Over the past three weeks, three MLSs have publicly come forward to reject Compass International Holdings’ demands that they stop enforcing rules that penalize brokers or agents for publicly marketing listings before submitting them to the MLS.
In demand letters sent to MLSs across the country in early September, Compass argued that enforcing these policies violates antitrust laws. The national brokerage conglomerate also threatened that it would file federal antitrust lawsuits against any MLS that continued enforcing these policies, claiming that they unlawfully restrict competition and prevent home sellers from marketing their homes how they choose.
So far, California Regional MLS (CRMLS), Austin’s Unlock MLS and New York state’s OneKey MLS have publicly rejected these demands, which has already resulted in CRMLS facing an antitrust suit from Compass. In recent days, however, more brokers, many of whom are participants in MLSs that may soon be facing litigation from Compass, have also begun pushing back against the demands Compass is making.
Brokers speak out
“MLSs aren’t perfect, but that doesn’t give one company license to tell everyone else what’s best for them. I see no upside if Compass is successful,” Bess Freedman, the CEO of Brown Harris Stevens, told HousingWire.
If MLSs give in to Compass or the firm wins any litigation, Freedman believes there will be increased market fragmentation and that other brokerages may be compelled to guard their own inventory.
“We will end up with inconsistent data, confused consumers, and many more lawsuits down the line,” she said.
Anthony Lamacchia, the broker-owner of the New England-based brokerage Lamacchia Realty, shares a similar view.
“People will look at Compass and say ‘Ok, if you are going to hoard your listings and not share them with the MLS, we are going to hoard ours.’ For us, in Northern Massachusetts, Southern New Hampshire, the Berkshires — if we hoard listings it will be an issue for the Compass agents there, but in Boston, if Compass agents hoard listings it will be a nightmare for my agents,” Lamacchia told HousingWire. “This is literally what I see as mutually assured destruction.”
If a listing arms race breaks out, Lamacchia believes it will be the death of the small brokerage as they will not be able to compete without a robust MLS.
“If they take it that far, it would blow the whole system up and that won’t be good for anybody,” he said.
If you don’t like it then leave
Brokers also wonder why Compass wants to continue belonging to the MLS if the company feels it is so harmful to its agents and consumers.
In a recent interview on CNBC’s The Exchange Compass CEO Robert Reffkin discussed what he feels are the risks of listing a property on the open market. Reffkin called days on market and price history, which typically appear alongside properties listed in the MLS, the “killer of value.” In addition to this, Reffkin also reiterated complaints that the MLS dictates how his firm and his agents can compete for listings through its rules.
“If you don’t want to follow the rules, then leave,” James Dwiggins, the president of NextHome, said of Compass’s complaints. “These demands are essentially a request to free ride — it is only agreeing to participate when it is convenient for them. You don’t get to have your cake and eat it too — it doesn’t work that way. There is no requirement for Compass to be part of the MLS.”
Dwiggins argues that MLS mandatory listing submission rules like Clear Cooperation (CCP) exist to make the MLS a true cooperative.
“Everybody follows the same rules regardless of the size of the organization and the purpose behind that is to provide data and information to the system that drives the American economy,” Dwiggins said.
Like Lamacchia and Freedman, Dwiggins also sees a world where a listing arms race breaks out, which he says may lead to the complete breakdown of the real estate system in the U.S.
“Agents wouldn’t be able to do comps anymore because the MLS infrastructure is gone. Appraisals become a huge problem across the U.S. because, again, the infrastructure is gone and searching for home, which is a very standardized process now, goes away because the system to support it is gone,” Dwiggins said. “This is a very fragile moment in our industry. If the MLS doesn’t get this right, the fragmentation that will occur will be severe and the system will eventually collapse.”
Freedman agrees that the consequences of this will not be good for the industry or consumers.
“They are going to take us back 50 years where information was not accessible to consumers, and they’re using their size to privilege themselves and hurt a free and fair market,” she said.
The duality of sellers and buyers and MLS boards
Dwiggins also noted that while Compass claims that the MLSs are hampering sellers by limiting their marketing choices and putting “negative insights” onto their properties, the vast majority of sellers go on to become homebuyers.
“I think people forget that over 70% of sellers are also buyers and they are going to want to know data like days on market or price history,” Dwiggins said. “You don’t get to be like, ‘Well, I’m hiding that information, but I want to see it from everybody else.’ It doesn’t work that way.”
Brokers also took aim at Reffkin’s claims that MLS boards are made up of Compass’s competitors.
“Many of these MLS boards are made up of real estate professionals from participating brokerages, including Compass and the companies it just acquired through Anywhere,” Freedman said. “All parties entered into the MLS agreements and set the rules in the spirit of a cooperative marketplace that was good for buyers, sellers and agents.”
Dwiggins added that by being members of MLS boards, agents and brokers under the Compass International Holdings umbrella are helping to guide the conversations around the policies Compass and Reffkin are pushing back against.
But is it really the best system?
Not all brokers feel Compass is completely off-base with its demands. While Phillip Cantrell, the broker-owner of Tennessee-based Benchmark Realty believes that the industry “needs the MLS and that market prices are best achieved by the highest exposure in the open market,” he agrees that the MLSs have overstepped by enforcing policies like CCP.
Benchmark Realty operates primarily within the footprint of Realtracs, which despite being Realtor association-owned, is not enforcing mandatory listing submission rules.
“A couple of years ago, the Realtracs board and leadership wisely recognized they are a data company and [policy enforcement] was not an argument they wanted to step into,” Cantrell said. “If these other MLSs would focus strictly on their core business of being a data company, not a rules enforcement arm of the association, this conversation would not exist.”
For Cantrell the MLS’s response to Compass’s demands are not about their desire to keep a level playing field for all MLS participants, but “about maintaining the power broker network of the national, state and local associations.”
“There’s a lot of noise in the industry right now, and at times each side seems to lose sight of why we do what we do – to improve the lives of the consumer,” he said.
For its part, Compass pushed back against these criticism, noting that “all Compass listings are publicly available on our website or by contacting Compass, even if the buyer uses an agent unaffiliated with Compass or no agent at all.”
A spokesperson for the company also told HousingWire that MLS rules “actually force listings to be private. They punish agents for public marketing through public channels that compete with the MLS and the portals.” The spokesperson also refuted the criticisms that this could fragment the market, noting that “people don’t shop for everything in one store,” and that AI is simplifying the search process for many buyers. Additionally, the spokesperson said that “agents should be free to compete on the marketing strategies they offer.”
In response to questions about Compass appearing to prioritize sellers over buyers, the spokesperson noted that “Compass offers sellers more marketing choices, including the option to market their homes without immediately appearing on every real estate website, including those that force sellers to include days on market and public price reductions in their ads.”
“No other seller of a good is forced by private companies to disclose how long the good has been for sale or the price changes,” the spokesperson added.
It remains to be seen if other MLSs will publicly speak out against Compass’s demands and how the firm’s suit against CRMLS will pan out, but if these brokerage leaders are to be believed, mass destruction could be in store for the industry.
