MLS Rules: Source of Salvation or Ruin?

Jun 24, 2014  |  Michael Wurzer

Rob Hahn has a post up on his blog showing videos of entering a listing in two MLS systems and comparing that to entering a listing in Zillow and Trulia. Rob introduces the videos by writing, “[H]ere, in 4 million words (or equivalent thereof) is one main reason why the MLS is on a death spiral” and then concludes, “[y]ou watch the videos and tell me which one you would rather use for the mundane, yet critical, task of adding a new listing into some database.”

There are several problems with Rob’s comparison but they all boil down to the MLS rules and the comparative lack thereof in ads placed on Zillow, Trulia, or other ad portals. Obviously, if you’re trying to get someone to enter an advertisement, you care less about data quality than you care about quantity. That’s not to say the ad portals don’t have any data integrity checks or that every MLS rule is perfectly designed or implemented, but comparing the user interfaces for these two different functions misses the main point.

The fundamental question facing the MLS industry today is whether the MLS rules are the source of salvation for the MLS or their ruin. As I’ve written previously, the argument for salvation goes something like this:

  • Brokers are competitors;
  • MLSs help competing brokers cooperate through rules;
  • Cooperation allows for aggregation of data at critical mass;
  • The cooperation and aggregate data is the value delivered by the MLS;
  • Rules, therefore, are necessary to the MLS value proposition.

A corollary to the above is that advertising portals do not elicit the same cooperation and so cannot replace the MLS.

The counter-argument that MLS rules are or will be the ruin of MLSs is as follows:

  • There are too many MLSs and too many rules, creating inefficiency for brokers trying to compete across market boundaries;
  • The advertising portals do not have to obey the rules and so can offer a more innovative, streamlined, and national experience;
  • The national scope, efficiency, and innovation of the portals will replace the rule-laden MLSs.

A corollary to the above is that the industry needs fewer MLSs and all will be well, such that the NAR is now “raising the bar” for Associations in an attempt to weed out the smaller ones.

If you’ve been reading my previous posts here on the FBS Blog, you know that I believe that MLS Rules are the source of value and not ruin. In fact, I’d say those who want to mess with the MLS rules should be wary of killing the goose that laid the golden egg. To understand this point, simply recall all the turmoil surrounding IDX and VOWs over the years, including the threats of many brokers to withdraw from the MLS if the rules are not structured to their liking. Striking the balance of the rules among competitors certainly is hard (and constantly evolving) work, but this is the value the MLS brings and failing to recognize that value is an error.

That being said, I fully recognize the inefficiency caused by disparate rules and so have put my own time and that of FBS to work for the Real Estate Standards Organization (RESO) to reduce those pain points wherever possible. MLS organizations and their vendors have been making great progress on a standardized data dictionary and new APIs for retrieving that standardized data. The promise of these efforts is to allow the flow of listing data, saved searches, CRM data, and more to drive innovation instead of proprietary lock-in.

For example, as I wrote about recently, FBS has released Flexmls for iPhone, built on the Spark API, which allows for transportability of saved searches, CRM, and portal information, in addition to listings. Without these types of standardization efforts, the rule and data disparity among MLSs could very well result in ruin or death of the MLS but, if that’s the case, the result will be less broker control, not more, as the advertising portals or other resulting monopoly or oligopoly will create the rules to benefit their interests and not those of the brokers.

The path for MLSs should be clear: Stay focused on creating and enforcing rules to support cooperation among your brokers but also work toward standards whenever possible. This balanced approach creates a limitless future of innovation and cooperation that is the very definition of life, not death, for the MLS.

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