I’m on an airplane back from Inman, feeling vaguely ill due to a combination of karaoke, tequila and vodka. Let’s just say it was epic, and I will pay homage to it somehow. Nonetheless, it was a wonderful Inman for me, as I’ve met some new friends, bonded all over again with old friends, and had a great time all around.
I also gave a brief presentation during the Data Track on the topic “It’s 2025: There is No MLS.” Except that I really didn’t, because right off the bat, I said there is no conceivable future in which there is no MLS. However, we might not recognize that future MLS as an MLS at all.
I wanted to expand on those thoughts, because I deliberately made them general and brief to fit within the allotted time. Seeing as how I have this here platform, I figured it’s worth putting down these thoughts into words and discussing them with you all.
Hole, Not a Drill
The presentation was really a variation on a theme I explored last year in Destroy Your Illusions: people don’t want a quarter-inch drill bit, but a quarter-inch hole.
The assumption that we all make about the MLS is that we want change, we want consolidation, we want efficiency, we want all these new things… but what we’ll have will still be recognizable as an MLS.
I’m not entirely sold on that idea, because I’m trying to destroy my illusions. And once you look at what it is that people really want….
To think about this, to think about 2025, we have to consider just what the MLS actually is. What goals does it serve? What is the hole that the MLS drill makes?
What is the MLS? What is its value?
Let’s start with some authoritative definitions, so you’re not immediately disputing my definition of what an MLS actually is. The National Association of REALTORS says the MLS is:
…a tool to help listing brokers find cooperative brokers working with buyers to help sell their clients’ homes. Without the collaborative incentive of the existing MLS, brokers would create their own separate systems of cooperation, fragmenting rather than consolidating property information.
The MLS Handbook defines an MLS as:
- a facility for the orderly correlation and dissemination of listing information so participants may better serve their clients and customers and the public
- a means by which authorized participants make blanket unilateral offers of compensation to other participants (acting as subagents, buyer agents, or in other agency or nonagency capacities defined by law)
- a means of enhancing cooperation among participants
- a means by which information is accumulated and disseminated to enable authorized participants to prepare appraisals, analyses, and other valuations of real property for bona fide clients and customers
- a means by which participants engaging in real estate appraisal contribute to common databases (Revised 11/04)
Really what we’re talking about here is a database with a unilateral offer of compensation.
Let’s go to another authority. The Council of MLS says the three core benefits of the MLS are:
- Confidence: The MLS safeguards market information and enforces rules that govern market participation. This allows real estate professionals to do their jobs with a confidence that would not otherwise exist.
- Connections: The MLS creates connections between professionals with properties to sell and those with clients who may buy them. It is the platform on which those who make transactions happen come together.
- Community: The MLS sustains a dynamic community of professionals where competitors cooperate to make homeownership happen.
It’s great marketing and sloganeering, but really, it means the same thing plus one key thing: a database with a unilateral offer of compensation, with data integrity processes. I mean, somebody has to make sure the data is accurate, right?
Or do they?
And if they did, is this the best way to do that?
Meanwhile, in Commercial Real Estate
Something to keep in mind: Commercial real estate has been chugging along for decades without an MLS. Commercial brokers and agents have never had a common database with all of the properties, never mind one that is checked for accuracy. They have never had unilateral offers of cooperation and compensation. They negotiate compensation on a case-by-case basis, or get together at the end of the deal and fight over the pot of money. It might be annoying, but it happens, and nobody dies.
Commercial folks don’t have an MLS (except in some areas where the local residential MLS offers out a commercial version, but even then, not everybody participates so it’s of limited value). They have private companies – well, one private company, if we’re gonna get real about it, in CoStar/Loopnet — that provide some listing data and some comps.
The situation reminds me of some debates I’ve had with friends of mine over Zillow and the portals. They’d say, “We bought and sold plenty of homes without Zillow, and we’ll do it again without Zillow. We don’t need no steenkin’ portals.” Yeah, that’s true, more or less.
Echoing them, I’ll ask, “Have you looked at commercial real estate? Properties got bought and sold without the MLS and without Realtor Associations, and properties will get bought and sold without them.”
