Improving the MLS system, Part II of II: An idea

 

Read Part I, “The complaint,” here. 

The idea I lay out below is not entirely original. Parts of it – or sometimes extensions of it – have been put forth by others. 

It is also undoubtedly flawed. I believe it is a good idea, but I need your feedback. I am not an MLS expert. I am someone who has been around this industry for 14 years, sees a problem, and wants to help fix it.

I am not interested in why this idea can’t be realized. I know most of those reasons already, and I find them to be weak taken in the context of an industry hungry for more innovation. I am interested in how it can be done. I want to develop the idea.

Also, to be clear, what I lay out below is a way to bring more innovation to the brokers and agents who are the lifeblood of this business. When I mention “the customer” I mean those agents and brokers, not consumers. So what I propose could not be used by a consumer play – say, a listings portal – to access data. It’s all about unlocking a wave of innovation to benefit the industry.

Of course, if you have a different or better idea for solving the problem I perceive (and I am sure there’s one out there) please weigh in!

The problem

There are lots of ways in which the current MLS system is broken, but this one is the most troubling:

The fragmentation of MLS data impedes the flow of innovation to agents and brokers.

Agents and brokers, through their MLS, sit on very valuable information. This information can be turned into products and services that help them compete in a fast-moving world.

Some of these products and services exist today. But there are not enough of them.

An innovator with broker clients and a great idea, or a brokerage company fortunate enough to have an in-house development team, must go through an unjustifiably challenging process, MLS by MLS, of review, board approval, data integration and compliance.

If they establish enough MLS relationships to build something viable, they must then spend an inordinate amount of time managing different data feeds, different terms of use and different political nuances.

They must plug into hundreds of sockets to light up an innovation that could benefit MLS participants.

Some manage to do it. But many get tangled in the mess of extension cords and duct tape needed to keep things going.

And plenty of people – innovators, developers, and dreamers – simply give up and move on after realizing just how maddening this process is.

Agents and brokers lose.

An idea for fixing this problem

I want one socket.

One place into which an innovator – either an outside vendor or an MLS participant – can plug to bring something great to agents and brokers.

They should be able to do this easily. Under clearly defined terms of use that respect the proprietary nature of the data.

They should pay to plug into this data socket. And some of the money should go back to the source that feeds it: the brokers who own the data.

Again, what I am talking about here has nothing to do with syndication to consumer sites, nor am I talking about data licensing to third parties outside the industry. Those are different – and, to my mind, less important – issues.

Here’s a visual (click on the image to enlarge):

Real Estate Data Socket

Every MLS sends data to the socket, just like every MLS sends data to realtor.com. Innovators pay to plug into the socket based on a number of api calls or on a per market basis. Royalties go back to the MLS (and, I would suggest, the broker).

A team would manage this. Data normalizers would make up the bulk of the crew. It would take at least a dozen. A couple folks manage payments. Legal counsel is needed. A GM runs it. And a board of directors is charged with establishing policies and procedures that apply across the board. No market specific rules.

So…

If I am a regional broker spread across many MLS boundaries that wants to build a killer market trends app, I go to one place – the data socket. I get one feed. I know, with certainty, what is permissible and what is not. It is easier, faster and cheaper to innovate.

If I am a 22 year-old Rails developer with an idea, a few grand in the bank, and a desire to create something great for real estate, I no longer have to email the “IT guy” at my local MLS ten times with no response before I am finally permitted to submit something for consideration “at out next board meeting.”

Instead, I plug in to the socket, pay my money, play by the rules, and rock.

A platform, not an app

No one has cornered the market on real estate innovation. Wherever you sit in our industry, there’s always going to be someone, somewhere, with a great idea you never considered.

What I have described here is a platform upon which the widest possible pool of smart people can play.

This is not an app. RPR is an app. And that’s been my problem with it. How could NAR possibly know the one thing Realtors need to stay competitive? It is, in my opinion, an arrogant endeavor, terribly limiting, and probably doomed.

Of course, not every brokerage with a dev team, or kid with tech chops, will bring something beautiful to market just because it becomes easier to do so.

Plenty will fail. That’s what we call a free market.

What we have now is called crazy.

Who loses?

If the data socket were created, there would be short-term losers. But we need losers to have winners.

  • Some MLSs will lose revenue derived from charging vendors for access to their data.
  • Existing tech vendors (IDX solution providers, for example) will have more competition as the barrier to entry lowers. Over time, however, they will be able to leverage their experience into more and better products.
  • MLS boards, executives and brokers will lose some control. This is a “give up a little to get a lot” situation. But again, I think these folks win in the long-term too. If I’m a big broker, I want to build or buy more cool stuff for my agents.
  • MLS software vendors who have already implemented data APIs for their customers may lose some value.

Who wins?

The customer. The agents and brokers.

Rationality

The important question here is “how could this work?” not “how should this work?”

Telling people they should do something because it’s the right thing to do, because it’s good for the industry, or good for the “Realtor Family” isn’t enough. That’s conflating broad ideals with individuals’ rational calculations of self-interest.

To make this work, everyone needs a specific benefit:

The MLS and brokers gets paid for the data they provision.

The brokers and agents get more and better tools, at better prices, to use in their business.

Everyone gets something. It’s got to be that way.

Questions

There are many, many questions to think about here that go well beyond my (already too long) blog post. I don’t have all the answers, and I am interested in what you think.

Here are just a few:

  • Who owns and runs this data socket? There was a lot of talk at the Inman Data Summit this summer about a “trusted third party.” This isn’t about trust. Trust doesn’t scale. It’s about creating something built with the right set of incentives, the right people and the right amount of industry involvement. The model NAR used to create realtor.com could be instructive here.
  • What are the boundaries on innovation? Should something like Redfin’s Scouting Report be permitted? Who gets to decide that? There needs to be some sort of policy apparatus. Not a study group, but a nimble team that establishes widely agreed upon boundaries and deals with edge cases swiftly.
  • Could brokers opt-out? Yes, just like IDX. You have to respect that.

Forward

Yes, I really do think the current MLS system is broken. It will either be fixed by leaders in the MLS industry or supplanted by players outside the industry. We’ll know soon.

The leaders in the MLS industry are out there. I know some of them. Smart people who care about their customers. People with vision.

But there are too many who are running out the clock. Managing their own decline. Hoping for a soft landing.

Let’s celebrate and support the leaders with vision, and insist on making those who stand in their way uncomfortable.

Something important depends on it.

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