October 9, 2017

Kalinski: Why you should care about local MLS consolidation

You wouldn’t guess it by surveying your neighborhood on your morning walk, but there’s been a battle raging for territorial supremacy all around you.  This battle (a fair characterization until recently) was being waged by our local real estate multiple listing services and its outcome may affect how you buy and sell real estate.

Fortunately for consumers, this battle has evolved into productive merger discussions, and it looks like a successful merger could bring new and meaningful benefits to the public.

Without dragging you too deep into the mud, a condensed history is necessary to understand the importance of what is coming. In December 2016, REcolorado (the Denver Metro MLS) made an unsolicited, multi-million-dollar offer to purchase IRES (the main Northern Colorado MLS). This incited a contentious debate among IRES constituents and an at-times acrimonious dialogue between IRES and REcolorado. IRES ultimately rejected REcolorado’s offer, and REcolorado cut-off the data-sharing arrangement the two MLSs had benefitted from for years. The two parties, recognizing their unsustainable positions, hired an industry-famous team to mediate a resolution, which attempt was ultimately unsuccessful.  The two groups then hired Chris Osborn, an attorney with Foster Pepper LLC, to rekindle the process. Through Mr. Osborn’s facilitation, and the dedicated work of appointed representatives of IRES and REcolorado, the two groups report making substantial progress toward a merger. While much work remains, a successful merger between the two MLSs could translate to significant benefits for consumers.

Here are some of the biggest benefits consumers could expect from a successful merger of IRES and REcolorado:

1. Greater Listing Accuracy.  Currently, in areas of overlap between IRES and REcolorado, many listing agents input their listings into both MLSs, which is important to ensure that the widest audience sees the home on the market.  The problem, however, is that there are slightly different data fields in each system, and this can cause discrepancies online and confusion in the marketplace.  This issue is compounded by listing portals (think Zillow, et al.) who get their data from a variety of sources, not all of which are accurate.  The result is that consumers can never quite be sure that their source of listing data is accurate. 

If the two MLSs merge, agents will only have to input listing data once, which will cut down on the potential for inaccuracies.  Moreover, the merged MLS will (most likely) have a public-facing website that could act as the authoritative source for listings.

2. Improved Transparency. Right now, each MLS has its own public-facing website, but has the listings inputted only into that system, so neither has all of the listings in areas of overlap. In the absence of a comprehensive MLS source of listings, consumers often turn to listing portals, whose business models depend on selling advertising to agents. As such, it is not always obvious to consumers visiting the listing portals who is the actual listing agent of a property and who is simply paying the portal to have their profile appear next to the listing.

A merged MLS with a strong public-facing website could be an authoritative – and transparent – listing source, so that consumers would know with confidence who is the listing agent and how to contact them with questions (rather than being redirected to an agent who may or may not know anything about the property in question).

3. Faster Innovation & Better Services. MLS consolidation is a strong trend nationally. At the start of 2016, there were approximately 1,200 MLSs in the U.S. That number has now dipped below 700, and experts estimate that this number will drop to 12-15 “super MLSs” in the not too-distant future.  The main drivers of this trend are economies of scale, technological advances and better services, all of which become more achievable through the synergy of consolidation.

A merged Colorado MLS (projected to be the sixth-largest in the country) would have more resources and be more efficient than two separate MLSs. Working as one, the new MLS could focus more capital on delivering the innovation and services that buyers and sellers are demanding (e.g., immersive virtual reality experiences) and do so more quickly than separate MLSs.

Conclusion: A successful merger between IRES and REcolorado, while not a foregone conclusion, could bring new, meaningful benefits to the public. Let’s hope the parties involved have the fortitude to see it through.

Jay Kalinski is broker/owner of Re/Max of Boulder.

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