REcolorado's messy sale eroded trust between Denver real estate agents and leaders

When MRI Software officials first learned REcolorado was going to be sold, they knew they had to act fast before the sale was finalized.

The Ohio-based real estate technology company announced this week it was interested in buying REcolorado, the state’s largest multiple listing service (MLS) where most homes on sale in Colorado are put on the market to be distributed to websites such as Zillow and Redfin.

It's the destination where more than 75% of residential sales in the state happen.

“There wasn't a lot of time to sit around and think. We wanted to act by providing an alternative solution for the future and the well-being and the security of REcolorado," Zach Garfias, senior director at MRI Software and former owner of Denver-based startup eGent, told The Denver Gazette.

Nearly two days after the company put in its "competitive" offer, it has yet to hear back from the MLS’s current owners, Garfias said.

By Friday afternoon, he said, the company put in another offer at a "considerably higher price."

REcolorado is currently owned by the Denver Metro Association of Realtors (DMAR) and the South Metro Denver Realtor Association (SMDRA) — membership-based organizations representing local real estate agents.

The owners are in the process of selling the MLS to a local investor tied to a title company.

But the sale remains mired in controversy.

The associations fired the entire board of REcolorado over speaking out against the deal and surprised its own members that it would sell one of its largest assets. Some real estate agents said the mess has left them questioning what’s next for the local real estate industry and wondered if the organization paid to advocate for its members is no longer representing their interests.

REcolorado's owners did not respond to The Denver Gazette’s request for an interview.

In a previous statement, DMAR said it received an unsolicited offer from MRI, but couldn't say anything else because of legal agreements.

Like a house under contract, DMAR and SMDRA may not be allowed to entertain other offers.

But they can still look before the sale closes, Garfias said.

Association leaders may have final say, Garfias explained, but MRI Software hopes the offer lets frustrated agents who are represented by the association know that there may be another choice available ahead of a key meeting next week to determine the MLS's future.

And those agents might be able to pressure their own board.

A messy process

On Monday morning, DMAR and SMDRA members are scheduled to meet with their associations for a vote on changes to each organization’s bylaws — including at least one directly impacting the sale.

It will be the main forum for members to hear from and discuss with the association’s leadership about REcolorado’s future.

DMAR represents more than 8,000 real estate agents and is the largest organization of its kind in the state. SMDRA, the second-largest, represents more than 5,300 Realtors.

An hour after DMAR’s meeting is scheduled to end, SMDRA’s members will meet.

The public controversy began nearly a month ago as the associations honed in on a buyer for REcolorado.

The primary shareholders began exploring selling the MLS to “decouple” itself from the platform after a federal court made a landmark ruling about commission fees causing uncertainty across the industry nationwide.

​​While anyone can search for homes on places like Zillow, Realtors who have access to REcolorado said they use the platform as their toolbox for drafting contracts, looking up the history of properties or setting up showings. It also used to show Realtors what sales commission fees may be.

The leadership of REcolorado was interested in buying itself from its owners, but were caught off guard as the associations strongly considered a private investor's offer.

REcolorado’s leaders leaked the news to real estate industry publications and put out a statement on its website on June 26 saying a sale to a private equity firm would cause more uncertainty for agents.

“We disagree with their approach and are dedicated to keeping REcolorado a broker-focused business partner and will continue to pursue all options to make certain your MLS remains a locally owned organization that is operated in your and your clients’ best interest,” the statement said.

The public outcry led the associations to fire the entire board of REcolorado for breaking confidentiality agreements and placed its own executive members in charge, DMAR and SMDRA announced July 1.

The former board’s statement has been deleted from REcolorado’s website.

DMAR and SMDRA also announced an agreement to sell REcolorado to MAZL, LLC., a newly-incorporated company created for the acquisition. Officials did not disclose what the deal was worth.

The association clarified it wasn’t selling to a private equity firm, but rather a private investor named “J. Burks,” who ran the company.

The announcement rang alarm bells for local agents.

The vague naming of the buyer sparked concern among agents over who might want the vast amount of data on the MLS. Then there was the firing of the board, a potential sign that opposition to the deal is being silenced.

DMAR’s and SMDRA’s Facebook comments were flooded with angry agents demanding more transparency.

One post said they felt “sold out” by their association.

Another questioned why a deal affecting all its members was so “hush hush.”

Then some agents noticed their critical posts were deleted over “anti-trust” violations. After asking why their discussions were being silenced, SMDRA commented it was because the anti-trust policy includes no “bashing/badmouthing.”

Those members said they felt like they too were being censored like REcolorado’s board.

The lack of transparency eroded trust among some Realtors over the sale of the country’s 16th largest MLS. It could also be the first sale of its kind in the country, following the national settlement case.

“People are looking for stability,” said Bret Weinstein, broker and founder of Guide Real Estate in Glendale. “And it's just gone.”

Weinstein said he can’t predict if the sale to an investor would be a good or bad decision, but it's the lack of transparency concerning Realtors like himself.

“What I can tell you is that in an already rocky foundation, the supports just got removed completely from any credibility,” he said.

Who’s the potential buyer?

Rumors began swirling around who could be “J. Burks” behind MAZL.

After industry publication RISMedia reported an Englewood-based equity title firm executive Joseph E. Burks may be the buyer and that MAZL’s address matched several of DMAR’s and SMDRA’s leadership, Realtors questioned the motives of the associations' boards.

On July 8, the associations confirmed in a letter to members that the potential buyer was Joseph E. Burks and apologized for its previously vague statements citing legal discretion.

It denied any rumors that board members will get any financial gain from the sale.

