Yes, I know, I know. Nobody likes a “I told you so”. It’s obnoxious and childish. But… I just can’t resist! So forgive your humble scribe as I do a victory lap around the Tree of Nostradamus.
About what, you ask?
Well, it appears that RealEstate.com is relaunching as a lead generation website using a very particular model of data harvesting that has various folks up in arms. To take as one example, Brian Boero over at 1000watt:
So, you have what I’m calling a “paper brokerage” leveraging IDX to grow their “lead-to-close marketing system.”
It gets richer:
Unlike Zillow, Trulia and Realtor.com, which have spent gazillions negotiating for voluntary access to listings from MLSs and brokers, Market Leader, by virtue of its brokerage licenses, simply grabs the IDX feed.
I’m surprised that Brian is surprised. This was so obvious that I’ve made it one of my Seven Predictions for 2012. And the implications of this is also obvious: End of IDX As We Know It.
What RealEstate.com Is Doing
To be sure, let’s understand precisely what RealEstate.com is doing here. Brian provides a great summary:
- RealEstate.com operated as a brokerage when it was owned by LendingTree. They had several physical offices and practiced real estate. They were, on paper and in practice, a real estate brokerage.
- When Market Leader bought the domain, they also acquired RealEstate.com’s brokerage licenses.
- They have used these licenses to get IDX feeds from over 150 MLSs. But they evidence no plans to operate as a real estate brokerage. They are, seemingly, a “paper brokerage.”
- On the IDX-powered RealEstate.com, Market Leader (quoting their press release) “features only one real estate professional per market area” who gets the business generated from these listings. Market Leader makes its money (again, from the press release) “via an industry-friendly flat-fee referral model.”
Who could have seen such a thing coming?
Let me quote from a previous blogpost of mine on this subject:
For that matter, everyone in the industry with a shred of awareness knows that there are “brokerage” companies out there, who are officially participants in the MLS, dues-paying members of the Association of REALTORS, whose entire business model is predicated on earning referral fees from other agents to whom they will ship the “lead” to. And that “lead” is generated from the IDX search sites, which some of these guys set up by the hundreds to capture every possible long-tail search term.
Does the fact that such referral-farms have a real estate license, are paying dues to the Association, and paying MLS fees make such a dramatic difference? I don’t see it.
Ever since I started writing about syndication and worrying that all this syndication debates will spill over into IDX, I’ve had number of people tell me in no uncertain terms that the two are not even remotely the same thing. Syndication is evil, but IDX is all that is good and wonderful, or so I was told:
Both Rob Hahn and Jay Thompson pointed out that Internet Data Exchange (IDX) sites like yours, mine, and the sites of every brokerage in the country, are no different than the Troika sites. I don’t agree. The data accuracy issue becomes a relative non-issue where IDX is concerned save the MLS input errors. Even then, the MLS’s have procedures in place for policing and ultimately ensuring compliance. More importantly, IDX sites lack the resale component of the troika sites. While an inquiry on my listing may in fact go the agent-owner of another IDX site – and often does – consumers are generally clear on the fact that they are on a particular broker’s or agent’s site. And while some ambiguity may still exist where an IDX site is concerned, they are not simply trying to sell the customer to the highest bidder.
Pretty much everybody under the sun told me that there was a major difference between syndication and IDX, and that IDX wasn’t a problem at all.
How’s that working out for ya?
The End of IDX Is Now Foreseeable
In one fell swoop, the whole “data accuracy” argument goes out the window. If RealEstate.com’s data is inaccurate and can’t be trusted, why then, neither can yours.
Some folks are making a big deal of the “paper brokerage” issue. What I don’t understand is, given that almost half of the members in a many an MLS do zero transactions (that’s ZERO, as in 0, null, nothing, zip) in an entire year, what’s the difference?
Some have opined that a “real brokerage” offers cooperation and compensation. Um, well, I am 100% certain that RealEstate.com would gladly give you half of the commissions if you bring a buyer to one of their listings. What’s that now? They don’t have any listings? And that’s cheating, you say?
