On November 6th, at roughly 3:15PM Eastern Standard Time, the National Association of REALTORS declared war on the rest of the real estate industry. To be fair, NAR probably did not realize that it did so. Judging by the initial responses, it doesn’t appear to me that most people see what I saw. But, probably because of my twisted nature and my penchant for focusing on the dark side of human nature, I am predicting nothing short of civil war in the real estate industry going forward unless REALTORS Property Resource (or RPR) in its current form is immediately scrapped.
What brings forth such hyperbole?
RPR, or REALTORS Property Resource, was a project shrouded in secrecy. Brian Larson’s post of October 19th, 2009 is a pretty good pre-unveiling summary of the questions and concerns around RPR. Brian Boero’s initial take is a very decent summary of the post-unveiling. But since Brian is a much nicer, much sunnier, much more positive guy than I am, I believe what you’ll get from Brian is the “Glass Half Full” vision.
Strap in for the darker vision.
RPR In A Nutshell
I got off the preview webinar earlier today with my head spinning. With the video choppy, I confess I missed a good 20 minutes at the end, so if anything I write/speculate below is totally incorrect, I’d be happy for corrections.
(UPDATE: The entire webinar/webcast is available here: http://webcast.streamlogics.com/audience/index.asp?eventid=35680788. The RPR Fact Sheet (PDF) is available here: CLICK FOR PDF.)
Based on what I heard — and I’m going off of notes here since I have neither a transcript or the webinar recording to review — RPR is a national database with 140 million property records, both residential and commercial, with the vision of becoming the resource for anything real estate related.
LPS (a division of Fidelity) will provide the base property data — some 265 million residential and commercial assessment, sales, and mortgage records. That is north of 90% coverage; through future unspecified investments into an unspecified company (or companies), RPR plans to increase that to 100% coverage. On top of that, RPR will add in all of the on-market and off-market data from MLS’s, including notes and annotations by individual REALTORS, to create what will be the most accurate source of real estate data in the country.
There will also be 850K distressed property records in various stages of foreclosure with complete address, owner, and mortgage info updated every month. It is unclear where this data is coming from.
125K elementary, middle, and high school information (both public and private schools) together with detailed data and parent reviews will be available via RPR. I assume one or both of Education.com or Greatschools.net is providing this data; if someone else, that makes things even more interesting.
Neighborhood demographic data (I assume the census, employment, etc. type of data that companies like my former employer Onboard Informatics specialize in) will be provided through RPR. But RPR will also feature psychographic data — consumer spending habits, consumption habits, etc. — of the variety available from companies like Nielsen Claritas with its PRIZM product.
Very cool mapping tools will be available through RPR; from what Marty Frame (more on this below) said, it sounded a bit like RPR will offer some level of GIS functionality through RPR.
Oh yeah, and RPR offers some of the coolest, slickest property search, annotation, comparison tools I have seen yet for real estate professionals along with customizable reports including CMA’s, Property Profiles, and others.
Finally, RPR will offer a custom AVM (Automated Valuation Model) a la Zillow’s Zestimates. Except that RPR will bring in actual MLS data, notes, annotations, and opinions of individual agents to create the REALTOR Valuation Model or RVM. This RVM will be, according to NAR, the gold standard for data accuracy and quality. Then on top of the uber-database, RPR plans on layering on heavy-duty data analytics to slice and dice for even more custom datasets.
I know I’m leaving things out, but bottomline is that RPR is a dream user interface for REALTORS. It’s better than anything I’ve seen from the Big Tech companies like Trulia, Zillow, Roost, Homegain, Cyberhomes, even Redfin.
Oh yeah… RPR is not only a database… it’s a company. It will be a wholly owned subsidiary of NAR, but separately staffed, separately created as an Illinois LLC, and run as a startup. The new CEO is Dale Ross, the founder and former CEO of MRIS, the largest MLS in the country. (Full disclosure: MRIS is a client of 7DS.) The President is one Marty Frame, formerly of Cyberhomes, and once described to me as “the smartest guy in real estate, period.” Those are heavyweights.
