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Saul

The discussion and resulting position of this paper must start with the basic question, what is a Multiple Listing Service (MLS)?

>From the NAR MLS Handbook:

>>
A multiple listing service is:
. a facility for the orderly correlation and dissemination of listing information so participants may better serve their clients and customers and the public

. a means by which authorized participants make blanket unilateral offers of compensation to other participants (acting as subagents, buyer agents, or in other agency or nonagency capacities defined by law)

. a means of enhancing cooperation among participants

. a means by which information is accumulated and disseminated to enable authorized participants to prepare appraisals, analyses, and other valuations of real property for bona fide clients and customers

. a means by which participants engaging in real estate appraisal contribute to common databases (Revised 11/04)

Entitlement to compensation is determined by the cooperating broker's performance as procuring cause of the sale (or lease). (Revised 11/94) <<

Of critical importance to the conversation and debate over what type of listings should be accepted into an MLS (and published on REALTOR.com) is understanding the fact that an MLS is a "unilateral offer of compensation,"
and why the issue of compensation is important and a key element.

It seems we lose sight of this (maybe as a matter of convenience by some)...or in some cases maybe we never knew this...and in other cases, maybe we do not really understand the importance of this basic and fundamental fact.

so for emphasis, I want to say it a few more times...
An MLS is an offer of compensation.
An MLS is an offer of compensation.
An MLS is an offer of compensation.
An MLS is an offer of compensation.

Just in case some are unclear about this, let me reiterate:
An MLS is an offer of compensation.
An MLS is an offer of compensation.
An MLS is an offer of compensation.

When an MLS accepts a listing into its inventory, that listing is then made available to all of the Subscribers and Participants of that MLS, for the purpose of sale of the property, per the terms of the listing agreement or any other price and terms the owner may accept. Why would someone other than the listing broker want to sell another broker's listing? Because there is, by virtue of the MLS, by the very definition of an MLS, a means for a "cooperating broker" (broker other than the listing broker) to earn compensation for bringing a buyer (ready willing and able to purchase the property under the exact terms of the listing agreement, or any other price and terms the seller may accept). If there were no means to earn compensation on the purchase of a property, why would a broker work to help their buyer obtain the property? Absent some promise of compensation and means to enforce it, brokers would only work to sell their own listings, as the only assurance the broker would have for compensation would be only the listing agreement the broker has with their sellers under listing contract.

The MLS allows Participating brokers to offer compensation for a sale to any broker who brings in an offer which is accepted, even though that broker has no contractual agreement for commission from the seller.
Brokers
bring buyers because they trust they will be paid and the vehicle which provides that trust is the MLS. MLS has provided tremendous consumer service for many years by creating the apparatus for competitors to cooperate and share compensation. MLS has created trust in the structure, format and discipline which allows for the orderly marketing of real property. MLS is part of a system which has resulted in a real estate marketplace where once illiquid assets can be sold efficiently and timely.

The compensation structure in real estate can best be described as a contingency based compensation structure (Work for Free...Work for Free...Work for Free...Work for Free...close a deal and earn compensation).
For the most part, real estate licensees are only compensated when a property closes and title is transferred. Licensees work for free until the transaction closes. Many transactions do not close. Often consumers will go from one licensee to another...getting the free work of one agent after another, and then, in some cases, buying from a "For Sale By Owner."

Would an agent, who works for free, want to show any properties where there is the chance that they will not be compensated for their work? Does an agent have an obligation to show properties where they earn no compensation because "someone" says it is in the consumer's best interest for them to do so?
Should licensees be required to support systems which will decrease their opportunity for income and systems which allow for consumers to avoid justifiably earned commissions? Might licensees lose confidence in a system that allowed for them to be "cheated" by consumers?

