MLS’s, pocket listings, anti-trust lawsuits and proptech.
I have to laugh, because as I am writing this, news has broken out that the Department of Justice is suing the National Association of Realtors over MLS related anti-competitive practices and anti-trust violations:
Dear investor, hedge fund manager, VC, attorney, entrepreneur, or contentiousness change agent, I’m going to show you inside my MLS membership, discuss popular conceptions, but also attempt to clear up some misconceptions around pocket listings, and the MLS’s significance at large that often lead to a misuse and overuse of the terms “MLS” and “pocket listings”, much like the buzz sounds “AI” and“blockchain”. Yes, MLS technology is important, but the numerous silos of MLS scattered around are not preventing proptech startups from undermining the traditional brokerage industry.
“If you want to list a property for sale and have it syndicated out to all the major sites; Zillow, Realtor.com, Trulia, Redfin, which is to be expected of you from any self-respecting seller, you need MLS syndication technology.”
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“I believe the grip the MLS has on anything is a bit overstated and exaggerated, as inevitably becomes the case when everybody is repeating what everybody keeps repeating.”
To review, an MLS (Multiple Listing Service) is not the same thing as an IDX (Internet data exchange). The MLS is the depository, the IDX creates the bridge between the MLS and the website that wants to display the listings.
There are about a thousand MLS’ across the country:
Upon getting the listing agreement contract signed, Realtors then log onto their MLS and upload the property’s information, list price, photos and video:
Upon clicking publish, within 24 hours, the listing gets syndicated out to all the sites that are receiving the feed, Zillow, Trulia, etc.
There is no public API, the MLS is private, so in order to receive listings feeds from one or all of the MLS’ featured in the above map, you need to join the MLS. They have requirements, you’ll need to be a Realtor, broker or appraiser. In order to be a trademarked REALTOR, you’ll need to have a membership with your local chapter. There is a difference between a licensed real estate agent and a REALTOR. Yes, this scheming requirement has been at the center of many lawsuits over the years: https://www.nar.realtor/legal/non-member-access-to-realtor-association-multiple-listing-service
On the surface, there is no reason why a club should allow access to non-members, but it becomes obvious that the Realtor institution has acquired every MLS for the purposes of monopolization. The National Association of Realtors is the world’s second largets lobbying organization, and with 1.3 million members out of 2 million licensed real estate agents, they have the highest ratio of members to non-members out of any other trade group.
An MLS membership runs about $725 a year:
I pay my local Realtor association / chapter $525 a year:
There are many more local chapters / associations than multiple listing services. An MLS coverage area encompasses many chapters, they don’t all have their own MLS. I do not need to be a member of a NJ chapter to join / access a New Jersey MLS.
Per my Bucks County sales territory, I am a member of BCAR, the Bucks County Association of Realtors:
You can see above that there are three other chapters in this region, but we are all using Bright MLS. Every chapter that falls into the service area below is using ‘Bright MLS’:
When you’re bordering another MLS territory, as I am in both PA (right below a different Allentown MLS) and NJ, you find yourself having to pay for those MLS’ as well. I became a member of the Garden State MLS to get access to listings in Jersey.
Its important to note, if an agent doesn’t pay their dues, the association will suspend MLS privlidges for the entire office. This is not an authority they would have if they did not also own the MLS:
MLS syndication monopoly
If you want to list a property for sale and have it syndicated out to all the major sites; Zillow, Realtor.com, Trulia, Redfin, which is to be expected of you from any self-respecting seller, you absolutely need MLS technology. Prior to 2017 Zillow / Trulia allowed Realtors to manually enter their listings, but ultimately decided to undo that functionality as part of a strategy to improve data accuracy by putting pressure on MLS’ to send their listings directly to Zillow. That was the virtue they advertised. But in the major market, Seattle, the MLS’ were on a Zillow strike of sorts. As mentioned previously, there are 2 million licensed agents, 1.3 million Realtors. Anti-fixed commisions brokerages like Trelora were advertising buyer-agents a flat $2,500 fee, which would only amount to the 2.5% commission they’re accustomed to if the home was $100,000. You can imagine, the buyer-agents with buyers wanting to buy Trelora listings were angry enough to throw bricks, and throw bricks through their windows they did. Little startup Trelora, and others, will manually entering in their listings… Keyword, were. You can see how Zillow could ingratiate themselves with the MLS’ — delivering a blow that jeapordizes the little disruptive startup’s ability to reduce commissions, an unapproved approach to innovation in the eyes of the National Association of Realtors:
Homie responds in kind:
Zillow’s current policy is that they will only accept feeds direct from brokers who have a minimum of 100 listings. REX Homes, is not a member of any MLS. Consequently their listings are not synidcated out to Realtor.com or Redfin, who only accept feeds from an MLS. REX does not compensate the buyer’s agent at all. They put the ouness on the buyer to pay their agent. REX has received over a $100MM in VC funding, I have written about their model. What happens more often than not, is the buyer’s agent will make their offer contingent upon paying them a commission. Their buyer never sees that form, they never sign off on it. So if the seller wants their offer, they have to agree to pay the buyer agent’s commission, although it’s often reduced from 2.5% to 2%.
