Minimum Standards for the MLS: Analysis & Proposal

Unless you’re in the MLS space of the residential real estate industry, you probably did not know that the MLS Standards Workgroup of the NAR MLS Technology and Emerging Issues Advisory Board released an Interim Report. In fact, you probably didn’t know that there was such a thing as a MLS Standards Workgroup. Well, there is, and they’ve been hard at work, and recently released said Interim Report, with some recommendations and some future thinking in the document.

I would link to it, but it’s apparently at a password-protected website called The Hub… so I can’t. A reader who has access to it emailed me a copy, with a request for my thoughts. I imagine anyone who really wants to read the Report probably has access. If you don’t, but would like a copy, let me know and I’ll send it your way. I’ll be quoting from it extensively in this post. [NOTE: Although the Report was put into this password protected Hub, since there is specific language in it asking for industry feedback, I do not consider it confidential. Nor have any of the Workgroup members I spoke with in researching this suggested that the document is confidential.]

Both because I was asked for my thoughts by a reader (VIP reader, no less) and because the document asks for industry feedback, I am pleased to do both. This might get long, but then, what’s new?

For the TL;DR crowd: the Report obviously represents a ton of work, and since I know most of the people in the Workgroup, I am confident that it represents one of the finest example of the idea that politics is the art of the possible. Rather than actual standards, we get a series of good ideas and best practices and guidelines, because those were what was possible.

It is proof that organized real estate is dominated by inside-baseball politics. Even powerful MLS CEO’s, who really know what the MLS needs, can’t get much done because of politics. They have to settle for “low-hanging fruit” (a phrase used by multiple Workgroup members I interviewed for this article) and wait for Phase 2, Phase 3, Phase 214 for future progress.

The Report itself is actually pretty decent in light of that ever-present reality, so if you have a strong urge or need to understand some of the intricacies of the world of MLS, do go read the whole thing. I’ll touch on some of the recommendations and the thinking in the Report, but… I think my role as the accidental prophet in the industry is to point out the obvious and say what others can’t say. So here we go.

  1. We absolutely need minimum standards for MLSs.
  2. Said standards need to be robust, because what matters is not how many MLSs can meet the standard, but what the actual brokers and agents need in 2020.
  3. The only way we get such standards is for the biggest players in the industry to get actively involved.
  4. If the MLS is to survive the next 10 years, these standards need to be put in place sooner rather than later, because it’s difficult to see a scenario in which we get to a Phase 72 at which point we’ll have actual standards.

Let’s dig in. But let me warn you in advance, that I was stuck on a long flight with nothing much else to do… so this is going to be long. 🙂

The Workgroup: Purpose and Background

Let’s start with the actual Standards Workgroup. Right at the top of the Report, we get this:

Purpose:
To consider the criteria and enforcement process for minimum MLS Standards required for all REALTOR® Association owned and operated MLSs.

Nice! Short and sweet, easily understood, and fairly limited in scope. This would be a fun Workgroup to be on.

Then we get a couple of paragraphs on Background, but it doesn’t actually set forth too much there. It mentions that the Workgroup was formed in the fall of 2019, then goes into how COVID interrupted their workflow, requiring more remote meetings, etc. No mention of what motivated the formation of the Workgroup in the first place… but those of us who have been in the organized real estate space instantly recognize that the effort here is the parallel to the Association Core Standards promulgated in 2014.

So a slight detour is required.

Core Standards

I’m not going to spend too much time on this, since it is of little interest to anyone who isn’t an Association junkie, and only relevant indirectly to this topic. But go ahead and check out the Core Standards page on NAR’s website.

The important point is that NAR wanted to reduce the number of REALTOR Associations and get rid of the small Associations who really didn’t offer much to its members, while charging annual dues and such. In its 2016 report, the Association Executives Committee mentions that when Core Standards began, there were 1,355 local Associations, and after the first “Compliance Cycle” there were 1,204, a decrease of 151.

Back in 2014, when these Core Standards were first put into place, I wrote a long piece on it, and Bob Bemis (who was posting on Notorious at that time) also wrote a long piece on it. So go read those if you’re interested in ancient history.