Yes, of course, I understand it’s a completely different business, sort of like how Goldman Sachs and your local credit union are both in the financial services industry but could not possibly be more different. But it’s worth thinking about why CRE folks appear able to keep things going without – to quote CMLS – Confidence, Connections, and Community.
And… as the biggest fan of the MLS, who truly believes that it serves both the professional and the consumer… let me play Devil’s Advocate (something I’m pretty good at doing).
One could argue that there is a far higher level of professionalism in Commercial real estate – I know the CRE folks certainly think so – BECAUSE there is no MLS. You don’t have the crutch of a common accuracy-checked database with guaranteed payment to rely on, so you have to hustle far more.
You want comps for that office building? You’d best do your own homework. Even if you pay CoStar a gazillion dollars to get you comps, your client isn’t going to be all that impressed if you haven’t done your own research to back up your estimates of value.
You don’t know the building, because you just found it on Loopnet? Good luck trying to get your client impressed as you’re walking through it, and he’s asking questions about the power load and foot traffic numbers.
You want the listing agent to pay you half of the commission? You’d best convince him that you’re bringing enough value to the table that he thinks it’s worth sharing his commission with you. Oftentimes, the answer in CRE is, “Get your client to pay you.”
Again, I know it’s a different business: CRE deals often involve deal teams, with multiple agents, engineers, consultants, lawyers, bankers, tax and finance experts. I mean, when you’re doing a $600 million lease, you’re not doing that with one guy who puts a sign on the building.
But having come out of the commercial real estate world myself, I can assure you that the disdain some commercial people have for residential real estate agents is real. “Blue-haired ladies who lunch” is a phrase I have heard more than once at commercial events, to use just one example.
There are people *cough* KenJenny *cough* who think that the MLS is one reason why the industry caters to the lowest common denominator, and screws brokerages over. I don’t agree with them, because I think the brokerages themselves often cater to the lowest common denominator, but they do have a point. Major CRE firms don’t go begging agents to please, please, pretty please come join us. CEO’s of big-time commercial firms do not, as a general rule, bend over backwards to kiss the ass of some agent with ginormous egos. Major CRE firms do not, as a rule, give away 100% of the GCI from a deal; 50/50 splits are far more common in commercial than they are in residential real estate. Why?
Because the brokerage firm’s own resources, their own database of properties and comps and contacts and networks, make a big difference. Commercial firms have dedicated research departments who have their own data resources on building and leases and comps. So their brand matters. It makes a difference when calling on a building owner to say you’re from CBRE or Cushman & Wakefield, vs saying you’re from Billy Joe’s Commercial Real Estate and Laundromat.
The 2025 Future Without “The MLS”
Taking all of that into consideration, here’s what a possible future without the MLS looks like.
First, we have to recognize that there is no scenario under which society, the economy, and the government allows no database of homes for sale. It’s too important a sector of the economy. We’re talking 17-18% of the GDP for housing alone. Include Finance and Insurance (a big chunk of which is residential mortgages) and we’re talking about a fifth of the total U.S. economy.
Policymakers simply won’t let that collapse because of a lack of data. Remember the Bubble and the Collapse? The Senate Subcommittee on Investigations looked into the cause of the financial collapse and released a 650-page report on it. One of its findings:
The absence of relevant data for use in RMBS modeling left the credit rating agencies unable to accurately predict mortgage default and loss rates when housing prices stopped climbing.
Note that this was with the MLS system we have in place, which supposedly checks listing data for accuracy and is super-timely and comprehensive and so on.
So the way I see it, the big banks, the institutional investors, and the governments around the world that they (more or less) own, simply will not allow there to be no data on housing sales/activity.
But that doesn’t mean that they love the situation as it is today, with 700 little disparate databases everywhere with different data formats and different business rules and so on. What Big Gov and Big Biz and Big Tech love is standardization, uniformity, and a as few sources of data as possible.
Remember: they don’t want a drill, but a hole.
So what would be the best way to get that hole, when it comes to real estate data?
It would be the easiest thing in the world to mandate that all real estate activity be entered into a single common database. The reason why it would be so easy is that every single broker and agent in North America has a job because of a license from the government. I’m not sure that new legislation would even be necessary, since all of the real estate licensing law I’ve read gives tons of authority to some regulator to promulgate new regulations in the name of consumer protection.
