It’s Time to Get NAR Out of the MLS Business

The party in San Diego is now over, and judging from the pictures on Facebook, it looks to have been quite a party. I’d say that CoStar made a memorable entry into the residential real estate industry.

But the other headlines coming out of San Diego convince me more than ever that it is high time, maybe past time, to get NAR out of the MLS business altogether.

Inman News is reporting on some of the drama that happened at the MLS Policy Committee. And we now have the aftermath, with NAR itself reporting on the changes to MLS policy.

As I read through both of these, I can no longer help but ask, “Why is any of this necessary?”

Prologue of Sorts

Right at the outset here, let me confess how much I dislike writing this. I know quite a few people are going to get their backs up because of my stance here, and many of them are friends of many years. I realize some folks are just going to think I’m bashing on REALTORS, hating on NAR, whatever.

The truth is, of course, that it is exactly the opposite — as I go into below in greater depth.

I write this because I feel compelled to write it. And I feel compelled to write it because I actually love the REALTOR Movement, and I love and respect so many of the men and women who make up the REALTOR Movement and represent the ideals of that movement every day.

I write this because I have been fortunate enough to be able to work with some of the executives and leaders in MLSs across the country, and I can’t just sit by when I think they deserve so much more than what they are getting today.

Think what you will; I know I can’t change how you feel about whatever you feel. I’m old enough to know that. But these are my words, and this is how I feel, and I thought you should know before you dive in.

The Policy Changes

I’m actually finding it very difficult to remain interested in what NAR has to say about MLS policy, but since that is the subject at hand, let’s at least look at what happened in San Diego. The MLS Policy Committee debated and approved, and then the 900-plus Board of Directors of NAR (larger than U.S. Congress!) rubber-stamped six changes:

1. Policy Statement 8.6: One Data Source.
2. Policy Statement 8.7: Brokerage Back Office Feed.
3. Internet Data Exchange (IDX) Policy Statement 7.58 and VOW Policy Statement 7.91: IDX and Vow Broker Attribution.
4. Display of listing broker offer of compensation.
5. MLS Policy Statement 8.4: Services advertised as “free.”
6. MLS Policy Statement 8.5: Non-filtering listings based on offers or compensation or name of the brokerage or agent.

#4, 5 and 6 are a direct result of the DOJ suing NAR, and NAR settling with the DOJ, before the DOJ walked away so that it can bring a lawsuit against NAR on cooperation and compensation and Clear Cooperation Policy.

Is it really possible that there are MLS executives and MLS Boards who couldn’t implement those changes on their own, given the clear and obvious signs that the Federal government was going to mandate those changes anyhow? Did they really need permission from Daddy NAR to make these changes?

#1 and #2 are so obvious as to be painful. The very fact that this had to be “debated” through ginormous committees in 2021, when IDX itself was created in 1999… that ought to be more concerning to everyone who isn’t a NAR junkie. The strong implication (and the reality for those of us who know) is that MLSs have resisted providing a single data feed for decades because… who the hell knows? Petty bureaucrat bullshit? Lack of funds to create a single data feed?

That some national trade organization gets to define “the data, use and terms” of the so-called Brokerage Back Office Feed ought to be concerning to everyone who isn’t a NAR junkie. Why in the world would the MLS itself be deemed incompetent to define “the data, use and terms” of a feed for their own Participant brokerages? Why is anybody asking NAR for permission to do any of this?

#3, the “controversial” proposal that resulted in all kinds of wrangling, arguing, backroom dealmaking, and whatever is both silly on its face and none of a national trade organization’s business. Inman reports breathlessly that the big issue was listing agent contact information and “at least as prominently” language. And it quotes Art Carter, CEO of CRMLS: “One of the problems we always get into at the committee level is limiting technology in such a way that we turn ourselves into website designers. I don’t think that’s the intent of the main motion. The intent of the main motion is to really put the contact information out there.”

Except that #3 does turn NAR and the MLS Policy Committee into website designers. The language of the Policy Statement now says, “…identify the listing firm and an email or phone number provided by listing participant in a reasonably prominent location and in a readily visible color and typeface not smaller than the median used in the display of listing data.” Readily visible color and typeface not smaller than the median? Why not go full-on web designer and start laying down what Pantone colors are and are not acceptable, and what typefaces are allowed, and how to define median size?

Is this really the sort of thing that a local MLS (or better yet, the brokers and agents who pay for these websites) can’t decide on its own?

