Data Ownership: MLS Dispute Heats Up

Chicago-area brokers challenge regional MLS by withdrawing offices.

June 1, 2004

Whose MLS is it anyway? That’s thequestion MLS operators and brokers have grappled with as they’ve watched the Internet turn listing compilations into both a lucrative commodity and a security risk. Despite general agreement that the data belongs to brokers, debate has ensued, particularly among large brokers, over what level of control MLSs should have over the information.

That issue has come to head in Chicago, where two major brokerages recently pulled a total of 18 of their offices out of the area’s large regional system, MLS of Northern Illinois Inc. The brokerages’ actions demonstrate the sticky wicket many MLSs find themselves in today.

Heart of the matter

MLSNI is owned by 10 area REALTOR® associations and serves the entire Chicago metropolitan area. In mid-March, Doug Ayers, chief operating officer and president of the 50-office Coldwell Banker Residential in Des Plaines, Ill., pulled his 10 North Shore suburban offices from MLSNI. Just six weeks later, Chris Eigel, CRB, GRI, president of Koenig & Strey GMAC Real Estate in Wilmette, Ill., withdrew eight of his 14 offices. The affected offices now have their listings only with the smaller MAP Multiple Listing Service, which serves Chicago’s western and northern suburbs and counts some city members among its ranks. MAP is a broker-owned, not-for-profit system founded in 1956. Koenig & Strey listings have been available through both MLSNI and MAP for a year, Eigel says. “It wasn’t an impulsive decision.”

For Ayers and Eigel, the situation comes down to three things: data protection and control, operational structure, and, to a lesser extent, technology.

Ayers says MLSNI uses old technology, whereas MAP uses new browser-based technology and is more user-friendly. Jay Huffman, MLSNI’s chair and CEO, acknowledges that MLSNI’s legacy system is built on old technology and so doesn’t have newer features such as autofills. However, his board of directors has approved the money to migrate to new browser-based technology, he says, adding that the current system has been accessible by browsers for some time.

Brokers’ concern about data protection and control is more controversial. About a year ago, MLSNI banded with a few other large MLSs to form the Real Estate Business Information Group, an Illinois-based company that licenses data from MLS databases to companies that produce business-to-business products, such as public record information.

“Listing data belongs to the broker and shouldn’t be used for other purposes without the broker’s and seller’s permission,” says Coldwell Banker’s Ayers, who also opposes MLSNI’s funding of REBIG “instead of using the money to improve the system and its security.”

MLSNI’s Huffman agrees the data belongs to the broker. But he says MLSNI gives brokers the option to opt out of REBIG, which Ayers has done.

Huffman also stresses that, contrary to some press reports, REBIG doesn’t license data to credit agencies, banks, moving companies, or listing advertisers. Rather, REBIG makes property characteristics (room counts, sizes)—not ownership information—available to companies that build automated valuation models for providing estimates of property value.

But Ayers has concerns, too, about the fate of data downloaded to other brokers’ virtual office Web sites. He believes some of this data is sold to third parties for marketing purposes that aren’t real estate–related. “People receive a barrage of mailings and phone calls after listing their house with MLSNI,” he charges, “and MLSNI is doing no policing to prevent it.”

Huffman strongly denies the charge. Under the VOW policy MLSNI has adopted, “no redistribution is allowed,” he says. “Members are prohibited from retransmitting.” There’s no more data leakage than in any system that’s accessed with a password, including MAP, he says.

Besides the data-sharing issue, Eigel says the structural differences between MLSNI and MAP are so fundamental he’s not sure they can ever be resolved.

“The MLS is the most important marketing element that brokers have, by a huge margin. They should be running it,” Eigel says. “Representatives of the [MLSNI] shareholders have a lot of other things to do besides going to MLS meetings and running the MLS.”

Association executives have a different take. “Whether associations own MLSNI and appoint board members or brokers own it and appoint someone, you still have people who are active in the business and looking out for the best interests of practitioners and the industry,” says Darcy Dougherty, CEO of the Chicago Association of REALTORS ®, an MLSNI shareholder.

Potential fallout

Huffman says withdrawals haven’t hurt MLSNI operationally but suggest they could hurt consumers who list with those offices since their listings would no longer have exposure throughout Chicago.

Since the news broke about Ayers’s decision, however, MAP has been swamped with application requests, mostly from MLSNI members, says CEO Bud Fogel. “Once they see what we have to offer, they decide it’s worth it to be members of both,” he says. MAP’s membership grew from 270 to 320 offices and from 10,500 to 12,000 individual members between February and April, he says.

Some don’t see this as a positive development. If MAP grows throughout the Chicago area and more brokers have to join two MLSs, it won’t be healthy for the industry, says Dougherty. “Many Chicago-area practitioners are angry that they might have to leave their current MLS or belong to two. It’s like we’re reverting 30 years [to when there were nearly 20 separate MLSs in the Chicago area],” she says.

Salespeople in the 10 affected Coldwell Banker offices can transfer their listings to other Coldwell offices if they want them to appear in MLSNI. Whether they’ll do so remains to be seen.

“The change clearly hasn’t hurt us,” says Kathleen Reidy, a salesperson with Coldwell Banker’s Lake Forest East office whose listings now reside on MAP. “March was our best month ever.”

Changes coming?

For now, there’s only speculation about what will happen next. “MLSNI is doing a lot of things to try to get us back,” Ayers says. “But it’s too early to say if we’ll go back in, even if MLSNI makes changes.”

One change that MLSNI has already made, according to Huffman, is adding seats for brokerages on its board of directors. He says brokerages hold five seats, with five more to be filled. MLSNI shareholders hold the other 10.

Over the long term, Ayers and other brokers want one MLS to service the community. That way, salespeople would have to pay only one fee and enter the data into only one system, he says. He’s not sure whether that would come about through a merger, buyout, or other means.

Fogel says he hasn’t had any discussions about a merger. But MAP would gladly share its data with MLSNI if brokers “tell us to, since they own the data,” he says.

MLSNI would also be willing to discuss a long-term solution, including data sharing, Huffman says. “We’re not against anything that would save our subscribers from paying two fees,” he says.

But like Fogel, Huffman says many issues, such as the fact that MAP doesn’t require its members to be REALTORS®, would have to be worked out by MLSNI’s shareholders.

The pullouts haven’t hurt MLSNI financially, according to both Dougherty and Huffman. “But if the [pullout] trend continues, we’ll feel it and our members will feel it,” says Dougherty, who’s trying to keep communication open between MLSNI and its members. “Our members want a solution, and a lot of people are trying to find one.”

Timeline

MARCH: Coldwell Banker Residential, Des Plaines, Ill., pulls 10 suburban offices from MLS of Northern Illinois Inc.

APRIL: Koenig & Strey GMAC, Wilmette, Ill. pulls eight suburban offices from MLSNI. Suburban MAP Multiple Listing Service shows a 19 percent increase in office count, growing from 270 to 320 since February, says CEO Bud Fogel.

MAY: Despite the pullouts, MLSNI shows a 2 percent net increase in offices, from 6,726 to 6,879, since March but a “modest loss in the salesperson count,” says CEO Jay Huffman.

MAY 25: Scheduled date for MLSNI shareholder and broker meeting to discuss the situation.

Additional reporting by Christina Hoffmann Spira

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