Except that describes numerous buyer specialist brokerages in America today. They don’t have listings either, and since they specialize in buyers, they don’t plan on ever getting any listings.
Is it cheating? Well, it’s certainly against the spirit of the rules. But given that brokerages have been exploiting this IDX thing for years and years and years now, setting up referral farm operations, offering cooperation and compensation on paper, but of course simply referring the business out to working agents for a 25% cut… what’s the difference again?
And it’s finally hitting some people that there is no way to opt-out of this, because it isn’t syndication. It’s IDX. RealEstate.com is not your average aggregator; it’s a brokerage. They’re not a portal; they’re a participant in the MLS in the usual meaning of the term.
How do you think this will end?
Will the likes of Bob Moline of RealtyAlliance and Pam O’Connor of LeadingRE, who threatened to pull out of the MLS over Franchise IDX, sit idly by and watch this happen?
Isn’t Jim Abbot of ARG Realty who was so passionate about the Official Listing Agent seal of approval now forced to pull his listings off IDX?
At the same time, will Zillow, Trulia, and Realtor.com, who have millions invested in the syndication status quo, who today spend enormous amount of time and money dealing with syndication feeds, simply sit back and watch RealEstate.com kick their butts with far-more-accurate data on a national scale at a fraction of the cost?
Time will tell, I guess, but I know how I’m betting.
Cue the Angry Policy Meeting
I suspect that if they haven’t happened already, we will soon be treated to the spectacle of MLS board after MLS board meeting to talk about this “IDX loophole” and trying to figure out how to close it.
Maybe make some sort of requirement that to receive an IDX feed, one has to be an “active brokerage”. Of course, defining such a thing would be mighty tricky. Especially since it was this precise sort of thing that brought down the Wrath of the DOJ down upon NAR several years ago.
Maybe watermark every single photo that goes out over IDX. But hey, wouldn’t that affect every single broker and agent in that MLS? Why, yes it would. Hmm.
Maybe prohibit flat-fee referrals amongst members? So RealEstate.com simply changes to 5% of commissions. Start regulating the referral amount? Uh oh, Mr. CEO, it’s the Department of Justice Anti-Trust Division on line two.
For that matter, no matter what NAR does, no matter what a MLS does, if they do anything at all to prevent RealEstate.com from this particular maneuver… their legal counsels have got to be hugely concerned about Market Leader bringing a private antitrust enforcement action.
Which means the Associations and MLS’s will be forced to move very, very slowly, if at all. That, of course, means the ball is in the broker’s court.
I’ll tell you what. If I’m a big broker, suddenly, that ListHub Real Estate Network thing is starting to look mighty attractive for a whole lot of reasons:
After much pleading and banging on doors, I feel that the executives at ListHub — all of whom are really smart, really cool people, by the way, and excellent at karaoke — would be forced to go to the MLS crying bitter tears of disappointment to inform them that the broker customers really really really REALLY wanted ListHub to setup a local Real Estate Network, enabling the syndication of listings to each other on the same Select-O-Matic technology they already enjoy with third party websites.
Farewell, IDX; hellloooo, bilateral syndication agreements!
Oh, this next group of MLS Policy Committee Meetings ought to be interesting to say the least. NAR should sell tickets to that event; it’ll still be standing room only.
So let me end by reiterating my suggestion from an earlier post:
Yes, yes, I know… quite a few people will see this inevitable move as a giant step backwards. Folks will take to Facebook and blogs and ActiveRain and Twitter and such places to write diatribes and talk about organizing a movement or a rally or some such thing. There will be lengthy posts written on how the dinosaurs have taken the industry back into the Dark Ages. Maybe there will be original poetry slams, or a music video, or an interpretive dance routine performed by masked dancers emoting sorrow and frustration. I can’t wait to see the creativity of the lamentations.
My suggestion is to do all of those things, but also to make plans for the post-IDX world. Because it’s coming, as inexorably as the Greek debt crisis is coming. You’re gonna want to be ready.
And to all those who thought I was an idiot for equating syndication with IDX… to quote the 20th century American philosopher Toby Keith: