Would a National MLS Benefit Consumers?
The National Association of Realtors (NAR) and US Department of Justice (DOJ) have different opinions on how home listings should be owned, managed and displayed. Supposedly at the core of this debate is consumer rights, and benefits to the public. But which consumers? And what part of the public?
From the very beginning, NAR and its Realtor Association members have primarily supported the interests of listing brokers, the real estate agents and their companies that serve home sellers by marketing their homes. Historically, all brokers truly represented only the sellers in a real estate transaction. It has only been in the last couple of decades that the issues of home buyer rights, especially their right to equal and independent representation in the home buying process, have come to the fore. As a result, many states have revised their real estate regulations and laws to give home buyers the right to independent representation, in the form of exclusive buyer agency, transaction brokerage, and other newer forms of agency that recognize the buyer’s right to equal representation, so that real estate agents no longer always work to the sole benefit of sellers.
This shift has created many “buyer only” real estate brokerages, whose business models exclude working for sellers, so that their agents work exclusively for buyers, always representing the buyer’s best interests. This shift has also worked hand-in-hand with the explosion of real estate information on the internet, and in particular, the ability of buyer focused brokers to display listings of other brokerages on their company and individual web sites, subject to rules of their local MLS organizations and Realtor Associations. This controversial transition has not been easy, often garnering major resistance from the traditional listing brokers to any kind of change that would erode their total control over real estate marketing and transactions.
Let’s examine how a national MLS database and system, universally available to the public, would affect this relatively new balance of power and rights between sellers and buyers.
Current internet listing display rules typically require the name of the listing brokerage to be displayed along with the property details. Some local rules also require display of the listing agent’s name and contact information. The effect of these rules is that many consumers, oblivious to the fact that listing agents always represent the best interests of their sellers, and never the best interests of the buyer, will be encouraged to contact the listing agent or brokerage directly. The only interests this serves are those of the listing agent and brokerage. They want to cut out the buyer agents whenever possible, not only in order to get the most money possible for their sellers, but also to put as much of the listing fee as possible into their own pockets and coffers, instead of splitting it with a buyer’s agent. The same conflict of interest exists with new home builders, who generally do not like buyers to have independent agents representing them. Home builders will often create insurmountable barriers to independent agents, or will offer buyers special incentives to encourage them to not use a buyer’s agent.
Would a national MLS system resolve these obvious conflicts of interest? Probably not.
In a national MLS system, especially if controlled and managed primarily by NAR, it is very likely that listing agent and office information would be more prevalent, not less so. This means that buyers, and exclusive buyer agents, would continue to get the short end of the stick. While I do not propose totally eliminating all listing office information from a national public MLS
system, I do believe that the listings should be displayed in such a way that the consumer, in this case the buyer, is not enticed, and not even able, to forgo their rights to independent representation by their own agent.
Another potential issue that a national MLS creates, is that in order to foster more competition in the real estate industry, and not stifle it, it should not be limited exclusively to agents who must contract directly with NAR and its direct contractors. Affordable mechanisms must be provided for independent agents to continue to be able to download and display local listings for their own market, on their own web sites, whether they are obtained from a local MLS, or from a national MLS database. In this regard, a national and standardized MLS database could make a lot of sense, since independent agents are often constrained in their choices of internet service providers by the huge disparity in listing data formats that currently exists, which limits the number of vendor web site and listing display solutions available to agents and brokerages. Even the new RETS standards, promulgated by NAR and one of its contractors, are not a total solution to this problem.
In summary, as long as a national MLS system supports and promotes buyer rights by encouraging independent buyer agency, and also supports the newer exclusive buyer agency models, with appropriate display rules and equal access to the raw data for presentation on independent agent web sites, using a common data interchange standard, then a national MLS could be a great improvement over the current situation.