ChatGPT

ChatGPTs take on commissions, compliance and the MLS

ChatGPTs take on commissions, compliance and the MLS

Cooperation and compensation are important parts of the real estate business. But the idea that they are inextricably tied to one another in the MLS structure, or that the marketplace would not value an MLS without a compensation feature, is short-sighted

RESO CEO Sam DeBord asks the latest in artificial intelligence, OpenAIs ChatGPT, what it thinks about compensation in the MLS. Heres what you should know.

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This post was republished with permission from the author.

Real estate commissions are in the news. Legal challenges have created some uncertainty around the future shape, or even mere existence, of an offer ofcommission sharingfrom a listing agent to a buyers agent in an MLS. This has caused some to question the existential value of an MLS without a compensation component.

Since were talking headlines were going to ask the latest in artificial intelligence, OpenAIs ChatGPT, what it thinks about compensation in the MLS. But lets lay a little bit of foundation first.

I wrote aseries on MLS issues for NARa while back, and the questions remain the same:

Cooperation and compensation have long been touted as the C&C pillars of MLS. But what if cooperation, consistency and compliance were all that were required to create the end goal: an efficient and transparent marketplace for participants and consumers?

If a mandate to offer compensation were not present in the MLS, how would the marketplace react? Consumers still, and increasingly, ask for professionals to guide their transactions. Market forces have already created a vast range of compensation options in our MLSs today. This issue may not be the bogeyman its made out to be.

So lets ask ChatGPT if it understands what the value of an MLS is. Then lets ask whether its value is terminally diminished without compensation offers. (Emphasis in answers is mine. This is standalone ChatGPT, not Plus or Bing/Sydney.)

Query: What is the value of an MLS in real estate?

Answer: The multiple listing service (MLS) is a network that connects real estate agents and brokers, allowing them to share information on property listings and compensation for sales. The MLS serves as a central repository of real estate information, providing agents with access to up-to-date andaccurate dataon homes for sale, including photographs and videos [2].

The value of an MLS in real estate lies in its ability to streamline the home buying and selling process. By providing a single source of comprehensive information, the MLS makes it easier for buyers to find homes that meet their criteria, and for sellers to market their properties to a broad audience of potential buyers. This increases the efficiency of the real estate market, leading tofaster transactionsand moreaccurate pricingof homes [3].

Furthermore, the MLS allows real estate agents to offer a wider range ofservicesto their clients, including access to market data, pricing trends, and property history. This enables agents to provide moreinformed adviceto buyers and sellers, helping them makebetter decisionsabout buying and selling homes [1].

Additionally, the MLS provides a level ofstandardizationacross the real estate industry, ensuring that all agents have access to the same information and are able to offer the same level of service to their clients. This helps to maintain theintegrityof the real estate market, ensuring that all transactions are conductedfairlyandtransparently[5].

In summary, the MLS is a valuable tool in the real estate industry, providing agents and brokers with access to a comprehensive database of property listings, market data, and pricing trends. This increases theefficiencyof the real estate market, facilitates faster transactions, and allows agents to provide more informed adviceto their clients.

Wow: this is apretty fantastic explanation. Weve all seen some wild AI conversations, but this answer oozes nuance and organization of complexity. Maybe it got lucky. It didnt cover every relevant detail and it overstated some. But we have to give it credit for a strong synopsis.

ChatGPT correctly identified more positive outputs and outcomes of MLS than an average observer would:

ChatGPT avoided the mostcommon mistakesthat people make when trying to describe an MLS. An MLS is not:

While those things can be a part of an MLS, none of them are mandatory components, nor do they describe the foundation of an MLS. As opposed to saying the MLS is a database, which one of its sources did (and many industry vets who should know better do), the AI correctly described the MLS as a network providing access to a comprehensive database of property listings. The separation of organization from features is clear in the explanation.

The AI listed sharing ofcompensationinformation as one feature of an MLS, but it didnt imply that this was a critical part of the cooperative. In fact, it focused almost all of its attention on other facets of the MLS.

So what would ChatGPT say if we pinned it down more specifically on compensation?

Query: Does an MLS still have value if there is no commission compensation agreement involved?

Answer: Yes, an MLS still has value even if there is no commission compensation agreement involved. The MLS, or multiple listing service, is essentially an agreement among real estate agents to list each others properties through a cooperative service [1]. The MLS provides a centralized database of properties for sale, allowing real estate agents to quickly and easily access information on available properties and share information with potential buyers. This can be a valuable tool for buyers and sellers even if no commission compensation agreement is involved.

Commission compensation agreements are typically outlined in the buyer-agent or seller-agent agreement. These agreements specify the terms of the agents commission, the duration of the contract, and other details related to the transaction [2]. However, the MLS itself is a separate entity from these agreements and can still provide value to agents, buyers, and sellers even if no commission is involved.

Additionally, the value of the MLS is not limited to commission compensation agreements. The MLS provides a centralized database of properties for sale, making it easier for agents to find properties that meet their clients needs and preferences. It can also provide valuable market data and insights, helping buyers and sellers make informed decisions about pricing and negotiating offers [3].

In summary, an MLS can still have value even if there is no commission compensation agreement involved. The MLS provides a centralized database of properties for sale, market data, and insights that can be useful to agents, buyers, and sellers regardless of commission agreements.

Its clear that ChatGPT has been reading some quality content from some thoughtful authors (to be clear, my articles are not in that list). Human leadership should be this good at giving an MLSs value proposition elevator pitch.

An MLSs value comes from many components of the organization, but the buck stops at compliance. Agreements, activities, information and services all require compliance with a set of predefined rules.

This is the essence of the broker cooperative: not just a place to help other brokers market and sell their listings, but an organization of rules and consequences to guide the actions of its members creating consistency and cooperation.

Consistency in information, services and participant experience is directly reliant upon this conformance. In the way that a nation of laws and enforcement allows for an orderly society, anMLS of rules and compliancemakes the marketplace work.

MLS rules are valuable and many. Few are related to compensation:

TheMLS, found mostly only in North America, is the envy of the world. Fostering an environment that entices competing companies to accept business practice rules and their associated compliance measures is not a small lift.

Real Estate Standards Organization Map of MLSs and Certifications

The tradeoff, though, is a better consumer and professionalmarketplace. The benefits are widely understood, but most countries lack unifying forces like strong Realtor associations to motivate a critical mass of brokers into MLSs. Submitting to rules compliance is a sign that brokerage companies trust in the organizers and the benefits of the marketplace.

Cooperation and compensation are important parts of the real estate business. But the idea that they are inextricably tied to one another in the MLS structure, or that the marketplace would not value an MLS without a compensation feature, is short-sighted.

If compensation details were handled directly between brokerages (a scenario that would bring unfortunate inefficiency to the consumer and professional parties involved), the MLS would still be immensely attractive to brokers seeking comprehensive information and consistent experiences. Consumers would still benefit greatly from the organized marketplace. Compliance, ensuring cooperation, provides a healthy, strong foundation for MLSs no matter the current winds of change.

Sam DeBordis CEO ofReal Estate Standards Organization (RESO). He has served as the National Association of Realtors­ Presidents Liaison for MLS and Data Management, President of Seattle King County Realtors, and Managing Broker for Coldwell Banker Danforth.

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