These MLSs could be on the hook for $34 million
The 30 broker-owned or hybrid MLSs not covered by NAR’s settlement agreement must decide whether to pay into a settlement fund, request mediation, or fight on.
Key points:
- The proposed settlement option for MLSs would require them to pay $100 per subscriber into a settlement fund.
- For the largest MLS organizations, the settlement amount could exceed $5 million.
- MLSs are also looking at how they need to update their platforms to comply with the rule changes outlined in NAR’s agreement.
As multiple listing services consider how rule changes mandated by NAR's recent settlement will affect their businesses, some are also facing an important decision about how to proceed.
The Mar. 15 settlement agreement between the National Association of Realtors and home sellers covers most MLSs — but not all of them.
About 30 organizations — MLSs not wholly owned by a Realtor association — are left out of the deal. NAR's agreement includes a streamlined process for settlement, should those MLSs choose to take advantage of it.
They can either put money into a fund to the tune of $100 for every subscriber — so, for a 1,000-member MLS, that's $100,000 — or request mediation and negotiate a different settlement amount.
The MLSs facing this choice include 20 broker-owned and 10 hybrid MLSs, based on T3 Sixty's Real Estate Almanac. (Note: T3 Sixty and Real Estate News share a founder, Stefan Swanepoel.)
The biggest broker-owned MLS is First MLS in Georgia, with 57,472 members, according to T3 data. MLS Property Information Network (PIN) comes in at No. 2 with 44,600 subscribers. The Massachusetts-based MLS was one of the original defendants in the Nosalek commissions case and reached a $3 million settlement last summer — a deal that could be in jeopardy following the NAR settlement announcement.
Northwest MLS in Washington State is next at 33,121 members, followed by SmartMLS in Connecticut (21,324 members) and Central Jersey MLS in New Jersey (10,448 members).
The largest hybrid MLSs are Midwest Real Estate Data (MRED) in Illinois, with 47,638 members; Garden State MLS in New Jersey (26,854 members); and MetroList MLS in California (21,660 members).
Settlement costs could exceed $34 million
In total, broker-owned and hybrid MLSs support more than 340,000 subscribers, representing about 18% of national subscribers, said Clint Skutchan, senior vice president of organized real estate at T3 Sixty. If all of those MLSs opted to settle using the formula outlined in NAR's agreement, they would contribute a combined sum of more than $34 million to the settlement fund.
But will they go that route? Skutchan said it's too early to tell, but felt confident that these organizations are doing their due diligence as they weigh options.
For now, there's plenty for this group of MLSs to digest and consider as they await preliminary settlement approval — which is when the clock will start ticking.
After preliminary approval, the multiple listing services not covered under NAR's deal will have 120 days to pay up through the streamlined settlement pathway, or 110 days to enter into mediation if they have a "good faith belief" that they are unable to pay the designated amount.
The two biggest broker-owned MLSs, MLS PIN and Northwest MLS, declined to comment while they continue to review the court documents.
Looking beyond settlements
Deciding whether to settle or pursue other options is just one of the tasks ahead for these MLSs. The organizations — along with the covered MLSs — will need to implement rule changes mandated by NAR's agreement, most notably eliminating the offer of compensation field, within 150 days.
Skutchan said many of these organizations would like to start making changes now, but nothing has been finalized, and there is still the possibility that the U.S. Department of Justice will have more to say about changes to the compensation system.
"They're trying to be proactive, but they also don't want to be so proactive that they have to undo the work that was done in order to stay in front of [the rule changes]," Skutchan said.
Beyond the changes MLSs will need to make to their platforms, broader, industry-side changes are likely, Skutchan said. Many MLS organizations could see subscriber counts decline, which could lead to further consolidation or mergers.
"We'll know better in a couple of months on this, but there's been momentum built up around at least thinking about or engaging in conversations of consolidation," Skutchan said.
Correction: An earlier version of this story listed First MLS as a hybrid MLS. It is a broker-owned MLS.