Will a seven-figure surprise be the offer that Colorado’s second-largest MLS can’t refuse?
REcolorado, the Centennial State’s largest MLS, has made an unsolicited multimillion-dollar offer to buy its neighbor to the north, Information and Real Estate Services (IRES).
If accepted, the deal would add momentum to what appears to be a movement toward MLS consolidation in some areas across the country, including the Mid-Atlantic and California.
For years spirited conversations surrounding consolidation have permeated the industry, and many MLS executives seem to agree that real estate is heading that way. But when it comes to specific mergers, the devil is in the details and 750 or so MLSs nationwide remain.
Kirby Slunaker
REcolorado and IRES declined to disclose terms of the offer, though REcolorado President and CEO Kirby Slunaker told Inman it was in the seven figures — less than $10 million.
“Colorado brokers and agents deserve the power that only comes from true consolidation,” Slunaker told Inman.
“I really think [consolidation] is the best way to remove the artificial boundaries and give brokers and agents better costs and services.”
IRES’s board of managers and representatives from each of the five local Realtor associations that own IRES will meet to discuss REcolorado’s offer on Dec. 19.
Savings and sweeping data
The greatest impact of the acquisition for both MLSs’ brokers and agents would be the ease of doing business across a single geographic area, as well as greater cost efficiency and better data, according to Slunaker.
“Essentially it would put brokers and agents back to being the expert, as opposed to [consumers] having lots of different sources and trying to figure out which one is accurate, which one’s whole and which one isn’t.”
REcolorado made the offer to IRES’s board of directors on Dec. 7. It came with a response deadline for the end of the month, but IRES can request an extension.
“We’re looking at acquiring their business, substantially all of their assets and liabilities, and taking on any of their employees that would like to join us,” Slunaker said.
He declined to say whether the funds were coming from the MLS’s reserves, but said the MLS wasn’t “floating bonds or debt or anything like that” to buy IRES.
‘One marketplace’?
REcolorado is based in the Denver metro area, in Greenwood Village. IRES is based in northern Colorado, in Loveland. Thirty years ago, 20 miles of green grass spanned between metro Denver and northern Colorado — Boulder, in particular — but now it’s all development, Slunaker said.
“[They] have kind of coalesced into one marketplace,” he said.
REcolorado has about 20,000 agent, broker and appraiser subscribers, while IRES has about 6,000.
IRES estimates more than 900 of its members belong to both MLSs. So if the two MLSs were to combine under REcolorado’s roof, about 64 percent of the state’s nearly 39,000 real estate licensees would belong to one MLS.
In terms of market share, REcolorado members currently close about 68 percent of transaction sides in the state while IRES members close about 11 percent, according to Slunaker. So combined, they would claim about 80 percent of Colorado’s market share, he said.
When asked whether the two MLSs are competitors, Slunaker noted that both are for-profit companies overlapping in four of the state’s counties: Boulder, Weld, Broomfield and Gilpin.
“I don’t know that we compete much,” he said. “I suppose the brokers and agents compete to a degree.”
Of Colorado’s 64 counties, REcolorado covers 22, 10 of those through a partnership with the Realtors of Central Colorado, Slunaker said. IRES covers seven counties, three of which REcolorado does not cover: Larimer, Logan and Morgan.
There are 16 MLSs total in the state, according to Slunaker. When asked whether this deal could eventually turn REcolorado into a statewide MLS, Slunaker said, “I don’t know that we’re thinking of it like that. We’re really focusing on the needs of brokers and agents. IRES is a natural [fit] that we know makes sense.”
For instance, he said, the third-largest MLS in the state, Pikes Peak MLS, is about 60 miles to the south in Colorado Springs and “there’s lots of undeveloped land between us.”
IRES’s response
Lauren Hansen
IRES has not decided how it will respond to REcolorado’s offer, which came as a “100 percent” surprise, IRES CEO Lauren Hansen told Inman.
“It’s been a process to digest, since it was unsolicited and unexpected,” Hansen said.
She said it was “too early to tell” what the impact on IRES’s members would be if it is acquired.
“As with any business proposition, IRES will weigh the pros and cons of the offer while maintaining laser focus on what is in the best interest of our customers. IRES supports moving the industry forward to benefit brokers, appraisers and consumers,” IRES said in a blog post.
“There are many models for consolidation and merger surrounding us. A solution and approach that best fits the parties involved while also serving the needs of its constituents is a lofty yet reasonable goal.”
By “moving the industry forward,” IRES means it acknowledges the trend toward MLS consolidation, Hansen said.
But “there are a lot of ways to paint a zebra,” she added.
The National Association of Realtors is working on a merger and consolidations toolkit for MLSs outlining ways they can join forces, according to Hansen.
Data sharing a ‘stop gap’?
IRES and REcolorado already share data so that their members can see one another’s listing information.
In its own blog post, REcolorado’s Slunaker said data sharing provides “a stop-gap measure at best, and at worst has impeded the progress needed to resolve the long-term business needs of brokers and agents.”
Data sharing often requires brokers and agents to follow different sets of rules for each MLS; does not include IDX; does not give agents and brokers the same depth of information that an MLS subscription affords; may require brokerage firms to “map” MLS data fields to use the data; and does not allow agents to use all of the data in comprehensive market reports, REcolorado said.
