A compelling case for repealing the MLS Clear Cooperation rules.
Are you working cc? Do I benefit from it? Would I like it to stay in place? Yes.
Is it good for consumers, (who are antitrust laws designed to protect?) It depends.
Are we comparing it to the Compass game which presents a worst case scenario where buyers have to go through 20 brokerage websites to see everything available?
Or are we comparing it to a mature free market where real competition forces the existing infrastructure to improve by simply opening the door to competition that can destroy it?
The MLS system provides transparency, but at what cost?
MLS is not capitalism in its ultimate form. In fact, if the industry started today, there is almost no chance that we would end up with 400+ MLSs each with their own management team, data structures and rules.
Every year I get a postcard for my birthday from my MLS, my MLS pays for technology that I will never use and they cover training that I rarely go to. Since I started writing this article, I have also discovered that the money I paid has been used to pay for dog watching services while ‘volunteers’ earn thousands of dollars in Hamilton tickets. For me and many agents I know, the value of the MLS is in the database and few want to support programs that we do not profit from and the buyers.
The costs incurred by consumers can be estimated in the billions of dollars to keep the current structure in place. The math is simple, I pay $1,200 a year in association and MLS fees and there are 1.5M agents like me who are required to pass these costs on to buyers.
Because of CC, doctors are required to provide their valuable data to marketers and sales consultants alike. Companies like Zillow, Reatlor.com and leading companies of all shapes and sizes use this data to add billions in value to buyers. If these companies could get their own data to attract customers, their businesses would look very different than today and this could benefit consumers more than selling to agents with a 40% markup. I recently wrote an article on the ‘Golden Goose of real estate’ that explains the real estate Referral problem that exists primarily because of CC.
As private equity moves into ownership of our industry’s infrastructure, do we really want to protect MLSs as if they were an unregulated business so lucrative in the spotlight that they must be preserved at all costs?
Benefits of MLS
I almost unanimously agreed with all the benefits that the CC proponents mentioned, making this a dilemma between choosing capitalism over safety and adapting to the current system. Today, consumers see all the innovation and the work of the sellers is easier without having to find it themselves. Transparency and access are pillars of capitalism and free markets. No one can argue with these ideas, but to say that they cannot exist without the transparency that CC provides is a deep mistrust of capitalism. It’s almost as scary as saying that first-time home buyers, juniors and VA borrowers will never be able to buy a home if the co-op is removed from the MLS. It’s only been three months and most of those fears have been proven unfounded.
What happens if the CC is revoked?
Sellers will still want to feel like their product is being marketed to the widest possible group of buyers. The company that can deliver the best execution, which often results in the most exposure to consumers, will win. Robert Refkin won’t be able to convince dealers to moderate their exposure and marketing so that Compass can attract more customers. Even if he was that good, I’m sure the industry as a whole would be wondering if they wanted to share listings with Compass – would buyers want to go to Compass if they were missing out on inventory from EVERY SELLER? A free market will filter through all kinds of ideas and iterations to arrive at something that gives consumers what they want, the best performance.
Agents should not be forced to choose between working within or outside of the MLS and buyers and sellers should not be required to subsidize the MLS if they do not end up using it. Any effective market place must allow participation without restricting other means of use, otherwise, it is anti-competitive. There is no incentive for the current system to improve and new ideas will never stand a chance if salespeople are pushed out of the church if they want to offer their customers alternatives.
Existing markets provide a blueprint
NASDAQ provides a strong example of how a marketplace can work for both sellers and buyers. For decades, NASDAQ has supported efficient, competitive trading by allowing dealers to manage their own electronic exchange networks (ECNs). The NASDAQ was born out of the inefficiencies of other markets such as the NYSE, replacing hand signals in the human crowd for instant electronic execution. What if the NYSE decides that brokers who place trades over their network cannot place trades on NASDAQ or they will lose their NYSE membership? Would NASDAQ be able to overcome the cold crisis to gain enough critical mass to succeed?
Brokers such as Morgan Stanley or Merrill Lynch have their own ECNs to process clients’ trades internally, which often results in lower costs for clients and higher brokerage margins. If a broker doesn’t have a match right away to trade, it’s added to NASDAQ, exposing it to other potential ECN companies. Imagine if real estate worked the same way: Compass or any major brokerage could offer clients an exclusive listing of the interior of the home with the option to list it on the MLS or equivalent if the property is not moving. The benefits? Sellers get lower costs and privacy options, while buyers still have access to inventory.
Repealing Clear Partnerships will not eliminate transparency or destroy the real estate market; it would create new levels of transparency driven by competition. Sellers want visibility, buyers want access to inventory, and sellers want options to serve customers efficiently. A competitive market will still show almost every listing, simply because sellers and sellers want it. And in real estate, where information is highly localized and diverse, competition ensures that service, quality, and cost are equal.
In this model, agents will thrive without being forced to fund an outdated MLS structure, and buyers will enjoy the benefits of true market choice. Capitalism thrives on competition, and when Clear Cooperation is scrapped because of free market trade restrictions, the infrastructure will change and that’s probably a good thing. Capitalism will do its job and create a more efficient market leading to more choice for consumers and more opportunity for agents to innovate, even agents who don’t hang their licenses from Compass.
Dean DiCarlo is the CEO of Homing.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this piece: [email protected].
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