What is the MLS, Post-AMP?

Who am I, what have I become?

Two stories hit my awareness overnight that confirm something I’ve been saying for a while.

In 2013, I wrote this:

The second possible unintended consequence is not regulatory, but practical. For a while, I’ve argued that the reason why the MLS has become so important was that in the newspaper age, it was the most cost-effective form of advertising a home for sale. I’ve argued time and again that it is a mistake to call listings “data”; they are fundamentally advertisements.

More recently, I’ve wondered if what the brokers and agents value the MLS for today is that it is the conduit through which they advertise properties for sale on the ultimate destination: the Internet and mobile apps where consumers actually are today.

For years, I worried that without reform, without change, the MLS will cease being the marketplace for homes and become the conduit to the marketplace: the Web. Everyone assured me that I was smoking some powerful herb. Then…

Yesterday:

Today, Quill Realty announces that it will be leaving the Northwest Multiple Listing Service. This will allow Quill to sell homes while charging owners only its own, single broker commission of 1%. So home owners will soon be able to sell their houses using the services of a fully licensed REALTOR™ for far less than the 3% to 6% of the MLS.

Quill frankly admits that sellers will lose some market exposure when they forego listing on the MLS. But not much. Ninety two percent of all home buyers used the internet themselves in 2014 when looking for the home to purchase. Quill anticipates being able to put its listings on numerous, highly trafficked web sites, such as Zillow, Redfin, and Realtor.com, exactly those places where buyers are searching today. All without using the NWMLS and without paying the commission of a cooperating broker who represents the buyer. [Emphasis mine]

Today:

Although the MLS is crucial to me as a broker — both for the data it provides and assisting in making dealings between brokers run smoothly — it is no longer my number one marketing tool to get properties sold. Yes, my MLS has a public-facing site, but it’s so ugly and clunky that I’ve never had a consumer tell me they’ve searched with it. The top real estate search portals — Zillow and Trulia and realtor.com — have the buyers’ eyeballs.

Zillow captures almost a quarter of the Internet real estate searchers. If that’s where people are searching, that is where my brokerage needs to be, front and center. That does not mean buyer’s agents are marginalized in the picture. I don’t care who sells my listings — one of my agents or an agent from XYZ brokerage. My goal is to get it sold.

Well then. So much for those assurances. Maybe that herb I was smoking is called prophecy?

In any event, combine those two stories with the fact that the Modular MLS has taken a huge step forward with RPR-AMP. RPR will provide the MLS with a technologically advanced back-end; a whole variety of vendors can and will provide the front-end (including custom broker or agent-specific front-ends that can access the MLS directly).

What then, is the MLS in the post-AMP era?

Post-AMP, the MLS is Not Technology

One thing that seems clear is that after AMP, with a Modular MLS, the MLS is no longer defined by its technology. Today, most people think of the MLS as a “technology company” of some sort, because they interface with the MLS through technology. With but a single front-end provided by the MLS vendor, the real estate professional “logs into” the MLS, uses the tools such as search, CMA, gateways, etc. The user experience, as horrible as it is, is fundamentally one of interfacing with the MLS software to get at data.

Post-AMP, the individual user is not restricted to “MLS software”. In fact, there is no such thing as “MLS software” for the user then. There is whatever software the user decides to use. Maybe that’s an off-the-shelf solution from a vendor like CoreLogic or Black Knight or FBS. Or maybe that’s a custom solution built for him by a local web developer (much like how IDX websites are done today). The point is that for the broker, for the agent, the technology used to access the MLS is no longer provided by the MLS. The experience is no longer a “technology experience”.

Post-AMP, the MLS is Not Data

So if the MLS is not the technology, is it the data? Is the MLS then a compilation of listings?

I argue that the MLS is not the data either. For one thing, the data belongs to the brokers. Yes, the MLS has copyright over the “compilation” of the data, but the actual elements of the compilation belong to the brokers. Furthermore, after the NeighborCity lawsuits, we know that the only copyrightable elements of a “listing” are the photographs and the Property Description.

Post-AMP, the MLS doesn’t even operate a database; RPR does that for the MLS.

Finally, if the MLS is data, then Zillow and Trulia and Realtor.com are also an MLS, since they all have listing data voluntarily contributed by brokers and agents.

