(This is Part 2 in a four-part series. I started with some definitions to get us on the same page; in this post I’ll look at NAR policy on the issue (for those MLSs that are bound by it); next, I’ll provide some of the arguments for and against making services ‘core’; last, I’ll touch on the legal dimension (but only briefly).
Most MLSs are affiliated with NAR. If yours is not, you can skip this post. If your MLS is NAR-affiliated, it is bound by NAR’s statement of multiple listing policy 7.57, which divides MLS services into three categories – core, basic, and optional – and provides guidelines about which services can be in which category. As a practical matter, though, this policy section appears to have little effect because in almost every case either (a) it is vague enough to permit almost any choices MLSs make or (b) MLSs really don’t pay all that much attention to it.
Here are NAR’s definitions. (All references here to NAR policy are to NAR’s Handbook on Multiple Listing Policy, 2009 ed. Link requires password to access.)
“Core: Core MLS information, services, and products are essential to the effective functioning of MLS, as defined.”
NAR says this boils down to current listing information and information communicating compensation to potential cooperating brokers.
“Basic: In addition to core services, an MLS may also provide additional information and services in a basic package of MLS information, services, and products, as determined locally and provided automatically or on a discretionary basis.”
Among the ‘basic’ services NAR expressly says that MLS’s may offer are sold and comparable information; pending sales information; expired listings and “off market” information; tax records; zoning records/information; title/abstract information; mortgage information; amortization schedules; mapping capabilities; statistical information; public accommodation information (e.g., schools, shopping, transportation, entertainment, recreational facilities, etc.); MLS computer training/orientation; and access to affinity programs.
“Optional: An MLS may not require a participant to use, participate in, or pay for the following optional information, services, or products: lock box equipment including lock boxes (manual or electronic), combination lock boxes, mechanical keys, and electronic programmers or keycards; advertising or access to advertising (whether print or electronic), including classified advertising, homes-type publications, electronic compilations, including Internet home pages or websites, etc.”
There is a great chasm between the examples NAR offers for ‘basic’ and ‘optional’ services; one in which many MLS services exist. Consider online contract forms that populate with MLS data; online showing scheduling utilities integrated with the MLS system; open house databases; and automated transaction management applications. Each of these is arguably similar both to the example ‘basic’ services and to the example ‘optional’ services.
The following paragraph opens this chasm a little further:
None of the foregoing precludes an… MLS from utilizing… MLS reserves, dues, or fees or special assessments… to acquire assets (including hardware and software) necessary to make optional information, services, or products available, nor does it preclude an… MLS from making nominal administrative expenditures out of such funds to initiate or maintain such optional services.
NAR’s definition of ‘basic’ services permits the basic package of services to be ‘determined locally,’ and the definition of ‘optional services’ just specifies two services that cannot be made ‘basic’ or ‘core,’ namely lock boxes and advertising; I interpret them together to mean that an MLS can make any service ‘basic’ except the two enumerated ‘optional’ ones. As for the two enumerated optional services, many MLSs heavily subsidize electronic lockbox systems and advertising (in the form of MLS public-facing web sites); I presume those efforts take the form of capital investment and ‘nominal administrative expenditures.’
Consequently, though Statement 7.57 technically binds NAR-affiliated MLSs, it appears to have little impact on their practices.
Note: I think NAR could premise a denial of umbrella insurance coverage to an MLS on this argument:
- Your MLS is offering a service as ‘core’ (‘basic’ in NAR’s terminology) which it should not, and thus it is violating Statement 7.57.
- Your MLS is being sued because of some alleged error or omission with regard to that service.
- Thus, NAR is not required to extend coverage to you for that suit.
I’ve never heard of it happening, but my mom always says there’s a first time for everything.
Next: Advantages and disadvantages of making services core and optional
-Brian