Uncertainty continues to plague the sale of REcolorado, one of the largest MLSs in the country, with a second prospective buyer petitioning for a chance to acquire the MLS as the two REALTOR® associations behind the sale push forward, despite significant misgivings and continued questions about the people behind the unprecedented sale.
A letter obtained by RISMedia, penned by MRI Software—an Ohio-based real estate software company that is owned by a private equity firm—urged the South Metro Denver REALTORS® Association (SMDRA) and the Denver Metro Association of REALTORS® (DMAR) to consider its “competitive” bid to purchase the MLS, claiming a vote will take place on the sale next Monday, July 29.
“We decided to take this action after learning of the potential sale of REcolorado, when it was reported publicly,” the letter states. “Having integrated and worked with REcolorado for many years, we know that REcolorado is a valuable asset to the real estate industry in Colorado. The goal of the proposed acquisition is to secure REcolorado’s future while supporting and improving its MLS and contract platforms.”
Both MRI Software and the original buyer are deeply involved in real estate software. MRI Software is owned by three private equity firms: California-based GI Partners, Boston-based TA Associates and New York-based Harvest Partners—and touts a global user base of over 6 million.
Spokespersons representing REcolorado, SMDRA and DMAR did not immediately respond to requests for comment about the offer by MRI, or to confirm the July 29 sale date.
The new bidder comes at a time when there are still deep misgivings about the sale, with both local real estate practitioners and the industry at large weighing the consequences of having an MLS owned by private, for-profit entities. Many involved in the Colorado real estate market have also criticized how the sale was handled, after the entire REcolorado board (save one member) was summarily fired following a leak of the sale to media.
Bret Weinstein, a broker for Guide Real Estate in the Glendale area who says he is “an innocent bystander,” tells RISMedia that he isn’t necessarily opposed to a sale of REcolorado, but that SMDRA and DMAR have lost the trust of the community at this point.
“In the time when transparency was needed most, this was the least amount of transparency that (SMDRA and DMAR) could have possibly provided,” he says.
Another broker involved with REcolorado, who requested anonymity, told RISMedia that agents are still unhappy. That broker repeated misgivings about the sales process, including that the previous REcolorado board had allegedly never had a chance to make their own offer to purchase the MLS.
Back in late June, following leaks by the now-former REcolorado board members, SMDRA and DMAR acknowledged that they had entered into an agreement to sell the MLS to a “private entity” controlled by a “J Burks”—who RISMedia later revealed was Joseph E. Burks, the president of a local title company who also seemingly has deep connections to the real estate software market.
DMAR, in a statement posted on its website after Burks’ identity was revealed earlier this month, apologized for an “initial lack of communication” regarding the sale, “has been perceived as secrecy” by the broader real estate community.
“We acknowledge that this has led to speculation and theories not based in fact, and we commit to releasing information to our member base as soon as we are able,” the statement read.
According to Weinstein, SMDRA and DMAR have been discussing a potential sale of REcolorado for more than a decade, but failed to make an effort to inform members at large or the public. He again decries the overall lack of transparency, saying the current real estate environment made careful and open communication vital, and noting that controversy will affect how the public perceives real estate practitioners.
Weinstein also notes that a single member of the former REcolorado board—Larry McGee—was named interim CEO without explanation, while others were sent cease and desist letters for talking to the media.
“Yes, this could have been handled extremely differently,” he says.
Many onlookers speculated that the deal was to benefit specific SMDRA or DMAR members, pointing to the fact that the LLC created to purchase REcolorado is registered to the same address as Metro Brokers Elite, a loose private association of independent brokers who share branding and office space. Jay Brown, president of SMDRA, is a Metro Brokers Elite member, while John Park, a director at SMDRA, claims to be a manager of Metro Brokers Elite—and also previously worked with Burks on a software company that contracts with SMDRA.
The associations have not specifically addressed these allegations. In a statement in response to detailed questions from RISMedia, DMAR and SMDRA said that disclosing information about the buyer or sale “has the potential to compromise the company’s competitive edge and, by extension, its service to its customers, trade secrets, market value, and more.
“By strongly adhering to confidentiality agreements going forward, DMAR, SMDRA and MAZL are protecting REcolorado. Information about the sale of REcolorado and its potential new owner will be shared as soon as possible,” the statement said.
In an earlier statement shared publicly, DMAR and SMDRA also “emphatically den(ied) all accusations and rumors suggesting that either the DMAR or SMDRA Board of Directors or leaders have any financial gain to be made from this sale.”
“Proceeds from the sale will be used in accordance with IRS guidelines. The Associations (DMAR and SMDRA) are committed to using proceeds of the sale to enhance member benefits through education, market information, tools and services and advocacy efforts to benefit our members and the Colorado real estate industry as a whole,” the statement said.
