While the Realtor Family fights, the neighbors innovate

On Saturday, the NAR Board of Directors effectively gutted its recently adopted policy of allowing franchisors to index the IDX feeds of their franchisees.

The indexing policy, just six months old, made it easier for big franchisors to create national websites with a listings footprint comparable to those of Trulia, Zillow, Frontdoor, HomeFinder.com, Homes.com and other media sites.

With Saturday’s ruling, it is now painfully difficult for them to do this once again.

Others have reported on the series of events that led to this. The details matter, of course, but the reason I believe this swift policy reversal is wrongheaded has nothing to do with the details.

It’s about the lessons of the past that were ignored and dimmed prospects for industry innovation in the future.

Innovation, relocated

When fighting within the industry – the Realtor Family – limits members of the family from innovating, innovation takes places outside the family.

This has happened before.

The original IDX policy was indisputably a milestone. Extending broker cooperation onto the web was no small feat. But the implementation and regulation of IDX over the past twelve years has limited brokers from doing much beyond putting mostly mediocre IDX solutions on their sites.

This sort of back and forth has been common with brokers:

Want recent sale prices on your site? Sorry, your MLS doesn’t permit that yet.

Want to implement a usable search experience congruent with your market area, not MLS boundaries? Not possible. Your MLS doesn’t allow you to “co-mingle” listings with listings from another MLS.

Think listing detail pages with value estimates and foreclosure data would generate more leads? Sorry, that’s a non-starter.

As smack-downs like these took place in brokerage offices across America, and while the industry’s own horse in the online race, Realtor.com, was kept on a short leash, new entrants, seeing clearly just how badly real estate had managed to hobble itself, entered the scene promising to improve the online real estate experience.

They fulfilled that promise.

How? By going broker by broker, MLS by MLS, to siphon listings from real estate’s gas tank entirely outside the rules the industry had created for itself.

And they delivered value. Tons of traffic. Exposure. Soon, darn near every broker was on board – because, well, everyone else was.

Today, when I talk to clients and friends in the industry – people who lead big brokerages, small brokerages, franchises and independent shops – they speak ruefully of this massive forfeiture of value.

But here’s the thing:

It couldn’t have happened without them.

This fact was forgotten last week.

I’ll repeat it:

When fighting within the industry – the Realtor Family – limits members of the family from innovating, innovation takes places outside the family.

Getting the house in order

My brother is taller and stronger than I am. My sister is better educated. My other brother is better looking,

Do I wish to limit their capacity to leverage their advantages?

No. They are family.

Allowing franchisors to index IDX did give national players – and the hundreds of thousands of agents under their brands – an advantage. I get that. Century 21’s website got better as a result of this policy.

But I also know local independent brands have advantages no Century 21 office can touch. I’d like to see a new comprehensive industry listings policy emerge from this fight that allows great local brands (we’ve worked with many) to deliver online search experiences built upon their unique position in the marketplace. Something no one at a national level would be able to implement.

I’d like to see a major brand player unleash a site that does everything the media sites nailed – but with no ads, better listings quality, and without the encumbrances of policies that cease to make sense outside the four walls of a hotel ballroom.

But that’s not going to happen so long as the industry insists on limiting its capacity for innovation – and thus expanding the space within which others can capture the interest of homebuyers and sellers.

This is not to pass judgment on the worthiness of the online “outsiders.” I commend them for improving the online real estate experience. It needed to be done. And I have sharply criticized the nativism that has at certain times characterized the industry approach to outside innovation.

They are here. And they continue to deliver value. But it’s time to create the conditions needed for those inside the industry to compete. Nationally. Locally. Each in their own way.

What to do

If the franchise IDX ruling is to be faulted, it should be faulted for being too narrow – for addressing but one dimension of this larger reality: the real estate industry has created, and sustains, the terms of its own online imprisonment.

A work group will be created to reevaluate the franchise IDX policy between now and the NAR annual convention in November. That’s not enough.

To get this right, all the cooperating competitors need to take care of some family business. Set some new household rules. And come to a wary but lasting agreement on a new listings policy that gives those with the means, brains or imagination to innovate the room to do just that.

[Disclosure: 1000WATT Consulting has performed consulting work for FrontDoor and HomeFinder.com in the past; Move, Inc. is a current 1000WATT Consulting client].