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The MLS debate and the end of real estate software

Someday, I’ll be able to stop writing about online real estate listings.

That day is not today.

In fact, that day seems ever more distant. Events of the past two weeks, largely emanating from NAR’s midyear conference, had a sisyphean feel to them.

Here we go… again.

If you haven’t done so already, read Inman’s excellent reporting on these events. But I’ll bottom line it for you right now:

The online listings debate threatens the future of the MLS.

The threat comes from big brokers, who believe that the MLS has gone beyond its proper mission as a private, business-to-business marketplace. From their perspective, MLSs are providing services that compete with their own, or effectively “level the playing field” for smaller brokers who benefit from expanded MLS offerings built largely upon big broker listings.

At the NAR midyear the big brokers took a run at MLS-operated public websites through a (failed) policy maneuver that would have cut their source of funding. But there are other areas of grievance: MLS syndication of broker listings, MLS delivery of software to agents, even IDX itself.

This last issue – IDX – is the most explosive in my opinion. It’s always been the lifeblood of little brokerages that generate buy-side leads from big broker listings, but it now also supports a growing number of what I call “paper brokers”.

These companies have brokerage licenses, but do not actually broker property. They are, in reality, technology companies that build websites and apps powered by the listings provided by the “real” brokers. They then sell the leads their websites or apps generate from the listings to – you guessed it – agents working for these “real” brokers.

If anything is going to blow up the MLS, this is it.

At the same time, new applications (see, for example, buyermls and Chicago brokerage @property’s @agent app) and a hot seller’s market are making it easier for agents to abstain from the MLS altogether. If you want to understand what’s at stake here, read Rob Hahn’s analysis of the “pocket listing” issue.

OK. You get it. It’s complicated. But why should you care?

Then end of real estate software

I’ve been a critic of the MLS system. I’ve even called it broken. But for all its feudal weirdness, it does play a critical role that we often overlook when we think about the future:

The MLS enables most real estate software innovation.

From this perspective, think about what would happen if brokers started defecting from the MLS to set up smaller private networks. Or if pocket listings drained the MLS of its critical mass.

Well, big brokers and small – and agents of every stripe – could say goodbye to the following applications:

  • Meaningful, up-to-the-minute market analytics (e.g., Market Snapshot)

  • Competitive intelligence (TrendGraphix, a tool used for this purpose by most brokers)

  • CMAs

  • Collaboration tools (e.g. CleanOffer)

  • Home search for agent websites

See, the MLS is the socket into which innovators plug to power their products – products that are used by all kinds of real estate brokers and agents.

No MLS = no products. Innovation takes a massive hit.

Well, let me qualify that: almost no products powered by broker-controlled data. There’s another repository with a critical mass of property data out there.

It’s called Zillow.

Sure, they’d have a mess on their hands if the MLS went up in smoke. But if you think they couldn’t figure out a way to get the 100,000 agents who create most of the listings to routinely post them to a site with 50 million monthly uniques you’re kidding yourself.

Be careful what you wish for

Honestly, I’m sympathetic to big brokers gripes with the MLS. I think they are right on most points.

But being right leads down a path of unintended and unknown consequences.

Let’s walk it carefully. There’s a lot at stake.

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19 Responses to “The MLS debate and the end of real estate software”

  1. Avishai says:

    Great point about the MLS powering so many different applications. However, the biggest drawback to the typical MLS is that it’s closed — often you have to register or talk to a broker just to get some basic details about the property, which many consumers would rather not do. That’s why marketplaces like Zillow (sales) and Apartable (rentals) are so good. They make it really easy to find out tons about a property without having to even pick up the phone.

    • Drew Meyers says:

      “often you have to register or talk to a broker just to get some basic details about the property,”

      I wouldn’t say that’s true. IDX lets consumers look at almost all the data without speaking to someone (in most MLS’).

    • TheRECoach says:

      It’s not just Z Drew, nor just T or R either. There are a dozen companies who, at any time, could build a National MLS Database. One that would include close to 100% of Homes Listed for sale. (even FSBO’s and Pocket Listings)

      I often agree with Brian, but here, I can not. IMHO the MLS’s, as currently constructed, only serve to “Muck Up” the data stream.

      The inherent danger is 1) a possible monopoly 2) N.A.R.s desperate attempt to stay relevant may include attempting to control this single source.

      the only thing that has kept us from a National MLS to this point is the enormous amount of money that would be redistributed to Agents, Brokers, and Consumers … and getting that from the “Good Old Boys” who control it, will be quite a task =)

      Change is tough, but often leads to real growth


    • Suzanne Ash says:

      Hear Hear Coach!!! Yes exactly. The monopoly and the Agents getting the money is exactly what is turning this debate so critical to the good ole money holders….

    • Ray Schmitz says:

      As a plausible natural monopoly a national MLS could be regulated like a public utility. Don’t count on that.

      The more likely scenario is that several companies try to create something as you anticipate That the scenario most likely to alter the landscape.