In answer to Brian Larson’s question about business models for RPR, there are two.
First, RPR has already been in discussions with government organizations such as Fannie Mae, the Federal Reserve, OFHEO, and others about providing them with far more accurate data on housing trends, pricing, etc. Washington (and I imagine state and local governments) responded with enthusiasm, suggesting that had RPR been available five years ago, the whole subprime mess might have been avoided.
Second, it sounded to me like LPS will be granted an exclusive license to distribute/sell the various data products that RPR will spit out, from the RVM to the various data analytics products of the sort that Wall Street hedge funds might care about.
Other than that, the entire system is free to REALTORS, and it sounded like it would be free to MLS’s and Associations.
So Why the Negativity?
Based on the above, if you thought that RPR was the greatest thing since sliced bread to hit the real estate industry, you would be forgiven. In a way, it is.
But RPR is a trojan horse to the MLS industry, which is the foundation of the real estate industry in the United States, and a giant middle finger to some very significant players such as MLS technology vendors (e.g, First American, MarketLinx, Rappatoni, etc.), data providers not named LPS, almost all of the major brokerages, and a few others besides (Dear Mike Simonsen: I wouldn’t make any large purchases anytime soon.)
Brian Boero writes:
This is where it gets really thorny. As Brian Larson pointed out in his excellent post examining the potential business models for the RPR, there are lots of potential overlaps between a national property data site and what Realtors already get from their MLS. Some MLS operators think the NAR has no business doing this and perceive it as the precursor to a national MLS – a cataclysmic prospect from their perspective. Others – usually those who are relatively innovative and thus less insecure about their own value proposition – welcome the potential disruption.
Some will be convinced much as they were during the days of Homestore options and Gold Alliance dollars by the prospect of some upside. Others will be won over by NAR/RPRs insistence that there will be no offer of compensation in the RPR.
Whose ox gets gored, who benefits, and where the money flows is anybody’s guess at this point. But what I can safely say is that this is a significant shock to a system that needs it.
Will MLSs play ball? As with most things in this space, the outlook is unclear.
I think I can answer this, Brian. The outlook is unclear, but all of the signs point to war. The ox that gets gored is obvious, and where the money flows is also not a secret. (Unless I’m missing something crucial here….)
First, look at the incentives. Try as I might, I can’t see a single good reason why an MLS might participate in RPR unless there is some contractual obligation on the part of MLS’s to provide its data to RPR or to NAR. I am assured by industry executives that there is no such obligation. Once its members start using RPR’s rather amazing user interface for all of their needs — except the entry of the listing information in the first place, which incidentally is not required since RPR has all of the property information in the country so all you have to do is go into the system and flip its status from “Unavailable” to “Listed” — they might reasonably ask, “Why am I paying the MLS this $20/$40/$60 a month again?”
At the very minimum, we’re looking at significant pricing pressure since the value being provided is so much less in the World with RPR. And in many cases, the MLS will simply go bankrupt. Turns out, MLS’s employ rather lots of people, including executives who are drawing a very nice income from heading up said MLS’s. Are we to believe that these people will voluntarily march down to the unemployment line so that RPR can make millions?
The $25 – $50 million in savings to MLS’s and Associations that Dale Ross threw out is presumably the bait. Some MLS executives will jump at that, then watch in puzzlement as their membership numbers dwindle down to nothing.
The “offers of compensation and cooperation” is significant, sure. I can think of no reason why NAR could not make that a rule as well. Of course, NAR has sworn up and down not to do such a thing to forestall the fear of the national MLS. However, the “offers of compensation” as nice as that is, is unnecessary to create a national MLS in all but name: case in point = Loopnet.
What further amazed me is that RPR openly admitted that it will pay $12M to LPS for its public records data, but left out any mention of any sort of payment to be made to the MLS for its far-more-difficult-to-obtain data. Was this simply an oversight? If not, the financials of RPR, LLC are going to look rather different. Public filings information, after all, is available from other players — specifically First American. MLS data is available only from the MLS itself, or directly from its member brokers and agents.
