are nonprofits owned by nonprofits with onerous — one might say dysfunctional — governance models), or somehow steal all the data, or something else bad.

I think the fear arises from the fact that CoStar is the de facto MLS for commercial real estate, is worth some $35 billion, has gobs and gobs of money, and the obvious willingness to use said money. MLS people know that their MLS simply cannot compete with CoStar (except for that whole cooperation and compensation thing and of course that happens to be exactly what is under attack by the government). So they’re a bit paranoid. It’s entirely understandable.

What should be troubling for MLS people isn’t that CoStar is going to come in and wreck shop, but that CoStar is preparing for the post-compensation world and the MLS is not. For example, I had a long debate with the general counsel of a large MLS who is convinced that they have figured out the photo copyright issue. And I’m convinced that most MLSs have not — see this interview I did with Vince Collura and Lucy Edwards from VHT:

Ep 27: Real Estate Photo Copyrights – Issues and Solutions w/ Vince Collura and Lucy Edwards of VHT

I interview Vince Collura, COO, and Lucy Edwards, Director of Client Success for VHT Studios, one of the leading real estate photography networks in the country, on an issue of some importance in real estate that almost never gets talked about: photography and copyrights.

Whereas CoStar really gets it, and really understands photo copyrights. They sued a number of companies on photo copyright infringements claims… and won a lot of them, including bankrupting one competitor.

So what the MLS executives and leaders ought to worry about is how prepared they are for the transition to a new world, rather than how CoStar or Zillow or <insert bogeyman here> is going to force them into that new world.

Wrapping Up

Those are just my personal thoughts and observations from a couple of days spent hanging out in the lobby of the Bellagio. Others are likely to have different thoughts and observations, and perhaps a few POCO will chide me for straying from Correct Opinions. It’s all good.

I suspect that many MLS execs will be upset that I said brokers are pissed… but really… how certain are you as to where they stand? Maybe they’re not pissed at you specifically, but are you sure they’re not pissed at NAR and its meddling slow-ass bureaucratic ways?

In any event, please comment below if you’d like to share your thoughts and feelings. Or since many of you are in sensitive positions, DM or email me or whatever. I’m now on Telegram (@robhahn) and Whatsapp (you’ll have to find me) as well — reach out if you’d like to link up there.

I’ll be busy again this week and next with more presentations and such, but I’ll try to update everyone again as soon as I can.

-rsh

C+C Music Factory – Things That Make You Go Hmmmm…. (Video Version) ft. Freedom Williams

C & C Music Factory’s official music video for ‘Things That Make You Go Hmmmm….’. Click to listen to C & C Music Factory on Spotify: http://smarturl.it/CCMSpot?IQid=CCMMGH As featured on Gonna Make You Sweat.

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Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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