MLSs Dealing With The Pandemic: Virtual Open Houses and DOM Read More

MLS Is More Than Technology

Mar 24, 2007 Michael Wurzer

Yes, that’s right, FBS, a technology company, is saying that the MLS is much more than the technology we or others may provide. I’ll demonstrate why first by commenting on the recent news that the Real Estate Board of New York (REBNY) announced (PDF) they are hiring Trulia to build a public listings portal. In Trulia’s blog post on the topic, they state: “For the non-New York readers out there it’s worth noting that Manhattan’s hugely important real estate market does not have a widely used MLS that would allow access to all listings through any single Web site today.”

I think this statement has the potential to mislead readers through two negative implications:

  1. That Trulia is now creating an MLS where there wasn’t one before; and
  2. That Trulia’s portal will have “all listings” where no site previously had them all.

Neither of these implicationsare true. First, Trulia isn’t creating an MLS system, they are helping REBNY create a public advertising portal of active listings, basically shifting their advertising dollars from the New York Times to Trulia. I’ve previously discussed why an advertising portal is not an MLS and REBNY provides a further difference in that their members do not share information regarding sold listings and there isn’t any indication that’s going to change with the Trulia public portal. Second, this deal will not include “all listings” in NYC because REBNY members will be able to opt out of the new portal and not all brokers in NYC are members of REBNY. That the REBNY/Trulia deal is neither an MLS nor a complete listing portal for NYC is made clear by comparison to the Manhattan MLS, which offers competition to REBNY and supplies listing data to Realtor.com, which continues to be the largest listing portal collecting information from hundreds of MLSs across the country.

In a comment I made in reply to Greg Swann’s post on the Trulia announcement, I said that the oddities of the NYC real estate practice make changes there a poor predictor of what may happen in the rest of the country. However, after reading a bit more about this, I now see that the story and conflicts in NYC are similar to the debates occurring in the rest of the country. I posted last week about the success the Houston Association of REALTORS® has had with their public listing portal and how that contrasts with the traditional thinking that MLSs should stay out of the listing portal business to avoid taking traffic away from broker and agent sites. The news of Trulia and REBNY’s venture seems to strengthen the conclusion that MLS listing portals are a critical issue as consumers look for independent sources of information. Also, the membership demand that REBNY allow opt outs is reminiscent of the debate that is at the center of the DOJ litigation against the NAR.

As I mentioned in one of my earlier posts on MLS regionalization, all of these issues are closely related to each other:

  • Brokers are trying to figure out how they can cooperate with each other more easily and also stake their claim in the web gold rush at the same time.
  • MLSs are trying to figure out how they can serve their members and stay relevant in the shifting sands.
  • New portals like Trulia and Zillow are making it harder for brokers to distinguish their brands to consumers as destination sites for real estate information.
  • The Department of Justice likes that the brokers and MLSs cooperate on collecting listing information, but doesn’t like the compromises struck to date to allow that cooperation.

As Brian Larson pointed out in a comment to my Death of the MLS? post, Point2 presents a model that is attempting to bridge this gap, creating broker and agent sites that allow them to share listings with each other and hopefully stay top of mind for consumers.

What’s missing from the Point2 model, however, is the cooperative framework of the MLS (ironically, exactly what the DOJ complains about). Point2 tries to use software to be the MLS but the MLS needs more than just software to create an atmosphere of trust that makes brokers and agents willing to share data with each other and reach a critical mass of listings. As an example, check out Point2’s few hundred listings for Houston compared to HAR’s 30,000+. This critical mass of listings is only able to be reached because of the trust created by the process that is the MLS.

Some of you familiar with MLS politics may be thinking, “Are you kidding? We don’t trust the MLS!” Ahh, but the majority do, and that’s the key. The MLS leadership (in almost all cases) was elected by their local peers. They’ve been entrusted with making decisions for the entire group. This little bit of representative democracy is what differentiates the MLS from non-cooperative models, and it has nothing to do with technology. This bit of politics is critical to establishing critical mass for two reasons:

  1. Representative Decisions. Brokers and agents compete fiercely on a daily basis. In that day to day environment, reaching broad consensus on issues like data sharing is challenging. While you might get a good number of people to agree, getting all to agree is unlikely, resulting in fragmented and incomplete data. Within the context of the MLS, however, decisions can be made by the majority that apply to the whole. In other words, compromises can be reached that will not evolve purely from individual decisions. This may be over the top, but I liken this to the U.S. Senate, which is created to be the more deliberative body, charged with taking the long view.
  2. Local Elections and Representation. Of course, leaders can err, trust can be breached, and the minority can feel oppressed and seek revolt. We see some of this now in the MLS world, where some brokers feel unrepresented, where the fast changing technology makes decisions by leadership complicated and more prone to error. Ironically, one of the sources of complaint currently is that MLSs are protecting their turf and being too parochial by not allowing broad, regional cooperation. I see this as ironic because I believe the local representation of the MLS is what allowed for the “critical mass” cooperation in the first instance. Cooperation with your neighbors is so much easier than cooperation with strangers. Although the web is stretching our definitions of neighbors and strangers, we should not lose sight of the benefits of local leaders giving voice through local representation. We can improve our cooperation through broader data aggregation and distribution, while, at the same time, maintaining the trust established by local representation.

