MLSs are changing. So is their relationship with Realtor associations

An organic change

However, Legrand says that Canopy MLS is more of an isolated incident, as, in his view, not as many associations and MLSs are taking such a deliberate approach to separating the two entities. 

“Right now, I am seeing a lot more separation coming organically from MLS mergers,” Legrand said. “Here, the MLS ownership changes to where the association may be just one shareholder of the MLS instead of the sole owner.” 

According to Legrand, there is a lot of momentum in the industry right now to consolidate MLSs. 

“I think there are a variety of reasons for this, whether that’s reducing risk by changing the MLS ownership structure and creating a joint venture between associations, or even just brokers getting tired of paying duplicate membership fees or navigating different rule sets,” Legrand said. “The industry has experienced so much upheaval over the past few years that it really has reset people’s thinking about what’s possible in the MLS and association space.” 

Legrand said one result of this is seeing a greater willingness for associations and MLSs in neighboring geographic areas to have open dialogues regarding their relationships with one another. The industry saw some of these discussions come to fruition earlier this week when Stellar MLS announced it was expanding into Hernando County, Florida, following the merger of shareholder West Pasco Board of Realtors (WPBR) and the Hernando County Association of Realtors (HCAR), resulting in the discontinuation of the former Hernando County single-association MLS. 

In the past, MLS executives said some associations and MLSs could be territorial, preventing moves like this one from happening, but that is clearly changing. 

Emily Girard, the CEO of Austin Board of Realtors (ABoR) and Unlock MLS, agrees that consolidations, like the one between WPBR and HCAR in Florida, have certainly contributed to the evolution in the ownership and management of multiple MLSs over the past year. 

“With consolidation comes questions about the shape of the business, who owns it, how it is owned, how it is governed and who controls  it,” Girard said. “Those are natural questions that come up in any M&A discussion, and I think because we’re having more consolidation discussions across the country, we’re seeing more questions asked around the relationship between the MLS and the association.”

Separation isn’t one size fits all

However, Girard noted for an MLS and association to be separate, doesn’t necessarily mean that they have to be owned or operated by two completely different entities. 

“Sometimes we think about this as all or nothing, but it comes down to the level of control that the parent company or shareholders have and the level of flexibility that they authorize the business to have in terms of how the MLS is run and how it serves the marketplace,” she said. “That can come in a lot of different shapes and sizes regardless of the ownership structure.”

At ABoR and Unlock, Girard said that while they share ownership and corporate leadership, they are very intentional about creating a “dividing line” between the association and the MLS. This includes strong separation of their financials and strategic plans. 

“The goals and strategies associated with each of the businesses are very different and distinct,” she said. “The things that work for an association would not naturally work for an MLS because the very nature of their businesses are different.” 

Girard also noted that while there is a lot of overlap in the make-up of the boards of both entities, ABoR and Unlock MLS are “very intentional” about making sure there are separate meetings and separate decision making for the two. She said this allows them to only wear one “fiduciary hat” at a time, ensuring that they are “focused on the success of that individual respective business.” 

The Canopy MLS case study

While Canopy MLS and Canopy Realtors, like ABoR and Unlock MLS, have one owner, the association and MLS took their separation even further than Girard’s operation. Since 2003, the two Canopy entities have had separate boards of directors and this year, Byrd took over as MLS CEO as longtime CEO  Anne Marie DeCatsye plans to retire at the end of this year, creating further division. 

According to Byrd, this division creates clearer governance, which in turn “creates clearer accountability and allows each board to focus on its own fiduciary responsibilities.”

Like Girard, Byrd believes the separation between MLS and association makes sense due to the different focuses of the entities. 

“On the MLS side, it really is more about delivering products and services and the tools your participants need to service their clients,” Byrd said. “The association side is a lot more political, a lot more about advocacy, about education. Establishing separate CEOs and executive committees further preserves the advantages of the affiliation while ensuring that each organization is governed appropriately for its own mission.”

But Byrd acknowledged that this division did not happen overnight, noting that the governance changes have been “implemented deliberately over several years.” 

As MLSs continue to consolidate and face legal scrutiny it remains to be seen if and how other MLSs and associations will adopt this concept, but industry experts believe the current trends within the industry may lead to more division among associations and MLSs. 

“I think associations and MLSs of all sizes can think about these questions, but they don’t have to go all the way through a full transition if they’re not ready for it or if there are reasons why this isn’t the right move for their marketplace,” Girard said. “But there are ways to continue to separate the businesses without completely turning over the apple cart.”