Why is any of this necessary? What exactly would happen if the MLS Policy Committee went away tomorrow? Would the MLS cease to function? Local brokers and agents, together with the MLS staff, can’t make up their own rules as to what should and should not happen with their own data in their own markets?

None of those things would happen. The MLS would be just fine. Brokers and agents would get deals done. Rules would be made by those who have to live under those rules.

Not Only Unnecessary, But Unnecessarily Costly

To add injury to insult, these NAR policies are not only unnecessary, but they impose unnecessary costs on the local MLS.

Suppose you are an MLS whose brokers and agents don’t actually want a “Brokerage Back Office Feed.” Or more likely, where two or three brokerages out of hundreds want a “Brokerage Back Office Feed.” Without the NAR mandate, that MLS can make its own decisions, and do what needs to be done to accomplish the goal. With the top-down NAR mandate, that MLS now must go out and pay the vendor to put in a feed to comply with the new Policy.

Is there funding from NAR to pay for these changes? No? Well then, we have ourselves a private unfunded mandate.

You will incur costs whether or not you or your members want said costs.

Conversely, there are hidden costs from the inability to innovate as an MLS because of NAR rules. An MLS could have implemented Brokerage Back Office Feed ten years ago if its brokers and agents wanted it. Except doing so would have violated MLS Policy in effect at the time. So you take years and years going back and forth with NAR on whether you can or cannot do something your own customers want.

Your own innovative ideas are subject to NAR’s regulations. There’s a cost to failing to innovate. You have all paid it, and continue to pay it.

Unnecessary, Costly, and Corrupting

What makes this whole scheme truly tragic is that it corrupts the REALTOR Movement.

Those who are longtime readers, those who have met me in person, who have heard me speak over the years, those who know my heart might recognize where the frustration comes from. Those who are new, who might have seen this post, might not.

If you are new, or need a reminder, consider reading this post and this post to understand where I’m coming from. Let me quote from that first 2017 post:

The Code of Ethics, the document that distinguishes a REALTOR from a mere licensee, embodies this concern for the consumer and the public. From the Preamble to the Code, which I quote a lot:

Under all is the land. Upon its wise utilization and widely allocated ownership depend the survival and growth of free institutions and of our civilization. REALTORS® should recognize that the interests of the nation and its citizens require the highest and best use of the land and the widest distribution of land ownership. They require the creation of adequate housing, the building of functioning cities, the development of productive industries and farms, and the preservation of a healthful environment.

Such interests impose obligations beyond those of ordinary commerce. They impose grave social responsibility and a patriotic duty to which REALTORS® should dedicate themselves, and for which they should be diligent in preparing themselves. REALTORS®, therefore, are zealous to maintain and improve the standards of their calling and share with their fellow REALTORS® a common responsibility for its integrity and honor. [Emphasis added]

I love these words. Who could not? They ring of concern for not just the buyer and seller, but for the public, for the interests of the nation and its citizens. They talk about grave social responsibility and a patriotic duty. The REALTOR Movement, at its heart, is a patriotic, public-minded, socially responsible movement. They are every bit as inspiring to those of us who work in the real estate industry as the Declaration of Independence is to the American people.

I love the REALTOR Movement. I love the REALTOR Movement and what it stands for. I continue to work in real estate in large part because of the REALTOR Movement. Those men and women I have met who truly embody this concern for clients and concern for the public, who embrace the higher calling to be more than just a real estate agent, are some of the best people I have ever met. They help keep me going, dealing with the frustrations and brick walls.

So if you want to call me a hater, if you want to think that I hate NAR for some reason, perhaps I should paraphrase Michael Malice: I hate NAR because I love the REALTOR Movement.

The Corruption of the REALTOR Movement

In an earlier post discussing the possible upside of doom, I wrote:

If we can get a divorce of the MLS and the Association, then as mentioned above, the Association can get busy making the REALTOR brand meaningful again.

Freed up from the need to worry about antitrust, those who want to remain as REALTORS, those who want to voluntarily embrace the call of the Code of Ethics can do so… and strengthen the Code of Ethics even further.

The only major change to the Code of Ethics I’ve seen in ten years is a speech code that regulates the private speech of REALTORS. Despite ten years of rank-and-file members pleading, begging, and agitating for a real significant requirement for professionalism, the best that NAR could do was a voluntary, aspirational C2EX program that is a joke even amongst people who take the online test. But make the wrong statement in the wrong company (or quote the Bible from an actual pulpit), and boy, not only is your REALTOR status at risk, the Association will rat you out to the state licensing authorities to get your livelihood taken away.

