The National Broker Public Portal — Not for everyone?

The National Broker Public Portal announced appointment of its initial board of managers this week. In the press release they state that the project is designed to fill “an unmet need in the online marketplace.” Unfortunately, don’t define what that need is, leaving many readers still scratching their heads wondering “Wha??” Have these folks divined a gaping hole in the Zillow/Trulia product strategy and set about to fill the vacuum before anyone else sees it? With hundreds of listing portals and tens of thousandsBroker Portal Logo of agent and broker IDX sites, how could there possibly be any “unmet need” remaining anywhere? We shall see what that means.

In their earlier information releases, the group described the project as “the Creation of a National MLS Consumer Facing Property Search website.” Apparently it evolved to a Broker website in the past 30 days which is most interesting given that it is to be funded by MLS dues to the tune of somewhere between $1 and $3 per MLS subscriber per month.

The funding basis was made possible by a redefinition by NAR some time ago of what Basic Services are in MLS land. Basic Services now includes public facing MLS websites which can be supported by dues paid by ALL MLS subscribers even though they may compete with SOME subscribers and their brokerages. Interestingly enough, the larger brokerages and franchises fought this change heartily. In May, 2013, The Realty Alliance wrote a letter to the MLS Policy Committee stating, “… since we are not in favor of MLSs establishing public-facing listings display websites, we certainly do not favor leaving only the words, “establish or maintain” in the authorization to use our dues/fees/reserves as it is too wide an authorization. Significant dollars of ours could be spent “maintaining” these sites, including marketing and promoting these in competition with broker IDX sites.”

Bob Moline, President and COO of Berkshire Hathaway Home Services and the first name on the announced list of newly elected managers of the Portal, wrote at the same time:

We have no doubt, based on proposals and communications of others of which you are, no doubt, aware, that some want to use the fees and dues collected by MLSs and Associations to actively market public-facing sites. Such expenditures–and the public facing websites themselves–would put MLSs and Associations in competition with many of their broker-members, specifically their larger broker-members.

Therefore, we strongly suggest that the proposed new language on advertising specifically exclude the use of MLS of Association dues or fees to market public-facing website. (emphasis added)

Yet, that’s exactly what happened. Despite the protestations, the NAR Board of Directors approved the MLS committee’s proposed rules change and included MLS public facing sites in the definition of Basic Services. Now the Realty Alliance and other major brokers are backing the biggest implementation so far of the new policy.

Please don’t misunderstand — I am not accusing any of the major brokers of doing a flip-flop on this issue. It actually makes great sense for the brokers and major franchisers to back such a move, even though they opposed the rule change that made it possible. From their astute perspective, it is easier to manage one national MLS portal than 600-800 small ones. By imposing the Fair Display Guidelines (see below) from the top down, they need not fight the multiple skirmishes that would surely arise from a bottom up approach.

Much conjecture and critique has been levied at the project and it’s not even off the drawing boards yet. But in all that’s been written about the Broker Public Portal, one question has not been asked that I think needs to be addressed before it goes further.

One of the core tenets of the project is the adoption of the Fair Display Guidelines that the Realty Alliance developed back in 2012-13. Guideline number four states, “ No Ads For Other Brokerages Or Agents Displayed On Or With A Brokerage’s Listing” and goes on to explain:

Only the actual listing broker and agent may be displayed on the property details page. No ads from companies that may compete with a broker’s affiliated business such as mortgage, title, or escrow companies will be displayed on an individual property listing page.

So only the listing agent and brokerage will appear on property detail pages. Buyers’ agents, who by definition do not have any listings, will not be given any exposure at the “point of purchase” – the moment when a potential buyer has a question but perhaps doesn’t want to ask it of the legal fiduciary of the seller for fear of disclosing something about his/her negotiating position. Those buyers agents are members of the same MLS that is supporting the Portal; they are paying the same dues as the listing agents; and $1 to 3 of their dues payments each month are going to fund this portal project. Yet they get nothing in return? How is it that no buyers’ agents have asked the magic question, “What’s in it for me?”

If the average MLS subscription fee is around $25 to $28/month, then somewhere between 4% and 10.7% of the gross revenues of the MLS are going to pay for a Portal that benefits only the small minority of agents who actually take listing contracts. That seems grossly and unfairly lopsided. I’m surprised someone hasn’t challenged that model yet.

The seeds of war bark like dogs

seeds of war bookInman reported on 4/30 that Redfin was going live in Las Vegas – going live, meaning they would have real agents with boots on the ground rather than relying on just one broker to give them a virtual presence in the market and access to the MLS. In a blog post entitled “Redfin and the Seeds of War” Brian Boero at 1000 Watt Consulting asked later that day why this was any big deal. After all, Redfin has had Vegas MLS listings on its site for four years by virtue of being a “Paper Broker” (I hate that term, but we’ll deal with that later), the industry invective for a referral model broker who doesn’t actually help buyers and sellers transact real estate purchases. Brian summarizes by stating the following:

Paper brokers get a license, tap into the MLS and drink from the cup of data direct from the source, whether or not the practicing brokers in an MLS are OK with it.

I have written about this issue before. Some brokers are concerned but worry about any sort of response for fear that the federal government will view such a response as anti-competitive. Others dismiss the issue as immaterial.

In any case, I believe this issue to be explosive, divisive and pregnant with the possibility of a war with much collateral damage.

(To his credit, Brian later posted a rebuttal from Glenn Kelman, CEO of Redfin, in which Glenn professes Redfin’s intention to pass through the “paper” phase to become a true, national electronic brokerage. Please reread Brian’s post for Glenn’s remarks if you haven’t already.)

Brian is exactly right on a number of levels but at the same time misses an even bigger explosive possibility.

