This is the second part of an x-part series on the question of MLS participants using listing data from MLS to produce AVMs. See the intro post for background. The text below is from a summary our firm prepared for lawyers attending the Council of MLSs legal seminar in Boise, Idaho last fall. Note that it does not reflect a position by CMLS on the matters discussed in it. Rather, it was our effort on CMLS’s behalf to understand the views of NAR policy staff on the matters discussed in it. Note, too, that NAR staff’s position may have evolved since last fall. I still think it’s a helpful overview of the issue and current policy, against which we can contrast current proposals. We are sharing it with CMLS’s permission. It’s long-ish… sorry about that.
Preliminary dialog with NAR staff: Brokers building “analytic tools” with MLS data
Prepared by Larson/Sobotka PLLC on behalf of CMLS September 26, 2013
In August 2013, CMLS legal counsel presented written questions/comments to NAR intended to clarify NAR policy on a matter of interest to MLSs in the U.S. and therefore of interest to the Council of Multiple Listing Services (CMLS). The results are offered here in the form of a dialog, with CMLS’s legal counsel’s comments, questions, etc., in black serif type on the left margin, and NAR policy staff’s responses of August 28, 2013, in blue sans-serif font, indented from the left margin.
CMLS recognizes that any response from NAR is limited in scope to the situations described below and might be different if the assertions characterized below as facts prove to be false.
NAR response: Thank you for the opportunity to comment on your document.
We have several concerns.
First, neither NAR’s Multiple Listing Issues and Policies Committee or Board of Directors has discussed or developed a definition of “analytic tools”. The same is true for other terms you define. That’s not to say you can’t develop definitions for discussion purposes; only that those definitions cannot be presented as NAR’s, or as NAR sanctioned or approved.
Second, the NAR Board of Directors has not established any policy related to “analytic tools”, either with respect to the IDX or the VOW policies or MLS policy generally.
Third, any official expression or interpretation of NAR policy should be published by NAR. Again, that’s not to say you or the CMLS can’t develop or publish opinions, understandings or definitions, only that they should be clearly distinguished as not being NAR’s so MLSs and others who rely on them understand their source. The IDX and the VOW policies, respectively, would be one possible vehicle to establish and communicate any policy expansion or, alternatively limitation that might be established. The IDX and the VOW FAQs would be another.
Fourth, The idea of expressly prohibiting MLS participants from using either an “IDX datafeed” or a “VOW datafeed” to develop valuations of real property for clients or customers is problematic given the information you shared last week (i.e. that most, if not all MLSs do not provide participants with the information they need to develop automated valuations of real property (e.g. appraisals, broker price opinions, comparative market analyses, AVMs, etc.), via any conduit other than an IDX datafeed or a VOW datafeed. An MLS, under NAR’s definition, must enable participants to perform the functions included in that definition of MLS permitted under the scope of their licensure and/or certification as real estate brokers or real estate appraisers, in both a physical setting and in their “virtual “offices”. In your scenario the terms of IDX and/or VOW licensure either could or would mean that participants would be unable to prepare valuations (including but not limited to AVMs). That is not a conclusion that has ever been intended by the Committee or the Board of Directors. Consequently, we cannot offer the opinion that such a result would be consistent with NAR policy.
If the CMLS believes that MLSs should be able to limit use of the data they provide in such a way that participants, either on their own or with the assistance of their vendors, would not be able to provide clients and customers with automated valuations, that would be an issue requiring consideration by the Committee and the Board of Directors, assuming the idea first survives antitrust scrutiny by NAR’s Legal Affairs staff.
- “Analytic tool” means an automated valuation model or other similar tool, provided it can fairly be characterized as a valuation of real property (i.e., appraisal, CMA, BPO, etc.).
- “Data feed” means a bulk data feed from the MLS of all listing data meeting certain broadly defined criteria delivered via ftp, RETS, or some other industry standard format but not formatted for end-use. For the data from a data feed to be useful for brokerage purposes, it must be processed and displayed in an end-user interface. Broadly defined criteria here could include “all active listings except those of brokers opting out of IDX”; all listing data eligible for display in a VOW; etc. For purposes of this document, “data feed” does not include delivery of data within the MLS-provided interface in response to a participant’s query (even though that includes “data” that must be “fed” from the MLS to the end-user).
- “IDX display” means a display with the purpose and subject to the requirements set out in the IDX policies of NAR.
- “MLS-provided interface” means the front-end or end-user interface to the MLS provided by the MLS to participants for their day-to-day use. This includes front-end systems like CoreLogic Matrix, FBS FlexMLS, or LPS Paragon. Such interfaces provide access to all the data and functionality necessary for a broker or agent to list and sell property and for participants in general to perform valuations of real property (including appraisals, CMAs, BPOs, etc.). Note, however, that MLS-provided interfaces do not necessarily provide the means to perform bulk downloads of MLS data, or at least not to the extent required for automated valuations. (Some such systems have download capabilities that are “throttled” in a variety of ways to prevent excessive burden on system servers.)
