Broker Opt Out

by Victor Lund on June 17, 2011

Broker Opt Out Button

Broker Opt Out Buttton

The practice of MLS data licensing gives rise to new questions in our industry. The question before us today is: What does Broker Opt-Out mean?

WAV Group reached out to a variety of respected industry executives to get an answer to this question. None were able to cite a rule or a legal case that outlined a definition. Moreover, none were able to produce a definition in their MLS rules and regulations.

As such, our industry faces a new opportunity. MLSs may define Broker Opt-out and Broker Opt-in as it relates to data licensing as we have done with IDX. Now may be the time for this effort.

Brian Larson of Larson Sobotka opined the best outline of an answer to the question. I can only summarize Larson’s comments as my recollection of our phone conversation. He may correct me.

Larson suggests that the listing record is attributable to the listing broker only.

This is an important distinction. It indicates that the buyer’s broker has no option in broker opt-out for the purposes of data licensing. Broker opt-out is only the choice of the listing broker who managed the data in the MLS.

This is not necessarily an intuitive position. The buyer’s broker may argue that their representation of the buyer caused the transactional event that created the selling price.

Larson and others point out that the listing broker is the responsible party for reporting the sale to the MLS, perfecting all points of the data entry. As such, the buyer’s broker may have played a role in the transaction, but not in the creation of the MLS data.

It seems clear that a data licensing program that has a broker opt out component means that all active, pending, and off market MLS data is available for license unless a listing broker opts-out. If a listing broker opts-out, none of that broker’s active, pending or off market data may be licensed.

Broker opt-in would follow a similar path, in reverse. If data licensing is offered as a broker opt-in program, then no data is licensed unless one or more listing brokers opts-in their active, pending, and off market data into the license pool.

I highlighted the word “their” in the last paragraph. It is worth taking a moment to discuss the understanding of who owns the data. In the MLS universe, there are various ways to defining ownership of data, but copyright law is the standard. In common practice, the listing broker owns the copyright to the broker’s individual listing information, but the MLS owns the copyright to the compilation (all listings in the MLS combined). In some cases, even the compilation copyright is shared 50-50 with the listing broker.

I raise this factor because it is relevant to the decision on making a data license program opt-in or opt out. These programs have choices, and it is usually the MLS board of directors who decide how to offer the program.

If your MLS takes a conservative approach to data licensing, all activities whereby the MLS provides data to third parties would be broker opt-in. This conservative approach passes the burden to the licensee to convince the brokers that their offering is important enough to participate in.

In some cases, the MLS directors may believe that broker opt-in is not a productive pursuit for the specific use of the data. For example, if the goal is to provide comprehensive data for use by the entire MLS brokerage community.  A product like Market Analytics requires  a significant portion of the MLS compilation to work. In these cases, the MLS directors may authorize the use of the data to a third party, but allow individual brokers to opt-out of having their active, pending, and historical listings excluded from the data set.

By virtue of their copyright, the MLS board of directors has the authority to license MLS data to third parties. In doing so, they must decide if they are going to offer the data license as an opt-in program or an opt-out program. Having clear MLS policies and definitions in place will help MLS directors make better decisions. These policies will also help brokers know their options and inform better decisions about including or excluding their data. This is a great agenda item for your next board meeting.

Another curious question related to broker opt-in/opt-out is confidentiality. Is the broker’s choice to opt-in or opt-out a matter of confidentiality between the broker and the MLS? Should the MLS be allowed to share who opted in or out with a third party or other vendor without the brokers’ consent?

If you have a divergent or concurring opinion on this article, or would like to add a consideration to the topic, feel free to leave a comment below, send me an email, or call.

{ 2 comments… read them below or add one }

blarsonmpls June 19, 2011 at 4:32 pm

Victor:
Interesting post. The copyright issues are a bit more complicated than you’ve described them (though I think what you said is a good first approximation). Elizabeth Sobotka in our firm did a couple posts on the copyright ownership issues in 2010, the most relevant appearing here. I recommend it for anyone interested in the nitty-gritty.

As for the requirement to allow listing brokers to opt-out, that really comes from NAR policy (for most MLSs). It applies only to uses that are not the core purposes of MLS, and the MLS does not need to do much to satisfy the policy’s requirements. (The NAR policy defines “core uses” poorly, and it allows MLS a lot of leeway in handling the opt-out issue.) Of course, many of our MLS clients go further than NAR policy requires, out of respect for the listing brokerage’s interest in its own listings. But NAR policy and copyright law do not require much…

-Brian Larson

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Victor Lund June 19, 2011 at 7:53 pm

Thanks Brian,

Now your comment begs another question – can you point me to the language that NAR uses to identify Core Services?

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