First, a little history DOJ beats NAR

Paper brokerages were a bane of existence to traditional brokers, their MLSs and their national association as far back as the middle ‘00’s. NAR took the DOJ inquiry into VOWs as an opportunity to squash Paper Brokers once and for all. The final settlement of the matter was published in May, 2008 and the definition of MLS Participant is in Exhibit B. The settlement that was reached included a provision that NAR demanded, that being a clear definition of “Participant” for MLS purposes. And the MLS purposes toward which the definition was crafted were to prohibit Paper Brokers from being MLS subscribers and getting access to MLS data without actually doing any brokerage. The definition reads:

“Under no circumstances is any individual or firm, regardless of membership status, entitled to MLS ‘Membership’ or ‘Participation’ unless they hold a current, valid real estate broker’s license and offer or accept cooperation and compensation to and from other Participants.”

The underlined words above replaced the previous language which read, “are capable of offering and accepting” cooperation/compensation. This change was further clarified in additional language which reads:

Note: Mere possession of a broker’s license is not sufficient to qualify for MLS participation. [Emphasis mine] Rather, the requirement that an individual or firm ‘offers or accepts cooperation and compensation’ means that the Participant actively endeavors during the operation of its real estate business to list real property of the type listed on the MLS and/or to accept offers of cooperation and compensation made by listing brokers or agents in the MLS. “Actively” means on a continual and on-going basis during the operation of the Participant’s real estate business. The ‘’actively” requirement is not intended to preclude MLS participation by a Participant or potential Participant that operates a real estate business on a part time, seasonal, or similarly time-limited basis or that has its business interrupted by periods of relative inactivity occasioned by market conditions. Similarly, the requirement is not intended to deny MLS participation to a Participant or potential Participant who has not achieved a minimum number of transactions despite good faith efforts. Nor is it intended to permit an MLS to deny participation based on the level of service provided by the Participant or potential Participant as long as the level of service satisfies state law.

The key is that the Participant or potential Participant actively endeavors to make or accept offers of cooperation and compensation [Emphasis mine] with respect to properties of the type that are listed on the MLS in which participation is sought. This requirement does not permit an MLS to deny participation to a Participant or potential Participant that operates a Virtual Office Website (“VOW”) (including a VOW that the Participant uses to refer customers to other Participants) if the Participant or potential Participant actively endeavors to make or accept offers of cooperation and compensation. An MLS may evaluate whether a Participant or potential Participant “actively endeavors during the operation of its real estate business” to “offer or accept cooperation and compensation” only if the MLS has a reasonable basis to believe that the Participant or potential Participant is in fact not doing so. The membership requirement shall be applied on a nondiscriminatory manner to all Participants and potential Participants.

Let me highlight a couple of key phrases that fall into the “CYA” category.

  1. Not intended to preclude part time brokers/agents. OK, just because you have two jobs in order to eat, you can still be an MLS broker
  2. Not intended to preclude those who have not achieved a certain number of transactions. OK, just because you’re an ineffective unproductive broker, you can still be in the MLS.
  3. Not intended to preclude limited service brokers. OK, just because you’re too lazy to provide full service and you want to pop listings into the service and on Realtor.com for a couple hundred bucks each, you can still be in the MLS.
  4. And finally, a broker who operates a VOW, and uses that VOW to refer out business to other brokers can still be in the MLS  “if the Participant actively endeavors to make or accept offers of cooperation and compensation” (in addition to the referrals).

That last bullet was aimed directly at the paper brokers, most prominently ZipRealty (through their “Powered by Zip” network), RealEstate.com (then a part of Market Leader and now rolled up into the Trulia camp of companies), and Redfin (in those markets where they had not yet transitioned to a full brokerage model).

What has happened since?

So what has happened in the six years since the DOJ gave NAR and its MLSs the club they so desperately wanted and needed to attack the paper brokers and grind them up in the paper shredder of oblivion?

Nothing!

Absolutely Nothing!!

No broker that I know of has been expelled from or denied participation in any MLS because they failed the “actively endeavors” test. I am not aware of any MLS that has been so bold as to draft policy that defines the level of activity required to pass such a test.

ZipRealty continues with their referral network, adding more brokers on a continuing basis.

Redfin, as we see in this story, continues to expand unabated by such restrictions.

Trulia professed loudly when they bought Market Leader that they wouldRECom WA LIC get rid of their referral brokerage licenses and not compete with their brokerage advertisers. Trulia VP Alon Chaver told Inman News in September, 2013, “We are not an operating broker, and thus do not intend to use IDX data on RealEstate.com after the acquisition closes.” Yet Trulia still maintains brokerage licenses in 44 of the 51 licensing jurisdictions.

(Just to be sure this list was not just an extraneous page they forgot to take down from the website, I checked four west coast states’ real estate departments and licenses were still active in Washington, Oregon, California and Nevada. In fact, the Washington license was just renewed this past January 8.)

The RealEstate.com referral model previously came under the scrutiny of HomeServices of American and The Realty Alliance brokers a year earlier (August, 2012) which prompted the aforementioned and highly esteemed Mr. Boero to pen “Welcome to Crazy Town.” In that op-ed, he opined that the middle-finger salute Market Leader was flashing at the industry could intensify the cry for “broker owned portals, MLS apostasy and retrenchment.”

To take Brian’s “Seeds of War” theme and extend it with the help of man’s best friend (Arf) and a little Pink Floyd, “The dogs of war won’t negotiate. The dogs of war won’t capitulate.” If you think the road to apostasy has been paved over with forgotten memories paper brokers past, think again.

As I suggested recently, the Project Upstream initiative by the Realty Alliance consortium is moving forward apace. Despite those who think this might be a boon to the MLS (by speeding consolidation) rather than yet another nail in its coffin, let me modestly suggest: MLSs have been warned.

They were warned in 2012 when Market Leader bought Realestate.com. They were warned again when Trulia bought Market Leader. They were warned yet a third time when Realty Alliance CEO Craig Cheatham made his case to the CMLS conference in Boise this past October. arrow

And my guess is the next warning will not be a shot across the bow. It will be through the head.

For this post:
Cause: I shot an arrow into the air . . .
Effect: It fell to earth right through my hair. . . (ouch)

 

This post also appears on Notorious ROB.