The MLS is Regulation

In a paper I wrote for SIRMLS back in the day, I laid out a scenario in which the MLS is neither technology nor data, but the lawgiver. Starting with the foundation of Cooperation and Compensation (“C&C”) but extending throughout all of the rules of the MLS, the MLS is simply the entity that provides the “rules of the road” and enforces them for the benefit of participants.

In other words, the MLS is a regulated marketplace. Its value is in the certainty that market participants have of what to expect. Its value is in the transparency of transactions.

Let me digress for a moment. My first job out of college back in the day was at a hedge fund called D.E. Shaw & Co. One of the business areas of DESCO back then (and may still be) was something called Third Market Trading. One definition of the Third Market is:

Third markets are financial markets in which listed securities are traded over the counter by investors who are not listed with a stock exchange. Also known as an over-the-counter (OTC) market, a third market traditionally has been utilized as a means of trading large blocks of stocks between institutions.

Basically, the Third Market was most often utilized by large institutions who wanted to make trades or acquire stock without alerting the rest of the world as to the price or who was buying and selling. Going through an exchange means the trade is posted, with the price and volume, so other investors can react quickly and the price of the stock can go up or down. Go through Third Market, and people can’t see that Big Fund A sold 10 million shares of Apple to Pension Fund B.

The downside of Third Market is that it is off-exchange. The rules and regulations of the various exchanges that protect the buyer and seller, that provide transparency and visibility, do not apply. Sophisticated institutional investors can cope with that, but they would need to enter into contractual arrangements with each other (the counterparties) to ensure that each side would do what it promised to do.

I bring this up because you realize when you get exposed to things like the Third Market, the currency markets, or private placement deals, that there is tremendous value to the stock exchanges. The rules and regulations of NYSE, of NASDAQ, of CBOT, of AMEX, etc. are real time-and-energy savers. Instead of having to negotiate (and enforce) contracts with each and every counterparty, you trust the Exchange to ensure that everyone behaves as they ought to.

The same with the MLS.

The value of the MLS is in the certainty of behavior and the transparency of the transactions. The latter is crucial in real estate, since houses are not commodities. Without comparable sales information, it isn’t clear that the housing market would function at all. Zillow can and does bring buyers to a property; once there, how would anyone know what to offer? Public records are months after the fact, and not entirely useful in a fast-moving market.

That’s not to mention the simple fact of C&C. Quill Realty makes the lack of C&C a business model, but they might find themselves regretting that decision when the buyer who calls on their off-MLS listing doesn’t want to buy that house, and wants to look at other houses on the market. Maybe the Quill agent will get paid for bringing a buyer to someone else’s property; then again, maybe she won’t.

Erica is correct that as the listing agent, her job is to sell the client’s home, and she has to be where the buyers are. That doesn’t solve the issue of what she can expect from the agent on the other end without the rules and regulations of the MLS (and to some extent, state laws and NAR’s Code of Ethics, if the other agent is a REALTOR).

The MLS Must Refocus

Having said all that, what is clear today is that the MLS has to refocus its efforts. In recent presentations, I’m fond of making the point (paraphrasing the immortal Bill Parcells) that you are what your budget says you are.

If the MLS’s largest line-item are golf outings, it’s not an MLS — it’s a country club. If the MLS spends more of its budget on executive travel than it does on compliance, that’s not an MLS but a travel club. If rules and regulations and data compliance (aka, transparency) are the core benefits of the MLS as a regulated marketplace, then those are the areas where the MLS needs to devote its attention, energy, and budget.

Furthermore, most everyone understands that the MLS is about C&C. I submit that the MLS needs to widen its approach to the rules and regulations, to regulate the relationship between professionals who participate in the marketplace.

For example, I support a rule in the MLS that mandates responding to inquiries within a set period of time. One of the scourges of residential real estate is unresponsiveness of agents. Make it a rule: when contacted by another member of the MLS, you must respond within 1 business day. That sort of certainty is a huge benefit to participants. I’m sure you, the most informed readers in real estate, can think of other rules as well.

Lawgiver. Rules and regulations. The regulated marketplace. Here lies value separate and apart from all the noise about technology.

-rsh

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