The rational case for repealing MLS Clear Cooperation rules.
Does cc work? Do I benefit from it? Would I like it to stay in place? Yes.
Is it best for consumers, (who anti-trust laws are designed to protect?) It depends.
Are we comparing it to Compass’ gamesmanship ushering in a worst-case scenario where buyers need to go through 20 brokerage websites to see all that’s available?
Or are we comparing it to a mature free market where actual competition compels the existing infrastructure to improve by simply opening the door to competition that could disintermediate it?
MLS system offers transparency, but at what cost?
MLS is not capitalism in its final form. In fact, if the industry started over from scratch today, there is almost no chance we’d end up with 400+ MLSs each with their own management team, data structures and rules.
Every year I get a postcard on my birthday from my MLS, My MLS pays for technology that I’ll never use and they put on training I rarely attend. Since I started writing this article, I’ve also discovered that my dues paid for dog watching services while ‘volunteers’ scored thousand dollar Hamilton tickets. To me and most agents I know, the value of the MLS is in the database and few want to subsidize the programs that we don’t benefit from and neither do consumers.
Cost absorbed by consumers can be measured in $ Billions to keep the current structure in place. The math is simple, I pay $1,200 a year in associations and MLS dues and there are 1.5M agents who like me are also required to pass along this cost to consumers.
Due to CC, practitioners are required to give their valuable data to brokers and marketing intermediaries alike. Companies like Zillow, Reatlor.com and lead gen companies of all shapes and sizes use this data to add billions in costs to consumers. If these companies had to source their own data to draw in customers, their businesses would look quite different than they do today and this would likely benefit consumers more than being sold to agents with a 40% markup. I recently wrote at article ‘Golden Goose of real estate’ that explains real estate’s Referral fee problem that exists primarily because of CC.
As private equity makes their way into owning our industry’s infrastructure, do we really want to protect MLSs as if they are a unregulated utility that is so beneficial to transparency that it must be preserved at all costs?
MLS benefits
I almost unanimously agree with all of the benefits touted by supporters of CC, which makes this quite a dilemma between choosing capitalism over the safety and familiarity of the current system. Today, buyers see all inventory and a brokers’ job is easier without having to personally source it themselves. Transparency and access are the cornerstones of capitalism and free markets. No one can argue against these ideals, but saying that they wouldn’t exist without transparency afforded by CC is simply a deep mistrust of capitalism. It’s almost as fearful as saying first-time homebuyers, minorities and VA borrowers could never afford to buy a home if cooperating compensation was removed from the MLS. It’s only been three months and most of those fears have been proven to be unfounded.
What happens if CC is repealed?
Sellers will still want to feel like their property is being marketed to the widest group of buyers. The company that can deliver the best execution, which usually comes from the most exposure to buyers, will win. Robert Refkin won’t be able to convince sellers to limit their exposure and marketing so that Compass can lure in more customers for themselves. Even if he was that charming, I’m sure the industry at large would consider whether they wanted to share listings with Compass – would buyers want to go to Compass if they miss out on inventory from EVERY OTHER broker? A truly free market will sort through all kinds of ideas and iterations to arrive at something that gives consumers what they want, best execution.
Agents shouldn’t be forced to choose between working within the MLS or outside of it and buyers and sellers shouldn’t be required to subsidize the MLS if they don’t end up using it. Any efficient marketplace must allow participation without prohibiting alternative execution methods, otherwise, it’s anti-competitive. There is no incentive for the current system to improve and new ideas will never have a chance if brokers are excommunicated if they want to offer their customers alternative methods of execution.
Existing marketplaces offer a blueprint
The NASDAQ offers a strong example of how a marketplace can work for both brokers and consumers. For decades, NASDAQ has supported efficient, competitive trade by allowing brokers to manage their own electronic communication networks (ECNs). NASDAQ was born out of inefficiency in other markets like NYSE, replacing hand signals in a crowd of humanity for instant execution electronically. What if NYSE decided that brokers placing trades over their network could not place trades on the NASDAQ or they would lose their NYSE membership? Would NASDAQ have been able to overcome a cold-start problem to gain enough critical mass to become successful?
Brokerages like Morgan Stanley or Merrill Lynch have their own ECNs to process customer trades internally, often resulting in lower costs for clients and higher margins for the brokerage. When a broker has no immediate match for a trade, it’s added to NASDAQ, exposing it to other company ECNs that might. Imagine if real estate operated similarly: Compass or any major brokerage could offer clients exclusive in-house listings with an option to list on MLS or an equivalent if the property doesn’t move. The benefits? Sellers receive lower costs and privacy options, while buyers still gain access to inventory.
Repealing Clear Cooperation would not eliminate transparency or destroy the real estate market; it would create new transparency standards driven by competition. Sellers want visibility, buyers want inventory access, and brokers want options to serve clients cost-effectively. A competitive market would still show nearly all listings, simply because sellers and brokers want it. And in real estate, where information is highly localized and diverse, competition ensures that service, quality, and cost are balanced.
In this model, agents would thrive without being forced to subsidize an outdated MLS structure, and consumers would enjoy the benefits of true market choice. Capitalism thrives on competition, and when Clear Cooperation is struck down for stifling free market trade, the infrastructure will transform and that’s probably a good thing. Capitalism will do its job and form a more efficient marketplace resulting in more options for consumers and more opportunity for innovative agents, even agents who don’t hang their license at Compass.
Dean DiCarlo is the CEO of Homing.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this piece: [email protected].