The $4 Billion Dollar Company

It’s been an exciting fortnight since Errol Samuelson shook up the online portal competitive picture by hanging up his hat and cleats at Move/Realtor.com and accepting a senior management position at Zillow. Much has been reported, and even more speculated, about the motives for the change, both from Errol’s perspective and from Zillow’s.$4 Billion Company

Then, when things started to settle down a bit, Curt Beardsley added salt to Move’s wounds by doing the same thing. Then the lawsuit, more reporting, more speculation, and a substantial rumbling of “what’s next” and “what is the unspoken conspiracy?”

So who won and who lost and what’s next? I’ve been working on a response to Rob Hahn’s proposal that NAR pony up some substantial cash and buy Move, essentially taking a public corporation private and thereby recapturing total control over their corporate brand and flagship banner website. I think Rob’s idea has some entertainment value, but would not work for a couple of reasons. First (and foremost), it would rely on NAR levying a special assessment of $250 per member and borrowing another $200 million to have enough cash for a buyout, including a nice premium to current shareholders. Would NAR members, half of whom did not close one real estate deal last year, actually agree to such a levy or would many of them walk?

Second, the payback of the loan depends on continuing to operate Realtor.com as a profit making venture. That’s the biggest flaw I continue to see in the current business model. I continue to believe Realtor.com can be a huge asset to NAR and its million members but only if it’s a core service paid for by dues dollars (or perhaps be RPR revenue or NAR’s investment in Second Century initiatives, if any of them eventually starts to make money) and not an advertising medium that sells ad services to members. That is the singular loudest complaint from Realtors about Realtor.com – “It’s our website. They shouldn’t sell us advertising. It should be FREE, because it’s our website.”

So I began to look at how possible it might be to convince the current Move board of directors they needed to take my advice and give back Realtor.com to NAR and make Move.com their lead portal. These are reasonable people, experienced business people with a roster of companies they have either served, helped, or directed that would be enviable for any company. Four of the directors (a majority of the seven member board) are independent, so they would/should have no conflicts of interest in voting for a proposal, however radical, that was in the best interests of the shareholders. Three are a little biased toward NAR and therefore might oppose such a change – current CEO Steve Berkowitz, former REALTOR (Grubb/Ellis, Coldwell Banker) current Chairman Joe Hanauer, and former NAR President Cathy Whatley.

Alternatively, if no one was able to convince the board to make that change, what were the chances someone could raise enough interest and money to make a run at the company – a hostile takeover in true Carl Icahn style. Perhaps a large franchise (Berkshire-Hathaway or Realogy might have enough cash) would buy it and use it as a basis for changing their online presence. The Realty Alliance is already looking for proposals to create a large national infrastructure for their cooperating brokers – perhaps they could buy Move and save themselves a lot of development time. I even looked at the possibility of a grass-roots movement starting with a couple of progressive, pro-active Realtors who want to raise the bar of professionalism by raising money on Kickstarter. But alas, I doubt that a national real estate portal would qualify under Kickstarter’s Guidelines (seems they have a prohibition against funding websites focused on e-commerce and business).

So then the thought struck me that perhaps a couple of the current major shareholders might be interested in increasing their holdings, perhaps even demanding a couple of seats on the board. So I started digging around for the current list of institutional shareholders (who, it seems, hold over 95% of the stock in Move) and aside from FMC, LLC (Fidelity Investments) that owns about 15% of the company (as of 12/31) there were no other major players with more than 3.5%. (FMC’s 15% represents about $93 million in stock holdings, but when you compare that to the $4.2 Trillion — with a capital T — in assets they manage, their Move stock represents about .00221% of their portfolio. Something to sneeze at?)

“Achoo!!”  “Gesundheit!”

I was getting a little discouraged trying to think of other options, so I started fooling around with the stock reports and looked at the changing positions of Zillow and Move on the NASDAQ since the chair shuffling began back on March 5. Here’s what I found.

Z vs Move

First, Zillow closed above $100 last Friday (3/21) for only the second or third time in their history. They hit $100 last September and have drifted below the century mark since.

The chart above tracks the percent of change in stock price for Move (red) and Zillow (blue) since March 5. They stay reasonably close from the time Errol announced his move until March 13 when Curt followed. Then stuff happened. Zillow started upward on a near 45 degree slope while Move held steady for about a week and then dropped off. The net effect, Zillow is up about 20% and Move down about 10%.

Details (text for those who hate charts):

Date

Event

Zillow

Move

3/5/14 Errol made “the move” (after market close)

$83.20

$13.12

3/14/14 Friday before Curt made “the other move”

$87.10

$12.30

Net effect of Errol’s move

UP $3.90
(4.7%)

DN $0.82 (6.25%)

3/17/14 Day of Curt’s “other move” and Move/NAR lawsuit filed against Zillow

$91.68

$12.37

3/21/14 End of week of turmoil

$100.24

$11.84

Net change from 3/17 to 3/21

UP $8.56 (9.33%)

DN $0.53 (4.25%)

Net effect of turmoil, since 3/5

UP $17.04 (20.5%)

DN $1.28 (9.75%)

3/21/14 Market Cap as of 3/21/14

$3.96 Billion

$465 Million

Whoa! Stop for a minute and take a look at that bottom line. That’s really what this whole process has been about. These are publicly held companies, companies in which people (and institutions, which we know because Mitt Romney told us so, are people too) invest their money in order to make more money. Investors in Zillow earned 20% on their investment in less than 30 days. Investors in Move lost 10% of their money in the same period.

By my calculation, Zillow is just one dollar and eight cents short in its share price of being a Four Billion Dollar Company.

But even more telling is this figure. In the seventeen days between March 5 and 21, while the real estate blog-o-sphere was fixated on why Errol and Curt moved and what Zillow would do next, Zillow stock gained $691 million in value. That’s 50% more than the entire Move corporation is worth ($465 million).

