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June 17, 2018

What Will MLS of Choice Mean for You?

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What Will MLS of Choice Mean for You?

Now that multiple listing services must offer waivers to agents who don’t wish to use their systems, the landscape is changing. But some say it’s not adapting fast enough.
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A long-simmering proposal colloquially known as “MLS of Choice” has become the law of the land. Last November in Chicago, the National Association of REALTORS®’ Board of Directors voted 654 to 58 to revise NAR’s longstanding policies for the assessment of MLS dues, fees, and charges. These changes refine terminology and update the MLS service structures to add a mandatory waiver policy enabling licensees who don’t use the MLSs’ services to opt out. Agents who don’t wish to subscribe must provide proof of membership at another MLS and can be required to sign a certificate of nonuse pledging to not access or obtain data from the MLS service they are opting out of.

How big is this change? It depends on whom you talk to and where you are in the country. But without a doubt, many brokers and agents are gaining flexibility they’ve long desired, and some MLSs may soon experience increased administrative duties to track where licensees subscribe. Assessing the overall impact will be difficult because no complete database exists to show where brokers and licensees currently receive MLS service.

The biggest adjustment will be for MLSs that charge agents fees based on all offices of a firm (within the jurisdiction of the MLS’s shareholder association), also known as the “jurisdictional assessment option.” That option has been eliminated. But changes are also coming to the larger proportion of MLSs with the simple approach of assessing fees to all licensees affiliated with an MLS participant. Under the change, all MLSs will soon have a waiver option for agents who comply with the requirements of nonuse and subscribe to a different service.

David Welch, the president of a 6,000-subscriber MLS owned and operated by the Cincinnati Board of REALTORS®, has concerns with how the new policy is playing out. “We’re not set up to do what they’re asking us to do,” says Welch, CRS, GRI, with Comey & Shepherd, REALTORS®, in Liberty Township, Ohio. He says the MLS didn’t have the forms, policies, and technology in place to implement the policy by March 1, as required under the terms of MLS policy. Welch, who’s also an NAR director, fought for and secured a delay in the start date to July 1 to give smaller MLSs more time to prepare. (Read Welch’s reflections on the debate and on the importance of speaking up before the board at realtorm.ag/welch.) He says the extra time will also give the Multiple Listing Issues & Policies committee a chance to make additional recommendations at NAR’s legislative meetings in May.

Ahead of the NAR board vote, some downplayed the significance of the change, especially in markets where MLSs already allow agents to opt out. “We’ve offered this waiver for 20 years,” Steve Byrd, CTO at Carolina Multiple Listing Services Inc., told the committee. “It’s really not that big a deal.” But Welch and others from small- and medium-sized MLSs object to that characterization, saying that while larger MLSs can more easily track who’s using their services, implementing this new rule and assessing fees on those who violate it will be too costly and difficult where staffing and budgets are lower. Welch notes that MLSs had already drawn up their 2018 budgets prior to the rule change, and one vendor estimated it would bill around $60,000 to create a tracking system that would allow MLSs to see where their subscribers have other MLS memberships. He’d like to see NAR make enhancements to the NRDS database to help association-owned MLSs accomplish this task.

As the executive officer of the Rogue Valley Association of REALTORS® and the Southern Oregon Multiple Listing Service Inc. in Medford, Ore., Tina Grimes seems an unlikely supporter of the new rule. “I was very much in favor of this change even though it’s going to be a huge amount of work,” Grimes says. “It’s a positive step in the right direction for evolving the MLS and keeping it relevant.” She and a small staff of seven (four of whom work almost exclusively on association, not MLS, duties) serve around 1,575 MLS subscribers and have decided to seize the opportunity to completely revamp subscriber agreements, a task they’ve been meaning to take on for quite some time, in the face of the change.

Some brokers see advantages for small MLSs because of the change. MLS Policy Committee member Sam DeBord, managing broker for Seattle Homes Group and vice president of strategic growth for Coldwell Banker Danforth in Bellevue, Wash., predicts this could spur brokers to expand their presence into new areas. “This is going to be better for the marketplace as a whole,” he says, noting that the intention of the policy change is to both circumvent off-MLS listing activity and support brokers and agents who want to expand but don’t due to the constraints of the so-called overlapping market syndrome. “These are brokers and agents who want to be members of more MLSs, but don’t join more because of the duplicative costs under current policy.”

Grimes says this will likely be the case in her area, where MLSs have up until recently employed the jurisdictional assessment model. She predicts her MLS may lose a few subscribers under the new policy, mostly among folks who are winding their businesses down in advance of retirement and shedding administrative costs where they can. “I think overall we will gain,” she says, reflecting upon phone calls she’d had from brokerages where a single agent wants to join the Southern Oregon MLS. When she tells them that all their agents would have to join because of the jurisdictional model, they usually change their minds pretty quickly.

But some areas could see fewer subscribers and brokerage locations. Managing broker Jenny L. Johnson, E-PRO, who runs the Chase International branch in the small town of Incline Village, Nev., predicts a few shadow offices in her area will close up shop. Some brokers rent a desk or nominal office space in a particular jurisdiction not for doing business but just so their agents can claim the location as their home offices and not have to belong to all the MLSs that their broker, in the main office, does. And while Johnson plans to continue paying almost $4,000 a year for her brokerage memberships in four MLSs, plus another couple hundred dollars so that she can list as an agent on one of those four, she says agents will face a choice. Out of the 25 agents who work in her Incline Village office, she says about half are paying for MLS access that they don’t use. She predicts nearly all of those dozen or so agents will choose to sign at least one nonuse waiver. “It’s expensive,” she says. “We need to support our agents and their business plans, not focus on dues and violation fines.”

The new rule should make recruitment easier for Johnson. As a trainer, she meets many new agents who want to work with her, but the two state borders and five MLSs that fall within 45 miles of her office make it tough to attract and retain sales associates who aren’t ready to compete in the market where her home office is located. “They don’t want to sell in Incline because it’s a luxury market,” she explains. “If I have an agent that hangs their license in my branch, but belongs to an MLS not located in my town, I get a call [from the MLS]. I’ve lost agents over this.” She still spends several hours each week informally coaching two such agents, who are working out of different Chase International offices, because she wants to see them succeed. But because they’d have to pay to belong to the MLS serving Incline Village if they worked out of her office, Johnson doesn’t personally see any profit in her work with them. With the waiver option, the situation may soon be different.

Making a Dent

The new rule represents one small step toward ameliorating some, but not all, of the problems caused by MLS boundaries that clash against natural market areas. Rocky Balsamo leads a top-producing seven-agent team within Weidel Real Estate in Princeton, N.J. Balsamo says he supports the rule change, even though it doesn’t address a bigger local concern. “We’re a little, itty-bitty state. We need one MLS for the state of New Jersey,” he says. Balsamo says he pays about $1,000 a year to belong to four MLSs. Because three MLSs converge in one area near his home turf of Princeton, his entire team needs to belong to all of them in order to market listings properly. “It makes syndicating listings complicated,” he says. “When you take a listing within five miles of that spot, you have to put it in three MLSs, or you’re going to lose out.”

Johnson agrees that other MLS problems remain unsolved, but she takes the new policy as a sign that change is in the air. “This is a solid move to get more control back to our agents,” she says. “What else can we enhance? What’s next?”

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