So when Brian talks of “some upside”, I’m not sure what he’s referring to. Because I didn’t hear anything about any upside to the MLS.
Those who are “more innovative and more secure” ought not to be so secure. Innovative how? A public facing website, as HAR has? Since RPR is not (yet) a public facing website, but a backend website for the real estate professional, once HAR’s data is being fed into RPR, I find it extraordinarily difficult to believe that a REALTOR in the Houston area would use anything other than RPR for his day to day business.
The inclusion of CMA’s, of reports, of notes and annotations — this is extremely significant from this perspective.
Fact is, once RPR is in your market, every REALTOR will use it. It’s that good. There isn’t an MLS in the country (yet) that can release a competing product. Over time — and a rather short period of time at that — every member of that MLS will wonder why he is paying those MLS fees.
Human nature dictates it.
The Technology Vendors
That RPR is a gauntlet thrown down to the companies that supply the backend technology to MLS’s cannot seriously be disputed. What RPR will provide is better than any MLS system on the market today, period, full stop, end of story.
If companies like MarketLinx want to stay in business, they’re going to have to spend a rather large sum of money to create a competing product. Oh yeah, and find data. Oh, and find a way to monetize that data, as RPR plans to do. And guess what? LPS ain’t gonna be playing with you no more.
Are we to believe that all of the executives and employees of these various companies will happily march their way to the unemployment line so that RPR can make millions? I seriously doubt it.
At a minimum, I would expect various MLS technology companies to suddenly discover that the RETS data standard simply doesn’t work at transmitting data accurately, adding months upon months of cost in order to make data import/export feasible. Or that certain things, like photographs, can only be transmitted by blind messenger pigeons with diabetes.
Actually, I expect that these executives are currently banging the phones a la Jerry Maguire immediately after he’s been fired, calling every single MLS client to convince them not to participate in RPR. The battle lines have been drawn.
Plus, should we expect that the good people at First American, at whichever school information provider who wasn’t chosen, at whichever foreclosure info provider who wasn’t selected by RPR, and other such companies are quietly updating their resumes?
I rather think they are sharpening their swords and polishing their muskets.
Speaking of Data Monetization…
What businesspeople and other evil villains quickly realize is that RPR, as a for-profit venture of NAR, isn’t offering all these wonderful tools for the betterment of humanity. They’re doing it to make millions of dollars from data sales.
Companies currently making money from selling data to governments and to Wall Street might reasonably inquire how they might forestall having to file a Chapter 7 bankruptcy.
MLS’s and Associations might reasonably wonder if they might bypass the middleman of RPR and sell their data directly to Fannie Mae and others by hiring a data analyst or three.
These two might find each other in the next few months and discover many topics of mutual interest to discuss. The battle lines are being drawn.
Speaking of which, via Twitter earlier today, I had an interesting exchange with an industry guy who’s really quite smart. He was all jazzed about RPR because now, there’s a single source of data from which he can pull information. Except that neither Dale Ross nor Marty Frame breathed a single word about “free data access”. I heard nothing about a RPR API; nothing about RPR web services; nothing about exporting the data out of RPR… unless you’re Fannie Mae, Wall Street, or… oh yes, customers of LPS! In fact, RPR is relying on the sales and marketing prowess of LPS to monetize the data products. Who might LPS be selling such data to? You don’t really need that many salespeople to sell to a dozen government agencies and Wall Street firms, do you?
Maybe I’m wrong; maybe RPR does plan to make a free API available. I can’t see it, since that would more or less destroy its business model.
Therefore, I have to conclude that RPR will offer the user interface, the tools, the RVM, the reports, and all of these wonderful things to the REALTOR at no charge… but charge rather handsomely for any sort of a data feed that isn’t tied up with a huge list of restrictions on display, usage, and derivative products (a mainstay of RPR’s business model).
