Forensic auditors are already interviewing shareholders of MLSNI, Chicagoland's largest MLS in a forensic audit.

Meanwhile, membership in competing MAP MLS which until recently mostly had North Shore brokers has suddenly shot up.

A who's who of Chicago-area brokers have interviewed with Realty Times and asked not to have their names published, but they speak of a growing fissure over the business practices of their associations' MLS, MLSNI - the nation's largest MLS, and its subsidiary Multiple Solutions LLC, and an investment in an MLS data repurposing company called REBIG.

In the wake of a forensic audit now being conducted into the affairs of MLSNI and its CEO Jay Huffman, is the underlying question - how should real estate associations create MLSs - to benefit the associations, or the members who supply the MLS data, the brokers? Some associations are already asking this question across the country, as well as another one - should MLSs be in the business of selling broker data for a profit?

On the surface, the question seems innocuous until what's happening in Chicagoland is considered, and the outcome could affect every association-run for-profit MLS in the country.

The MLSNI-REBIG controversy

Associations have long buttressed their revenues by creating for-profit MLSs, which some argue keeps expenses down for all association members, especially if the MLS can find other means of non-dues revenues. That's the genesis of data-repurposing - taking MLS data and reselling it to interested parties. But the flip side, is that no one can serve two masters. Either an MLS is serving association members or it's serving shareholders. It is these naysayers that question if there is any revenue model beyond member dues that doesn't invite conflict of interest.

As Peggy Keyser, CEO, Northwest Chicagoland Realtor Association told Realty Times, "Companies are finding ways to get the data. They were going to get it one way or the other; it's not a bad idea for the Realtors to profit from this."

MLSNI created a wholly-owned subsidiary called Multiple Solutions LLC which was used to fund an MLS data repurposing company called REBIG. MLSNI CEO Jay Huffman happens to be married to REBIG's CEO, Brenda Huffman, and some people have a problem with this relationship plus some of the numbers being thrown around.

While no one Realty Times interviewed will comment, at least until the audit is over, the anecdotal figure is that MLSNI either invested or loaned between one and two million dollars in REBIG, and approximately $350,000 went immediately back into the Huffman household as Brenda Huffman's REBIG CEO salary. Realty Times asked Brenda Huffman about this, and she declined to answer, instead suggesting that shareholders direct their questions to her and to her husband Jay.

"You may direct any shareholder that contacts you, including the shareholder you did not name in your e-mail, to me at either office email address of bsk1@ix.netcom.com or brenda.huffman@rebig.net or to either of my office phone numbers at 630-357-8534 or 630-577-2900. I will be happy to speak with them directly," says Brenda.

Some brokers, such as Doug Ayers, president and COO of Coldwell Banker Residential Brokerage, told Realty Times they strenuously objected to the formation of REBIG and MLSNI's funding of the start-up, asking how REBIG, or an MLS in Italy, or other such ventures are benefiting association members.

REBIG told Realty Times that MLSNI brokers wanted the deal, but there's a question there, too.

To get greater broker participation, MLSNI chose the opt-out method of participation, in which brokers would have to choose to opt-out of having their listing information forwarded to REBIG. By contrast, brokers demanded an opt-in method for participating in MLSNI virtual office Websites (VOWs,) resulting in approximately 33 percent participation, one of the lowest VOW-adoption rates in the nation. By contrast, the REBIG opt-out resulted in a 78.60 percent adoption, according to the company. It seems strange, noted one broker, that the same brokers who didn't opt-in to share their listings with competitors would suddenly share those same listings with third-parties for third-party profit. One person told Realty Times that if all the MLSNI brokers were polled, he doubted if half would know that their information is being given to REBIG.

Ayers voted with his feet. He pulled his North Shore offices out of MLSNI and moved them to MAP MLS.

Large-scale broker defection from MLSNI?

Rumors are rampant that other brokers are following Coldwell out of MLSNI. In fact, said one broker, MAP suddenly has about 22 member new member offices and over half of them aren't North Shore brokers. That blows any theory out of the water that MAP is the MLS of choice for North Shore brokers because now it is full of brokers from every association area in Chicagoland.

Before he could open shop in North Shore's MAP, Ayers had told Realty Times, he had to make sure that MAP systems worked with his company's proprietary software and that agents had to be trained to use the MAP MLS access software which differs slightly from MLSNI's.

It would stand to reason that other brokers defecting from MLSNI would do the same - test their systems for compatibility and get their agents trained on MAP systems. That may be the answer to why other large brokers who are rumored to also be pulling out of MLSNI have stayed quiet. While some thought the other brokers were letting Coldwell twist in the wind, whipped about by its own agents' objections to leaving MLSNI, the other brokers were quietly getting ready.

Steve Baird of Baird and Warner would not comment on whether or not this is true, or on whether he is directing the defection of any offices from MLSNI, but he did say this: "We, as a company, are supportive of what Coldwell is doing. We have the same issues they do with the situation. We are in lock-step from that point of view."

But not all brokers support Coldwell or Baird and Warner.

Said one broker, who insisted on staying off the record, "The underlying issue isn't whether MLS data should be re-packaged and sold. Coldwell Banker didn't pull 10 offices out based on principle. It is the fact that as MLSNI makes money, it reduces fees to agents, it doesn't funnel profits to Brokers. It is my understanding the non-NAR MLS system in Atlanta is a huge profit center for Brokers. That is what the Chicago Brokers, led by Coldwell Banker, would like to see happen in Chicago. They will use any excuse to undermine MLSNI to move in that direction. Unfortunately, MLSNI has made some mistakes and given its detractors ammunition."

That comment brings us full circle to the age old question - who owns the data? The brokers originate the data, but once it is turned over to the MLS, the MLS owns the compilation, and thus is born the clash of interests.

Meanwhile, the North Shore-Barrington Association of Realtors, the shareholder that brought the motion to audit MLSNI and its CEO Jay Huffman forward, has been inexplicably removed from the MLSNI member page.

Terry Penza, CEO of NSBAR, says she didn't request the removal of her board from the shareholder list. "Gary Jensen, Chairman of the Board for the North Shore – Barrington Association and I have been removed from the email list and have not been receiving communications as all the other Shareholders and their representatives. North Shore – Barrington name is now quite obviously off the list of MLSNI.com Shareholders. As we ARE Shareholders and we ask that we be placed on the proper lists immediately."

Editor's note: The NSBAR listing was restored by Monday, April 26, 2004.