One Step Forward, Two Hundred Steps Back

Oct 18, 2007  |  Michael Wurzer

Stefan Swanepoel writes that the California Association of REALTORS is taking a step forward by seeking to establish a monopoly MLS covering the state of California.  Clareity Consulting has explained in depth why this move by CAR required more thinking, but I thought it wouldn’t hurt to make a few points myself:

  • One MLS is a monopoly.
  • Monopolies thwart competition.
  • MLSs need more competition, not less.
  • The pains of brokers and agents from disparate rules and data sets has nothing to do with the number of MLS systems and everything to do with data and operating standards.
  • CAR’s claim that their monopoly MLS will solve the broker’s pains is like a drug dealer convincing the addict that this day will be easier with just one more hit.
  • The problem is the hangover the next day.
  • And the need for another hit tomorrow to get rid of the hangover.
  • Of course, the dealer is the only winner in that raging battle.

I’d be more stirred up about this if I actually thought the monopoly MLS will succeed, but it won’t.  A lot of money will get spent, some sort of system will be built, but by the time it is up and running, competition will have created something better.  The result?  RIN redux.

Centuries of competition in America and the world have proven that command and control monoply solutions don’t work.  What doesn’t CAR understand about that?  Here’s the funny thing.  I expect CAR was quite certain that David Barry’s “open MLS” for the state of California was a bad idea, yet, bizarrely, they are making that possibility more of a reality every move they make.

The better solution is straight-forward, inexpensive and fast: Focus on data and rule standards nationwide and create competition among systems.  Going about fixing these problems on a regional basis is ignoring the very real work on-going at the national level and that more intense focus on the national effort can create competition at the regional level.  One need look no further than the Internet and web to understand that the model of broad data standards creates freedom, competition and innovation, which is what brokers need now more than ever.

9 Responses to “One Step Forward, Two Hundred Steps Back”

  1. Matt Cohen says:

    Michael,

    > One MLS is a monopoly.

    What about having one MLS system in a smaller geographic region, the way it is today in most markets? I generally call that an “efficient marketplace” – simplifying training and other such practicalities.

    What happens to this position as one scales things up to the state-wide level in California?

    Let’s be careful in our discussion in differentiating between MLS systems and MLS organizations.

  2. I was being a little simplistic, certainly, but, if that one MLS in a smaller geographic region has market power, then, yes, it is a monopoly, which is exactly why the DOJ has been investigating even the littlest MLSs. Hilton Head? Pretty small market.

    I also agree that the discussion of these issues needs to differentiate between MLS systems and MLS organizations, which is exactly the differentiation CAR is failing to make.

    Really, these issues go to the heart of what I’ve been writing on the FBS Blog for months, namely that:

    (a) the industry is at a moment in time where definition of the MLS is in question;

    (b) definition of the MLS is up to the participants, the people involved;

    (c) first focus should be on retaining the cooperation necessary to allow the aggregation of competitors’ listings;

    (d) next focus should be on national data standards and as broad of rule standards as can be achieved with (c) in mind;

    (e) with national standards in place, MLSs can then focus on agreements for sharing data with each other, possibly using a national repository as a ‘gateway’ for efficient redistribution;

    (f) with national data exchange agreements in place, each and every MLS can compete at the level it desires, which will break a local monopoly if it isn’t efficient while also allowing it to survive if it is efficient.

    This last point is critical. You’re right that local MLSs provide efficiencies. The challenge is that without competition there isn’t a good mechanism to test that on a regular basis. Whatever solutions evolve over the next several years, a focus on increasing competition at all levels will be in everyone’s best interest. That’s why I find CAR’s actions toward creating a statewide MLS wrong-headed, because it limits competition instead of fostering it.

  3. Matt Cohen says:

    I’m substantially in agreement and knew that’s what you were getting at – I just wanted to tease out a greater level of detail with you, especially as it pertains to efficiencies. Great post Michael!

  4. It seems to me that this argument is predicated on the fact that there is a need for an MLS of any sort. Competition occurs when two or more entities are providing needed products or services and the question is, which of the two or more necessary goods or services will the consumer spend money on.

    The pure fact of the matter is that the MLS as we know it may quickly become obsolete as an efficient and effective method for practitioners to market real estate and cooperate in a transaction. It seems to me that the non-MLS sector (Google, et al) is quickly providing an efficient, cost-effective way to market property, and negating the need for local control.
    The inefficiencies and costs which accompany the current MLS systems are huge to both brokerages and to the individual salesperson, and competition between MLSs only increases the economic waste.

    Of course I understand all the arguments about the value of data integrity and of local business rules–I spent over 30 years supporting those arguements. But the pure fact of the matter is that the days of the conventional MlS are numbered. I don’t know what will take its place, but i do think it will include a simple governance system, timely decisions about business issues, efficient and user- friendly technology for both brokers and salespeople, effective statistics for marketing real estate and tracking market trends and conditions.

  5. Judith, nice twist, but this post is directed at CAR’s actions in trying to establish a monopoly MLS, which clearly doesn’t buy your “the MLS is dead” argument and, on that least, I agree with CAR for all the reasons I stated in MLS Is More Than Technology.

  6. Robbie says:

    The MLS as you know it provides dispute management for competitors. the promise of shared compensation for participants, the ability for members (both large & small) to aggregate their data in a structured environment, and the ability for IDX/VOW vendors to download the data from the MLS to provide solutions for it’s members. Despite a typical MLS system’s political challenges and technical shortcomings, there’s a lot right w/ the current system.

    Although, Zillow and Trulia are consumer friendly web properties that are great for marketing properties & advertising brokers/agents, they don’t let a professional do what a well written IDX/VOW or MLS systems could do.

    After all, those sites are designed capture real estate ad money (for a national audience) meanwhile, an IDX/VOW/MLS system is designed to improve your productivity, efficiency and ideally should help you market your listings and your company to the public.

    I think the problem is as Michael states 1) correct the political issues that prevent members from servicing the needs of customers and 2) correct the technical issue that hinder vendors rom servicing the needs of it’s customers (agents, brokers, MLS boards).

    h

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  8. Anonymous says:

    I’ve posted on this blog before….(anonymously…:)) and I’ve gotten a good answer, so I figured I’d try again. I’ve just started in the real estate industry and although I come from a technical background, it is not from development. I am still trying to figure out how and why things work the way they do……from software, hardware and meatware perspectives…:)…but I am still somewhat confused about RETS though…

    I understand the need for standards and I am certainly familiar with many RFCs and how and why they are written. As I understand, RETS is a standard way to define an object (real estate in this case) and that makes perfect sense. But it also appears to be an API and a communications protocol and an authentication protocol….etc etc. That i don’t quite get. Why was everything pushed to a single standard? Wouldn’t just defining object properties have been sufficient? It seems that once you have a metadata container defined, the actual exchange can take place via many different methods…

    If you guys can point out the part where I am mistaken…I’d certainly appreciate it.

    Thanks.

  9. A reasonable question. Part of the answer is history, in that RETS was started long ago, well before REST became popular, and when the primary method for exchanging data was FTP and the industry definitely wanted to move past that. Anyway, the standard is now moving towards a family of standards, with payloads being separate from transport and the potential for mix and match as you suggest.

    One of my personal goals has been to focus the standards on developing broad and deep payloads, which historically bas been seen as too difficult given the wide disparity of data being tracked today. However, I believe the excellent work done under the leadership of Paul Stusiak in the Schema Work Group is proving the skeptics wrong — broad and deep listings standards are being developed and hopefully the payloads will be the substance of RETS as you suggest.