I know that real estate people automatically think of Zillow… but there are a lot of databases out there with all of the property information. It could be Realtor.com, Trulia, or even RPR in a public-private partnership between NAR and HUD. Data accuracy compliance would also be the easiest thing in the world to do for .GOV: one strike, pay a fine; two strikes, suspended license; three strikes, and you’re out! You don’t have the issue of local MLSs failing to enforce data accuracy rules or the tiny local MLS with 300 members whose “Compliance Department” is also the part-time Association Executive, MLS Director, receptionist, party planner, and head janitor.
The ideal combination here is actually not NAR/Zillow/Whoever because of all of the passions involved and all of the internal politicking that would happen. The ideal vehicle for real estate data is a public-private partnership between the Federal government plus the 50 State Governments plus Google (you know, the $820 billion tech company whose original mission statement was “to organize the world’s information and make it universally accessible and useful”). This public-private partnership would operate a National Property Data Platform (“NPDP”) under HUD, with each of the States having its own set of offices and regulators, and Google supplying the technology. Forget RESO; the consortium will set the National Real Estate Data Standards – with input from the industry, of course, but they make the call.
That’s a lot of government jobs, and many would be filled with people who work for the MLS today. Denee Evans, CEO of CMLS, might be a NPDP Commissioner in that world. Hope you like DC, Denee.
Since this would create a large number of federal, state, county, and municipal jobs, the insanely powerful AFSCME (American Federation of State, County, Municipal Employees) would get behind this project… as would their friends in the police, teacher’s, firefighters and other unions. I’m actually somewhat mildly surprised this hasn’t happened yet.
NPDP would of course be a public utility, with HUD and the States setting the rates that Google can charge for access. Not only would it be possible for anybody to enter listings and activity into NPDP, as well as get data out of NPDP, but it would be required. So, if you’re doing a FSBO, you have to enter it into NPDP. Your FSBO home sold? Enter it into NPDP – or pay a fine. Refuse to pay? Get your tax return docked, with penalties.
Dozens, hundreds of companies would pop up to help individuals and companies comply with NPDP; think how big the tax prep industry is. That’s additional economic activity, additional jobs, which elected officials tend to like.
Obviously, there are other “Black Swan” type scenarios for this. Feds + States + Google is just one scenario.
About Cooperation and Compensation
So we have the database, with data accuracy mechanisms that are superior to what we have today.
What about cooperation and compensation? That’s the other major piece of what makes an MLS.
The key issue to keep in mind is that the MLS system was invented at a time when consumers really didn’t have access to the marketplace. Everything was mediated.
Think about law. There was a time when you had to contact a lawyer to do anything: draft a contract, draft a will, setup a new company, whatever. Today, LegalZoom and other companies let you do routine legal tasks online without speaking to a single person.
Medicine? Time was, if you had a pain in your wrist, you had to go see a doctor just to find out what the problem is. Today, you have WebMD and other resources that lets you self-diagnose quite a bit of common ailments. There are in-home tests for drugs, for STDs, for cholesterol, and so on and so forth.
Accounting? TurboTax, everybody. Travel agents? Stockbrokers?
Now, it may be that even today, the best thing to do is to call a professional. I know the industry certainly feels that way. But consumers gonna consume, no matter what we think. And if they screw themselves – like pay too much tax because they Turbotaxed, or suffer in pain because they trusted WebMD instead of a real MD – then they screw themselves. It’s the American Way, where you are free to screw yourself. (Well, sorta, within reason, and maybe not in the Bloombergian vision of paternalistic government where they won’t let you have sugary soft drinks….)
And on the list of things that concern consumers, this cooperation and compensation stuff is pretty low on the list… if it appears on any list whatsoever. What do consumers care about? Themselves, and their own goals: how do I buy this house, or sell this house? How do I find out what’s on the market? How do I know if I’m paying a fair price?
When everything was mediated through a real estate agents, cooperation and compensation served the needs of the consumer. So it was invaluable. Today? Forget invaluable; is it even necessary?
More to the point, does the blanket unilateral offer of cooperation and compensation serve the needs of the consumer, and is it necessary? Again, they don’t want a drill, but a hole.
How exactly do consumers get screwed if a buyer broker and a listing broker have to agree on how they’re going to pay each other? It really isn’t clear anymore in the age of Zillow, Redfin, Opendoor, Knock, and whatever is around the corner.
