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.