For the past 18 months I have been busy working on a project. The subject of the project is not new — the evolution of MLS technology. The assumptions and proposals of the project are not novel — many were proposed years ago by others. The result of the project is not radical — an extension of current technology into a much broader application. Yet the project has the potential to revolutionize the MLS industry.
And the concept will be controversial. The stakeholders in all quarters will have opinions about the wisdom of such an approach. And the sayers of “Nay” might as well start sharpening their pitchforks now because I’m sure they will want to shake them at me in the near future.
But given a fair reading and an open-minded debate, I think you will find the concepts I am going to relate here to be disturbing to some, interesting to most, and important to all.
My report will be in four parts.
First, a history of how this project developed and the research I undertook.
Part 2 will be a definition and deep dive analysis of the problem the project was designed to address.
In Part 3, I will propose a solution and explain why it makes sense.
And finally, in Part 4, I will look at the pros and cons of the proposed solution and, identify the people I think can provide that solution and look at the potential for the future benefits for all parties involved.
Let’s dive in.
Part I – The Historical Perspective – Background and research.
Summary of the state of the MLS industry
The real estate industry is in a state of flux. Competing groups from all quarters are converging in a conflict that will change the landscape of the infrastructure and it is expected to happen within a relatively short time.
At the heart of the conflict is the MLS, as it becomes a focal point for the serious discussions prompted by changes in technology and consumer behavior and a continuing effort by the trade associations that own the majority of MLSs to reestablish their relevance to their membership.
The MLS is being pushed and pulled in many directions, used as a pawn in the chess game between the Realtor associations and the brokerages who formed them and whom they were created to serve. The calls for reform in the practices of the MLSs to make them more responsive to brokerage needs are competing with calls for consolidation and merger to strengthen the existing MLS organizations by increasing their size and influence.
Such conflict is not new. But adding to the growing enmity among these players is the increasing influence of the consumer, particularly the self-service oriented Millennials and Gen-X-Y’s abetted in their pursuits by the growth and influence of the national real estate portals. Zillow in particular has been on a crusade to become the top -of -mind brand when a consumer thinks of anything related to the home buying or selling process, or real estate in general. And they’re succeeding, thanks to a world-class marketing team and a seemingly limitless supply of advertising dollars.
I experienced first-hand the animus many MLS CEOs held toward Zillow during the 18 months I called on them as an employee of Zillow, seeking direct listing data feeds. The demands were many and the inclination to negotiate was practically nonexistent. But I consistently felt that the hostility was directed not at me personally or at Zillow as a company, but at an undefined, nebulous “threat” that the MLSs perceived coming from the portals in general. In the minds of some CEOs, the portals were threatening the MLS’s raison d’être by becoming the de facto marketing platform of choice for both agents and consumers.
Into this contentious environment, one MLS CEO made an unusual phone call in early spring of 2013. He said his MLS was about to begin the dreaded vendor selection process and he wondered if Zillow would be interested in being considered as the system provider for their MLS. He was working from the common perception that “Zillow is just one field away from being a national MLS.” Would Zillow like to add that field?
“No!” The answer was swift and resolute. Zillow had no interest in getting into the MLS business or even the technology business for an MLS. They held to their mantra they were a media company, not a broker, not an MLS, not a title company, nothing but an advertising vehicle for brokers and agents (and others) to reach a potential audience through pay per impression display ads.
That should have been the end of it. But ten days later I received a second call from another association executive asking the same question. I had no reason to believe these two people had talked to each other or compared notes. And I gave the same emphatic negative reply when asked the second time.
That spring, at the NAR mid-year conference in May 2013, I had lunch with both executives and talked in general about their frustrations with the current vendor options and their ideas for a different kind of MLS system. Their comments stayed with me even after I left Zillow some months later.
After Zillow, this newly minted industry consultant was invited to facilitate various strategic planning discussions for MLSs large and small. Many, I found, were wrestling with the same questions, looking for answers that would define purpose and mission for an industry seemingly at sea.
The MLSs were feeling pressure from many quarters.
- Big brokers, including the major franchises, had launched a broadside against MLSs in general when in the fall of 2013 The Realty Alliance presented their demands for immediate industry reform — “or else.”
- Agents and brokers expressed more frustration with the lack of innovation in MLS technology and pointed to the upstart portals as examples of what an MLS should look like. MLSs were seemingly talking to the wall if they asked for major improvements in their MLS system from their vendor. The MLSs had dug their own deep hole by playing vendors off against each other during contract renewal time, thus demanding and receiving the lowest possible price for service, sometimes near the break-even point for vendors. Without profits, vendors were at a loss how to finance innovation, research, and new development, while the MLSs who had selected them felt the backlash from their subscribers who demanded more.
- Agents are irritated with the lack of professionalism in the industry and the influx of thousands of new practitioners who became licensed during the bubble and who were now just hanging on. They started pocketing listings, marketing them through peer networks on Facebook rather than submitting them to the MLS. Major chunks of inventory in some parts of the country were being sold off-MLS.
- NAR through MLS rules adoptions and subsequent reversals of such rules were making it more difficult for MLSs to manage the playing field at the local level. The “Core Standards” initiative posed a threat to the charters of smaller associations. While many members would not miss their tiny association, agents would die without their local MLS that could wither with the demise of the association.
As I worked with the MLSs to dissect each of these problem areas, a couple of major trends showed through: most (not all by a long shot) of these problems resulted from either a lack of innovative technology to be able to solve the problem, or if such a solution were present and available then a lack of adoption of that solution by the MLS.
In Part II of this series, we will dig deeper into the challenges of running an MLS in today’s Internet age using systems developed during the first (sic) Clinton administration.
This post first appeared on Procuring Cause blog.