What. The. Actual. Fauci.

It isn’t even clear that NAR cares about member benefit. For example, here’s a table of NAR membership versus home sale transactions:

Over a ten year period, which includes the tail end of the housing recession from the Bubble bursting, annual transactions per REALTOR went from 7.9 to 7.7. Yeah, you read that right: the average REALTOR did fewer transactions in 2020 than she did in 2010 when we were still mired in the aftermath of the Bubble.

If NAR had not added 400,000 new members, if it had raised standards for membership to hold the line at 2010 numbers, then each REALTOR in the banner 2020 market would have done 10.6 transactions instead.

This is the same ten year period during which REALTOR members themselves have been vociferously demanding increased professionalism. Raise the Bar has been a rallying cry for thousands upon thousands of dues-paying REALTOR members. Bob Goldberg went on stage and famously said NAR now stands for National Association FOR REALTORS. If this is being for REALTORS, one wonders what being against REALTORS looks like.

We all know for a fact that the MLS is the reason why most people join REALTOR Associations. They don’t join because they feel the calling for “Under all is the land” and “interests of the nation and its citizens.” They could care less about ethics, professionalism, learning, education, whatever; they just want the MLS. NAR and its millions in member dues income is almost entirely dependent on brokers and agents needing the MLS.

So, NAR does everything it can to make sure that the MLS not only exists, but that it ensures the pipeline from MLS to NAR remains intact. To do that, NAR must control the MLS in every possible way. Hence, the massive Committees and top-down mandates, and so on.

If only NAR cared as much about the Code of Ethics, about professionalism, about defending private property rights as much as it does controlling the MLS. If only NAR truly cared about obligations beyond those of ordinary commerce and the REALTOR’s grave social responsibility and patriotic duty.

This must end, not just for the MLS but for the soul of NAR and the REALTOR Movement.

A most urgent need in the residential real estate industry today is to restore the REALTOR Movement somehow. I hope that can be done by reforming NAR; if not, it must be done outside of NAR and against NAR’s resistance.

I believe now that this reform begins by getting NAR out of the MLS business. Let me lay it out for you.

Getting Out Goes Two Ways

Since it is highly unlikely that NAR will distance itself from the golden goose, perhaps the real call to action here is for the golden goose to escape the nest on its own.

NAR’s hold over the MLS is almost entirely political. The NAR liability insurance is a pittance for an MLS of any size; it turns out that insurance companies are happy to make money from the local MLS wanting to buy its own liability insurance. The Association’s governance over the MLS is driven by political actors doing political things. There’s no reason why the governance can’t be done by real estate practitioners doing practical things, and real estate data and technology people doing data and technology things.

In some cases that I have seen, the local Association has clauses in its bylaws that revert ownership of assets to the state Association or to NAR if its charter gets pulled. Well, if I were a local Association or a local MLS, I’d want to look at my bylaws to see if that clause exists, and if it does, I’d look at changing my bylaws today. Not tomorrow or next week, but today.

Then you, the local MLS, can tell NAR to mind its own business, to stay in its lane, when NAR comes up with a variety of rules that the local MLS must obey. Turns out, NAR doesn’t have the power to enforce any of those damn rules.

So get out.

Why might you, the local MLS and the local Association, want to get out?

The Wrath of God

The government, like Yahweh, is a jealous god. As a rule, the government tolerates self-regulatory organizations only insofar as those organizations are ultimately under the thumb of the government. See my post on FINRA for an illustrative example. Even when there is no statutory authority to directly regulate an industry, the government will tolerate a self-regulatory organization only if it learns to ask, “How high?” when the government tells it to jump.

NAR has made it clear that it regards itself as not only the equal of, but superior to, the government… at least in the form of the Department of Justice and the Federal Trade Commission. Not only has NAR tried to negotiate its way out of an investigation, when that didn’t work out, it has sued the government to stop an investigation.

This will not stand. It will be seen as intolerable by those regulators and their backers in the legislature and the administration.

What that means to me is that the federal government will strike down upon NAR with great vengeance and furious anger. And you all will know that their name is The GOV when they lay their vengeance upon NAR.

If you’re a local MLS, and what you’re getting from NAR is some liability coverage that you can buy in the open market, and a bunch of rules that you don’t really want to follow… why in the world would you want to be anywhere near NAR when that happens?

