Decoded: The ‘behind-the-scenes demands’ over Clear Cooperation 

Editor's note: This is the first of a two-part series in which Art Carter, CEO of CRMLS, explains why the nation's largest MLS is embracing the controversial Clear Cooperation Policy despite significant pressure from some brokerages.

The views expressed in this column are solely those of the author.

I believe in facts — in life, and in real estate.

So, let me be upfront: This article is long. But it is full of facts. Facts that I believe most people are not paying enough attention to and truth about my thoughts on the Clear Cooperation Policy.

CRMLS, like most larger MLSs around the country, is under pressure to change our stance regarding the Clear Cooperation Policy, as created by the National Association of Realtors. However, to understand this pressure campaign, the industry deserves to know both about what behind-the-scenes demands have been made and about why CRMLS rejects those demands to stand firmly behind the intent of the policy.

We at California Regional MLS (CRMLS) have carefully considered the pros and cons of the Clear Cooperation Policy (CCP), as created by the National Association of Realtors' (NAR), as the needs of the industry and our users change. To that end, CRMLS wholly supports the CCP because it fosters cooperation, transparency and trust — values we firmly stand behind.

As the debate about Clear Cooperation continues, CRMLS has been asked to:

• Terminate mandatory cooperation by revoking the NAR Clear Cooperation Policy;

• Establish a new status that conceals relevant property information from buyers; and

• Create a private listing network that would withhold available properties from unrepresented consumers, but make those listings only accessible by CRMLS subscribers.

CRMLS rejected each of these demands, and I believe now is the time for us to share our positions and concerns with the real estate industry. The following points outline in detail why CRMLS has denied these requests and why we fully support the MLS's rules on Mandatory Cooperation: 

1. CRMLS is not a listing platform; it is a broker cooperative. As a broker cooperative, CRMLS has the right to develop business practices that support brokers and their clients, including implementing policies, rules, and processes that benefit buyers, buyer agents, sellers, and listing agents. Unlike a listing platform, which functions solely as an advertising tool for sellers, a broker cooperative needs to provide meaningful services to all of its subscribers, their clients and other stakeholders. Allowing certain firms to "free-ride" on the efforts of others is not sustainable. 

2. Sellers who choose to hire a real estate agent and market their property without using the MLS are fully permitted to do so under current CRMLS Rules. Any CRMLS subscriber who enters into a non-exclusive (aka Open) listing agreement with such a seller is not subject to the CCP rules mandating submission of the listing to the MLS for cooperation or dissemination. CRMLS Rule 7.9, Mandatory Submission upon Marketing, applies only to properties that are "subject to any exclusive right to sell or seller reserved listing agreement."

Exclusive listing agreements are critical to protecting the interests of listing firms when a property is placed in the multiple listing service and made available for cooperation with competing brokerage firms. These agreements ensure the listing firm will get paid, even if the listing firm does not directly bring in the eventual buyer. This incentive to share the listing broadly by the listing firm directly benefits the seller.

Outside the MLS, where mandatory cooperation does not apply, sellers receive minimal, to no benefits, from an exclusive listing agreement. In fact, such agreements can be detrimental to the seller, as they give the listing firm complete control over the property's information and access, potentially excluding other brokers who may have qualified buyers. Listing brokerage firms, leveraging their superior knowledge, experience and salesmanship can easily convince sellers to sign an exclusive agreement, guaranteeing the firms top line commission even if the listing firm refuses to cooperate with other brokers or provides minimal or no service in the event of a sale.

Any competent listing agent can effectively use the terms of a non-exclusive listing agreement to meet the needs of a seller who prefers not to have their property widely disseminated through the MLS and its corresponding IDX distribution systems. This approach is particularly relevant for high-value properties, where it is common for showings to require signed non-disclosure agreements (NDA) to ensure privacy and facilitate the exchange of proof of funds between buyers and sellers. NDAs can easily include provisions to protect the listing firm's commission rights by preventing a buyer broker from bypassing the listing firm and negotiating directly with the seller.

3. CRMLS will not be a participant in any agreement, plan, or scheme to intentionally misrepresent or withhold critical information about a property's listing history and number of days it has been available for sale, as these brokers have requested. If showings are permitted for a Coming Soon listing, what would distinguish the Coming Soon status from an Active status? This request would likely result in misrepresentations of the actual number of days it took for a listing agent to sell a property.

In addition, agreeing to this request could subject an MLS to significant liability, as the listing firm's potential misrepresentations could harm buyers who might overpay for properties with inaccurately reported Days on Market (DOM). It could also mislead sellers into hiring listing agents who claim to have shorter average marketing times, by them quoting only the time the property is active in the MLS, as opposed to the actual number of days it took to market and find a buyer for the property. 

4. CRMLS will not support, nor participate in an agreement, plan or scheme to hide available properties that are for sale from potential buyers who choose not to hire a real estate agent, as these brokers have requested. The long-established rules governing the IDX policy were established as part of a settlement agreement reached between NAR and the Department of Justice, which emphasized the importance of ensuring consumers have the same access and knowledge to available property listings as subscribing agents have in the MLS.

Requests made by market-influencing brokers to exclude their properties from IDX feeds, thereby withholding them from unrepresented buyers, could expose CRMLS to potential litigation from consumer advocacy groups and plaintiffs' attorneys. A buyer who decides not to pay the costs or fees associated with hiring a buyer's agent is entitled to full and fair access to every property available for sale, across the same platforms, and websites that are accessible to represented buyers.

CRMLS recognizes the motivation behind a market-impacting brokerage firm seeking to force buyers to find properties exclusively on that broker's own website. Such a strategy would also benefit the brokerage by pressuring buyer agents from competing firms to leave their current brokerages and join the firm controlling the hidden inventory.

However, CRMLS will not implement rules that favor a particular business model at the expense of others, especially when it causes direct harm to potential buyers, as well as sellers whose properties languish on the market longer than necessary. Adopting such rules could subject CRMLS to potentially significant antitrust liability, compromising the principles of fairness and competition that guide our operations.

CRMLS is guided by the principles of fairness, equal access to accurate information, and the spirit of competition between brokerage firms.

Brokers should compete for clients based on the level of their skill, experience, pricing, services and successful results in the representation of buyers and sellers. Buyers, and their agents, should not be forced to join only the largest brokerage firms simply because those firms withhold available properties from the general marketplace. Brokerage firms should have confidence in their skills, abilities and service levels without relying on exclusive control of listings to force others to use their services.

As those in the real estate community evaluate the attacks on Mandatory Cooperation, we should all ask why certain brokerage firms are afraid to compete in an open marketplace where all consumers, and the brokers they choose to hire, have fair and full access to all properties?

5. CRMLS will not establish a Private Listing Network that is only accessible to CRMLS subscribers, as these brokers have requested. Such a system would clearly disadvantage consumers who choose to not work with a real estate agent, as they would have no access to the listed inventory. The only way for these buyers to view available for sale properties would be to hire a CRMLS subscriber real estate agent.

The case of an MLS making rules that force consumers to use a real estate agent to see properties that are for sale will be extensively litigated, and implementing such a policy could expose CRMLS to significant antitrust liability.

Art Carter is the CEO of California Regional MLS (CRMLS), the nation's most recognized multiple listing service, and is committed to creating and maintaining a more equitable real estate industry.