Business people in a boardroom look at a checklist.
Illustration by Lanette Behiry/Real Estate News

What MLSs should do now to prepare for commissions lawsuits 

A proactive approach could help MLSs better manage any potential changes to their business models.

August 29, 2023
4 minutes

Key points:

  • MLSs should be proactive in the face of commissions cases with industry-wide implications, said Clint Skutchan, SVP of organized real estate at T3 Sixty.
  • Changes to ownership models and increased collaboration are two of the outcomes MLSs should consider.
  • All members of MLS organizations should be thinking about their mission and working through scenarios.

As compensation lawsuits loom, multiple listing services should be thinking about how their business model could be affected.

That's according to Clint Skutchan, T3 Sixty's senior vice president of organized real estate, who shared his thoughts and an MLS action plan during an Aug. 29 presentation to industry leaders. (Note: T3 Sixty and Real Estate News share a founder, Stefan Swanepoel.)

The commissions lawsuits against the National Association of Realtors and several major brokerages claim the entities engage in anticompetitive practices by forcing seller's agents to split their commission with buyer's agents. Twenty MLSs are named as co-conspirators in the two largest suits, Moehrl and Sitzer/Burnett.

Even though the lawsuits may not be settled for a while, Skutchan said MLSs need to consider how these cases could impact their businesses — and they need to start now.

"Being proactive will help [foster] the mindset of doing activities to assess ourselves and think through our strengths," Skutchan said during the LinkedIn Live event. "We'll also probably identify some areas where we're not as strong moving forward, and that gives us an opportunity to feel a little bit more in control of what's going on around us rather than just looking to headlines every day."

What could change for MLSs

While changes to compensation practices may be most immediately and acutely felt by buyer's agents and their brokerages, the industry as a whole, including MLSs, will need to rethink how it operates. There are two main ways MLSs could be impacted:

1. Ownership models could change

A verdict in favor of the plaintiffs could force MLSs to adopt new ownership models, Skutchan said. Currently, many MLS are owned either partly or wholly by local Realtor associations.

The lawsuits could compel some businesses to reconsider whether it is "healthy" for these associations to be part of the ownership group, he said.

2. Collaboration and consolidation could increase

MLS consolidation has been a trend over the past decade, and even among MLSs that don't choose to merge, partnerships and data- or technology-sharing networks have become more common.

Examples include smaller MLS providers like REcolorado working with larger entities like Bright MLS to strengthen their market position, or BeachesMLS partnering with other organizations to expand offerings to their members.

Skutchan noted that some small MLSs may start looking for a buyer to take over their operations entirely.

Consolidation also makes sense from a market perspective, Skutchan added, at a time when many MLS are seeing lower revenue from subscribers and members. This has forced some to start looking for new ways to monetize their technology and data, Skutchan said.

"These are really hard conversations, but we better start having them now because we don't know where things could end up," he emphasized.

Next steps for MLSs: Revisit mission statements, play out scenarios

As MLSs consider what changes may be in store, they may find themselves in a better position if they evaluate and are transparent about their end goals, said Skutchan.

For MLS leaders, Skutchan said it's important to nail down a value statement for members and subscribers, and to let them know whether the MLS will prioritize cooperation or compensation going forward.

Another way to smooth the potential transition is to hold scenario-planning meetings with key volunteers and staff members, Skutchan said. For example, MLS staff could start thinking about how to increase subscribership while company executives debate whether to add new brokerages to the ownership group.

This approach could become more valuable as "copycat" compensation lawsuits appear, he added. It could also help the entire organization start planning for change instead of relying on a few leaders to implement broad-stroke initiatives.

"It's really important for MLS businesses to leverage what they can do collectively instead of individually," Skutchan said.

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