Creating Multiple Listing Service: Pre-emptive strike or just first step?

Members of a real estate task force said they have been working since January to create a Multiple Listing Service and were shocked when they learned of an effort by three brokerage firms to create an MLS of their own.

"To say the industry was surprised is an understatement," said Kent Swig, a task force member and co-chairman of Brown Harris Stevens LLC Group. "They're trying to do an end-run around us."

Members said the Manhattan MLS Joint Task Force, which includes, representatives from 45 residential real estate brokerage firms, has been meeting since the beginning of year to create an MLS. It is intended to be an expansion of a computerized system called the Listing Exchange, or LEX, that is currently being used in the industry.

A few weeks ago, The Corcoran Group, Douglas Elliman, and Halstead Property Company announced plans to create an MLS that the companies plan to be operational by Jan. 1, 2001.

Shari Goodstein, Executive Director of Goodstein Equities Inc. and LEX chairwoman, said representatives from The Corcoran Group and Douglas Elliman serve on the LEX board and were aware of the task force's MLS initiative but never mentioned their companies' MLS plans. In fact, the two companies had argued against the industry creating an MLS.

"They may not even have been aware of what the executives of their organization were doing," Goodstein said.

Pamela Liebman, President and Chief Executive Officer of The Corcoran Group, said the three companies decided to put competition aside and join forces to create an MLS because they thought it would help facilitate the process.

The three companies sent a letter Aug. 10 to brokerage firms explaining the initiative.

"Given the revolutionary nature of this announcement, and the surprise surrounding it, a great deal of misinformation has been propagated with regard to our intentions," the letter states. "First and foremost, we want you to know that it has always been our intention to create an all-inclusive venture and to ask each and every member of the New York brokerage community to join us in becoming members of the MLS."

Douglas Elliman and The Corcoran Group have provided $2 million in funding for the project, but The Halstead Property Group had signed on as a founding member of the initiative, the companies announced.

Liebman said the three firms contacted many other firms prior to the announcement to seek support for their initiative.

"I think they expected a lot of firms to jump on their bandwagon without understanding their vision first," said task force member Michele Kleier, President of Gumley Haft Kleier Inc.

Multiple listing systems are used throughout the country and are beneficial to buyers, who have access to the maximum number of listings, and sellers, who are assured the maximum number of customers. Although brokers in New York City share some information, through a practice called "co-brokering," the brokerage community has shown an historic reluctance to implementing an MLS.

When an MLS is established, a charter delineating rules and regulations of the service is generally put into place. Ownership of the MLS is also established prior to initiation of the service. Charter and ownership play an important role in decision-making regarding the MLS.

Task force members have called the Corcoran Group and Douglas Elliman initiative "exclusionary and divisive," in part because they claim the two firms will own and control the largest portion of the service. Under the task force initiative, the service will be non-profit with each firm owning an equal portion of the MLS, members said.

"We expect Elliman and Corcoran to understand the barriers to cooperation their model will create, and we invite them to join our industry group to create a system based on our cooperative model," said Barbara Fox, president of Fox Residential Group.

Liebman denied claims that The Corcoran Group and Douglas Elliman will own the largest share of the MLS under their initiative, saying the charter has not been written and decisions regarding ownership have not been made. The letter states "we expect that the MLS will function as a co-op, with its members owning a component of the parent company," but no further details regarding ownership are given.

"The speed of execution with a small founding group was necessary. Our industry in New York has always operated as a collection of independently owned and operated organizations who compete mightily for clients," the letter states.

The Real Estate Board of New York is staying above the controversy.

"REBNY is prepared to work with all its members in the best interest of the entire residential brokerage community and the consumers they serve," said REBNY President Steven Spinola.

Marilyn Harra Kaye, President of The Prudential MLBKaye International Realty, pointed out that privately owned MLS initiatives started in other parts of the country have proved unsuccessful.

"The consumer will end up paying more," Kaye said.

MLS Joint Task Force committees have been researching topics, such as technology, operations, and charter issues, related to establishing the MLS. The task force is targeting the first quarter of 2001 for implementation of the service.

Among firms in the MLS Task Force are Ashforth Warburg Associates, Charles H. Greenthal & Co., Coldwell Banker Hunt Kennedy, Feathered Nest, Goodstein Equities, The Sunshine Group, and William B. May. Members say the list continues to grow.

Under the task force initiative, the new MLS will operate in a similar fashion as the listing exchange but will incorporate better technology to maximize efficiency, members said.

With much of the seed work already completed, creation of MLS should proceed smoothly, members said.

"We're not reinventing the wheel," said Kathryn Korte, Senior Vice President of Sotheby's International Realty and a task force member.

Despite the controversy, Liebman said she believes the industry can create one united MLS.

"We all have the same ideas about setting up one MLS for the industry," she said. "I believe at the end of the day, these two efforts will be folded together."