Role of the MLS: Defender of the REALTOR?

As my Red Dot subscribers already know, I published the March Red Dot on the future of the Multiple Listing Service a couple of days ago. I have also been traveling nonstop since last Monday and most of my meetings and conferences have been on the MLS, so I have the MLS on my mind.

There is something I didn’t write about in the Red Dot that I think is worth exploring. I didn’t put it in the report because there isn’t any real evidence for what I want to discuss. It’s more of a feeling I get from some of the comments from brokers and agents and MLS volunteer leaders on a variety of issues. So I’ll put it as a question first.

In 2019, is one of the roles of the MLS to be the defender of the REALTOR?

It’s not really clear what that means, by the way, to be the defender of the REALTOR. But it might mean something like defending the value of a real estate agent in the transaction, it might mean defending the relatively high (for developed nations) commission rate, or it might mean defending the “REALTOR values” — whatever those might mean.

Let me get into it with a bit of background from the Red Dot. I’ll be quoting myself from the report copiously.

The Changing Understanding of the MLS

Let us jump in the hot tub time machine and travel back to the ancient days of 2006. Our destination is the chambers of the House Committee on Financial Services’ Subcommittee on Housing and Community Opportunity. Today’s hearing is on the important topic of Real Estate Sales and the Internet.

In the 2006 hearing, which roughly coincided with the DOJ antitrust action against NAR, the issue was whether the real estate industry was discriminating against new Internet-enabled brokerages that were saving consumers money.

But a major subtext of the hearing was whether the MLS should be regulated as a public utility. Consumer Federation of America led the charge on that, and its Executive Director, Stephen Brobeck, testified before that committee and suggested this:

Second, because the MLSs and Realtor.com so dominate listing services, they function as a near-monopoly and should be regulated as a public utility. This regulation should ensure, most basically, more complete and accessible home sale information both to all service providers and to consumers.

Glenn Kelman of Redfin also pointed to the MLS as the barrier to innovation, at least back in 2006. He has since changed his mind on the subject. But still, we don’t whitewash actual history here. The following is not in his written testimony, but from the transcript (at 2:11:12):

Listing services stifle innovation not just in business models, but in how Web sites share data. I do not think we have focused on this enough today. You can find out more on the Internet about an eBay beanie baby than you can about a $1 million home. Multiple listing services have told us we cannot allow public commentary on a listing. We cannot let people search by time on market. We cannot display for sale by owner listings alongside commission properties, and that we have to register our users. Rules like this are a thousand tiny shackles on Internet businesses.

In response, industry representatives like Pat Vregood-Combs, President of NAR in 2006, and Geoffrey Lewis, Chief Legal Officer of RE/MAX, defended the industry in general and the MLS in particular.

Pat Vregood-Combs, President of NAR in 2006, testified as follows:

Real estate reform advocates maintain that the MLS is a necessary utility, and as such, should be available to the public for use. As indicated above, the MLS is a cooperative that not only operates for the use and benefit of its members in serving their clients and customers, but it is created and operated, and its inventory provided by, the very members it serves.

Geoffrey Lewis, Chief Legal Officer and SVP of REMAX, was even more blunt:

The MLS was designed as a B2B vehicle, not a business-to-consumer vehicle. It was designed as a mutual sharing of information by industry peers to facilitate the sale of and search for properties. The idea was that cooperating brokers and agents would work to earn their own customers using their own assets and then share listings via the MLS. The concept is simple: you earn a customer, you get to use the MLS with the customer. The concept is not: you get free access to the MLS and then you use it to advertise the properties of your competitors in order to attract customers. [Emphasis added]

Whether the arguments of Vregood-Combs and Lewis prevailed on the Subcommittee, or the power of NAR as a lobby convinced Congress not to act, fact is nothing was done to force the MLS to become public utilities.

Instead, as we all know, NAR settled the antitrust lawsuit brought by the DOJ, entered into a consent decree (which expired last year), and some of the rules of modern online real estate were established.

What we care about, however, is what those testimonies tell us about the industry’s own understanding of the MLS and the value that it provided.

But that was in 2006. Even then, though, the MLS was already involved with exactly what Geoff Lewis was arguing against: lead generation, via IDX.

