So much advice for MLSs from so many corners and a lens for sorting through it all

Aug 5, 2011  |  Michael Wurzer

Leading up to and following the recent Inman Connect and Inman Data Summit conferences, there have been a deluge of articles from vendors, consultants and industry observers about how MLSs need to innovate:

Each of these articles is fascinating on its own but collectively they remind me of why I started the FBS Blog over four years ago.  My first article, penned in March 2007, was called Death of the MLS? The hot topics then were competition from consumer portals such as Zillow and Trulia, mass regionalization of MLSs, and the Department of Justice litigation against the NAR over VOWs.  The VOW litigation with DOJ has now been resolved, of course (with some effects lingering through reverberations in IDX), but the other two topics remain at the forefront of MLS policy issues.

The big question pertaining to sites like Zillow and Trulia has morphed from whether they will become a national MLS to how MLSs can help them improve the quality of their data.  Similarly, regionalization has forged on in many areas, but it’s slow and hard work.  Perhaps the biggest shift related to regionalization is that NAR has put forth the REALTORS Property Resource (RPR) and Corelogic and Move have made their national moves toward the MLS as well.  In fact, one of the newest fronts on the regionalization front combines these two themes into one by those advocating a national aggregation of listing data for syndication.

In many ways, I think the real question being debated in all these articles and over the last few decades is simply the question of whether there should be one national MLS or whether the local/regional MLSs will continue.  I’ve long argued that getting competitors to cooperate is very difficult and the value delivered in that regard by local MLSs should not be underestimated or presumed. Much of the consternation over how slowly or awkwardly MLSs appear to respond to calls for innovation may not be a lack of vision or guts, but rather a keener focus on the priority of preserving the cooperation that created the valuable data aggregation in the first instance.  The reality is that all the outside innovators in our industry are coming to the MLS for the value they continue to deliver day in and day out by fostering cooperation among the competitors in their market. Ignore or presume that value at your peril.

This is not to say that leadership and innovation aren’t important, but it’s helpful when there is some foundation for judging the innovation. I think the best way to judge an innovation is the market and competition. If value is proven, adoption will come through market forces. I think this is true for both product innovations like lifestyle search as well as bigger policy questions such as how big of a market an MLS should cover (local, regional, national, etc.).

Much of the debate in the articles linked above is basically trying to predict what the market ultimately will or should determine. Some argue that innovations like lifestyle search, agent ratings, and consumer-facing MLS sites will prove valuable.  Others argue that national MLS will be the ticket.  I say let the market figure it out.  Awesome leaders like Bob Hale from HAR and many others are absolutely necessary to an efficient market, but that doesn’t mean every MLS should try those innovations let alone adopt them. The entire point of competition and market forces is creating a market open to many decisions producing the truth over time.

I also think this basic premise — encouraging competitive markets — could be a strong foundation for many MLS decisions.  The MLS (local and regional) is basically laying the foundation for competitors to make a market in real estate. In thinking about this, MLSs need to distinguish between the different markets they impact, including the real estate market, the real estate software market, and the market for MLS services themselves.

Many argue that the market for MLS services is a monopoly already at a local level and so it makes sense to just nationalize it and create a more perfect monopoly.  I’ve long argued that is a mistake as it is too likely to result in a sub-optimal system over time and will eventually lead to fragmentation and re-building of the local and regional MLSs.  You can see a glimpse of this already over controversial issues like franchise IDX.  Instead of nationalizing the MLS, I’ve argued MLSs can improve competition for their service by agreeing to data standards.

In terms of the market for real estate software, MLSs definitely could increase competition by focusing on data standards but, equally important, it would be very helpful to create a business model (e.g., an app store) that allows developers to market to their products to all agents regardless of MLS on similar terms instead of having to cut deals with every individual MLS.

By focusing on industry standards, MLSs can open the key markets and improve competition, which should be fundamental to the MLS mission.  This also applies to the real estate market itself.  Many of the times MLSs get in trouble is when they succomb to the pressure of brokers to limit competition in the real estate market.  MLSs certainly need to preserve cooperation but also need to create rules that increase competition.

In sum, I’m just another voice providing advice to MLSs.  Many of the articles posted above provide great advice.  My advice is to judge them through the lens of creating competitive markets.

5 Responses to “So much advice for MLSs from so many corners and a lens for sorting through it all”

  1. Victor Lund says:

    Bravo!

    From the lens of creating competitive markets, the whole (national MLS) would be less than the sum of its parts (todays 900 MLSs).