A bumpy road
There are more connections and concerns regarding the sale to Burks that have not yet been fully explained. And beyond that looms bigger questions of how to best positions MLSs to succeed against regulatory scrutiny, with DMAR and SMDRA contending that private ownership offers both safety and better services for members.
Weinstein describes Burks as “the founding father” of a company called CTM Software, which he claims has “a fair monopoly” in the region.
In 2019, CTM Software was sold to MRI Software. In an emailed statement to RISMedia, MRI Software said “there is no ongoing relationship with (Burks) and MRI Software.”
In the press release announcing the acquisition, MRI Software claimed that CTM Software has 90% of the marketshare in the state of Colorado.
In its statement to RISMedia, MRI Software also said it is “well versed in data privacy and security, making it a top priority in all of its products and services, including any acquired businesses.”
The other company set up to purchase REcolorado is known as MAZL, LLC. Though SMDRA and DMAR have not directly addressed if there is any other person or entity with an interest or ownership in MAZL, Weinstein says that it is his understanding that Burks is the “sole owner” of the company.
Weinstein also acknowledges that there are concerns specifically with a real estate software vendor controlling a large MLS, who could theoretically limit competition for software services.
But regardless of the owner, taking a MLS out of the hands of a REALTOR® association or broker cooperative, and putting it in the hands of an individual, for-profit entity is going to open up the potential for major issues, Weinstein says.
“What happens when an individual owner feels threatened by certain groups and chooses not to allow them to have an IDX feed? There is no equal access to information,” he says. “For the REALTOR® associations, it’s all about equal access to information…but for an individual owner who’s a private entity, it has to be at some point about money.”
Responding to questions from RISMedia, SMDRA and DMAR noted the company is already a for-profit (though owned by SMDRA and DMAR, which are non-profits). The LLC controlled by Burks “was established to ensure REcolorado continues to be a locally owned and operated MLS focused on serving real estate professionals.”
“REcolorado has always been subscriber-focused, and this commitment will be strengthened under new ownership,” the associations said.
SMDRA and DMAR have focused on how divesting the MLS from REALTOR® associations protects everyone involved from regulatory scrutiny and lawsuits, as commission-focused lawsuits honed in on the close connection and control of MLSs by REALTOR® entities.
“DMAR and SMDRA strongly believe this is the right time to sell the MLS, as the industry continues to advocate decoupling from the REALTOR® Associations that have long owned the MLS. As has been widely reported in industry reports and media coverage, decoupling MLSs and REALTOR® Associations could help protect MLS organizations from ongoing antitrust litigation,” SMDRA and DMAR contended.
Weinstein says he is not convinced by that argument.
“In reality, they’re taking their one asset today and selling it as quickly as possible because that’s the value they have, because of this decision. If they don’t sell today or within the next couple of weeks—they’ve already lost a substantial amount of membership. They’re going to lose a substantial amount more,” he says.
The National Association of REALTORS®’ settlement agreement will still apply to REcolorado under new ownership, Weinstein says, and there is no way that REcolorado can duck the requirements of that settlement just by shifting ownership.
“At some point, it’s a lawsuit,” he says.
SMDRA and DMAR, in their statement to RISMedia, focused on the broader positives of “uncoupling” the MLS and REALTOR® associations. The current trend for the MLS industry, they claimed, is independent ownership “to promote growth and adaptability.”
“This approach allows (MLSs) to effectively develop and integrate solutions without having to create new entities,” the statement read. “By doing so, MLSs can enhance their capabilities within their existing structures to improve efficiency and provide better service offerings for their subscribers and the real estate community they serve. Uncoupling from REALTOR® ownership also gives MLS companies the flexibility to develop market-driven policies that with (sic) the goal of remaining competitive and adapting to the changing needs of the real estate market.”
Weinstein is more open to this argument, noting that MLS tech is often “unbelievably antiquated,” and that so-called “disruptors” are likely able to bring some significant changes that would benefit the real estate community.
“So there is a benefit here for having someone bring in better information, better technology to make it a better experience for the users at the end line,” he says.
Most important, though, is that MLSs—whoever their owner—remain focused on sharing information, Weinstein says. He envisions a scenario that over two or three years, a large number of MLSs will be transferred to private ownership, due both to market and regulator pressures.
Asked by RISMedia how the new owners have shown their commitment prioritizing the interests of the real estate community, including around services and dues, DMAR and SMDRA said they are still negotiating the terms of the sale.
“(The prospective new owners) are including language that will ensure service remains at industry-leading levels, MLS fees stay affordable long term and subscriber data is secured. It is in all of our best interest to make (sure) REcolorado is a strong, affordable MLS with secure data,” DMAR and SMDRA said.
Editor’s note: this story was updated with additional information about MRI Software’s ownership.
