MLS CEOs warn of fragmentation, ‘shadow’ market, erosion of trust 

Editor's note: As brokerages and portals move to create their own rules around pre-market listings, MLSs are faced with a choice — follow the lead of their trade organization, which takes a clear stand against selective marketing, or offer flexible policies that accommodate the shifting marketplace. In part two of our three-part series Dividing Lines, we share concerns some MLS leaders have raised about trust, transparency and marketplace fragmentation.   

Read part one here.

Private listings and office exclusives existed long before the Clear Cooperation and pre-marketing debates became the topic du jour in real estate. 

But Compass International Holdings CEO Robert Reffkin's aggressive stance on the issue, and his brokerage's strategy to promote listings as Compass Exclusives first — whether MLSs allow it or not — has helped fuel the flames and deepen divisions within the industry.

While some MLSs are largely aligned with the Compass 3-phased marketing approach, others have pushed back, invoking Reffkin's ire while offering a forceful defense of their position.  

The outspoken CEOs

Owing at least in part to Reffkin's criticism of their policies, two major MLSs — California Regional MLS, which supports around 100,000 subscribers, and Northwest MLS, which covers most of Washington state and parts of Oregon — have become some of the more vocal MLSs to speak out against pre-marketing strategies that withhold information like days on market and price changes, which Compass has referred to as "negative insights."

CRMLS told Real Estate News that it supports pre-marketing when it "preserves fairness and access" rather than obscuring key information that allows consumers to make informed decisions. The MLS noted that it allows its coming-soon listings to be syndicated via IDX and offers office exclusives that are marketed within a single brokerage. 

"These options ensure brokers have flexibility, without creating the fragmented environment that restricts visibility and disadvantages consumers," CEO Art Carter — a staunch advocate of Clear Cooperation — said in a statement.

NWMLS, which has been embroiled in litigation with Compass for more than a year over the MLS's listing policies, filed a counterclaim against the brokerage in April, arguing that Compass' strategy inhibits competition and goes against fair housing principles — issues NWMLS CEO Justin Haag also raised in an open letter last year.

The counterclaim asserts that Compass is effectively "wiping the slate clean" by testing properties as private exclusives and coming-soons before distributing them broadly on the MLS. NWMLS argues that the brokerage is artificially resetting time on market and price history, concealing the truth about a property's demand and suppressing the "public auction effect."

Fragmentation, and the problem with 'shadow inventory'

SmartMLS, which is based in Connecticut, has listing options for subscribers that include fully private listings, delayed marketing listings and coming-soon listings, President Michael Barbaro told Real Estate News. These include restrictions, like the banning of showings or offers being accepted during delayed marketing and coming-soon periods.

Barbaro said he sees the wave of pre-marketing partnerships flooding the industry now as "devastating." 

"This is not new," Barbaro added, "and we have a woeful tale that we can watch, and it was called commercial real estate."

The MLS leader lamented that in the commercial sector, brokers have to search multiple portals and physically canvass an area in order to find most of the available properties for sale. But, he noted, the MLS for years has provided residential brokers with a low-barrier-to-entry method of seeing most of the properties available in any given market.

"SmartMLS is $35 per member, per month," Barbaro said. "If [an agent] got her license today, she gets in, she pays the same amount of money that I pay, she has access to all the same data that I have, at the same time that I have it, so it's a very fair system, and it is a cooperative. It's a potluck dinner — you bring something, and you take something away."

The SmartMLS president also expressed concerns that a growing "shadow inventory" could have a disparate impact on historically disadvantaged communities. "I've heard legislators talk about this recently as a new form of redlining — and I don't disagree," Barbaro said.

The importance of the MLS as a 'trusted source'

Down in the Peach State, Georgia MLS allows for office exclusives (when brokers submit the appropriate paperwork) and coming-soon listings that are syndicated as part of the MLS's feed. Coming-soons do not accrue days on market, but showings and the acceptance of offers are not allowed while the listing is in that status. 

The most important thing for Georgia MLS, CMO John Ryan told Real Estate News, is to "be a real-time reflection of the marketplace."

Ryan said one of his biggest concerns with growing fragmentation in the market is the preservation of MLS data. 

"We want to continue to be that trusted source, and I think that the further it moves away [from the MLS], the less accurate that data can be," Ryan said. "The one heavy lift that MLSs provide is that compliance of the data."

"The data we provide is that bridge that allows us to provide good insights [to agents]," he continued. "And if an agent doesn't have access to all that data, can they really provide everything that they need to to their clients?"