History of the mls – Part 3

The mls was created to protect the seller, not to provide a means of sharing listing information between brokers. As you have seen in The History of Real Estate – Part 2, the brokers already had a loose system of sharing info and cooperating among one another. Some companies were excluded, similar to the “opt out” provision being challenged by the DOJ today. If a local broker was not supervising his agents and the agents were leaving doors unlocked, tracking mud into people’s homes, misrepresenting the house by “puffing” or outright falsehoods, that company was removed from membership. That is why the mls reserves the right to “opt out” by not cooperating with a company doing “bad” things and refusing to be associated with a company that does “bad” things. “Guilt by association” should not be forced on anyone and brokers should have the right to “opt out” and not allow their listings on that “bad” members website. But that’s a whole nuther thread.

The mls, as a system of rules, was created to protect the seller. The mls is a system of RULES, not an inventory of homes. The rules protect sellers because we, strangers, come into their homes with other strangers (buyers). We agree to abide by many, many rules when given the privilege to enter their homes while they are off at work.

The rules also protect the seller from multiple claims to be paid. The seller was happy to have every agent in town bringing buyers, but worried that he might have to pay two agents who both brought “ready, willing and able” buyers to his house. And so the mls was created to prevent the seller from multiple claims to be paid the buyer agent fee. Now of course buyers’ didn’t have agents, this was then (and by some still) called “the co-op” fee. The fee paid by one broker to another. The fee the listing broker pays to the “cooperating office” who brings the buyer.

The mls books were not “the mls”, just as “the mls” is not a system of data. Books were just “inventory” and mostly stale inventory. They were picture books for buyers to look at the same as viewing property on the mls is today. Agents still came in and wrote listings on the chalkboards, as the books weren’t printed quickly enough nor often enough to be the information sharing tool. Agents writing down where new signs were posted and coming in and putting that on the board, was still the key to knowing what was for sale on a day to day basis. Before you assume this is “ancient history”, know that in many markets where multi million dollar homes sell within hours of people knowing about it (often before it hits the mls), this system is still used today. Three years ago in some markets, relying on the mls computer system to find property was useless, as the property had 5 offers by the time it was entered and available to be seen. This is true to some extent today.

The mls system is to provide rules because we are entering peoples homes with strangers in tow. The mls is a system to provide rules because we have keys to lots of people’s homes and need lots of rules in that regard.

Establishing an mls for members only, was a means to control the conduct of agents in peoples homes, as well as a means to determine which agent the listing broker would pay. That took the seller out of the loop and made the listing company responsible for knowing whom to pay. This is called “The Doctrine of Procuring Cause”. When one agent brings an offer, but another agent claims that he was the one working with the buyer all along, the seller does not have to worry. The seller does not have to try to figure out who actually “sold” his house.

The listing broker decides whom to pay “the co-op/Buyer Agent” fee. If an agent disagrees with the listing broker he submits a claim to the mls and the mls has a panel who reviews “the chain of events that led to the eventual sale” and determines who is to be paid. If they determine that it is a different individual than the one who wrote the offer, they take the money from whomever received it and pay it to the broker “deemed to be the procuring cause” of the transaction.

That is why when a buyer looks at property on the internet and then goes to see that property with an agent, they have initiated a “chain of events”. If that buyer then goes directly to the listing agent saying “I don’t have an agent so I want the buyer agent fee taken off the price”, the listing company may still have to pay the agent the buyer used to see property.

Nothing has really changed, Robbie, except that there are people who are becoming members of the mls, without any intention of knowing or abiding by the rules of entering people’s homes, because they think it is a data source. Unfortunately, those non LIBB members have the same access to people’s homes as we do. Maybe they think they can bring all of their friends through a 3 million dollar vacant house, because now they can get the key.

Having non-LIBB members (Legitimate Internet Based Businesses) gaining licenses and mls membership, who have no intention of representing either buyers nor sellers, but having the same access to keys to homes, is nothing to take lightly.

