Statewide MLSs Are Both Too Big and Too Small

May 24, 2010  |  Michael Wurzer

Inman News published an in-depth paper from Cameron Paine, CEO of the Connecticut MLS, advocating consolidation to statewide MLSs.  I agree with many of the arguments and claims made in the paper, but I disagree that statewide MLSs are the best solution.  Instead, as I’ve long advocated here on the FBS Blog, the best solution is a national data standard that allows for innovation and competition at every level by every MLS, franchise, broker, agent, and software developer.

My primary question at this point is whether consolidation is the only path to data standards.  The whitepaper states, “Politics is the single greatest barrier to the advancement of MLS consolidation.”  There’s a grain of truth in this statement, and it applies to forming data standards as well.  At the same time, creating statewide MLSs without first addressing data standards would only seem to exacerbate the current problems by making the political entities stronger.  It is in this regard that statewide MLSs are too small.  The best data standard is one without borders, not one constrained to state boundaries.

With a national (or broader) real estate data standard, software developers would have a much better chance of writing software that could be sold to all the agents in the country instead of just those in one state at a time.  By creating a bigger opportunity for software developers, the competition increases and the options to agents, brokers and franchises increases commensurately.

In addition to being too small, statewide MLSs also are too big.  As the whitepaper points out, politics is one of the biggest problems, and making MLSs even bigger (other than through market forces) will just exacerbate the politics.  Having 50 statewide data formats may be perceived to be an improvement, but not if it prevents a national standard.  The whitepaper points out that some brokers don’t have a choice of MLS software, but the choices become even less with statewide MLSs.

No, statewide MLSs are not the answer.  What is the answer is developing national data standards that can promote a platform on which competition and innovation can be fostered.  Only the market can determine the best size of each MLS, but the market needs to be able to work and so leaders like CTMLS should focus on creating a platform for competition instead of trying to button-hole data into statewide MLSs.

12 Responses to “Statewide MLSs Are Both Too Big and Too Small”

  1. Chris says:

    In order to have a truly fair and efficient mls system at any level, you need to let it break free of the Realtor stranglehold and let agents know the REAL costs of running the system.

    It’s about jobs, politics, money, control and egos and none of those will go down without a fight.

  2. John C says:

    as a practicing agent I can agree with the national data standard wholeheartedly. I think it would help agents do a better job of presenting data to the public, therefore helping everyone all the way around. Statewide MLS would just create another boundary. Why go to “OK” from “poor” when you can select the best option?

  3. John Mijac says:

    The funny thing about constraints (read: standards), is that such restrictions of freedom in one area often end up opening the door to freedom, creativity and expression in another. Once boundaries and rules are set, the mind moves on to how to use the given space.

    You are right, Michael, National Standards are a must but because Real Estate is local, the local MLS is the best way.

  4. Jim Mellen says:

    In our area, and I’m sure we are not alone, we have 3 MLS’s covering about 100SQ miles. We (and extend that to buyers and sellers) could easily be better served by one MLS. From an agents perspective, bearing the cost of belonging to two or three MLS’s is much more a probem than the data integration-again from their perspective. From a sellers perspective, they don’t understand why their home is listed more than once and with varying information-not uniform.

    The MLS’s have all been “born” at different times and no one is going to give up territory easily. Their real customer-the agent-who pays the bills- has little say or ability to institute change since the participants are the only voters. We won’t quickly see a regional MLS much less a statewide or national version. But it’s time has arrived. I can foresee a change in the future, and one that may not include the National Association or REALTORS

  5. “Statewide MLSs Are Both Too Big and Too Small – but a common, standard database, accessible via the user’s access point/software of choice, requiring membership in ony one MLS for access is just right.” – Goldilocks.

    Russ Bergeron
    CEO, MRED LLC

  6. Jim Harrison says:

    Great comments, Michael.

    MLS consolidation is a trend that is generally behind us, and a political solution isn’t a time or cost efficient path….you’re right in that this politically charged topic isn’t really the endgame solution, Standards are.

    Consolidation does make sense when duplicative administrivia can be eliminated and a larger operation can accomplish economies of scale, create better tools and services with a higher capitalized business, and the agent on the street and his firm benefit directly from those economies, but common sense does often take a second seat to politics and tradition.

    And certainly, an MLS solution should not be burdened with a political governance structure…it’s a non-profit b to b coop and should be run like one. State-wide solutions sponsored by state-wide organizations run the risk of infecting the MLS operation with burdensome state governance. On the other hand a well defined business with a truly industry lead governance structure could be structured to be effective and responsive as well–run by market leaders who run real estate businesses, not state org volunteers.

    Cheaper should not be the objective, increasing the agent and broker’s ability to service their clients and customers better and increase their own profitability should be our objective. Those of us who are charged to be servants to this industry should continue to work together collaboratively with the benefits we can accomplish for our agents and brokers at the forefront.

    Brokers, agents, and their vendors should have one nationwide data standard to expect to confront…not local variations of a partially defined standard, but one standard, and a consistent data model to compliment that standard.

    MLS rules regarding data should be standard, as well.

    If we were all focused on the Realtor, and not the survival of our legacy infrastructures, Standards would be the key focus in this industry for those of us whose role is to be the industry’s information service providers..