I’ve already heard from some MLS executives the cost of complying with discovery demands. That cost can easily run into the millions in legal fees and document prep costs alone. Do you really want the FTC coming in and making even more demands? If not the FTC, how about the state authorities? And that’s before they start really messing with you for the sin of being affiliated with NAR.

If the MLS is going to get sued, maybe it ought to be for something the MLS itself has decided to do, instead of for something that a Committee at NAR decided that it has to do. At least the MLS would then be trying to defend something that its own brokers and agents want from them, rather than something somebody else with no skin in the game wants from them.

I haven’t the faintest idea why that idea would be so controversial, so radical, so spicy. Doing time for your own crime is one thing; doing time for somebody else’s crime is something else altogether. Especially if you don’t have the choice not to do somebody else’s crime.

Real Consolidation and Competition

The other reason, which I’ve already pointed out in my Upside of Doom post, is that the liberated MLS can now start to do real consolidation through real competition:

Once the linkage between the MLS and the Association is removed, then there is no more protected territory for the MLS. We should finally see real consolidation take place, and rapidly.

Without the local Association providing a protected territory, there is no way a tiny 300 person MLS survives. When the law prohibits tying REALTOR membership to MLS access, it isn’t obvious that the local Association would even have a say in what happens to the MLS. The market will do what the market will do, and I think that means a massive wave of real consolidation.

650 MLSs in the country is at minimum 600 MLSs too many. But you can’t go start taking them over or competing against them head-to-head as long as you are a REALTOR MLS affiliated with NAR, since NAR controls the local jurisdictions of local Associations. Once you are liberated from those shackles, then it’s game on with actual competition between MLSs.

I guess if you’re a weak local MLS and afraid of competition, that sounds horrible. But that sounds wonderful to the brokers and agents who are paying you fees to get a weak local product. They’d prefer to pay you fees to get a much stronger, much better product along with much stronger, much better service.

This is how the MLS evolves. Because evolution, it turns out, is the strong eating the weak. Nature is red of tooth and claw, and NAR has prevented natural evolution of the MLS for decades. It’s time that protectionism ended for the benefit of the MLS and the brokers, agents, and consumers that it serves.

Not having to compete has only led to small little fiefdoms in danger of being completely disrupted, whether by an outside technology company or by a single change in regulation. Natural competition within the MLS industry would lead to fewer but larger, stronger, better MLSs that could withstand some disruption now and then and figure out how to evolve with the times.

On Efficiency

I recognize that some of the national players like big brokerages and franchises, big portals and Big Tech, would hate to see hundreds of local rules, local jurisdictions, local technologies. They would much rather have a single top-down policy to make their lives easier. It is inefficient to have to deal with hundreds of tiny local variations. I get it.

However, allow me to point out that CMLS exists. RESO exists. There are other avenues where national policy, data standards, best practices, technology platforms, etc. can be coordinated without having those things become unfunded mandates that corrupt the REALTOR Movement.

Once liberated from NAR, local MLSs can be consolidated much easier, much faster. Big national companies can play an active role in that consolidation. Dislike having four MLSs in your local market? Well, leave three of them and join one. Spend some money and buy out the other three. Stop just bitching about multiple market disorder, and running to Daddy NAR to fix your problems for you. Do something yourself, with your fellow brokerages, about that problem.

Have real efficiency that results from open competition between the MLSs, instead of the fake efficiency that results from top-down policymaking through a political process.

Get NAR out of the MLS business. Use other organizations and avenues for technological and data efficiency. Let true competition flourish, because you all will benefit from that.

Conclusions

I realize this will be like a voice crying out in the wilderness to some extent. I doubt NAR itself will do the kind of soul searching that will result in real reform. I recognize NAR junkies will do a lot of handwaving and explaining as to why the notion of the independent MLS is impractical, terrible, heretical. And yet, I proceed.

Because fundamentally, I want the REALTOR Movement restored to its original purpose and mission. I want the brokers and agents to determine their own destiny in their own local markets. I want the benefits of competition and consolidation for all of us. And I believe that the MLS that recognizes the competitive advantage that arises from liberation from NAR will ultimately win the chaos that lies ahead.

At least a few from the local MLS leadership ranks recognizes that, and I think they will change the world.

Thanks in large part to NAR itself, the industry is about to get federal regulations from the FTC. Regulations and top-down control are part of life in today’s America. At a minimum, we don’t need two top-down regulators; one will be more than enough.

Get NAR out of the MLS business. It will be good for NAR, good for the MLS, good for vendors, good for brokers, good for agents, good for consumers, good for society as a whole.

-rsh

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