Is it time to separate ‘church’ and ‘state’ in organized real estate?

Authored by:
Clint Skutchan
Published:
November 2020

Managing a successful MLS today requires more sophistication and resources than ever before. One of the largest impediments to successfully run MLSs, however, often lies with its parent company, the Realtor association. The $64,000 question is: Has the time come to separate them from each other?

Local Realtor associations have their hands full to adequately and meaningfully support their broker and agent membership with the core services they provide: advocacy, professionalism and education. The National Association of Realtors has worked to address this situation with its Core Standards effort, but the challenge persists, seemingly, for one key reason – many local Realtor associations remain overly tied to the MLSs they own.

These challenges, in fact, have been part of the trend of the increasing number of MLS consolidations and partnerships in recent years. The nation now has 107 regional MLSs, defined as MLSs with multiple association stakeholders or service areas.

Still, many smaller associations who run their own MLSs remain. T3 Sixty research shows that 1,078 of the nation’s local residential Realtor associations, 452 associations run their own local MLS, 58 percent (262) of which are micro MLSs with under 400 subscribers each.

Most of those Realtor associations have an overly dependent business relationship with their MLS, which hinders their ability to focus on refining their core Realtor services, and, on the flip side, their ability to support their MLS subscribers adequately with service, excellent technology and constant innovation.

  3 Realtor Association and MLS Organizational Business Types   TYPE 1: Independent: Two clearly identified entities (Association/MLS) and completely independent organizational and operational structures   TYPE 2: Cooperative: Two clearly identified entities (Association/MLS) with a mix of independent and shared organizational and operational structures   TYPE 3: Dependent: Two entities (Association/MLS) with a single identity and shared organizational and operational structures of various degrees  

Based on T3 Sixty’s in-depth analysis of the organized real estate market, Realtor associations with independent and cooperative relationships with their MLS are better positioned to serve members and consumers, on both the association and MLS sides, and have overall healthier organizations.

Those with dependent relationships with their MLS stand on shakier ground. Realtor associations have valuable roles to play. When they depend on an MLS to define their value proposition and disproportionately fund their operations, it is counterproductive to their core, essential roles.

Why decoupling is advantageous

First, running an MLS in today’s fast-paced and digital world requires an entirely different focus and technical acumen than in past decades. Many local associations, especially smaller ones with limited members or MLS subscribers, need to recognize: They simply do not have the fundamental economics to do what needs to be done.

Secondly, many associations hold their MLS subsidiaries tightly because the relationship provides them with a clear value proposition to their association members. The intertwined association and MLS, however, creates misaligned goals because MLSs tend to dominate the planning, resources, income and day-to-day activities and association membership suffers from a lack of a clear focus on advocacy, professionalism, and education services.

Benefits of decoupling

Segmenting business strategies, finances and management provides clarity and accountability to both associations and MLSs. Realtor associations need to hone their core offerings and improve the businesses of their members and communities they serve.

Association and MLS leaders and staff should be empowered to spend the time and resources necessary to develop their own strategies separately, without hinderance from the other, and then execute each entity’s unique purpose and core competencies with greater clarity and value for those served.

This will likely lead to a reduction in bifurcation of staff duties. Those who are responsible for advocacy are no longer distracted by enforcing MLS rules and addressing system outages or vice versa.

Realtor associations who run MLSs may worry that they will struggle to survive by creating a more independent relationship. In some cases, they may not survive, but the 626 Realtor associations -- 58 percent of the nation’s total – operating as standalone entities demonstrate that associations are viable or even vital beyond MLS.

Takeaway

A strong argument can be made that local Realtor associations dependent on the MLSs they own do not serve the best interests of their members. Making the two organizations more independent – strategically and administratively – has a much higher probability of increasing each entity’s ability to retain and attract members. Failing to do so will likely result in members and consumers being underserved, which decreases the ability of associations and MLSs to determine their own future. Remaining autonomous and providing lesser services to members and subscribers is no longer acceptable in 2020.

Should you wish to explore your options or debate this issue, feel free to reach out to me.

Clint Skutchan (clint@t3sixty.com) Lead of T3 Sixty’s MLS and association division

T3 Sixty – Trusted business advisors and management consultants.

Part of the T3 Sixty family of companies.

© T3 Sixty 2020. Enabling Intelligent Change.

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