I hate to keep being the guy pounding nails in the Realtor.com coffin, but the more I look at this situation the fewer reasons I can find for anyone to want to buy Move.  Even NAR – at least not right now. The sinister plot may not be one spun by either Zillow or Trulia but rather by NAR itself. Their continuing shackles on how Move can operate R.com might just be the smartest play in the game. They could soon buy back control of their website, and a company of people to operate it, for pennies on the dollar.

Much as I hate to admit it, I think Rob’s advice is right: NAR should take Move private. But I would advise NAR to hold off on that special assessment. It just might not be needed after all.

For this post:
Cause: If you can’t see the mark in the poker game, then it’s you.
Effect: The card sharp may be the player you least expect. 

Maybe it’s time for MOVE to move on

Move-Realtor-BrokenHeartIf you have been living under your real estate the past few weeks instead of inside it, there has been a verbal war raging in the REweb over the testing by Realtor.com of a new creation called AgentMatch, ever since Realtor.com (RdC) president Errol Samuelson first announced the “experiment” at the NAR Convention in San Francisco in November.

As sometimes happens in such debates, clear and concise points of logic are overshadowed by ad hominem arguments toward the speaker. Witness what happened to Allison Schwartz, Communications VP at RdC parent corporation Move, Inc. when she engaged the madding crowd in comments following the first webcast of the AgentMatch advisory board meeting in early December. Alison commented on the resignation of board member Jack Attridge (an agent with Massachusetts based William Raveis realty) by questioning whether Mr. Attridge was right for the job in the first place:

I can’t help but wonder if you weren’t committed to helping shape the product development process from the beginning. Your quitting of the board in such a premature and public manner without discussing your displeasure with us first leads me to conclude that you might not be the best person to help shape the product on behalf of our industry.”

That little jab resulted in a deluge of barbs being thrown at Ms. Schwartz, some deserved, many not, that merely exacerbated the problem and diverted attention from the real issues.

More positions were staked and more opinions followed. Keller Williams, the largest real estate franchise in North America, condemned the effort and advised agents not to participate, then followed later with a revised semi-condemnation.

Ernie Graham, product management leader for AgentMatch, did a podcast with Rob Hahn on the Notorious POD and later a Goggle+ video chat in with Lani Rosales, COO of AGBeat.com. In his resignation letter, Mr. Attridge took Ms. Rosales to task for having “just written an article belittling agents and who had only included AgentMatch’s lead person in a biased article supporting the product.”

What a mess.

Despite the deluge of disassociated complaints included in the comments posted after every new news story on AgentMatch, there were a number of valid points made about the service that would give one pause before moving forward. It is based primarily on listings taken, managed, and sold and measures such basic parameters as list to sale price ratio, days on market, volume of listings, etc. The loudest cry from the Realtors who object was two-fold: (a) numbers alone do not a story tell, and (b) NAR should not be in the business of rating its members or comparing one member to another by any measure or mean.

Enough has been said, and said, and said about the first objection. So much so that barely a month after announcing the project Realtor.com published a letter from President Errol Samuelson stating that the pilot test of AgentMatch was concluded, but that the effort “to create the most accurate and complete resource for consumers looking for a Realtor online, and to continue moving the industry forward with innovative solutions” would continue. The REWeb can now breathe a collective sigh of relief, pat each other on the back for a job well done in bringing down the program, and concentrate on the holiday festivities that will surely fill their calendars for the next few weeks.

While Realtors are pleased that they overcame the first objection (data does not tell the whole story) It’s their second objection that deserves closer scrutiny, because it goes to the core of a larger conversation being had in the halls and on panels at real estate conferences, a conversation that will continue for the next year or longer.  Underlying all of this superficial debate over whether ratings are good or bad, whether they should be accompanied by reviews, and how to keep Trulia and Zillow from doing it first (even if everyone agreed it was a bad idea), underlying all of that is the real core issue. Once one dispenses with the myriad of complaints about how it’s done, one is left with the underlying question, “Should it be done?” and if so by whom.  What is the role of NAR in all of this? And what should it be?

NAR has tried to avoid this conversation. It rebuffed attempts to link NAR to its AOR-MLSs in the context of The Realty Alliance’s general protestations about MLS behavior. (We at NAR don’t tell the MLSs or the brokers how to do business.) It tried again to dodge the bullet aimed at them because of the actions of the website that shares the Realtor name. (We don’t tell Realtor.com what they can and cannot do with their website.)

I would contend that not only does NAR tell Move what they can and cannot do with the RdC website they bill as the “official website of the National Association of REALTORS” they should either own up to that authority and responsibility or abstain from the conversation and abdicate the throne.

Most commentators presumed that in the wake of this past summer’s history making special meeting of the NAR board of directors in Chicago there was a direct causal relationship and significant oversight by NAR in the development of AgentMatch. Barely a month earlier, NAR CEO Dale Stinton reconfirmed for the zillionth time that Realtor.com is the official consumer website of the NAR and detailed many of the changes that had been made or were about to be made as a result of the loosening of the reins guiding RdC.  To quote the Inman News article, “He said NAR’s relationship with Move had vastly improved. ‘We’re in constant communication now,’ he said.” [Emphasis mine.]

Agents were now puzzled to see a new controversial service emerge, one which presumably NAR had communicated constantly about with RdC.  A common theme heard throughout was NAR exists to promote all agents, not promote one over another, which is what such ratings systems do. To make that a viable issue, one needs to clearly understand the origins of RdC and to dispel many of the false premises that have been repeated so frequently as to become, if not fact, certainly accepted lore.

A brief history of Realtor.com

Realtor.com was originally created to be an extension of the Realtor brand. It was to be an advertising medium, operated by the Realtor Information Network (RIN, the NAR subsidiary created to run RdC). Originally, it was free. The plan looked good on paper. And it didn’t work.

So in 1996 RIN hired a startup company called RealSelect to operate it. In exchange RealSelect got listings from the MLSs, paid the MLSs for listings, paid NAR for the license to use ‘Realtor’ and sold data feeds to other websites (AOL being the most notorious) and advertising.

