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MLS OUTLOOK: The future of the MLS

January 1, 2006

By G.M. Filisko

Tomorrow’s

MLS

Privately owned? Association-owned? Regional? National?Which Multiple Listing Service model has the best chance of becoming the MLS of the future in America?

MLSs aren’t what they used to be—and that’s a good thing. Most have expanded well beyond their original mission to include: public displays of listings online, links to member Web sites, lead-generation tools, uploads to listing aggregators, transaction management platforms, and much more. Participants not only have more benefits available to them, but they also have more options, and more grievances.

Originally based on a single model, MLSs now come in about three types—with local market variations—each with its own benefits and drawbacks. With this new competition brewing in the world of MLSs, industry professionals are eager to see which model will come out on top.

And Then There Were Three

The main differences between the three types of MLSs (privately owned, association-owned, and regional) are fairly straightforward.

The devil, it turns out, is in the details. At the privately held First Multiple Listing Service in Atlanta, President Cantey Davis points to the continuity of management that gives his MLS an advantage over most association-owned services. “With a board-owned MLS,” he says, “you have turnover in the board committee that oversees the MLS. Here, our directors are all active in the real estate business, and their average tenure on the board is about 10 years.” Davis likes how this allows for a more consistent operating philosophy.

Who’s calling the shots has become a key issue at many MLSs—is it the working brokers? Or the association executives? If you ask Don Hull, CEO and president of Consolidated Multiple Listing Service in Norwalk, Conn., it’s less about ownership and more about control. While CMLS’s board of directors consists of brokers, the MLS ensures that several local associations whose members participate have a say, too.

CMLS functions like the typical private MLS, but Hull would like to see the business model change to a contract-for-service type where brokers buy the level of services they need.

A drawback for private MLSs is that they are not covered under NAR’s insurance policy and, therefore, have to purchase expensive errors-and-omissions insurance.

This disadvantage is among the many factors that can make a privately owned MLS costly for members. As today’s larger brokerages pay membership fees in two or more MLSs, cost is becoming a key issue for privately owned MLSs.

In many areas, privately owned and association-owned MLSs compete head to head. At the end of the day, it comes down to the simple fact that one might offer services that the other does not and vice versa. Privately owned First MLS and an association-owned MLS in Atlanta are just one example.

First MLS offers a feature that allows agents to create a Web site for each customer. The customized site allows consumers to view listings handpicked by their agents because they meet certain criteria. This allows consumers to cut through the clutter, view selective data at their leisure, and respond to their salespersons via e-mail with questions. On the other hand, the association-owned MLS offers a transaction management system that acts as a central database within the MLS. Basically, this means that every document and piece of information related to the closing is available to every party in the transaction—electronically, at all times. It’s certainly clear to see how Realtors® could be swayed in either direction. Looking to make the participant’s choice a bit easier, Davis says he’s about to sign a contract to add such a system to First MLS.

Regardless of structure, the MLSs that best meet their participants’ needs are those that can make business decisions quickly, says Beverly Faull, former Realtor® AE and now a top executive at MLS technology vendor Fidelity Systems, which services 345 MLSs nationwide. “Since technology is driving the industry, MLSs cannot take three, six, or 12 months to make a technology decision—and the type of ownership doesn’t have anything to do with that.”

Faull has seen more MLSs seeking to share their databases recently, but not necessarily merge their organizations. This may be the newest type of MLS structure, where technology is consolidated but governance structures remain separate.

For private MLSs, the ability to set their own rules is a big benefit. “We do our best to follow NAR’s major policies, but there are cases where we don’t agree with what NAR’s doing or we just go slow implementing those policies,” says Davis.

Smaller association-owned MLSs also boast a degree of flexibility, only theirs allows them to create rules for a more homogeneous participant base. Specific MLS rules and procedures are easier to pass in a small area where there’s little diversity in business models.

MLS of the Future

In the future, according to Robert Rucker, CEO of the Arizona Regional Multiple Listing Service Inc. in Tempe, MLS ownership still will be mixed. “The only places where you’ll see more broker-owned MLSs are where it’s clear the MLS in place isn’t doing a good job, such as when they’re too expensive or not providing technological advances,” he says.

Although his members haven’t expressed a desire to change the ownership to have more control over their MLS, Wes Wiggins, MLS director of the association-owned Tucson Association of Realtors® MLS in Tucson, Ariz., says his association-run MLS is looking at regionalization with smaller boards south of Tucson. “That’s something our brokers would very much welcome because it would save them money.”

Bud Fogel, CEO of MAP Multiple Listing Service in Palatine, Ill., a broker-owned regional MLS, sees the future of MLSs in hybrids. “We’re going to see broker-owned and a combination of board- and broker-owned, but MLSs will be broker-managed,” he notes. “In smaller or rural markets, there’ll still be association-owned MLSs.”

For all their different opinions, best bets, and rationales, it seems that all MLS executives ultimately agree on one thing: it’s not who runs the MLS but how well they do so.