Trends 2023: A more collaborative MLS landscape 

Editor's note: Since 2006, the Swanepoel Trends Report has provided in-depth research and analysis to help leaders understand the forces shaping residential real estate. This exclusive series of excerpts highlights each trend featured in the 2023 report.

The Future of MLS: A National Web of MLS Collaborations on the Horizon. MLSs are the backbone of the U.S. real estate brokerage industry, but as the industry matures, the old ways of doing business are becoming less effective. An increasing number of innovative MLSs and their leaders are pushing for change and envision a future marked by enhanced collaborations and partnerships. This excerpt outlines some of the growing pains around MLS expansion. 

MLS Market Expansion

MLSs have evolved to serve, with a few exceptions, exclusive geographies of real estate brokers, agents and consumers. Exclusive MLS markets are a legacy of local Realtor association territories, and as brokerages, and more recently MLSs, expand their service areas, these boundaries are creating friction for MLS subscribers whose businesses transcend them.

The geographic boundaries of MLSs are increasingly bumping into neighbors as both Regional MLSs and Local MLSs grow and expand. In recent years, large Regional MLSs, such as Bright MLS in the Mid-Atlantic region and Stellar MLS in Florida, have consolidated and expanded. As these and other MLSs like them do, they run up against smaller MLSs on the edges of their footprints.

Home price escalations have contributed to this increasing pressure of MLS market overlap, as consumers look for cheaper housing farther from market cores. In doing so, neighboring MLS markets have begun expanding into grey areas on the fringes of their territory; in some cases, once disparate markets served by separate MLSs are becoming increasingly a single real estate market in practice causing increased direct competition among MLSs.

When MLS boundaries get close or begin to overlap because of growth, MLS subscribers must join multiple adjacent MLSs, which breeds frustration as they often must pay two separate MLS fees, and must manage two different data systems and different data sets, which add costs and duplicative work. Brokers that support agents in multiple MLS markets also face the challenge of having to support and normalize multiple data feeds for their tools that use MLS data. Often, adding a second market requires brokerages to move to different technology providers that can more readily handle multiple market data feeds.

The increasing expansion of Regional MLSs and rapid growth of neighboring smaller MLSs has become a newer challenge for many MLSs and their subscribers as once-exclusive territories increasingly overlap.

Off-MLS Activity

Homes sold but not marketed to the full swath of MLS participants remains a challenge for MLSs, and erodes one of their core value propositions: the central repository of a market's homes for sale and history sales data.

The percentages vary by market, but as many as approximately a quarter of home sales in some markets are completed without full marketing in the MLS, either on private databases or as office exclusives, as allowed in the Clear Cooperation Policy.

For example, a 2022 Bright MLS study using its data found that 29.2 percent of Baltimore homes sold in 2021 were done so outside of the MLS. For its full Mid-Atlantic footprint, Bright MLS found that 16.6 percent of all homes sold from 2019 through the first quarter 2022 were done so off the MLS.

MLS Vulnerabilities

As MLSs look to adapt to these challenges, they have a host of vulnerabilities based on their circumstances and makeup, including their structure and governance, incentive structure, disparate broker needs, third-party vendor dependence, narrow revenue model and lack of consumer focus.

Digital and printed copies of the 2023 Swanepoel Trends Report are available for purchase at t3trends.com.