California Regionals Breaking Ranks

by Victor Lund on February 10, 2016

February is the month of love, but in the case of California Regional MLSs, it may be the month of divorce. There are regional MLSs in California that are in the midst of breaking up. On the surface, this looks like an asymmetrical strategy relative to the regionalization monster that is devouring MLSs across the nation. wall-arrowPerhaps below the surface, collapsing an existing regional may be the first step to creating a New World Order.

When most regional MLSs were created, Associations of REALTORS® funded the companies. They are for-profit companies on paper, but typically build reserves then run the corporation at a financial break even. There are a few that pay dividends, but not many. More likely, the regional MLS has service center agreements (training, support, rules enforcement) with the Associations or will wholesale services to the Association. Either path provides a vehicle for Associations within a regional to financially benefit from the MLS with the services they offer.

In the two counties in San Francisco’s East Bay, there are three MLS operations that share a contract with Black Knight Financial Services for a shared Paragon system. East Bay Regional Data, Inc. is owned by Oakland/Berkeley Association of REALTORS®, The Delta Association of REALTORS®, and the Alameda Association of REALTORS®.

The three shareholders have reached a tentative agreement to restructure the corporation’s ownership. Oakland/Berkeley will remain the owner of EBRD solely. Alameda and Delta will be free to continue purchasing services from EBRD, to obtain MLS from the other two East Bay MLSs, or shop around. This also gives Alameda and Delta associations the opportunity to consider purchasing services from San Jose based MLSListings, or from Los Angeles based California Regional MLS. CRMLS has entered into a license agreement for a Paragon system from Black Knight, and MLSListings is in negotiations for a Paragon system as well – the same system used by EBRD and the other two MLS operations in the East Bay.

Presumably, the members in Alameda or Delta could switch systems and the subscriber (agents) impact would be minimal. The Associations could also explore other options or contract directly with a vendor. Knowing what we know about pricing, CRMLS and MLSListings options may be the most handsome. Step 1 is to set the Associations free from the Regional. Step 2 is to shop for a better option. Step 3 would be to obtain a data sharing arrangement with the East Bay MLS operations for East Bay listing data so that there would really be choices for Realtors in the Bay Area.

Note that MLSListings and CRMLS are in a full data share, while MLSListings and the other MLSs in Northern California have reciprocal linking arrangements, and some data sharing outside of the MLS platform. MLSListings and CRMLS have given each other permission to distribute combined IDX and VOW data and to use each other’s data in other products, while the Northern California initiative does not allow for that level of data sharing.

More MLS insight

The Associations of REALTORS® in San Diego County are in a shareholder lawsuit. San Diego Association of REALTORS®, the largest Association, wants to have representative control over the other association, Sandicor, but the shareholder agreement gives each Association equal standing. Sandicor currently controls the license of the broker’s data, so SDAR cannot simply take a copy of the shared database and go on their own without the permission of the other Associations.

In similar fashion, there are six Associations of REALTORS® that participate in the Central Coast Regional MLS (CCRMLS). Some of the Associations would like to join the California Regional (CRMLS). Others want to keep it the way things are. CRMLS runs in parallel across some of the Associations in CCRMLS today. Here again, the license to the data is the cornerstone of the discussion.

Remember, regional MLSs operate under the governance of the MLS corporation and, most commonly, each Association of REALTORS® enforces the MLS rules for offers of compensation and disputes following the National and State adopted procedures. There is little issue among the Associations of REALTORS® about rules enforcement. The only issue is the cost of the MLS system, choice of system, and data rights. Note that MLSListings is a full service MLS and administers rules enforcement, billing, training and software development with the owner associations functioning as paid service centers. CRMLS wholesales to associations who may have to administer many of those functions.

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