While Brian Boero saw RPR as a big boon for brokerages, I rather think differently. Already, big brokers are under pressure for not doing enough to provide value to its agents. Independents are popping up everywhere as the big brands continue to lose meaning in the consumer’s mind.
One of the benefits that large brokerages could provide to its agents is a sophisticated, sexy backend tool that provides things like accurate data, custom reports that provide a competitive advantage, and beyond-the-MLS information.
After RPR, every single member of NAR will have the best backend agent tool ever created. If you’re a Coldwell Banker agent, there will be little reason to go to CREST or to the CB Extranet site to get tools and data. RPR will have it for you.
The mapping tool on RPR kicks the bejesus out of anything I’ve seen offered by any major franchise or major brokerage. And the local mom and pop will have it, just as your agents will, except that the local guy will be paying 90/10 splits since he doesn’t have the overhead you have.
Think your big brokerage office will be attracting or keeping more top agents? Based on what?
The Civil War
With the incentives as lined up above, civil war within the industry is virtually inevitable. Brian believes that NAR will simply go direct to brokers and agents if the local MLS does not cooperate. I wonder if he has considered the possibility that the local MLS will withdraw from NAR.
As far as I can tell, each MLS is a private business enterprise that has no legal or financial relationship with NAR, a trade organization. As far as I can tell, each local Association is a private organization, rather than a chapter of NAR, that is affiliated with NAR and allowed to use the REALTOR name and logo. But since licensing of real estate is at the state level, I’m not sure I see the downside for (let’s say) the Houston Association of REALTORS to change its name to the Houston Association of Real Estate Licensees.
For the broker/agent in Houston, then, the choice will be: (a) join NAR and get access to RPR, but only with listings other RPR members have put in, or (b) stay with HAREL, deal with crappier interfaces (at least until HAREL’s MLS tech vendor gets its upgraded product to market), but get all of the listings.
Some brokers may choose RPR and NAR; others may choose HAREL. And now we have civil war.
Every single vendor, every data provider, every company that was not chosen by RPR as its partner has all the incentive in the world to line up with the Rebel Alliance against the LPS-RPR Empire.
Yes, I’m probably being overly dramatic. Probably. Right?
Blessed Are The Peacemakers
The sad part is, I suppose, that this did not need to happen. And since RPR is not yet fully launched, war may yet be avoided. How?
It’s actually quite simple.
First, get rid of the RPR website. Offering that user interface alone makes NAR/RPR the enemy of every MLS tech vendor and of every MLS in the country. Instead, sell that interface technology to someone… like say LPS, which owns a MLS tech company, or put it into the public domain as open source code to spur innovation throughout the industry.
Then focus on making RPR a database in the true sense of the term: MLS’s put in data, and they get back data. The members continue to rely on the MLS for the user interface, for the reporting, for tools, resources, etc. The more innovative MLS’s will partner with better tech vendors to create innovative interfaces; the bad ones will get taken out by the good ones.
Second, the revenues from data sales must be split with the MLS, which can then pass on the savings to its member brokers/agents, or use the money to improve services and products. If the interests of NAR/RPR are not aligned with the interests of the organizations it is relying on to provide hyperlocal and hyper-valuable data, I see no way to convince them to give it up. This will make RPR’s financial projections worse, but on the other hand, they don’t have the cost of developing out sexy user interface either. And NAR doesn’t face the prospect of losing members by the hundreds of thousands.
I believe I have just now done more for peace than Barack Obama has. I await the phone call from Sweden.
Do keep in mind that I wrote this off of hastily taken notes and first impressions. Maybe I missed something big that renders my whole post completely wrong. Also keep in mind that maybe I’m dead wrong about what motivates people and organizations and companies. I doubt it, but the possibility exists.
Having said that, what I heard and saw today on the webinar is nothing short of a declaration of war by NAR on the rest of the real estate industry. By extending RPR past a national database into the best user interface/MLS software in existence, RPR has threatened the survival of the organizations that make up the infrastructure of domestic real estate: the MLS. I believe this is a mistake on NAR’s part, and one that they will end up regretting in relatively short order.
There will be blood.