The point is that Core Standards were intended to get rid of local Associations that really weren’t doing much at all and did not deserve to exist. Sure, everyone said that the goal was to raise the bar on what local Associations provided to its members for their member dues dollar, and that is in fact a laudable goal, but the inevitable result of that would be the elimination of local Associations that weren’t getting the job done.

Seeing as how just two years ago, I found myself in the one-room office of a 178 member local Association with the “CEO” who nonetheless killed off a major MLS reform initiative because, and I quote, “I don’t want brokers making decisions on the MLS!”, I think it’s safe to say that Core Standards hasn’t done very much to raise the bar. I mean… 178 members… how do you charge enough to pay the electric bill and the so-called CEO’s salary? Local advocacy? Education and training? Riiiight.

This will be relevant for us.

Purpose of Minimum Standards

So let’s be clear about this: the purpose of any minimum standards is to get rid of those who do not meet said standards. It doesn’t matter whether we’re talking about the Association, the MLS, firemen, or the Marines. To have minimum standards means you live up to them, or you’re out. There’s not a whole lot of gray area there.

“Aspirational” minimum standards are not standards. Best practices are not standards. Suggestions for improvement are not standards. They may all be wonderful things, but they are not standards, because they do not automatically eliminate those who fall short of them from being a Marine, being a fireman or being an MLS.

With that in mind, let us look at the Recommendations of the Workgroup.

The Recommendations

The following are the Recommendations from the Workgroup, which have been forwarded onto the MLS Technology and Emerging Issues Advisory Board:

Recommendation #1. Additional guidance and examples of progressive discipline for violations of MLS rules, including differences between violations of the MLS rules compared to violations of an MLS data licensing agreement.

Recommendation #2. Changes in existing policy that eliminate paying administrative sanctions to resolve charges for repeat offenders of the MLS rules within a single year. Instead, these licensees must attend hearings convened to consider their actions provided for in MLS Policy Statement 7.21 – Appropriate Procedures for Rules Enforcement, and within Section 9 of the NAR Model MLS Rules and Regulations that follow the NAR Code of Ethics and Arbitration Manual. Hearing panels will be instructed to consider and to use progressive discipline including fines and other remedies in Section 14, Nature of Discipline, from the NAR Code of Ethics and Arbitration Manual; and to charge administrative processing fees not exceeding $500 for individuals found in violation of the MLS rules to help cover the costs of the hearings.

Recommendation #3. A new MLS policy that compels an MLS participant (principal broker) to attend hearings for potential MLS violations by their licensees where the licensee’s ability to resolve charge(s) by paying administrative sanctions has been revoked.

Recommendation #4. Changes to existing policy that authorizes individuals to file anonymous complaints for violations of the MLS rules. If the allegation is forwarded to a hearing, a complainant will be required and can be fulfilled by a representative of the MLS Committee, or alternative representative.

These four Recommendations are in the “Compliance” bucket and are intended to help the local MLS do a better job of enforcing compliance with its rules and policies.

Note that none of these four can be said to be a “standard” in any sense of the term. Instead, they are suggestions for policy changes. I happen to like some of these suggestions, but again, they are suggestions for policy changes, not “minimum standards.”

Recommendation #5: Changes to existing policy statement 7.92, Real Estate Transaction Standards (RETS), indicating that Web API data feeds must have no less than the same listing data fields provided to participants and subscribers via other data feeds, such as RETS or FTP systems. (Revised from what appears in the Advisory Board Agenda)

Recommendation #6: A new MLS policy so that MLSs will actively require and enforce accuracy in the listing data submitted to the service, and sanction individuals for intentional or repeated misinformation by monitoring data input and addressing areas of concern.

These two have to do with Data. The first is kind of a standard, since it’s black-and-white, but the second one is a suggestion.

Recommendation #7: A new MLS policy requiring MLSs to include contact information on their public website and MLS platform for customer service and tech support.