Then there is this…
Let’s say you believe – as so many people do in our industry – that cooperation and compensation is absolutely critical to protecting consumers. Say you believe that C&C ensures that a home gets maximum exposure on the marketplace as buyer agents are strongly incentivized to bring buyers to every single home for sale on the market. Or say you believe that C&C makes it affordable for buyers, since otherwise, they have to pay the buyer agent something at a time when they have to scrimp and save every nickel to make the down payment. Whatever the rationale, say you truly believe that cooperation and compensation are essential for consumer protection.
If you believe that, then cooperation and compensation probably should be written into the law, and not left up to the whims of local MLSs or REALTOR Boards or brokers and agents to work out. For example, Indiana Code 876 8-1-9 should be revised to read:
Sec. 9. A listing broker
maymust offer a portion of the broker’s commission as an inducement to selling brokers to sell a particular property. Such commission must be paid to the selling broker, and in no case shall it be paid directly to a broker associated with the selling broker.
That sound you hear is the collective groan from hundreds, thousands of Government Affairs Directors going, “You want us to lobby for what now?”
The Third Party Solution
So like I said, the whole “There is no MLS” angle is… well, uninteresting. The economy, the society, the government will not allow a fifth of the GDP to be overwhelmed by chaos.
The interesting thing is more of a “What exactly does the MLS look like in 2025?”
For our purposes, let’s assume that the industry does not make necessary improvements, and tries to maintain the status quo – as it pretty much always does. Let’s assume that we’re still having panels in 2024 where MLS CEO’s get together and say, “Technology isn’t the problem; it’s all the politics!” Let’s assume that brokers are still pissed off and working on some new UpsideDownStream Initiative 3.0. (In case you think that’s insane, we were talking about pretty much the same things in 2010 that we were in 2017.)
I think that future looks like one or maybe two large property databases, operated more or less as a public data utility. The key need in the Internet Age is:
- Centralized database of information on real estate
- Accurate data
- Easily available to all data users, including consumers, Wall Street, government, and academia
Surrounding this Property Data Platform will be a whole host of companies that provide everything from technology to payment clearing to Cooperation & Compensation Services.
There is already a model for something like this: the financial exchanges, like NASDAQ and NYSE.
These markets themselves don’t make user technology; NYSE doesn’t provide you with a computer terminal or a web-based user interface when you sign up. Dozens if not hundreds of vendors, like Vela, Thompson Reuters, Bloomberg, and so on provide technology to access the NYSE.
The same thing with NASDAQ. You get your membership in NASDAQ, pay NASDAQ for the privilege, and then go buy a tech platform to access it.
In many cases, the exchanges themselves don’t do key services surrounding the exchange, like clearing and settlement. Dozens of companies provide those services to market participants.
Similarly, I see a future in which the so-called “MLS” is a giant trading platform/database with data accuracy and data compliance requirements. Those compliance requirements should and could be legal/regulatory in nature, which means violating those have real consequences. The technology will be provided by an array of vendors, just like in the financial world.
Cooperation and Compensation will be provided by third parties that specialize in guaranteeing coop & compensation. Several come to mind as to who could do this, and guarantee that if you bring a buyer, you’ll get paid, at least by others who are part of the same cooperation and compensation network:
- National franchises
- Referral networks (Top Agent Network? LeadingRE?)
- Title & escrow?
- Facebook? Paypal?
- New entities that specialize in C&C
And of course, you’ll have dozens of forms that allow two brokers to instantly execute a bilateral cooperation and compensation agreement on a case-by-case basis with an e-signature.
This is really not hard to do. The technology piece is trivial. So… you have to ask, why not?
Is This the MLS?
Let’s go back to the beginning. Does something like this — a large national database of properties, with accuracy mechanisms, and a whole host of third party solutions for cooperation and compensation — serve the same essential function as the MLS? Of course it does. It makes the same MLS-shaped hole but at lower cost, greater efficiency, and without so much of the politics.
But is that the MLS? Would any of us recognize it as an MLS? After all, it won’t be owned by REALTOR Associations, or by real estate brokers. It’ll be owned by some large tech company, or a government agency, or some public-private partnership of some kind.
Not the drill, but the hole.