Hansen disagreed with Slunaker’s characterization of data sharing as a “stop-gap measure.”
“The fact that we have a custom-built system allows us the freedom to integrate it more deeply than a conventional vendor may be able to and as such it has been a resounding success,” Hansen said.
“It certainly isn’t perfect because we don’t have the same fields, so there are certainly some challenges in the data mapping, but what we offer is certainly better than not having it.”
Slunaker said that Bright MLS, a consolidation project involving large MLSs MRIS and TREND, and the nation’s largest MLS, California Regional MLS, came to the same conclusion as REcolorado about data sharing: it ranks inferior to MLS consolidation, in part thanks to duplicate costs, varying rules and regulations and incomplete access to listing data.
The data sharing arrangement between the two Colorado MLSs has also not been without its disagreements.
Moreover, the MLSs’ current agreement omits display capabilities on each other’s public-facing sites. If REcolorado buys IRES, IRES members would benefit from the traffic that REcolorado’s MLS consumer site, REcolorado.com receives, according to Slunaker.
“[REcolorado.com] is a nice alternative, though a smaller alternative, to Zillow, Trulia and realtor.com. We get 8 to 10 times more traffic volume than any other website that’s locally hosted here,” including IRES’s consumer site ColoProperty.com, he said.
Citing comScore figures, he said Zillow gets about 40 percent of real estate consumer traffic in Colorado while REcolorado.com claims about 21 percent, with about 2.4 million unique visitors monthly, the MLS said.
Hansen said IRES has suggested both REcolorado.com and ColoProperty.com be included in each MLS’s listing syndication options for brokers so they can opt-in to distribute listings to both if they desire.
“Just as there are many sites with listings throughout the U.S., we feel there can be multiple sites in Colorado,” she said.
Will brokers and agents save money?
REcolorado’s blog post also indicates that if REcolorado purchased IRES, brokers and agents currently belonging to both will “save money because they will no longer need to pay subscription fees to use separate MLS systems” and all of the MLSs’ members would “receive access to additional products and services at a lower cost.”
Whether IRES’s members would save money is an open question, according to Hansen.
“IRES MLS fees currently include online contracts, a showings module, Cloud CMA, prospect websites for clients and mobile access, which are customarily add-on fees,” she said.
IRES’s dues are $44 a month, according to Hansen. She does not know what REcolorado’s are. Slunaker declined to share that information with Inman.
“[MLS fees] are things you work out in negotiations, and you go from there,” he said.
“It’s awfully early in our discussions here. I can tell you that the benefit of consolidation is much greater cost efficiency.”
He did confirm REcolorado’s “plan and desire” for the MLS to continue using the Matrix MLS system from CoreLogic, as opposed to IRES’s in-house system.
“The market has already spoken what the preferred solution is,” he said. About 23,000 agents and brokers in the state use Matrix, he said, including two other Colorado MLSs.
IRES’s system was recently featured in an “MLS: Homegrown and Happy” blog post from Clareity Consulting detailing the success and benefits of in-house systems.
How have IRES members responded?
Hansen directed Inman to a couple of perspectives from members. Craig Plantz, president and CEO of Resident Realty, shared his opinion in a YouTube video (skip to around 4:25).
Plantz seemed most concerned about how the purchase would limit agents’ choice in MLS and what that would do to costs.
“Once you eliminate that competition between the MLSs, now they’ve got much more control. Our price controls are gone,” Plantz said.
“If I can’t say, ‘Well, I’m going over to IRES because it’s cheaper,’ or ‘I’m going to REcolorado because it’s a better cost situation,’ that creates a problem for me.
“I have to pay whatever they’re asking and there’s no price constraints in place for me.”
Ron Rovtar, broker associate at Cherry Creek Properties, worried that current IRES members would be left with an MLS neglectful of local needs.
“I believe the northern IRES area has little similarity to the Denver metro area. Much of the north area is rural or semi-rural. The cities are smaller, each with a unique character. The idea that a Denver MLS would care enough to spend much time or effort meeting local needs seems quite unlikely,” he said in an email.
On the other hand, IRES has been responsive to member needs with classes and meetings on topics such as the value and drawbacks of real estate portals, he added.
“And it continues to make upgrades that fit the local real estate climate,” Rovtar said.
“I would not expect to see a similar vitality from a Denver operation. The bigger any operation gets, the more sluggish its response times.
“Big operations with little competition become complacent, top heavy, and usually more expensive.”
He guessed that REcolorado was mostly interested in up-and-coming Boulder County, which he said is increasingly becoming an urban center in its own right.
“Selling the IRES MLS now would give REColorado a very fast-growing geographic area at what probably will turn out to be a bargain basement price within just a few years,” Rovtar said.
“In some ways I hate to say it, but, if IRES owners really want to sell, they probably would be wise to open the bidding to other entities, which hopefully would keep the current boundaries intact and, perhaps, encroach a little to the south.”
For his part, REcolorado’s Slunaker said he’s heard a lot from brokers and agents in the Denver area and “every single one has said, ‘It’s past time. Let’s get this done.’ I won’t say we’re 20 years late in doing it, but we probably are as an industry.”
“It’s that old adage: ‘Take care of your customers or somebody else will,’” he added.
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