I am performing a miracle right now. Blogging while flying 30,000 feet in the air. Will wonders never cease!
In any event, given the quality of in-flight wifi, I thought I’d keep this as short as possible.
Had a fascinating discussion recently with a friend of mine in the MLS business. We got to talking about Project Upstream, as he had thoughts on my recent post about the “Brokercentric MLS“. Somehow, we ended up on the fascinating statement from the Upstream people about how they view the role of Upstream. Here’s what I wrote:
Upstream is the initiative that the Brokerage Sphere believes would help reform the broken agent- and Association-centric MLS. Its core value proposition is that Upstream, and not the local MLS, will be the point of entry of listing (and brokerage) data. Upstream, and not the local MLS, will be where that data is maintained and updated, including status changes. In fact, Upstream is not just a data-routing platform; it is something far, far more:
Upstream is “a single source of truth” for broker information, said Cary Sylvester, a Keller Williams vice president and Upstream board member.
The local MLS would receive the broker data, including listing data, from Upstream. It would continue to provide some MLS functionality, such as CMA tools, that requires all of the data in a given marketplace since Upstream does not plan to launch with 100% coverage or 100% participation by all of the brokers in a marketplace. The MLS remains the provider of things like IDX and VOW because Upstream will only provide a broker with his own data, not some other broker’s data… “unless they have signed agreements to share listings with other brokers.”
And then further:
Keeping in mind that Upstream will take over the Add/Edit function, and be the “single source of truth”, the MLS no longer needs to do compliance. Upstream takes over the compliance functions from the MLS since it must be the single source of truth, the reference database for all client MLSs.
My anonymous MLS executive friend wondered about this, because no one from Upstream has actually explicitly stated this change.
So that’s the question: in the post-Upstream world, who does data compliance?
Ye Olde Golde Standarde of Real Estate Data
Once upon a time, in a kingdom far, far away — which is to say, oh, before last May — the common understanding of the real estate industry was that the MLS was the “gold standard” of data accuracy. MLS execs and even a few brokers would get on stage at various conferences and talk about how the Zillow and Trulias of the world wanted MLS data, because it was so accurate. RPR’s original business model revolved around the idea of taking this “gold standard” of accurate data, packaging it up, and selling it to Wall Street. And brokers fought a battle to get MLS sold data to create broker AVM’s because that data was so accurate.
What most people understand, of course, is that the accuracy of MLS data is not by accident. It is the result of the pain-in-the-ass compliance work done by the MLS. You know, all those nasty emails sent out to subscribers when they screw something up? All those fines levied because someone didn’t dot the i’s and cross the t’s when entering and modifying data in the MLS?
A lot of the pain-in-the-ass business rules of the local MLS exist in part to enforce data accuracy, so that the various compliance departments (which may be one part-time admin person who also makes the coffee) can make sure that the information in the MLS is as accurate and as timely as possible.
So… who does this thankless job in the post-Upstream world?
Option 1: Upstream Does It
The obvious option — the one I sort of glancingly mentioned in the previous post — is that Upstream would do data compliance. After all, it will be where brokers and their agents do Add/Edit. It would make sense for Upstream (or its tech partner, RPR) to make sure that the information being Added, or Edited, is in fact accurate. Given RPR’s technology backbone — a parcel-centric database — it makes even more sense that data compliance be done at the Upstream level. Let me explain briefly, although I’ve written about this before a few times.
In a parcel-centric database, like RPR’s, one does not create a listing from scratch. One looks up the property (by address, by parcel number, whatever) and then converts it into an “active listing”. One would add a few fields, such as price, start date, end date, listing agent, showing instructions, etc., but the core property data — bed, bath, square footage, etc. — are pulled from the existing property record.
Accordingly, if the agent entering the information makes a mistake (e.g., a fat-finger typo in the pricing so instead of $300,000, it’s entered as $30,000), Upstream is in the best position to catch that error.
The MLS receiving the data feed from Upstream — which is the entire structure/workflow being discussed — could/would/should rely that the data being fed to them is accurate. Well, now that the issue is before us, perhaps the MLS in question should insist on a “representation & warranty” clause from Upstream that the data is in fact accurate in any contract it executes…. Calling Mitch Skinner!