“We understand that the initial lack of communication about the pending sale of REcolorado, MAZL and Joseph E. Burks specifically has been perceived as secrecy and has been an ongoing source of frustration this past week,” DMAR and SMDRA posted on July 8.

Burks did not respond to a request for comment.

Burks is the executive vice president of Equity Title, a real estate title company based in Englewood.

The associations said selling to MAZL would “leverage their expertise and resources to enhance the services and technological advancements available to our members.”

Equity Title operates a phone app “Equity Mobile” that allows users to search properties on a map and calculate closing, title and escrow costs. It also has a stake in REshare, a contract startup with the same address as MAZL, and also the “only contract platform recommended” by SMDRA.

DMAR and SMDRA also said Burks is “one of the largest shareholders in the early creation of CTM eContracts.”

CTM eContracts is a software application integrable with the MLS to create, sign and manage real estate contracts. It was founded in 2003 in Colorado and has been used by 40,000 subscribers across the state.

Since 2019, the contract company has been owned by MRI Software.

Yes, the other interested buyer.

Contract software competitors

MRI Software acquired the Denver-based eGent, another contract software startup at the start of this year, and has been working on launching a “next generation” platform of CTM eContracts.

Garfias, the founder and former owner of eGent, joined MRI Software to help merge his acquired technology to CTM eContracts and "watch out for any boulders,” he said.

“MRI has already shown its pledge to investing in this market and they've done that by upgrading the CTM platform that's not live yet,” Garfias said.

When asked about competitor REshare’s ties to Burks, Garfias couldn’t say if there’s an association between the two but noted the fact that MAZL and REshare have the same address in Greenwood Village and wouldn't be surprised there may be some involvement.

Then he positioned MRI’s undisclosed “competitive” offer as a choice between an inexperienced LLC with no acquisitions and a multi-billion dollar company with a vast network that has plenty of crossover with REcolorado subscribers.

For Realtors, the main question they have is what could any private entity want with the MLS?

The platform has holds lots of customer data and dozens of software applications.

“We have no reason to believe that those things would go away,” said Andrew Malkoski, a broker associate at the Denver 100. “But we also don't know what a private entity that would be owning it, what their motivating factors would be, and what it is that they have planned.”

The Denver real estate veteran of nine years said it’s too early to tell what will happen, but he’s paying attention to what this may mean for commissions if a MLS is no longer tied to an association.

Commissions have been negotiable for a long time in the region, Malkowski said. But the national settlement case will make it harder for agents to find out how much money they might make off a sale.

“We are no longer going to be able to list the co-op compensation for the buyer's agent,” Malkoski said. “If it is a privately-owned company, then theoretically, they could make whatever choice they want to on whether or not they would allow that.”

Weinstein with Guide Real Estate later shared after MRI Software's announcement that private companies' interest is a red flag for the future of the real estate industry.

“At this point, this whole thing feels like a joke and like it could be sold to anyone, which means a company can take control of how information is shared and perpetuate their monopoly on contract software,” Weinstein said in an email to The Denver Gazette.

The sale of REcolorado shows how private companies seeking to buy an MLS can quickly become a messy process, he added.

It could become a national trend, Weinstein said, but the issues arising out of REcolorado should be noted across the rest of the real estate industry.

“It's not about finding the best fit or maintaining free, accessible, and reliable information for the public,” he said. “Instead, it’s turning into a money grab.”

Preparing to speak out

Karen Frisone, a broker and former director of the Denver Metro Association of Realtors, has been a staunch critic of the associations’ handling of the sale.

She used her industry connections to find out who the buyer was and publicly spoke with news organizations, including The Denver Gazette, saying that she said what many people who are prevented by nondisclosure agreements aren’t able to speak out on.

Because of it, she got a cease-and-desist letter from REcolorado’s current owners.

“I'm glad I got it, because I am not intimidated by a letter from a lawyer,” Frisone said. “Send me all the letters they want. I know what my rights are and I'm not lying and I'm not making direct accusations. I am asking questions.”

The association members meeting was originally scheduled for June 17, but was delayed because of member push back.

DMAR’s members must attend in-person to vote and the association needs a majority to pass any adjustments to the bylaws. The members-only meeting has 15 minutes of allotted time for leadership to answer pre-submitted questions and another 15 minutes for questions from attendees before voting begins, according to the event schedule.

DMAR only needs 1% of its members to vote to make any changes.

Frisone said she worries Monday’s meeting is just a formality and intended for low turnout.

She noted the meeting starts at 8 a.m., at rush hour, and the parking lot may not be able to accommodate the number of members who may want to attend. She began coordinating with other local real estate agents to carpool together to the meeting.

And a 15-minute window to ask any questions on the spot isn’t enough time to get to the bottom of the sale, Frisone said.

“It's going to take longer than 15 minutes,” Frisone said. “We suspect they're going to cut us off and go straight to vote.”

Frisone doubts the associations’ reasoning of decoupling the MLS because of the settlement, she said, adding the value of the data makes more sense as a driver.

In a broker advisory meeting in 2021, Frisone recalled a developer warning REcolorado’s data was vulnerable to a “hostile takeover” because of the association’s structure of rotating volunteer board members who lack experience in software platforms and “could easily be persuaded.”

“Fast forward three years, and everything he laid out in that meeting is happening,” Frisone said.

And REcolorado is already included in the settlement agreement and isn’t subject to more legal issues, Frisone added.

“If that were true, other MLS’s throughout the country would be following suit and doing the same thing, but they're not,” she said. “Denver's the first. We're the guinea pigs.”