The representative decision-making process of the MLS is what allows for the broad cooperation necessary to create critical mass in terms of data sharing. Without this, I believe we’ll simply have a mishmash of data strewn here and there, with no possibility of a national repository or any other useful portal. The MLS embraces the duality of competition and cooperation, and strikes a limited balance that enables critical mass to be established. This feat should not be underestimated. Fully cognizant that I may be stretching the importance of this issue, the words of no less than George Washington in his letter of transmittal of the Constitution for ratification may be instructive here:

In all our deliberations on this subject we kept steadily in our view, that which appears to us the greatest interest of every true American, the consolidation of our Union, in which is involved our prosperity, felicity, safety, perhaps our national existence. This important consideration, seriously and deeply impressed on our minds, led each state in the Convention to be less rigid on points of inferior magnitude, than might have been otherwise expected; and thus the Constitution, which we now present, is the result of a spirit of amity, and of that mutual deference and concession which the peculiarity of our political situation rendered indispensable.

That it will meet the full and entire approbation of every state is not perhaps to be expected; but each will doubtless consider that had her interest been alone consulted, the consequences might have been particularly disagreeable or injurious to others; that it is liable to as few exceptions as could reasonably have been expected, we hope and believe; that it may promote the lasting welfare of that country so dear to us all, and secure her freedom and happiness, is our most ardent wish.

Of course, just as our Constitution has been tested and stressed through changing times, so, too, has the MLS. We’re clearly in such a time right now as our relationships are being transformed by the web. Many are questioning whether the MLS should be Association owned or whether the MLSs should become broker owned. This is a good question and should be answered by whichever approach gives voice to those being led. If this is done, just as the Constitution and our country have survived, so, too, will the MLS, because the MLS brings something to the table that cannot be replaced by technology: Trust. Technology can foster trust, but it cannot form it. True competition requires some cooperation. Not a lot, but some.

This is why I believe the MLS will survive and even thrive. As HAR has shown, the MLS is in the best position to create strong listing portals that benefit brokers, agents and consumers. The MLS is in the best position to do this because they can present the data in an independent way, representative of all the competing brands. When it comes to effective local search, brand emphasis is no longer very effective. Companies like Trulia may turn out to be a great partner for MLSs in building these portals, but I don’t think so, because I don’t see the current business models they are forming as fostering cooperation in the long run.

For example, one of the most interesting, as yet unconfirmed, aspects of the Trulia/REBNY deal is that there is some sort of revenue share involved. Will the revenue share result in funds flowing back to brokers? Who will direct the advertising on Trulia’s site, which presumably is what will generate the revenue to be shared? Will that advertising be from brokers participating in the revenue share, such that they’ll effectively be getting back part of their ad spend? If broker advertising is allowed, how will that effect the opt out rates? If an ad supported revenue share is involved, I think that would be a mistake. I suggest the successful model for a listing portal is not advertising supported. The site should focus on promoting the homes for sale and the brokers and agents listing and selling them. As the controversies swirling around Realtor.com have shown, introducing advertising introduces too many sources of tensions that break down cooperation.

Similarly, the more I learn about the deal between Realogy and Trulia, the more I think it cries out for a strong, independent MLS portal. Over on the Bloodhound, Greg Swann suggested that Realogy would be selling leads from Trulia back to their franchisees. I responded that I thought that was unlikely, because many brokers are already getting leads directly back to their web sites when Trulia scrapes their sites for listings, and wouldn’t want to see that change just because Realogy was now supplying the listings. However, someone else commented:

To clarify a few points mentioned in the comments above, let it be known that all C21 and ERA listings link back to their respective corporate sites (c21.com, era.com), unless–and herein lies the rub–the broker pays Trulia an advertising fee. Presumably, after paying this fee, Trulia will then link the listings back to the brokers’ site and display the brokers’ company logo (i.e. C21 DBA). But, until and unless the broker ponies up, Trulia is contractually obligated (yes, Trulia and Realogy have signed a contract) to link all listings to the corporate site.

Whether this will lead to C21 or ERA collecting referral fees on leads generated from these listings (which brings up another interesting point about who owns the data, the franchisor or franchisee) is an unknown. My sense is, however, should this happen it would upset an awful lot of independently owned and operated companies who, not to be ommitted, already pay substantial royalty and advertising fees purportedly for corporate marketing efforts.

Frankly, I find this incredible. Think about this: Trulia’s brand is trumping the franchise brand, requiring payments to Trulia, and the franchise brand is trumping the brokers’ and agents’ brands, requiring payments to the franchise. At the same time, the brokers and agents in the field are building the business relationships that form the foundations of the all the brands. They’re doing all the work and they’re having to pay very dearly for lead generation that the web is supposed to be making more efficient. Efficiency for Trulia and Realogy, perhaps, but it doesn’t look very efficient for the brokers and agents.

These business models don’t work in the long run. There’s a fascinating post today on O’Reilly Radar about how Google and others, in their quest to “free” information, need to be careful not to destroy content creation. The post quotes someone quoting a Google employee on the evolution of Google’s thinking on this issue I find highly relevant to MLS today: “”Some think of Google as selling search. Some business types think it sells ads. I think it needs to be in the business of ensuring there’s something to sell ads around.” Yes, exactly. We need to protect content creation, especially the content that’s hard to create, like broad, deep and standard listing information.

Sooner or later, the brokers and agents will figure out that they are paying too much money to Trulia or their franchises for these leads and that they can do it more efficiently through cooperation. This brings me back to the MLS, back to local decisions in the best interest of all competitors. The MLS can and will figure out a way through these challenges. The specific business model for data aggregation and sharing on a broader scale may not exist yet, but the solution exists in a framework of trust allowing MLSs to foster a national non-advertising listing portal controlled by the brokers and agents.