What makes an MLS work is the fact that Subscribers and Participants are confident that should they show another broker's (Participant's) listing which has been submitted to the MLS, then the agent (Subscriber or
Participant) bringing in the buyer, even though they have no contract with the seller (or contract with the buyer for compensation), will be compensated for the sale should one ensue. This is a key factor in a contingency based compensation system.

If that confidence about compensation did not exist, would not agents with buyers be reluctant to show another broker's listings? I submit that they would be reluctant. This reluctance would result in fewer MLS listed properties being shown and this would not be in any one's best interest...the seller's, the buying public, the listing broker, or agents working with and representing buyers.

Anything which jeopardizes or minimizes that trust and confidence in one's ability to collect compensation for their efforts would be detrimental to the MLS. It is our position that MLSs can and should set up and enforce business rules which ensure the benefit of those who belong and also which ensures the successful operation of the MLS.

Exclusive Agency Listings in the age of instant dissemination of listing information, could result in a decrease in the trust and confidence brokers currently place in their MLS. Think about this...are agents working with a buyer willing to show their buyers FSBO (For Sale By Owner) properties?
Usually not. Why not? Because there is no confidence that the agent showing a FSBO will be compensated...there is no "trust and confidence."


Position:

MLS allows competitors to work together for the benefit of buyers, seller, Subscribers and Participants.

An MLS should have the right to determine the type of listings it accepts into its MLS inventory of properties.

REALTOR.com has the right to publish the listings provided to REALTOR.com by the MLS.

Allowing Exclusive Agency Listings into an MLS inventory, and then requiring the subsequent posting of those exclusive agency listings to REALTOR.com, would establish a direct path from a buyer, not using a REALTOR, to a seller directly, avoiding the payment of a commission to an agent. Forcing MLSs to accept Exclusive Agency Listings may in time, erode broker trust and confidence in the MLSs as it pertains to payment of commission. MLSs might then decide not to publish MLS listings on REALTOR.com and this would not be a benefit to REALTOR.com or to the public, as the public loves REALTOR.com as is evidenced by the fact that REALTOR.com is the most visited real estate web site in the world.

This is a complicated issue with many comments being made by those who are ignorant of the business of real estate brokerage or who have their own agenda to accomplish.

InternetCrusade applauds Realcomp for taking a stand and not caving into the bullies of the DOJ and FTC, who once again prove they are ignorant of the workings of the real estate industry and the value the industry provides to the economy and to our country.

*Definitions of Listings from the NAR MLS Handbook:

Exclusive Right-to-Sell Listing: A contractual agreement under which the listing broker becomes the agent of the seller(s) and the seller(s) agrees to pay a commission to the listing broker, regardless of whether the property is sold through the efforts of the listing broker, the seller(s), or anyone else; and a contractual agreement under which the listing broker becomes the agent of the seller(s) and the seller(s) agrees to pay a commission to the listing broker regardless of whether the property is sold through the efforts of the listing broker, the seller(s), or anyone else, except that the seller(s) may name one or more individuals or entities as exemptions in the listing agreement and if the property is sold to any exempted individual or entity, the
seller(s) is not obligated to pay a commission to the listing broker.

Exclusive Agency Listing: A contractual agreement under which the listing broker becomes the agent of the seller(s) and the seller(s) agrees to pay a commission to the listing broker if the property is sold through the efforts of any real estate broker. If the property is sold solely through the efforts of the seller(s), the seller(s) is not obligated to pay a commission to the listing broker.

Open Listing: A contractual agreement under which the listing broker becomes the agent of the seller(s) and the seller(s) agrees to pay a commission to the listing broker only if the property is sold through the efforts of the listing broker. (Amended 11/89)

PS: Real estate, real estate law, and the real estate brokerage business is complex and detailed. While I have worked to achieve a certain level detailed in this Position Paper, even more detail and definition is always possible and so I assume a certain level of industry knowledge, hoping the threads of thoughts and conclusions can be easily followed.


Saul

Saul Klein
President, InternetCrusade
http://InternetCrusade.com