That didn’t work either. Real Select reorganized into Homestore, went public. It didn’t work. A bunch of people went to jail. To give you a flavor of the times back then, and a better understanding of how long the war over listing data syndication has been waged, here’s a quote from Brad Inman, then publisher of Inman News, in a November 2004 (yes, ten years ago) article. See if this sounds familiar.

In real estate, MLS data sits at the apex of the change, specifically the MLS information that is pushed to the Internet every minute of the day. In most cases, this data migration ironically is endorsed by the industry, but it also has ignited distrust and deep angst in a business that was congenial for decades.

The industry has made strategic mistakes in the mad scramble to quickly publish the data on the one hand, but at the same time try and control it. The Internet inherently frowns on the idea of control.

The Homestore saga was partly due to a confusing strategy of both keeping control of the data while letting go of the information. Despite an assertive and ethical new management team, the company is still struggling with its past. NAR’s restrictions on the control of the data contributes to the quandary for Homestore.

Source: http://www.inman.com/2004/11/12/changing-real-estate-industry

Homestore became Move in 2006, and now it’s working pretty well, but many of the issues Mr. Inman identified a decade earlier still plague the relationship between Move and NAR.

Let’s get our facts straight before we begin the debate.

NAR owns the trademark on the term REALTOR® and they will (and have) defend it to the death against continuing misuse and inadvertent usage that threatens to devolve the term into common usage like Kleenex® or Plexiglas® despite the preemptory addition of the registered trademark ® after each.

NAR has a subsidiary corporation called RIN (Realtors Information Network), a remnant from an earlier attempt by NAR to run their own national portal. RIN contracts with Move to operate the Realtor portal on behalf of NAR. RIN licenses the right to use the Realtor name in their agreements with Move. For this privilege, Move pays RIN about $2 million each year in license fees.

Move, not NAR, owns the domain name “Realtor.com” as confirmed by Whois.org.  To make things even more confusing, Move has created a d.b.a. operating entity name for its RealSelect subsidiary called (coincidently) Realtor.com to actually operate the website. To differentiate the two, I’m going to call the website RdC (for realtor-dot-com) and the company R.corp.

NAR does not own the website (i.e. all the code that runs the website, the servers upon which it sits, or the content created by R.corp). Nor does NAR have a say in product development by R.corp other than the restrictions placed upon Move by the operating agreement.  NAR holds one seat on Move’s board of directors, a seat occupied by Cathy Whatley, past NAR president in 2003 and NAR holds less than 2% of its outstanding stock.

So what is the real issue here?

The original mission of RdC – “To connect real estate professionals with consumers in order to increase the number of home sales transactions.” – the one that most Realtors remember and that they hang their argumentative hats on is no longer viable, because there’s competition out there. If you operate a website with your name on it and you want people to come to it so you can reap the free leads from it, you need traffic. RdC is losing the traffic race, slipping to fourth place in the October Experian report with less than half the traffic of Zillow (not counting Yahoo! which Zillow powers).

All this noise about AgentMatch, while there is some validity to the arguments, disguises the underlying problems:

  1. RdC has a new mission – to make money for Move, Inc – and agents don’t like it.
  2. NAR has control of the brand and to the extent defined in the operating agreement can tell Move what they cannot do with the brand. But they don’t want to get too close because they don’t want to be blamed for all the stuff Move does that agents don’t like.
  3. NAR still receives payments from Move, only $2 million per year in related-party transactions, enough to make it interesting.
  4. NAR does have editorial control over some parts of the content (i.e. no FSBOs unless listed by a broker), and bully pulpit control over others. But they don’t want to use the veto power too often or they’ll be painted with the failure brush again and we’ll be back in Chicago for another board meeting.
  5. Despite calls from agents to “Take back Realtor.com” NAR can’t fire the operator of the website. According to NAR CEO Dale Stinton at the May 2013 mid-year meetings in DC, “…there ain’t no getting anybody else. It’s an evergreen agreement (with Move) that goes on forever. If you didn’t know that before, you know it now.” So NAR couldn’t pull the website from Move as long as Move is performing to the dictates of the agreement.

And right there is the opportunity.

NAR might like to end the relationship with Move if they could. But it’s kind of nice to have a whipping boy around when you need to divert attention away from other failures.  It’s even better when you can disown ownership of the problem or the ability to solve it. NAR may want a national website devoted exclusively to promoting the Realtor brand, but they have proven once before they couldn’t make it competitive.  Even their latest efforts with Housevalues.com are nothing short of unremarkable.

But reverse the roles and look at this question from the other side of the table.

It may be time for Move to tell NAR they don’t want to operate RdC anymore.

Why? Because the brand is more of a liability than an asset. It’s closely associated with the trademark and the national association. It comes with restrictions (still) that prevent it from being fully competitive. And it’s not a name Move can advertise to promote the website without promoting the people designated by that mark as well. And therein lays the real problem.

The name means too many things, so many that it really means nothing at all. It’s worse than Kleenex, which everyone recognizes as meaning only one thing – nose blowing, tear absorbing, make-up removing tissues. Realtor means lots of things in many contexts, and not all are clear or good.

One cannot overlook the tacit acceptance of this premise embodied in the latest redesign of the RdC website.  Gone is the Big Blue R logo from its prominent position, top-most left-most on the homepage, along with the tag line about being the ‘official site’ of NAR.  It’s now “Where Home Happens.” But clearly it’s not where NAR happens, and that’s apparently OK with NAR.New_RDC_Logo

By stepping away from the Realtor.com name entirely, Move would have a chance to show what they can really do with a national website, how they could compete on a level playing field with Z, T, H, and W (‘w’ for whatever is next).

There are plenty of breach provisions in the agreement that would give Move an opportunity to exit, even if NAR didn’t want them to. They could breach for non-payment or for adding content not approved by NAR.