Recommendation #8: A new MLS policy that MLS must monitor and take action to correct language within a listing that violates fair housing policy. (Added Recommendation from what appears in the Advisory Board Agenda)

These two have to do with Service component. Yes, #7 really says what it says: an MLS must have contact information on its website. This has the benefit of actually being a standard, as it is easily verifiable and is a “yes/no” situation. But it does make one wonder how an MLS that doesn’t even have contact information on its website or in its MLS system doesn’t close its doors simply out of shame.

It’s a wonder that the Recommendations do not include other incredibly obvious standards:

  • A REALTOR-owned MLS must own, or at least rent, a computer.
  • The MLS must offer data on media other than printed books and 5.25″ floppy disks.
  • The MLS may not staff customer support with runaway orangutans.

I can’t help make fun of Recommendation #7, but knowing the people on the Workgroup and having spoken to them, I completely understand. This is how terrible the situation is with the MLS today. Experienced MLS CEOs like Art Carter and Chris Carillo and Matt Consalvo, who manage complex data and technology operations covering tens of thousands of REALTORS, had to say, “You need to put your phone number on your website” because too many MLSs do not. Think about that.

But they said it because it was the low-hanging fruit. It was what was achievable at this time. The mind boggles.

The Future Potential Recommendations and Additional Considerations

I’m not going to spend a lot of words on this, except to say that the Workgroup lays out some future directions for Phase 2. There are a bunch of ideas and suggestions floated for future debate and recommendation and ultimately implementation.

But let me pick out two potential recommendations, just to illustrate what the Workgroup members — all smart, experienced people with deep expertise with the MLS — are dealing with.

— MLSs must enforce mandatory MLS policies and model rules and must issue “meaningful” sanctions for violations of their local MLS rules.

Seriously? Not only did the Workgroup have to put forth a proposal that the MLS must enforce mandatory MLS polices, because you know, that’s kind of what “mandatory” means… but it didn’t get enough traction to put into actual Recommendations. This had to get pushed to Phase 2.

Then we have this:

MLSs must ensure that their listing data is current, accurate, and includes all relevant property information that can be used by its participants and subscribers to best serve the interests of their clients and customers.

This strikes me as the “MLS must put its contact information on the website” kind of a deal. I mean, if the MLS doesn’t have current or accurate data including relevant property information for its members to use, what is the goddamn point? Why not just subscribe to *my* MLS, because I can guarantee that I too can provide inaccurate, not-current and incomplete information, but I can do it for $1 per month. Hell, I’ll do it for a nickel a month.

This did not make the Recommendations; it was pushed to Phase 2.

Political Games Tie Their Hands

I spoke to about a half-dozen of the people on the Workgroup, because most of them are friends of mine from long years of hanging out, talking, discussing, and debating. A few are clients and former clients. I have confirmed my suspicion that this Report is the result of the kind of internal politics that coats everything in organized real estate like mold on cheese left outside… in a swamp.

These intelligent, capable, and expert men and women spent hours upon hours of work, immense amount of brainpower and effort, over months of time… knowing what needs to happen, but unable to propose things like, “deliver accurate data” because that would result in political wrangling and ultimately not get through the layers of decision making at NAR. Consider that this Report now goes to Emerging Issues, then to the MLS Policy Committee, then to Leadership Team, then finally to the Board of Directors.

Every person I spoke with said, “We wanted to make some progress, so went after the low-hanging fruit.”

From that perspective, the Recommendations are actually pretty solid. They are exactly the kind of best practices advice that experienced MLS operators would and should provide to one another. I can nitpick and talk about the methodology or the process or whatever, but that’s truly deep inside-baseball stuff that is of zero interest to someone who isn’t responsible for operating an MLS.

But what those suggestions — that try to improve the MLS today, that try to accomplish what is doable and feasible today — are not are standards. They are not standards.

And what we need badly as an industry are standards.

So here’s my proposal on how to get real standards, and actually get them past the labyrinth that is NAR policymaking.

Strategy vs. Tactics

Let me begin with what I consider to be an important factor: the difference between strategy and tactics, between goals and means, between standards and best practices.