The mls is not a data system, not even close. It is the means by which we enter people’s homes and the rules that control our conduct when in their homes. Common fine for “rule breaking” is $5,000. That includes the rule “not to advertise another broker’s listing without their express permission”, as the seller may not want everyone peeking in his living room on the internet. And only the listing broker knows what restrictions each seller has placed on that information.

What was your question again? Hope I answered it somewhere in these three posts 🙂

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ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: ardelld@gmail.com cell: 206-910-1000

12 thoughts on “History of the mls – Part 3

  1. P.S. One of the mls data entries that we intentionally “hoard” are the security codes into security buildings as well as the security codes for peoples homes. Some data was not intended for public consumption. I know; we’re “selfish” that way. 🙂

  2. Ardell, great posts and great history. This is the kind of information that the MLS just doesn’t tell “the rest of us.” If you’re curious what the MLS is to non-agents, don’t log in next time you go there and see what kind of information you can find.

    I now understand the reasoning behind “blacklisting” certain brokers from listings. The North West MLS (NWMLS) seems to do a good job of keeping these rules in place – as I understand it you can choose to either put data on the internet (where every rube can see it and ask their agent to visit) or not. As I understand it, the Justice Department is not challenging this sort of setup.

    I’ve heard that other MLS systems are a little different, where members can withold listings from selected brokers’ websites, which does little to keep nasty, mud tracking agents out (they can still try to sell the home, right?), but makes it harder for them to do business because their website isn’t as useful. This sort of discrimination seems less in the interest of sellers and more in the interest of established brokers and, as I understand it, this is the type of descrimination the Justice Department is suing over. It’s not like I will only use my agent’s site when I’m looking for a house online. My family uses a local (full service!) agent who does a great job off of the internet, so for internet stuff I would use the great tools put out there by others. I’m all for handing out punishment for those who don’t follow the rules set by the community, but isn’t that what the fines are for? You’ve worked with the MLS here and I’m sure you know a lot about other MLS systems – Is arbitrarily banning selected (usually low-cost) brokers from receiving internet listings really a tool you wish you had or is the NAR going overboard in defending this practice? I’m curious!

    Also, do you ever feel like a pirate when you say NAR? Do you hold the R longer on National Talk Like a Pirate Day (http://www.talklikeapirate.com/)?

  3. LOL. How about WAR (Washington Association of Realtors)? Do you say WAR like a battle or WAR like NAR.

    I’ve been a member of NAR, WAR, PAR, FAR NJAR and CAR. But am not currently a member of NAR or WAR. We’re considering IBA and are members of CBA and NWMLS.

    I will do the DOJ explanation in a new post. As to the NWMLS public site. It is purposely not snazzy so as not to compete with member brokers’ sites. It worked for a long time as most used the Brokers’ sites instead, for the reasons you noted. A public site is a requirement, but spending tons of money to make it better than the broker members’ sites is not required. NWMLS is owned by the brokers, so competing with the broker sites doesn’t make sense.

  4. “The MLS is a system of Rules, not an inventory of homes”

    Ardell, I just wanted to jump in and say thanks for articulating what many people do not grasp. Even agents and brokers fail to realize the significance of the MLS. We all need to do a better job of getting this message out. This is also in direct contrast to MLS wannabees like Redfin that want to reap the benefits of the MLS without any of the responsibility.

  5. Hey Galen, I want your comments on the war with a discounter post. Dustin and Robbie too. Very curious how people who don’t sell real estate view that scenario. Anyone who doesn’t sell real estate out there…how do you feel about using the opt out clause when the “complaint” is the other material on the site.

    What if there were porn pictures all over the site with an mls search tool? Can’t the broker opt out of having his listings and company name show on a porn site? If Redfin can get a license and access, so can a porn site.

  6. I think a great way to start the PR campaign would be to put some links on the NWMLS site that talk about what they do and who they serve. Maybe just a link to these three posts.

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