    Many thanks go out to the current standards initiative…I provide two employees to the initiative as well. There is a tremendous degree of effort going into today’s initiative. However, a part-time volunteer driven initiative with political governance is destined to be slow and ineffective, despite all the hard work the volunteer participants contribute.

    A fully resourced full time industry driven initiative which never stops and is constantly evolving would be a better initiative. Let’s make a business out of industry standards, and make it move quickly to more effectively service the real estate industry, and let’s remove the politics from the standards initiative and deliver fully baked solutions quickly.

    Let’s make standards consistent and enabling. Let’s find a way to skip over the legacy infrastructure issues and focus on creating nationwide data consolidation and nationwide standards and API; while allowing portals of service to become more effective in serving the industry and insuring all brokers and agents have solutions available to provide them all the information and services they need to be effective and profitable.

  7. David Harris says:

    Michael and Jim,

    great thoughts and ideas. I am growing evermore convinced that for standards to work at any level, more than just volunteer effort will be needed. The newly created RESO R&D workgroup is packed with hard working, well meaning folks from all parts of our industry. But even with all the energy our group has, we struggle to gain commitments beyond our bi-weekly calls.

    But I am concerned with the direction running a standard as a “business” will head. Having revenue goals ( let alone profit) could misguide and unbalance a effort for equitable standards.

    But one thing I do know: problems with competing mls’s (statewide or not) will pale in comparison to issues with competing standards. So let’s make sure that RESO, COVE, atom red, mismo, etc. attempt to work together instead of duplicating their solutions.

  8. Jim Harrison says:

    To clarify, David, I believe a “not-for-profit” business can be very effective at keeping its eye on the ball with a business based operational and decision making structure without being subjected to a “non-profit” governance and decision making structure. Full time dedicated staff 100% committed every day to the objective…while leveraging the expertise and relationships within the entire industry to accomplish promptly solutions which work for everyone.

  9. Brian Wilson says:

    I don’t see how nationalizing the MLS helps the agents who pay for and produce the MLS content. I think almost everyone agrees that those areas where there are more than one MLS servicing it should be combined into one. But how does that translate into a need for a national MLS? It benefits national websites who want to aggregate national listings but again, how does that benefit the actual stakeholders of the MLS’s? I don’t get it.

  10. Michael, I appreciate your comments on the white paper. Though I did not get into it, I agree with you about data standards. I suppose that the statewide MLS concept is the administrative approach and the data standard is the technological approach to the same problem, but they are not mutually exclusive. The statewide MLS effort could only benefit from a data standard. Similarly, a data standard would be useless if local MLSs still don’t share data with one another.

    As I see it, the purpose of having statewide MLSs, other than the improved efficiencies, costs, etc., is to ensure th quality of the data entered into the MLS. Even with a data standard, the variances in quality of data input, depends entirely on the administration at the host level MLS. This is pricesly the problem that bedevils many data sharing efforts. I believe the statewide MLS administrative framework, with a data standard, is the best path to ensuring high quality data throughout the system.

    Jim’s point about politics is a good one. In Connecticut, though we are owned by the CT Association of REALTORS, we are run by brokers and are functionally independent from CAR. They have no control over our budget, operations, staffing, or anything other than limited portions of our bylaws. This has allowed us to be run like a business and avoid the damaging political infighting that has beleaguered NAR and so many REALTOR Associations.

  11. mwurzer says:

    Brian, I’m not suggesting a national MLS, but rather a national data format and, as Jim Harrison mentioned, standard business rules for creating the data. With proper data standards in place, brokers and agents will benefit by having more and better tools to access the data they need for their business. And the market should be able to determine the best footprint for each local MLS, which will continue to offer the tools to brokers and agents.

    Cameron, thanks for your additional comments. As Jim mentioned, a true data standard would include data integrity rules. And, you may be right, in some places, statewide may be the only approach to getting the data standardized. But, as California has shown, it’s not the best everywhere and I would prefer to see a national data standard in place first to allow market forces to work before using a blunt instrument like artificial statewide market boundaries.

    Goldilocks, I’m so happy you brought a Stanley Cup to Chicago! Thank you! And congratulations on your move!

  12. Michael, Unfortunately, you’re right about California. Part of the impetus for me to write the white paper was to contradict what I feel was a misguided approach in California. I would classify that as an attempted take-over more than an organically grown statewide effort. To be clear, I do not subscribe to the California model, which is why I hoped to offer an alternative.

    Regarding whether MLSs would share data, even with a data standard, I can assure you that they would not. While agree whole heartedly that a data standard is needed, it will not resolve the fact that brokers covering multiple MLSs will still have mutliple training for staff, multiple input, multiple fees, MLS rules, and the public will still not be privy to all the listings unless their agent belongs to all applicable MLSs. If this sounds like overkill, the situation right now in Fairfield County, Connecticut is that 5 MLS exist in one county. (the rest of the state uses the statewide) There are 3 single town MLSs, a county wide MLS, and the statewide MLS. Unless an agent belongs to all 5, it is VERY likely that the public will not see all the listings that are for sale.

    With an average of 20 MLSs per state, that’s at least 20 border territories that large brokers have to contend with.