In this case, NAR could benefit as well. They would get back their brand-named website. Some might say they have not proven in the past that they could run a national website. But a couple things have changed for NAR in the past few years, not the least of which was the creation of the Realtors Property Resource (RPR), and with it the elevation of two nationally prominent and industry respected leaders who DO know how to run a website: Dale Ross and Marty Frame. Dale started what would become at the time the largest MLS in the country, MRIS, and Marty was operating national listing portal Cyberhomes.com before the agreement with LPS that created the RPR product and the team to manage it.

Exposing selected portions of the accumulation of property information that is RPR could become the basis for a new and improved RdC. They wouldn’t even need active listings. The content on RPR is unrivaled anywhere and would definitely separate and differentiate RdC from the current portal competition. By making RdC the showcase for REALTORS® rather than just one more website with listing data, NAR could put the sheen back on their brand. NAR could recapture the respect and support that has long been missing from its membership be creating a flagship website that truly offers unique content and value to consumers and at the same time guides buyers and sellers toward Realtors to help in their transaction when the time is right, all without competing advertising, three-headed monsters, or “selling us back our own leads.” And all without dues dollar support if the RPR revenue plans are still intact and on track.

The current operating agreement actually contemplates such a possibility in the terms for termination.  In section 7.3 (b) entitled “Transition” It states:

If deemed reasonably necessary by RIN in order to facilitate the Transition, RIN shall have the right to enter the facilities where the personnel and equipment related to the operation of the Domain Site and the RPA Business are located for the purposes of (i) observing such operations, (ii) directing such operations and retaining personnel, if felt to be necessary to the continued operation of the Domain Site and the RPA Business, and (iii) obtaining copies of Data Content Provider Agreement, copies of agreements with advertisers and copies of any and all related records. In addition, Operator shall provide to RIN copies of all source codes and related documentation for the Software without charge. [Emphasis mine]

So MOVE could keep the same website system and simply change the name from Realtor.com to Move.com. All the license agreements with AOR’s and MLSs are with RealSelect (dba Realtor.com, the corporation not the website) and would carry over to successors and assigns, so the data flow wouldn’t be interrupted. If some MLSs objected to that assignment, remember Move owns ListHub, the largest aggregator and syndicator of listing data anywhere. Move could just make themselves a new publisher in the ListHub network.

Then with ALL the shackles off, Move would truly be able to compete head to head with Zillow, Trulia and Homes in a no-holds-barred race for the hearts, minds, and wallets of not just Realtors but all licensed agents, without the need for any more special NAR board approvals.

WOPR

from War Games

By making this change, Move would actually be helping NAR and for Realtors as well.  Breaking the ties with Move would give NAR a second chance to build the national website that most Realtors thought they were getting 15 years ago – a national showcase for Realtors as a core service of membership with all of their properties displayed in full splendor, unencumbered by any advertising for anyone or anything other than the listing broker and agent. Just think of this Realtopia. No FSBO’s, no Non-Realtor listings, no builder listings, no foreclosures, no REOs, no AVMs, no three-headed monsters – just plain simple Realtor supplied property information on a website that doesn’t try to compete with ZTH because it doesn’t have to. If New RdC chose to display active listings, they would do so knowing behind the listing info is the deep library of proprietary RPR information that is available ONLY to Realtors and only through them to their clients. NAR would follow the advice of the WOPR – the only  winning move in this traffic war may be not to play.

There are enough benefits on both sides of this equation to make this divorce a no-contest event. NAR can’t be having fun trying to decide where to focus their attention or make their next defensive stand. After the divorce, they can say with a clear conscience that they don’t have a dog in the AgentMatch fight, or any fight involving the new Move.com. And they would finally be right.

Now, how about a nice game of chess?

For this post:
Cause:  The latest uproar over agent ratings
Effect: A solution for the syndication arms race

This post is also published on Notorious R.O.B.
Contact Bob Bemis at www.bobbemis.com

Question #21

NAREP StopSignRob Hahn published a detailed and most entertaining analysis of Texas broker Ben Caballero and the National Association of Real Estate Professionals (narep.NET – not .org or .com) that Ben founded about a year ago. In the post, Rob poses 20 questions to Ben about his real estate business, his business practices, and the current status of the NAREP non-profit organization. But he missed the biggest question that has been in my mind since I first heard about NAREP.

Why?

NAREP was created with the express purpose of stopping “syndication abuse.” Toward that end they created the Real Estate Professional’s Bill of Rights. The document “aims to ensure that proprietary real estate listing data are used in a manner that serve the interests of consumers, real estate professionals, and publishers. This Bill of Rights shall apply to all online and print media that publish listing information, including desktop and mobile applications.”

After a quick read of the ten major bullet points, it becomes evident that the doctrine is aimed squarely at the major national publishers. All but three of the “rights” not only demand changes in display practices by the publishers but actually require that the publishers change or abandon many of the business practices, not just display practices, that made them so successful. Seven out of the ten points contain requirements that if followed by many of the publishers would insure their self-destruction. It’s pretty clear that NAREP isn’t so much concerned about fair display of listing information as it is bent on the elimination of the national portals.

Back to the question of “why”? I don’t ask “why” because I don’t know what the motivation is behind this organization. That is pretty obvious. I ask “why” they chose to use this tack when they know for absolute certainty that no national publisher who wants to stay in business would, or even could, agree to all of the points in the Bill of Rights.

I am reminded of the recent kerfuffle in Washington, the government shutdown of 2013, caused by a small group of elected radical extremists hell bent on destroying the Affordable Care Act of 2010. They launched this crusade and brought the government to a screeching halt while knowing full well (because they were told by the more rational branches of the their own party) that this kind of blackmail or extortion not only wouldn’t work but it would, in the long run, damage the reputation of the party and undermine their attempts to regain the Senate in the 2014 elections.

Yet they persisted. And in the end they lost. Their futile attempts to usurp the authority of the Senate and the executive branch of the government and single-handedly repeal a law, approved by both houses of congress, signed by the president, and that withstood Supreme Court scrutiny was, in the end, a “tale . . . full of sound and fury. Signifying nothing.”