    Consolidation of MLSs and Data Sharing between them makes a lot of sense when the theory is applied carefully on a market by market basis.

    When an MLS is simply a contracting entity with the MLS vendor, and is not providing technical services and support to the members, it can hardly be considered an MLS. Those MLSs need to seriously consider their value proposition to their members.

  2. Tim Hansen says:

    Thanks for the links to the discussion, Michael. I saw some sparks flying from the Inman Data Summit but hadn’t seen most of the blogs. Great reads – no matter where your feelings land, it’s valuable to keep the topic of innovation in the forefront.

  3. Brian Habel says:

    I’m so appreciative of such a brilliant synopsis on what is going on and how to not get caught up too much in the thick of thin things when it comes to our free market society. I feel refreshed to be put back into my history or ideologies upon which built this country and made it great from our founding fathers until now. It reminds me of oh, one of the founding fathers vs. another where, was it Madison and Jefferson where one argued for nationalizing government and the other toward totally the other way to the states and the resulting mix we have that came out of those early discussions and founding of our constitution, where in, as my mother tells me, my great, great, great (how many greats I do not know), grandfather, John Adams, also argued for checks and balances. To me this free market concept and catering to that, has it nailed, that the will and sovereignty must be vested and trusted to the people without too much control up top. I think Michael Wurzer really gets it and argues for that correct balance. Thanks Michael for such a brilliant and refreshing expose! I do not know if it adds anything as I am sitting on your coat tail to the discussion and issues you obviously have saved me a lot of time disseminating, but as coming from a Realtor perspective now, when I first started to justify myself and my hefty commissions in the business, I had to view real estate transactions upon early principles of land ownership. Key to this historically, as I was able to glean as it pertains to a free market society, was my figuring out the role of the Realtor in the transaction of a ‘service tax’ (often 6%) that comes as part of buying or selling. The right to own property and control the flow of goods and services on it was explained in terms of leasing, used more generally as descriptive of that kind of ownership. It was determined I believe, that the inalienable rights connected with this ownership, and freeing ourselves during our independence, that the liberty at stake involves making sure there is not too much taxation during the exchange process. These are the principles at stake and that land ownership not be controlled too much by a centralized sovereign is my query. Would centralizing the MLS put pressure on a person to NOT list their home as a FSBO (fore sale by owner)? If so, this of course would favor us as Realtors who have peeped in on the debate about how technology is helping to do away with what much of the real estate agent used to be relied on for, thereby heightening chances for more and more people to get together to “sell it themselves”. I have always valued the “for sale by owner” market for its check and balance on the amount of commissions that are commensurate to our ‘service tax’ we charge when we do a transaction. This taps into directly and squarely upon issues of keeping the taxation down on exchanges as to what made America spawn and be great in the first place. I am not afraid, but believe that the Realtor is still very much needed and will continue to be called upon by consumers. I believe that there are many ‘market forces’ at work upon individuals and families that lead them to eventually have to start trusting each other a bit more again, to entail some increasing expertise of a more polished Realtor force, expanding their expertise for good. My only concern is that we, society, will not put the lessons to work that are very valuably being learned regarding letting property values become over-inflated in the process of “building wealth”. A good Realtor can and should be playing a vital role in helping check our client into market value- this can really help make a difference. Honesty with ourselves and others is what made this nation great. Don’t forget it!

  4. Here is a basic question to nationalization: who will pay for it? And who will control it? You make an excellent point about data standards. Everyone will want their input, which makes it likely a national mls will never occur just for that reason. Local boards will be loathe to give up their control (and $$) that the MLS brings in.

  5. Bill S. says:

    Seems to me that there are alot of folks who talk about the MLS who really don’t understand what it is or does. They preach change and tell others what should be done – but have never used an MLS, been an agent or sold a house.

    Alot of polite back and forth conversation in consultant speak, but what is their motivation for calling for change? What is their goal and endgame. What do they want? How can they possibly comprehend what is needed and how things work if they don’t the darn thing?

    There are already real estate industry standards and organizations that define them.. but you have to look outside the protected closed loop of the US brokerage landscape. You can bet that if there was money to be made catering to a group other than brokers that entrepreneurs would jump right on it.. but as of now they pay the bills so the status quo doesn’t want to upset the apple cart. Don’t bite the hand that feeds you.

    The RPR may go down as the biggest mistake in the history of real estate because once consumers get a taste of the rich data presented by even the lowliest of agents they are going to want more and demand access. That will accellerate change in the MLS sector with consolidation of all classes of vendors and suppliers.