Totally rational

As we noted in The Dose at the beginning of the week, brokerage giant Howard Hanna has pulled out of IDX in its Cleveland market. IDX is the protocol under which brokers share each other’s listings on the web. It was established some 20 years ago.  

This move means that other brokers in Cleveland can no longer display Howard Hanna listings on their websites. Kind of. These brokers could set up something called a VOW, which requires home searchers to log in before seeing search results, and still show Howard Hanna listings, and Howard Hanna could do nothing to stop it. Why could Howard Hanna do nothing to stop it? Well, it’s because of some bad things that happened between the NAR and the federal government about 15 years ago. But we won’t get into that bit of nastiness right now. 

So anyway, Howard Hanna itself already has one of these VOW things fired up in Cleveland, so they’re good. All their competitors’ listings are still on right now, even though Howard Hanna pulled out of IDX, the reciprocal sharing protocol. You just need to log in to see them now. Because, you know, requiring people to create an account on a website with a couple clicks protects all the secret stuff. Smaller brokers that compete with Howard Hanna will find it harder to set up a VOW, because it’s somehow trickier to do technically, so they are kind of S.O.L. 

And oh yeah, Howard Hanna will continue to send its listings to Zillow, which is itself a licensed broker that participates in IDX. But that will be done via something called a “direct feed,” not IDX.  

If none of this makes sense to you, that’s because none of it makes sense. 

Or more specifically, IDX/VOW no longer makes sense in its present form.

First off, if you’re a listing-heavy brokerage like Howard Hanna, you’re taking far fewer pennies than you’re leaving in this reciprocal IDX system. Why would you do that?

Second, IDX does not generate leads for a large majority of the operating brokers I know. Yes, there are exceptions, Redfin being the most obvious. I could name more, and I am sure I’ll hear from others. But these, again, are exceptions. Let’s be honest, the time when local brokers could expect to drive the top-of-the-funnel home search experience by sharing listings on each others’ local websites is behind us. The world in which IDX was conceived has largely vanished. 

These days, the brokers most effective at generating leads from IDX are what people call “paper” brokers. These entities don’t get into the operational weeds of brokering homes but do have licenses, which allows them to participate in IDX, and make referrals or sell leads based on the listings they display thereunder. These companies either affirm or downplay their “brokerness” depending on the context.  If I’m Howard Hanna, why would I want to support these companies, blank check, by giving them my listings via IDX, an all-in or all-out system? 

What Howard Hanna would want to do, and did, is keep their large number of listings on their website, then cherry-pick the brokers they share listings with. And the juiciest cherry to pick — the one you more or less have to pick — is Zillow. 

Moreover, it’s not like IDX is what really sells homes. Agents at operating brokerages, working together within the MLS, is what sells homes. I know, big secret!

Howard Hanna did not pull out of the MLS. They pulled out of IDX, a creaky system conceived in a bygone time, because it no longer serves their interests. I’m not anti-IDX, but I can appreciate obviously rational behavior by companies for which it is no longer advantageous.

I can also apply my super obvious rational behavior detector to conclude that, yes, Howard Hanna probably wants to sell more of its own listings, and this move will help with that. I know, call me a conspiracy nut!

Now, last thing here (and this is actually kind of a fringe take): It is possible that the entire notion of marketing your business using another business’s listings, whether it’s Zillow or an individual agent doing this, may have helped land the industry in the position it is in now, scrambling to defend the value of buy-side representation. If IDX had not been established, two generations of agents just might have developed a buyer value proposition more substantial than “see this house” or “contact.” Two generations of agents just might have taken the time to more fully develop their buy-side service offering, and charge for it accordingly. 

So maybe we should take the opportunity that Howard Hanna has afforded us to create a new protocol for brokers sharing their listings, one built for now. Because I don’t think this week’s news is the beginning and end of it. 

It is only the beginning. 

Enjoy the weekend.