Since that time, it is evident that the industry’s understanding of the MLS has changed. It is no longer merely the utility you get to use with a customer once you have earned a customer. It has a major role in helping brokerages and agents use its data in order to attract customers. Think about Solds Over IDX. Think about broker AVM. Think about all of the syndication battles we have been in, because some brokerages want the MLS to be the conduit to portals, while others do not.

What IS the Role of the MLS in 2019?

As part of my research for the Red Dot, I went and asked my sphere on Facebook as to what the value of the MLS is for them. I got a variety of answers from a variety of people. Without quoting all of them from the paper, I can say that the answers break down to these:

  • The value of the MLS is the unilateral offer of cooperation and compensation, so that buyer agents do not have to worry about getting paid.
  • The value of the MLS is as a database, and a conduit to the internet, whether IDX, VOW or syndication.
  • The value of the MLS is as a database of available homes (for buyer agents) and as a way to advertise to all other agents (for listing agents).
  • The value of the MLS is in accurate data and compliance.

Suffice to say that this is what brokers say they value. At the same time, their actions indicate otherwise. Upstream is just one piece of it. That would wreck the value of the MLS as a database and as a conduit to the internet. But things like Coming Soon and pocket listings, which now have major brokerages like Compass launching formal programs enshrining them, also undermine the value of the MLS as stated by brokerages.

Defender of the Realtor?

Here’s what I didn’t put in the paper: is there a sense within the brokerage and agent community that one of the roles of the MLS, and therefore a value that it provides to its members, is to defend the REALTOR in some way?

Think about something that Zillow does, like iBuyer or Premier Agent Forward. How often do people say something along the lines of, “Well, I hope this will finally wake up the MLS to the need to protect the REALTOR from Zillow and cut off the data.”

Think about how often people will post something like, “The MLS has to do something about these non-REALTOR business models like Zillow or Redfin.” (Nevermind that Redfin is the very definition of a REALTOR business model since every single one of their agents is a dues-paying Code-of-Ethics-following REALTOR.)

Think about how often people will post something about how the MLS needs to “do something” about Opendoor or Offerpad or Knock or whatever else they feel threatened by.

So the question is, do brokers and agents in 2019 somehow feel that the MLS needs to protect them from outsiders, from third parties, from disruptors? Is there a sense that somehow the MLS has a role to play as a defender of the traditional business model, of the traditional 6% commission rate, of the traditional whatever it is?

I’ve lost count of the number of times I’ve been in MLS strategy planning sessions to hear a Director of an MLS say something like, “We need to protect our members from disruption!” It didn’t matter to that person that the disruption in question was a full Participant brokerage with actual REALTOR agents, like Redfin or Purplebricks or Houwzer. That those companies did something to threaten the status quo triggered that sentiment.

I’m not interested in whether that sentiment is right or wrong. I am interested in whether that sentiment suggests a new role in the (sub)consciousness of the real estate broker and agent that the MLS (and to some extent, the REALTOR Association) owes them some kind of duty to protect and defend them against disruption, against the unknown, and against the frightening.

Because if so, the MLS executives around North America want to hear about that.

From B-2-B to B-anti-B

What is so interesting here for me is that in the span of about 15 years, we went from the MLS as a B-2-B utility by and for brokerages to use in order to do client service to a B-2-C tool to help brokers and agents do lead generation to a B-anti-B organization to defend brokers and agents against disruption. How did that happen? Why did that happen?

And what does that mean for the future of the MLS?

As of right now, I have no answers; I only have questions. But hopefully they are interesting questions that might help illuminate the path to the future.

-rsh

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10 Comments

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  1. ROB,

    I’ve always looked at the MLS as residential real estate’s version of the New York Stock Exchange back when it was the only marketplace to buy and sell stocks. While, at the time, the NYSE was the only marketplace to transact, over time things changed. In came the NASDAQ marketplace to handle transactions and open up opportunities for new types of equity.

    Then came (tech) marketplaces like Instinet, dark pools etc. These platforms served those that wanted to avoid the traditional marketplace process and use the new technologies to streamline transactions and reduce costs for customers – all while clearing the market at market prices.

    While I may be off topic….IMO, this story is what we are seeing now with the MLS. It is an important marketplace and serves multiple purposes – but, like over at the NYSE, things change and IMO, we are seeing a similar maturation with the MLS.