There’s a whole fascinating history behind FDR’s decision to go to war in North Africa first, then Europe against Nazi Germany. This article is particularly interesting, as it is from the Australian perspective. But the end result was that even though the U.S. was brought into World War II due to an attack by Japan, not Germany or Italy, we went to war against Germans in North Africa to kick things off. This was, as you can imagine, a controversial decision. It was so controversial that FDR kept the “Germany First” plan a secret from the American people. It also led to bitter division with the American military.

But FDR decided to stick to the Germany First plan and ordered Operation Torch, the invasion of North Africa. The military men, grumbling or not, then put together all of the plans, logistics, training, tactics and executed on the strategy.

In the American system of government, the civilians control the military. The generals are undoubtedly experts in war; the President is equally indisputably not (with the exception of Eisenhower). Yet, strategy belongs to the civilian authorities, because they were duly elected by the people to govern. Tactics belong to the generals, because they are the experts, and in our system, the military exists for the people, not the other way around.

I apply similar thinking to the real estate industry. We all know we need standards. As this Report so amply demonstrates, there are MLSs that can’t produce accurate and timely data. There are MLSs that don’t post contact information on their websites. There are MLSs that do not enforce “mandatory” policies. We obviously need minimum standards.

But I believe those standards must come from the brokerages. They are, for our purposes, the civilian authorities. The MLS exists to serve them, not the other way around. As Art Carter, CEO of CRMLS, has said often, the MLS is a cooperative of brokerages; it exists to serve them.

The Workgroup Should Be Remade

Therefore, I propose that NAR depart from its usual way of doing things. The MLS Standards Workgroup itself should be disbanded, its members thanked for their hard work and their service, and then reconstituted.

Here’s my list of the people who should be on it (or their designated representatives):

  • Ryan Schneider, CEO, Realogy
  • Ron Peltier, CEO, HomeServices of America
  • Gary Keller, CEO, Keller Williams
  • Adam Contos, CEO, RE/MAX
  • Hoddy Hanna & Helen Hanna Casey, Howard Hanna
  • OB Jacobi, Geoff Wood, Jill Wood, Managing Principals, Windermere
  • Glenn Sanford, CEO, eXp
  • Glenn Kelman, CEO, Redfin
  • Robert Reffkin, CEO, Compass
  • Kuba Jewgieniew, CEO, Realty One Group
  • Matt Widdows, CEO, HomeSmart International
  • Craig Cheatham, CEO, Realty Alliance
  • Tami Bonnell, CEO, EXIT Realty
  • Jim Weichert, CEO, Weichert Companies
  • James Dwiggins, CEO, NextHome
  • Joshua Harley, Founder & Chairman, Fathom Realty

You get the point. These are some of the largest brokerages and franchise companies in real estate today. If anyone knows what it’s like to belong to hundreds of local MLSs, it’s these men and women. If anybody knows what a broker or an agent actually needs from the MLS to do their jobs, it’s these people.

The average broker, with one office and a half dozen agents (I’m not kidding; look at the stats), works in one MLS for his entire career. He only knows his MLS, which might be one of the best in the industry, or may be one of the worst. But he doesn’t know what it’s like to belong to a different MLS. The big companies do, simply because they have to belong to dozens if not hundreds of them.

The Workgroup listed above also has the advantage of being fierce competitors who actively hate each other (in a commercial sense). If they can come to agreement on a common standard, then we can be fairly sure that said common standard is one they all want, that won’t provide a competitive advantage to one over the others. Redfin and Compass might to want to push hard on a minimum standard that is way tech-forward; the other companies aren’t going to go for that. Realogy and RE/MAX might want an enforcement standard based on physical offices; eXp and Fathom aren’t going to agree to that.

So whatever minimum standards come out of that group is quite likely to be what the vast majority of brokers and agents actually need in 2020 to do what they need to do to help consumers buy and sell houses.

The MLS executives and the experts need to be at the Workgroup to provide insights, advise, and educate the brokerage leaders on what is and is not feasible or possible technologically, or point out the cost of some standards, logistics of other ones, and so on. They can advise the brokerages on the realities of operating an MLS, then leave it to the brokerage leaders to formulate the standards themselves.

