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

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.