De-risking the MLS: CEOs say consumer friendliness is the best line of defense

The legal teams at multiple listing services (MLS) have been getting quite the workout over the past few years, first with the commission lawsuits and more recently with lawsuits related to Realtor association membership and MLS access.

Given these circumstances MLSs are naturally looking for ways to lower their legal risk portfolio, with “derisking” being a hot topic of conversation at the Council of MLSs’ (CMLS) Open House conference in Toronto. 

As MLSs comb through their operations and policies for risks and liabilities, legal experts say MLSs should focus on the consumer friendliness of their platform and rules. 

Consumer choice flexibility is key

“I think MLSs should look at their rules and policies and any rule or policy that is not consumer friendly, they should consider addressing it ASAP,” Justin Haag, the president and CEO of Northwest MLS (NWMLS), told attendees at CMLS Open House. 

Charlie Lee, the senior counsel and director of legal affairs at the National Association of Realtors (NAR), agrees that consumer friendliness is key. 

“Consumer choice flexibility is key,” Lee said. “Ensure that your participants and subscribers understand how your policies work to provide consumer flexibility and are able to articulate that to their customers.”

Open the MLS to non-Realtors

But consumers are not the only ones who MLSs should be thinking about providing options for. With increased scrutiny on the tying of MLS access to Realtor association membership in some markets, MLS leaders on stage at CMLS encouraged other MLS executives to seriously consider opening their MLS to non-Realtors. 

Later this month, members of Kathy Elson’s Connecticut-based SmartMLS are voting on removing the Realtor member requirement from their non-Realtor affiliated MLS.

“The broker-owners and the head appraisers get it — they understand that agents want choice,” Elson, the CEO of SmartMLS, said. “But what we are finding is that people are completely clueless and that they don’t understand the difference between a licensee and a Realtor.”

In Louisville, Kentucky, Jerry Legrand, who serves as the chief technology officer of the Greater Louisville Association of Realtors/APEX MLS, said his MLS has been open to non-Realtor licensees for 25 years. 

“We are wholly owned by the association, but we don’t have a lot of people taking us up on that option,” Legrand said. “It is great to have the choice, but MLSs need to be aware that subscribing to the MLS is only one part of that. What good is an MLS subscription if you can’t get into the property because you don’t have lockbox access or you can’t submit and offer because you can’t get access to forms?” 

Legrand said his team is currently evaluating how it can provide APEX’s licensee-only subscribers with access to more tools and services so they can more effectively do their jobs. 

The perfect storm

While many may be surprised by the recent uptick in interest reassessing policies and derisking, Tim Dain, the CEO of NorthstarMLS, believes the current environment has created the “perfect storm” for such interest.

“Typically when we wonder whether or not we need to update rules it is when there is a major shift in the legal landscape, major advancements in technology or continuous user feedback and I would say that all three of those things are happening in the industry right now,” Dain said. 

Given the tumultuous nature of the current environment, Haag said MLSs need to be looking ahead when it comes to their rules. 

“We do our best to be proactive and not reactive,” Haag said. “We try to look down the road and see what is coming and create rules and structure to address that. It isn’t always possible, but I think that is a reason why it is good the MLS business is nimble because we can act quickly and create rules for things that are happening right now.” 

In the same vein, CMLS Open House speakers encouraged MLS leaders to take their own initiative to evaluate and assess their existing rules portfolio.

The time is now to assess your rules

“In my experience, we tend to shelve our rules and only really modify them when something is provided to us by NAR or CMLS, and I challenge each of your in this room to stop waiting for someone to hand you rules or give your permission to revisit your policies,” Nicole Jensen, the CEO of realMLS, said. 

Instead of just inserting language provided by NAR or another association into existing rules, Jensen encouraged MLS executives to take a hard look at how proposed policies fit in with their local marketplace, and adjust their policies to fit their current environment. 

As MLSs look to retool and revamp their policies, Jessica Hickok, the CEO of the Association of Real Estate License Law Officials (ARELLO) encouraged MLS leaders to engage with their state regulators to ensure they are aligned on MLS policy objectives. 

“The best thing that an MLS can do is engage with a state regulator or state regulatory body,” Hickok said. “Contact them and talk to them about what your goals are, what the state standards are, and how those align.” 

In doing this assessment, Hickok said special attention should be paid to how things impact consumers and where outcomes rank that may bring harm to consumers. 

While MLSs may want to shy away from rule making in the face of legal liability, MLS leaders and legal experts said that the right rules are necessary to create a fair marketplace. 

“MLSs need to harken back to their origin and creation. Without the MLS it would be the Wild West,” Lee said. “Realtors created the MLS because they thought it would be good for the marketplace. The MLS represents an invitation for brokers and agents to participate in cooperation because it is going to help facilitate the most significant transaction a consumer engages in.

“At NAR, we are working toward providing a framework where MLSs continue to provide accuracy, reliability, transparency, and an equal playing field that is agnostic toward business models, business practices and serve the consumers.”