Compensation lawsuits could 'explode' MLS status quo 

Growth and change are nothing new for Tennessee-based MLS Realtracs, which has been looking to expand its regional footprint for years.

But lawsuits challenging agent compensation — which could diminish the value of the MLS-association relationship — are changing the MLS landscape.

"The definition of an MLS right now is an offer of cooperation and compensation," Realtracs CEO Stuart White told Real Estate News in an interview. "That's getting ready to be exploded."

Rethinking compensation agreements

At the center of the issue are the compensation agreements many MLS providers require agents to sign before using their services. In these agreements, seller's agents must specify an amount of compensation for buyer brokers, and some MLS websites won't allow agents to list their properties unless they agree to those terms.

But things are starting to shift.

Recently, Bright MLS, which serves more than 100,000 subscribers throughout the Mid-Atlantic, announced it was making a small but meaningful change to its listing fields: Seller's agents can now list an amount of $0 for buyer-broker commissions.

And in light of the ongoing commissions lawsuits, some in the industry are calling for policy changes to compel buyer-brokers to sign agreements with their clients at the beginning of their relationship.

White expressed agreement with those sentiments. "Realtracs is exploring all options to help make representation and commissions transparent to consumers," White said, adding that "this effort includes eliminating mandatory offers of compensation through the MLS and supporting state law modifications that would require buyer-broker agreements to be signed as soon as possible."

MLSs could become data marketplaces

To White, the commissions lawsuits represent a turning point for MLS providers on multiple fronts. For starters, White said they could essentially turn MLS websites into data marketplaces like LoopNet in the commercial space or Zillow for residential homes.

"Operating as a data network is much different than operating as a financial commitment between private brokers," White said.

At the same time, the lawsuits could compel MLS providers and local Realtor associations to develop their own data marketplace technology, White added, essentially forcing MLSs and associations to compete over technology.

One challenge, according to White, will be providing a consistent experience to MLS customers, especially considering the number of vendors MLSs often contract with.

"Just dumping a bunch of products on agents and brokers is not an effective way to run a technology platform," White said. "Right now, everyone is exhausted with technology change. It's not just agents and brokers."

Cooperative partnerships key to growth

Finding a more cooperative approach will be especially important to regional MLS providers like Realtracs that rely on partnerships with Realtor associations and brokerages to expand, White said. Realtracs currently covers about 57% of Tennessee and has more than 20,000 subscribers spread out across Alabama, Georgia and the Carolinas, he noted.

In the past, Realtracs tried expanding by partnering with local Realtor associations in Tennessee. When the associations declined, White said the company pivoted and began reaching out to local brokerages. Realtracs has partnered with "hundreds" of brokerages since 2019, said White, although he declined to offer specifics.

Going forward, White said it will be imperative for MLS providers to earn the trust of Realtor associations in nearby markets. That has proven to be more difficult than it seems for Realtracs, White added, because some associations have grown more protective of their territories since the compensation lawsuits were first filed.

"It's all about trust these days," White said.