I see the same sort of mentality at play in the NAREP philosophy. Any real estate practitioner with more than a few years experience and some broad exposure to the issues and debates of the day could, if asked, advised NAREP that their demands were impossible for publishers to meet. Indeed, the advice from long-time esteemed advisers at Clareity Consulting, whose similar draft of a Syndication Bill of Rights was used as a basis for the NAREP rewrite, would certainly have been moderation had they been asked.

NAREP published a list of constraints that no publisher could possibly agree to without at the same time throwing in the towel and giving up on their current business model. So if it is that obvious that the Bill of Rights couldn’t succeed, one must question the intent of the organization. Surely it isn’t just to stir the pot and generate a ton of publicity for the organizers. The most successful real estate broker in the nation with over 2,200 closed deals worth $668 million in 2012 doesn’t need the free publicity. Even at a 1% commission rate, that’s nearly $7 million in revenue. If I were drawing down that kind of coin, I’d be sipping umbrella garnished beverages on my sailboat in Margaritaville rather than trying to reform an industry that had been very generous to me.

So my question, #21, is Why?

for this post:
Cause: Obfuscated intent
Effect: Bearding authority

This post appears on Notorious R.O.B. as well.

Miscellanea 927

Brian Boero, 1000 Watt Consulting, has blasted out his miscellaneous thoughts called Friday Flash for quite a while (highly recommended). I like that name, but since it was already taken, and since I’m cautious about over-committing to a schedule I’m not always able to maintain, I need a new name without a time constraint. Possibilities: Intermittent Items. Sporadic Stuff. Serendipitous Subjects. Random Run-ins. Still thinking on that one.

– – – – – – – –

One of the advantages of working for yourself is you have a lot of time on your hands. Hours and hours spent sitting in an office “at work” pretending to be productive simply by keeping your eyes open and glued to a computer screen are now available to accomplish softer tasks – things like reading and thinking, and imagining. I love it. In reading many news sources, I sometimes hit two or three articles that seemingly on close examination have no relevance to each other, but from the higher level view they might. While none is of sufficient interest to warrant a full blog post, collectively they make for some interesting (I hope) thoughts. As I come across those from time to time, I’ll pass them along here.

In a Washington Post article this week on carbon nanotubes and super-miniature computers, scientists have been successful in creating a working computer so small you could fit 40 CPUs on Franklin Roosevelt’s head on a dime. If you share my wonderment that today’s smartphone has a more powerful computer than the Apollo 11 spacecraft that put Neal Armstrong on the moon, you’re also thinking that our pocket pals couldn’t get any smaller or smarter. You, as am I, would be wrong.

On the Time magazine cover this week is a question – Can Google solve Death? Followed by a subtitle, “the search giant is launching a venture to extend the human lifespan. That would be crazy – if it weren’t Google.” So the progenitor of driverless cars is now striving to become the Ponce de León of cyberspace and not discover but create the fountain of youth.

Lastly, news from the University of Washington that Microsoft co-founder Paul Allen is funding a project to advance computers that connect brain to spine in paralysis victims. The device could recharge wirelessly at night (sleeping on a coil-imbedded mattress). How big? See item #1 above.

Ear on mouseI’ve long been convinced that if I live just ten more years I will live forever. Between replacement parts (knees, hips, shoulders), growing new body parts in petri dishes or on mouseback , and robotics (Afghanistan and Iraq wars may not have done much for world peace or the national debt, but they did accelerate research into replacement parts for limb blown away by hidden explosives), about the only thing we couldn’t survive would be the proverbial ‘hit by a bus’ problem.

Based on these three stories, I’m starting to rethink my 10-year time horizon. Could be less.

– – – – – – – –

Speaking of cars, this article over on the Tech Dirt blog is worth noting. Consider this opening paragraph, which I have altered (three yellow highlights) to remove the identity of the players or the industry:

MLSs have been dealing with disruption just about as well as any other legacy industry has. Instead of attempting to compete, MLSs have chosen to respond to web portals refusal to cut them in on the middleman action by throwing up as many regulatory roadblocks as possible. Sadly, this antagonistic attitude toward both their competition and the home-buying public somehow makes sense to them, and they seem very willing to bury both the upstart and their last remaining shreds of goodwill at the same time.

The article is NOT about real estate brokers or MLSs. But it seems that the protectionist philosophy is not unique to the world of real estate data managers. Check out the link to see who they’re really talking about. And then ask yourself, where on the “most trusted professions” list do those folks rank relative to your position? And where should you rank?

– – – – – – – –

And lastly, keep this Tundra© cartoon in mind the next time someone says that your MLS or Association needs to be nimble, make quick decisions, and develop new ideas with the dexterity of an internet startup.

Wolves eat deer by committee action

Even with all good intentions, you’re still running by committee.


For this post:
Cause: Odds and ends hanging around
Effect: Three ideas do a blog post make

 

 

Zillow Strikes Again

On the newswire this morning was a press release announcing the broadcast of an interview with Senators Bob Cocker (R-Tenn) and Mark Warner (D-Va) conducted by Zillow Chief Economist and all-round trend prognosticator Dr. Stan Humphries. The senators are co-sponsors of co-sponsors of Senate Bill 1217, the Housing Reform and Taxpayer Protection Act of 2013 which seeks to replace Fannie Mae and Freddie Mac, the two government sponsored enterprises (GSE) that were deeply embroiled in the housing crash of this past decade. Their bill would completely replace F&F with a new system of regulations designed to prevent future housing bubbles and crashes.

Casey-at-the-BatTo my thinking, this discussion is hugely important to the future of the housing industry. But who is holding it may be as significant or more so in the minds of some. Remember back in August when Zillow hosted a housing conversation with President Obama? Remember the uproar from the REALTOR membership asking why their trade association wasn’t involved? Multiple questions of “Why Zillow and not NAR?” led to the release of an excuse document, called a “Special Report” by NAR explaining that this wasn’t a real serious discussion on housing policy but just a “chat” sponsored by a “housing entertainment website.”