    #consumeroptions

    Thanks,
    Brian

    1. Right, that’s what I’m sensing as well, that there’s a sea change going on with the MLS. It used to be the marketplace; it is not the marketplace anymore. The internet is.

      But NYSE members did not, as far as I know, look to the NYSE to defend them from disruption. I’m wondering if brokers and agents do look to the MLS to defend them from disruption. I’m not saying they are; I’m asking if they are, perhaps subconsciously.

      1. Back when the NYSE started losing business to these new marketplaces the members didn’t know that something big was coming (it was too early to see the Internet). So, I’m not so sure they even knew they should be concerned or find it necessary to defend their turf.

        Given this one example, it’s difficult to understand how this new marketplace (the Internet) is catching our industry off guard – it’s been around long enough now to see that some of the old ways just won’t make it to the next phase.

        The floor of the NYSE is basically empty, as is the CBOT and CBOE etc.

        As you said, the Internet is the new marketplace.

        #itsnotfunbeingbehindthecurve

        We’ll see 🙂

        Thanks,
        Brian

  2. The current system of how the MLS handle listings data is an outdated system designed for a pre-internet world.
    The MLS closes off itself from the rest of the world, except for it’s member agents and the information they decide to let out.It is obvious that many buyers do not get the chance even to see the many hot deals on the market that are for sale. Why? Because the MLS have full control on the data. In the future and increasingly the present, people will buy homes from a company, due to the laws of comparative and technical advantage. It doesn’t mean that agents will go away, but they will have to work harder to survive. Consumers do not care about MLS turf wars.
    Real estate brokerages can’t control where consumers browse for data, or the geographic areas where they want to live, or when they want to sell.Buyers and sellers’ have the freedom to shop for a house wherever they want. The data that consumers find on the third party portals is just enough to be useful to them when they’re trying to decide where to live, or when to sell.

  3. I have long wondered how the MLS functions as an independent organization when most are owned by their respective REALTOR associations. Many allow the Association to restrict access to “members only”. It has always looked like a method to unfairly restrict trade to me. Granted, my background is not REALTOR focused, (global marketing).

    Our local MLS is open to both REALTORS and non due to a judgement in a restraint of trade suit from the 90’s. The expanding competitive options available to CONSUMERS, ( the only real audience here), seem to have made this situation more protective not less. Should the information resource of CONSUMER information really be a tool to enforce association, (union) membership? IMHO protectionism doesn’t move any market forward real estate included. Ultimately it is the consumers information that the real estate professional borrows to support a transaction. I’ve never believed that the information “belonged” to the real estate professional simply because they are given access to it for a limited period of time to accomplish a specified task.

    In my experience, consumers will always find the information they need to make informed decisions. The MLS’s could be that resource if they are allowed to be a stand-alone organization but lose perspective, (and power) when they are used as a retention weapon by a third party. The new entrants into this category are plugging into the needs of the CONSUMER, not the needs of the Associations. Ultimately the consumers will decide who remains in a hyper-competitive marketplace, and I’m not sure the MLS model in its current state, will still be standing in the end.

  4. Agents and brokers built the MLS for B2B with their own effort and dollars, Zillow used deregulation as a way to monetize the data, made millions selling leads back to the agents and brokers, and are now changing their business model to buy and sell homes directly to the consumer – ultimately bypassing the agents and brokers.

    The horse is out of the barn. MLS is long past being able to protect its members.

  5. Rob,
    Thought provoking article. Thank you! Yes, the Internet, not the MLS, is the marketplace. If I use only the MLS to find properties for buyers, they often ask me “But what this property and this property?”
    That is because they found them on sites like Zillow, which not only has MLS properties, but non-MLS properties like Pocket Listings and FSBOs. I can’t rely on just the MLS anymore.
    I don’t expect MLSs to start accepting FSBO listings anytime soon, but one area that MLSs could improve is data sharing with neighboring MLSs. The outdated concept of building a wall around your MLS, by not data sharing, hurts both the profession and the MLS as a whole.

    1. Hurts the consumer, too!

  6. The MLS should be *the* “regulator” in that they oversee the collection and dissemination of data to all parties (vendors, brokerages, third parties) and facilitate an open-source economy. Everyone is better off when data can flow freely.

  7. The best way to protect ourselves from disruption is to raise the bar of professionalism for ourselves, make the experience of buying and selling homes as pain-free as possible for our clients and remodel and streamline the financing process.

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