In my experience of offering less than 2.5%, the buyer agent uses a form to change the commission, and the National Association of Realtors perpetuates this fraud by not requiring the buyer to sign the form. This is just one piece of evidence that will make it very hard for NAR to prevail in the courts:
The sole reason Multiple Listing Services were conceived was to advertise the cooperating commission. REX took a stand against an arrangement that has since become the focus of a major class action lawsuit against NAR and company; Berkshire Hathaway, ReMax, Keller Williams, alleging pricing fixing and other anti-trust violations.
You can get updates on the suit here: https://www.courtlistener.com/docket/14624704/moehrl-v-the-national-association-of-realtors/
Recently a judge missed NAR’s motion to dismiss. This case is going to a jury trial. There isn’t a jury in the world who isnt going to agree there is massive fraud, extortion and price fixing, because there is. As a Realtor insider, I can attest to it.
Compass became very upset with the Bright MLS, managed by an executive committee and a board of directors, and sent a ‘pre-litigation letter’ over its pocket listing policy. In the letter they stated “Bright MLS’ ban on pocket and off-market listings is anti-competitive and may lead to legal action.”
Of course, Compass doesn’t care about competition, quite the opposite.
When a Compass agent, or any agent obtains a signed listing contract, Bright MLS, and others, allow for up to 2–3 days to get that listing entered into the system. They issue serious penaltys for not doing so. Not all MLS’s, but some. A pocket listing is when an agent gets a signed listing contract and instead holds onto it for some period of time…
What Compass wanted was the ability to exclusively post their listings on their website, Compass.com, so that they can attract consumers to their protal, with exclusive listings not yet available anywhere else. Marketing a listing internally, within Compass, also increases the odds the company will handle both sides of the transaction. Typically a 5% commission is split between the buyer-agent and list-agent, 2.5% a apiece. When the listing agent also represents the buyer, its known as dule agency, and they are entitled to both sides of the transaction. But if another Compass agent has an interested buyer, Compass can receive both sides of the transaction. An unrepresented buyer calling the listing agent directly occurs about ten percent of the time. But giving a Compass agent first dibs at a listing could keep the deal in house about half the time, opposed to a much lower percentage if the listing was available to all brokerages everywhere. Across thousands of Compass listings it becomes lucrative strategy. Its absolutely an unethical thing to do a homeowner, which will receive the best price by having their listing available to the open market, whose competition would stand to deliver the best and highest possible bid for the homeowner, an outcome homeowners expect from a professional agent. But we must remember, Realtors are sales people, not asset managers. Unlike their alternative, flat fee counterparts, they are not in business to net homeowners the most amount of money possible. The horrifying irony (not just across Compass and others, but iBuyers as well) is that Realtors are charging more money, to get homes sold for a lesser price.
Homebay, REX, Homie, Door, Trelora, Houwzer, Reali, Felix Homes, to name a few, have obtained almost a billion dollars in venture capital backing.
I believe the grip the MLS has on anything is a bit overstated and exaggerated, as inevitably becomes the case when everybody is repeating what everybody keeps repeating. There are MLS available everywhere that do not require Realtor membership, and will not sell to the National Association of Realtors. If someone wanted to be in the MLS business as a matter of principle, they certainly could, and Zillow, who has gotten the legal respect of NAR over the years, would accept their feed. Alt brokers can band together and establish their own national MLS, as these fragmented MLS’ everywhere serve no practical purpose, its a function of a big trade group. They want dues paying members and lots of ‘em. They want commissions high, because that employs Realtors and encouraging more to obtain their license.
My startup, inlyst, is designed to bypass the entire mls system, by enabling homeowners to upload their own property pictures, and speak to buyers directly. Is should be clear to everyone at this point that the status quo is designed to insert a middle man in between transacting parties. It is a middleman driven industry, consumers spend $80 billion annually on superfluous Realtors. We intend to remove all barriers between buyers and sellers, fascilitate communication and provide the tools, expertise and full-service consulation involved in closing a home; agreements of sale, title, deed transfer, etc.
This is not to be confused with a pocket listing, as our goal is to keep all the money in the pocket of the homeowner, not hijack their equity in a dual agency scheme shamefuly taking place across the industry.
The world needs a residential real estate marketplace.