Well, guess what! Things are getting entertaining again. This time Zillow has snagged the two named sponsors of one of the most significant pieces of legislation pending before the otherwise do-nothing congress. And once again, NAR is nowhere to be seen in the discussion.

In pooh-poohing the Obama interview, NAR contended that one of the main reasons they were not involved was because NAR is often at odds with the Obama Administration over housing policy. To quote from NAR’s Special Report, “Our defense of issues that directly impact Realtor® business and the ability of Americans to own and invest in real estate sometimes contrasts NAR’s positions with those of the administration. Because of NAR’s leadership in the advocacy arena, our sources tell us that the White House did not want to get caught in a conflict of interest with us.”

But no such conflict of interest exists between NAR and DC over GSE reform. In a position paper published by NAR, the REALTORS support Senate Bill 1217 stating,

In the Senate, S. 1217, the “Housing Finance Reform and Taxpayer Act” (Corker R-TN; Warner D-VA) offers comprehensive reform of the secondary mortgage market but maintains a government guarantee. Though there are issues that remain to be addressed, NAR is supportive of this bipartisan approach which will accelerate the conversation necessary to reform our housing finance system.

So, without the potential conflict of interest, why is Dr. Humphries, not Dr. Yun, hosting this discussion? While the tape of the discussion hasn’t been released as of this writing (it’s due out tomorrow morning), I doubt NAR can play the same trump card as last time. This isn’t merely a chat done for entertainment purposes. This issue needs a serious policy discussion and supportive action by the leading home ownership lobby in Washington. Seems to me this would have been a perfect opportunity for NAR to seize the moments following the first Zillow interview and line up the senators for a follow-up conversation. That didn’t happen. There was no carpe in NAR’s diem schedule.

Here’s one final suggestion for NAR: host a serious discussion of tax reform, specifically the mortgage interest deduction (preservation of which NAR strongly supports) before Zillow goes three for three – and takes all the joy out of Mudville.

For this post:
Cause:  Fool me once . . .
Effect:  Fool me twice . . .

~bb

This post also appears on Notorious R.O.B.

Filling the white space void

This week’s Trialogue on Brand White Space & Brokerage Opportunity, with Rob Hahn (@RobHahn), Matthew Shadbolt (@Corcoran_Group), Linsey Planeta (@linsey), and Gahlord Dewald (@Gahlord), [which by the way actually makes this podcast a quadralogue – but who’s counting?] is a continuation of the mini-pod from last week entitled Zillow Begins to build a Media Model.  The discussion delves into the thought that Zillow is becoming the Home Depot of the home ownership process.

Rob goes to Home Depot to buy replacement windows.  The service company that Home Depot contracts with shows up with a different name on the truck and does a great job.  Rob thinks of this window company as just an extension of Home Depot and is happy Home Depot did a great job.  Likewise, should the installation go south, it’s Home Depot that Rob calls and delivers a tongue lashing.  Home Depot and Lowe’s are the go-to sources in home repair, improvement, or remodeling. Once you’re in the relationship, once you’re satisfied with a couple of jobs they do, you stay there.  There’s no reason to change.

How does this translate to Zillow (or the other portals) vis-à-vis Coldwell Banker or RE/MAX.   Zillow launched their television ad campaign intending to capture consumer mind share where none currently exists – a huge amount of “brand whitespace” in the real estate category, meaning no one brand symbolizes real estate in the U.S.   This “white space” is the empty place(s) in the entire home ownership process to which the homeowner can’t manage to attach a name – any name, be it an agent name, a brokerage name, a realty website, or a trademark brand of any kind.

If the first brand that pops into a consumer’s head when they think about buying a house is Zillow and not a brokerage or franchise, that fundamentally changes the business equation, WITHOUT Zillow actually getting into the brokerage business.

There was a lengthy discussion about the similarities between the Zillow ads (first one and second one)  and a flight of Coldwell Banker spots that aired earlier this year (right down to the music beds – did the Lumineers sample a little too much Phillip Phillips?).  Both had a similar feel, warm and tender, family oriented, designed to bring a little moisture to the corner of your eye which we men brush away as a sudden onset of hay fever. (“No, really, it’s just the pollen.”)

But despite the small difference in the commercials’ approaches, and the similarities in the message (start your home search on our web site), there’s a huge difference in the brand experience being advertised. When the consumer goes to Zillow.com, they get the same experience every time. The website behaves the same whether you’re signing on from Connecticut or California.  That’s what a brand promises – the fries will be the same no matter which McDonalds you drive through.

But Coldwell Banker is selling neither a website experience nor French fries.  Yes, the chain of events may well begin with a web search (many web searches on many websites if the consumer research is valid) but the product being sold is agency representation in the home purchase/sale process.  And THAT experience is not only different from branch to branch, but it is entirely different from agent to agent within the same branch.  There is no possible brand continuity within a brokerage or franchise unless the broker trains her agents to a robotic repetitious adherence to company process and mantra.  Perhaps some of the new models where agents are employees might be able to demand this level of adherence, but in an office of type-A personalities called independent contractors – NO WAY!

The discussion progressed on to the various models of brokerage, particularly considering the new LLC model where broker takes an equity position, not a commission split, in the agent’s business, not just within the current firm but in any future brokerage the agent affiliates with.  (More on that concept in this article by Imprev CEO Renwick Congdon.)  Carried to its logical extreme, this fractures the concept of broker branding beyond what all the king’s men could hope to reconstruct from Humpty Dumpty’s eggshells. This idea is worthy of another chapter all by itself, particularly the discussion of how a broker chooses which agents to “invest in.”

And to that point, how does the broker decide not only which agents she feels will be worthy of her investment, will be productive and return handsomely on her investment, but which of these agent-LLC’s will be brand reinforcing.  Can a company, made up of a bunch of smaller mini-companies, actually have a brand identity and create brand awareness in the mind of the consumer?  Or are they doomed to be lost in the aforementioned snow storm of white space?

For this post:
Cause: 
Entropy– the measure of disorder
Effect: 
Carpe diem