This is not an idle theoretical point. If Upstream guarantees accuracy, then the local MLS can save some money — quite a lot of money in some cases — by re-allocating resources from Compliance to somewhere else, like Customer Service. A local MLS might choose to just lay off the Compliance people and lower fees even further. So it’s a real dollars and cents question here.
Option 2: The MLS Does It
I suppose the other option is that the MLS will continue to do data compliance, because in some cases, the error is caught by other brokers/agents. For example, suppose the listing agent enters the listing in Upstream and creatively converts a study (with no closet) into a bedroom. I know, you are shocked, shocked, that such a thing happens given that almost everyone using the MLS is a REALTOR with the vaunted Code of Ethics and its requirement for honesty. But we live in an imperfect world where criminals don’t respect those “No Guns Allowed” signs, so we must try not to be surprised.
In any event, sometimes, it isn’t the listing agent entering the information who discovers the error, but a buyer’s agent who walks through the property and notices that the fourth “bedroom” doesn’t have a closet, or a window. And sends a note to the MLS’s Compliance Department saying so. “Snitches get stitches” is not yet a business rule in the real estate industry, so the Compliance folks send their emails and make their phone calls and issue their fines and get the listing agent to correct the “mistake”.
So it is possible that Upstream would not rep & warrant that its data is accurate. Instead, it would ask/require that the local MLS receiving that data continue to do data compliance to make sure that the information is in fact accurate.
Three follow-up questions then come to mind.
First, if the MLS finds an error, does its compliance thing, and gets it corrected… does it have to send the correction back to Upstream?
Second, assuming that the answer to the above is Yes… shouldn’t the MLS get paid for the valuable service it is performing for Upstream? Again, remember that the Ye Olde Golde Standarde of data accuracy used to be the MLS; if Upstream becomes that thanks in part to the compliance work of the local MLS, shouldn’t there be some sort of compensation?
Third, if Upstream cannot or will not “rep and warrant” that its data is pristine and accurate… exactly how is it “the single source of truth”?
Option 3: They Both Do It
Theoretically, both Upstream and the local MLS can do compliance work. For example, Upstream could rep & warrant that its data is accurate, but require that when the local MLS gets a note from a
snitch subscriber, the MLS pass that on to Upstream, so that Upstream’s Compliance Department can track down the listing agent and get her to correct the “mistake”. The bulk of the work — and therefore the cost — will be on Upstream, but the local MLS will play a role.
Or maybe Upstream does compliance on Add/Edit type stuff, while the local MLS does compliance on the snitch-related stuff. Typos in price, or failure to update the status of a listing — these are Upstream’s compliance responsibilities. But “mistakes” in property descriptions, in neighborhood classifications (believe it or not, even REALTORS get awfully creative in describing a property as being in XYZ Exclusive Neighborhood two blocks away vs ABC Ghetto Slum Neighborhood), and so on, are the responsibility of the local MLS.
In that event, one wonders who will “rep & warrant” to the other — and to the world — that the data is pristine and accurate. Calling Mitch Skinner! Mitch, please pick up on line 2!
Not Idle Speculation, Part Deux
In the way of wrap-up, I suppose, let me say again that this is not idle speculation. I’ve already covered the cost angle above, but now think about litigation.
Suppose some litigation-happy consumer somewhere gets irate that his house didn’t fetch the price he wanted, and he claims that the reason is because the listing agent put his gorgeous two-story Colonial not in Richville where he thinks it ought to be, but in Ghettoland. He brings a lawsuit against the agent, of course, but also against the local MLS.
If Upstream has warrantied that its data is accurate, because it is the “single source of truth”, then the local MLS simply passes on the lawsuit (the cost of litigation) to Upstream: “Hey, you guys said your data was accurate, so you defend this silly lawsuit!”
If Upstream has not warrantied data accuracy, well, then the local MLS is up a creek, proverbially speaking.
Now change that litigation-happy consumer to some litigation-happy hedge fund who lost $2 billion on a credit default swap because its computer models used local MLS data to run its analytics.
So… with all that said… who does compliance work in the post-Upstream world?