Standards, Not Suggestions for Improvements

The overwhelming feeling one gets from reading the Interim Report is that most of it is comprised of attempts to improve the MLS. That is entirely laudable, and something needed, but they’re not standards.

Standards are yes/no questions, and objectively quantifiable.

Must do 5 dead hang pull-ups” is a standard. Either you do 5 pull-ups, or you do not. If you do not, you can’t be a U.S. Marine.

There’s no advice or suggestions in the standard. There is no “here are seventeen exercises to strengthen your triceps” in a standard: it just states the number, or the condition, that you must meet.

If the Workgroup is comprised entirely of brokers and franchise leaders, then they don’t even know how an MLS could improve, what policies will help and what policies won’t. So stay away from those. It isn’t their job to tell the MLS how it can meet the standards; their job is merely to tell the MLS what those standards are.

Let the MLS experts, who gather in organizations like CMLS and RESO and elsewhere, offer advice and suggestions to one another so that they can meet the standards that the brokers have put in place.

So for example, the Interim Report has this under potential future recommendation:

MLSs must have a clear process available to participants and their vendors to request MLS data feeds, including an explanation of the different feeds and the information provided in each. This includes contact information for administrative and technical support. The data transport method must consist of Web API, and can also include other methods like RETS.

This is helpful advice and suggestions, not a standard. A standard, promulgated by the group of brokerages and franchises, might be this:

MLS must provide a data feed within 24 hours of a request by a participant or a participant’s vendor.

No need to discuss data transport methods, or explanations of different feeds, or whatever. Just a simple, easy to understand, and easy to measure standard. The MLS has either provided the feed within 24 hours, meeting the standard, or it has not. Yes/No.

All of the discussion about administrative and technical support, about data transport, etc. are and should be subjects for the MLS executives and their teams. Those all go towards meeting the standard in a cost-effective manner. Those are the how, not the why. Those are tactics, not strategy, and that is the province of the MLS expert.

Let the large brokerages and franchises provide the minimum standards, because their brokers and agents need them. The MLS community can figure out how to meet those standards.

NOTE: As Chris Carillo, co-chair of the Workgroup told me, the standards aren’t about size of the MLS but about the quality. There are smaller MLSs that do a wonderful job in every aspect. The minimum standards isn’t about driving those MLSs out of business, because they will meet the standards easily. Sure, larger MLSs have more money and more resources, but that is never the whole story.

Pragmatic Consideration: Politics

The other major reason to go down this road is because internal politics is an inevitable fact of life in organized real estate.

There will be a huge group of people — employees of crappy MLSs, the REALTOR Associations who operate them as cash cows, local brokerages who don’t want to make it easy for others to enter the market, etc. — who do not want to see any minimum standards whatsoever. The status quo is just fine for them, thank you very much.

As mentioned above, the Association Core Standards were promulgated to raise the bar and to get rid of some of the smaller Associations that simply did not have the resources to execute the mission for which the Association was founded in the first place. Then politics got in the picture… and we still have dozens if not more local Associations with 100 members who obviously provide no value and cannot accomplish the mission.

Maybe that makes sense for the Association, many of which have become a less-expensive country club with no golf course for some REALTORS to get together to socialize and give each other awards. It makes zero sense for the MLS, which is a data and technology utility for the actual conduct of business.

If a local Association doesn’t do a bunch of lobbying and consumer outreach, there is no third party company eager to jump in to do those things. Because they’re not essential. The MLS is a different story. If the MLS can’t provide accurate and timely data, if the MLS cannot enforce “mandatory” rules thereby causing chaos in the housing market, then I guarantee there are third parties who will jump in and do those things. No consumer anywhere has ever been frustrated that the local REALTOR Association hasn’t taken a position on ADU regulations or hasn’t done a charity golf tournament, but inaccurate and missing data on a house he wants to buy? Yeah, you bet your ass they have been and will be frustrated if that happens.