- “Participant” means a person permitted under state law to engage in brokerage or appraisal who meets the eligibility requirements for participation in MLS and who subscribes to MLS. For sake of simplicity, the term is meant to include “subscribers” affiliated with “participants” as NAR policy uses those terms and to exclude non-licensed administrative staff acting as employees or contractors of the brokerage or appraisal firm.
- “VOW” means a “VOW” as defined in NAR policy, operated at all times subject to the requirements adopted in the MLS’s rules relating to VOWs.
Each of these questions assumes that terms with definitions above are used with the meanings given above. Assumptions upon which a question relies are listed immediately below it.
Under NAR policies and the rules of NAR-affiliated MLSs, may a participant use MLS data legitimately in his/her possession to deliver analytic tools to the participant’s clients or customers or both? We understand the answer to be “yes.”
NAR response: Agreed.
Can a participant obtain assistance from a third-party technology provider to perform the activities described in the previous question? We understand the answer to be “yes.”
NAR response: Agreed.
Assumption: Some MLSs have a requirement that brokers sharing listing data with third party technology providers who are assisting participants in their businesses must have the third party sign a confidentiality or license agreement with the participant or the MLS or both. Assume here that the participant and third party have satisfied this requirement if it exists.
Is an MLS required to provide a data feed to a participant that intends to perform the activities described in either of the previous two questions? We understand the answer to be “no.”
- MLS provides IDX and VOW data feeds as required by NAR policy. (See 2013 NAR Handbook on Multiple Listing Policy, pp. 23 & 42). But MLS does so subject to a license agreement that restricts those data feeds for use solely for IDX, VOW, or both (depending on the terms of the MLS’s license agreement).
- The participant is not providing the services in question via a display that meets the requirements of the IDX or VOW policies of the MLS.
- MLS does not impede the use by participant of a VOW data feed to perform the activities in the previous two questions in the context of a VOW that meets all MLS’s requirements for VOWs.
- The participant has access to the MLS-provided interface for purposes of performing brokerage and property valuation services.
NAR response: The scenario you have constructed, and explained during our telephone conversation (i.e. that automated valuations of the type under discussion cannot be created using the data feed or access to information that participants and subscribers use to conduct their day-to-day brokerage activities in their physical offices and using channels, mechanisms or tools other than VOWs and IDX displays), results (as we understood your explanation of how many if not all MLSs operate) in participants not being able to performs certain types of valuations that they would otherwise be able to perform under their real estate license and status as MLS participants or subscribers. This is not a result contemplated under the existing definition of MLS. Hence, what you suggest would need to be considered by the Committee before we could provide a definitive answer.
If an MLS chooses to provide a data license to participants and their third-party contractors for purposes of facilitating participant deployment of services described in the first two questions, may it impose reasonable restrictions in the license agreement? We understand the answer to be “yes.”
- The MLS does not impose any new requirement on VOWs or IDX displays.
- The restrictions imposed by MLS are a subset of the restrictions contained in the existing IDX and VOW rules that would be applicable in these circumstances: for example, the requirement that subscriber notify the MLS when it begins delivering the service; the requirement that the participant allow the MLS and other participants to have access to the service for purposes of monitoring it; etc.
- The data license permits the participant to use the data feed only for purposes of creating analytic tools (as defined above). Any further use would be beyond the scope of the license and be a breach of the license agreement.
- The MLS would charge a reasonable fee for this data feed.
NAR response: There is no reason why the restrictions you spell out above couldn’t be included in such a license agreement. Other restrictions would need to be considered in light of whether they preclude participants from engaging in otherwise permissible activities.
[We noted an additional assumption, to which NAR did not respond.]
- If the MLS learned that a participant was using the data for a purpose not associated with the definition of MLS, it would either (a) require the participant to stop or (b) filter from the applicable data feed the listings of brokers who opted out of this data use after notice from the MLS.
Assuming the answer to the previous question is “yes,” under similar circumstances could an MLS impose restrictions in the license agreement other than those associated with IDX and VOWs, so long as the restrictions are reasonably related to protecting the MLS data from unauthorized use? We have not previously discussed this, but we would expect the answer to be “yes.”
Assumptions same as the previous question, except for the second.
NAR response: The answer is likely yes but, as noted above, additional restrictions would need to be considered in light of whether they preclude participants from engaging in otherwise permissible activities.
So, what’s your view on the questions we asked NAR and NAR’s responses?
Note/reminder: Our firm has previously represented The Realty Alliance, though not in matters related to MLSs. We currently represent the Council of MLSs, but these posts do not necessarily represent the position of CMLS or any of its members. Our MLS clients have a variety of views on this subject, all of which appear to us to be supported by rational arguments. Finally, we also represent a few of the larger brokers in the U.S., some of whom are members of TRA; again, we don’t represent them with regard to their relations with MLSs. I have not consulted them regarding their views on this issue, and I therefore have no idea what their views on it are.