    • Drew Meyers says:

      “There are a dozen companies who, at any time, could build a National MLS Database. One that would include close to 100% of Homes Listed for sale. (even FSBO’s and Pocket Listings)”

      Really? Name one besides Z and T.

  2. David Charron says:

    Yet another provocative post Brian. Nicely done. Indeed “…the woods are alive” with all manner of threats to the status quo. The “end around” at last week’s NAR meetings was great theater but wisdom prevailed (at least as it relates to consumer facing websites). Look for brokers in cooperation with leading MLS’ that have consumer facing sites to weigh in very soon on guidelines regarding appropriate and acceptable display of broker content.

    Pocket Listings are not just a threat to the MLS. The entire cooperation model could be impacted as a result of its unintended consequences. Brokers cannot turn a blind eye to this practice. To their credit, enlightened brokers like Robert Bailey in California and Cindy Ariosa of Long and Foster are doing their part to ensure the model endures. http://www.mydigitalpublication.com/publication?i=158604

    This is a great debate. Thanks for keeping in the forefront with constructive comment

  3. ryan says:

    @drew, I’ll save you some time. All zillow has to do is add a commission/CBB field to active listings along with private remarks that can only be seen by registered licensed pros.

    We’ve be sending listings directly to the major portals and some major vendors for quite a while. Listhub, postlets, and website vendors could easily work with the majors and provide standardized input forms.

    This idea/argument that MLS’s want to be able to compete with the major portals is a joke. That ship has sailed.

    MLS’s need to focus on what they are supposed to do/be. Quit being jacks of all trades and master of none.

  4. Suzanne Ash says:

    I remember my Mom dealing with all those little MLS’S not being able to hook up, paying multiple fees etc… Couldn’t we all just figure out that the simple solution is that as voting members we do not allow our MLS to sell our data to anyone. So we continue to control data. I heard that Colorado doesn’t allow trulia or zillow contracts. Why throw out the baby w the bath water….. Pay trulia yourself as an advertising mechanism for your properties and your brand but don’t give access to all the MLS listings. Zillow is a mess I wouldn’t want them running my MLS and we would lose voting rights and board membership or representation.. Restructure and fix zillow can’t even tell the difference between a rental and a for sale.

  5. Connor MacIvor says:

    I do know that Real Estate syndication websites are starting to develope a “negative stint” from some of the buyers of the world. However, the numbers of buyers and sellers searching with their systems far outweigh anyone that has a negative view.

    If I could waive a magic wand and get rid of them all tomorrow I would – However, I am also a realist.

    I think you are “spot on” with regard to being careful of what we “local agents” wish for…

    I, nor anyone on my team, won’t pay into thier systems and will continue to keep our sellers listings from being syndicated on their sites…

    • Drew Meyers says:

      “I, nor anyone on my team, won’t pay into thier systems and will continue to keep our sellers listings from being syndicated on their sites…”

      Not pay into their systems, fine. I get it. But keeping your sellers from syndicating? Why oh why? In 5+ years, I still haven’t heard an argument that makes sense on this issue, that isn’t the exact same as IDX (ie other agents on your listings).

  6. Matt Dollinger says:

    Brian – this is a great writeup and post. Just like to add my two cents to a couple of the comments and your post.

    1) The whole “Good MLS vs. Bad MLS” is pretty subjective. I believe that yes, there are way too many of them in the world and some that don’t provide the value an agent/broker needs, but there are some (and we’re lucky to have one in Chicago) that are empowering agents and brokers alike.

    2) The pocket listing is a great way to drum up initial interest in a listing but any agent that sells a home this way without posting on the MLS is subject in my book. If you get 95% from a pocket listing sent out to 500 agents – what’s not to say you won’t get 99% from 5000 in your MLS?

    3) Where some MLSs have paved the way for innovation, I have seen more excellent products fail when trying to get adopted into multiple markets and dealing with the different MLS rules and monies to access the data. Some have empowered and some have stifled. It’s a sad fact that we could have 10x the innovation in our industry if vendors didn’t have to consider this when going to market.

    4) SLS – the consumer already is starting to question the accuracy of the big portals and if you think that 100K agents posting single listings (and keeping them accurate) to them is going to be easy… i beg to differ. In my opinion from polling agents, listings are on those sites to generate leads and appease the sellers. 98% of our transactions in Chicago are done agent-to-agent through the MLS and I don’t see that changing soon.

  7. Michael Sosnowski says:

    I agree with Matt above. Although we are a much, much smaller market – leads are NOT being generated via national portals. It is agent to agent – and good local websites still have strength.

    I would really like to see some data that suggests that agents are getting leads from national portals that really turn into sales. I believe that the percentage are very, very, very low.

    Show us your data!

  8. Espenoza says:

    Great points by several above re: the market-by-market dynamic (on both the sales and rentals side).

    There’s a reason one-size-fits-all solutions leave something to be desired, and it’s not just that local agents know their local market best. It’s that local consumers recognize when they’re confronted by a top-down solution that doesn’t account for local factors (say, parking space in Los Angeles vs. access to the metro in Wash DC).

    Some kind of a standard data model w/ full API access, something like a 4Square for real estate data, would be compelling.

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