Nonetheless, because people protect their turf, their jobs, and their fiefdoms, there will be political resistance within NAR to any strong minimum standards for the MLS with teeth.

As I see it, only the combined effort of the largest brokerages and national brands can hope to overcome that internal resistance. They and their brokers and agents are going to have to step up and get involved and push the minimum standards through, because the local MLS or the local Association threatened by standards are not going to take it laying down.

Pragmatic Consideration: Enforcement

There is also the problem of enforcing said minimum standards. In my 2014 post about Association Core Standards, I wrote:

This question of power infuses the entire Report. It’s one thing to talk about all the wonderful things that NAR would like to see happen. It’s one thing to call something a MANDATORY CORE STANDARD.

It’s another thing entirely to enforce things. We’ll return time and again to this exact issue. Power might corrupt, and absolute power corrupts absolutely, but the reason why powerlessness doesn’t corrupt is that it’s worth jack diddly squat.

Does NAR and the State Association actually have the power to enforce their will on the recalcitrant locals? What is the nature of that power, and how can/will they enforce these policies?

Truth is that NAR has very little power to enforce any MLS policy or rule or standard. It has three tools at its disposal, really:

  1. NAR’s umbrella liability insurance policy;
  2. Pulling the charter of the REALTOR Association that owns the MLS;
  3. Sticks and carrots for individual REALTOR leader of the MLS who might want to rise in the NAR hierarchy.

That’s about it.

It turns out, the MLS can buy insurance. The many broker-owned MLSs do just that, and they’re doing just fine.

The only enforcement mechanism that has any real teeth is enforcement by the brokers and agents themselves. If XYZ MLS fails to meet the minimum standards, then the brokers and agents have to take their business to one that does. And there just aren’t many MLSs in the world today that can afford to lose all of the companies listed above and survive. HAR is the only one that comes to mind, actually, and HAR is not an MLS you have to worry about meeting any minimum standard.

So I think making sure that the largest companies in the industry are the authors of the minimum standards for the MLS will lead to enforcement of said standards on MLSs far easier (possible, even) versus having a group of MLS executives come up with a standard, no matter how well-intentioned, then trying to have NAR enforce it.

Push comes to shove, NAR doesn’t pay the MLS’s bills. The brokers and agents, on the other hand… do.

Wrapping Up

This got long, because I wrote it on a long flight from Las Vegas to Raleigh. And it’s rare that I get this much time to just think and write right now. So let’s wrap up.

The Interim Report has a lot going for it. The people who put it together are among the best in the MLS industry. The Recommendations are all solid suggestions that deserve discussion and debate.

But they are not standards. And what was put out is the pastel-hued watered-down recommendations based on what is possible, what is politically feasible, what is the least offensive, the least threatening. The men and women on the Workgroup know what the hell they’re doing; they know what is needed. But politics gets in the way.

If NAR is serious about raising the bar on the MLS, then it needs to convene a new Workgroup, a new PAG, that is comprised of the heads of the largest brokerages and national companies in our industry. They are the ones who actually belong to hundreds of MLSs, from the best to the worst, and they’re the ones who actually can speak to what the bare minimum they need from an MLS is.

In fact, the brokers don’t even need NAR to convene the PAG or Workgroup. Just do it yourself, announce your minimum standards, and let NAR and the MLS figure out how to get with the program or face the prospect of mass defection to another MLS that does meet those standards.

Pragmatically, to do something like setting a minimum standard on the MLS and enforcing it will require not just the cooperation but the active participation of the brokerages, franchises, and agents.

This won’t be easy to do, not by any stretch of the imagination. But doing what’s easy, going for the low-hanging fruit, is what we all have been doing for decades now. And look where that’s led us. MLSs that don’t enforce “mandatory” rules, or even have their phone numbers on their websites.

We must have minimum standards. That means we must have the largest companies come up with those standards and convince NAR to pass them, then help NAR enforce them.

If we don’t, then someone else will. And we don’t want to be stuck in some not so distant future thinking, damn, I should have bought you flowers when I had the chance….

-rsh

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Rob Hahn

Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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