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.

The wolf eventually showed up!

The whole world of MLS is exploding. That part that isn’t exploding will be carpet bombed into oblivion. The sky isn’t just falling, it’s getting ready to crush every little chicken in its path. So many people are crying “Wolf!” that even the wolf is scared spitless. At least that’s what some writers would have you believe.Boycriedwolfbarlow-260px

Others see the problems inherent in crying “Wolf” but nonetheless think there may be some substance to the cries.

One of the morals of the Aesop’s Fable of the Boy who cried Wolf is often lost behind the more important metaphor: Don’t cry Wolf unless you mean it because you will make your audience weary of your warning. What we forget is that the Wolf eventually DID show up – and killed the whole flock of sheep.

I fear the same thing happening now in the MLS community in the aftermath of the warnings by The Realty Alliance to the collected MLS executives and leaders in Boise last week.

Some pundits are saying, “Yeah, we’ve heard this all before and nothing ever happens.” “Why should this time be different?”

This time it is different.

I’ll offer that this time is different because these are not idle threats made by some petulant teenager throwing a hissy fit. No one on the stage last Friday at CMLS was holding their breath until they turn blue in order to get their way. Not once did I hear the phrase “or else” uttered by TRA President/CEO Craig Cheatham. What I did hear was simple declarative statements of what TRA considers the facts of business life – that the practices they itemized were likely to cause conflict between MLSs and their Broker participants.

Some listeners were shocked, SHOCKED I tell you to hear there had been discontent here. They had never heard of such a thing, at least not in their backyards.

I’ve been doing some digging trying to figure out where this schism between brokers and their association owned/operated MLSs started. This has apparently been going on for years and no one noticed until last Friday.

Here’s what I’m finding and some of it is disturbing.

The Realty Alliance has a Facebook page. The page is posted to with great regularity by the administrator with observations and statements that sound an awful lot like either policy or stated concerns. These posts go back two and a half years, to May 2011. There aren’t many, but they do recite multiple expressions of angst about the growing schism between brokerages and their associations and MLSs. Examples:

TRAFB-01

TRAFB-02

 

TRAFB-03

 

TRAFB-04

 

Some of the messages are very cryptic. Such as

TRAFB-05

 

and a reminder a week later

TRAFB-06

And earlier that year when Franchisor IDX was a hot topic:

TRAFB-07

 

TRAFB-08

 

 

TRAFB-09

 

TRAFB-10

 

TRAFB-11

 

These last few entries all point to the time when TRA was fighting its implementation of franchisor IDX by NAR. The discussion was heated and almost everyone with a passing thought and a keyboard chimed in with their personal opinions about the debate. One blog, Matthew Ferrara, linked to from the TRA Facebook site, had some provocative quotes and comments, such as:MFerrara Post

Again, so what? This is just picking at the scabs of the never-healing self-inflicted wound REALTORS stabbed themselves with decades ago, called MLS.

So all of the “nice” things that MLS policies supposedly provide brokers are becoming less valuable to many brokers with every new technology decision that accompanies them.

Mr. Ferrara had some observations that seem to presage the discussions we’re having today by nearly three years. Here, on how difficult a new technology solution would be:

As for sharing it (data) between multiple brokers, alternatives have already proven the possibility: Postlets, Point2 and – shock! – peer-to-peer syndication feeds make it possible for companies to transfer data to each other without much cost (in some cases, none). If an unfunded-nobody can syndicate their data to Huffington Post using a free WordPress-coded blog and free WiFi at Starbucks, don’t you think today’s brokers can figure out how to send data to each other?

On how to do business without an MLS (remember this is early 2011):

And that’s the real unintended consequence of the IDX syndication rule. Some brokers must now seriously consider withdrawing from the MLS club entirely. And why not? Most of New York City has survived just fine into the 21st century without MLS. Millions of real estate brokers around the world get along fine without overly organized compensation policies and data policing. They know how to cut each other a referral check, and generally play nice. Consumers, on the other hand, are far better at inducing brokers to keep their data fresh than a few dollar fine by a MLS cop, lest the broker face consumers’ wrath on Twitter and Yelp.

So the discussion of MLS v. Broker problems isn’t new. Nor are some of the more obvious possible resolutions to the problems in the event that the brokers and NAR/MLS teams can’t reach consensus on changes needed in the underlying relationships.

At the risk of repeating myself, I will. Here are comments I posted to the Vendor Alley essay on this topic earlier today:

I think we are over-thinking this. Let’s look at Occam’s razor: the simple answer is most often correct.

What do the brokers say they want? A simple solution that lets them trade inventory and cooperate on selling homes. Nothing more. The simple solution would be to meet for coffee at the corner restaurant once each week and exchange lists of addresses and prices. Sound familiar? Now make it electronic, but keep it simple.

We are seeing this in the agent community with private listing networks where agents exchange pocket listings with other agents with whom they choose to work. No NAR oversight; no mandatory cooperation requirement, no syndication; no MLS rules or competing products/services, no need to join 47 MLSs because of artificial geographic or political boundaries, just a simple society created by the peers in the group. And if someone isn’t playing by the rules, the group either kicks them out or just ignores them.

That approach on a slightly larger scale could work for residential brokerages. It certainly has worked just fine for the commercial brokers for decades. And most of them have never joined an MLS in their lives.

What have we learned from all this research? The sky isn’t falling yet, but storm clouds are definitely making it darker out there. We’ve heard these complaints before, but ignored them. The alternative solutions being considered aren’t really that hard to do nor are they that novel. Don’t ignore the warning signs just because you’ve heard them before.

One more lesson from many, many old black and white jungle movies: the most dangerous time is not when the war drums are pounding in the distance, but when they stop. As long as TRA and its affiliated groups are making noise, NAR and MLS are probably safe.

But don’t expect brass bands to come marching out of the Realty Alliance meeting room on Monday. There will probably not be a news conference held, no press release released, no profound statements of great import about the future of the industry, and certainly no ceremonial button pushing. The time to really start worrying will be Tuesday morning when the drums fall silent and the jungle is deathly quiet.

For this post:
Cause: Boy cries ‘wolf’ and no one listens
Effect: the Sound of Silence.

What did the lion mean by that roar?

Following on my post about the Broker/MLS conflict at CMLS, as promised The Realty Alliance (TRA) has published their list of complaints and Gregg Larson, Clareity Consulting has it posted with his commentary on their blog at http://clareity.com/Lion with Big Stick

By far the most commented article is the Inman News coverage of the event. Nearly 100 comments as of this writing and they’re all over the map.

And this morning Greg Robertson posted his take on the whole debate on Vendor Alley.

Most of these authors and comments are focused on the surface issues – complaints about specific MLSs and their practices – while ignoring the underlying reasons that TRA is so angry. The issues run far deeper than MLS public websites or white-labeled iPad apps. The main issues for TRA are fundamental disagreements with the way MLSs and Realtor Associations are structured, not how they’re managed. There are hints at this underlying problem in between many of the superficial nits being picked at in the TRA list.

Here’s my take on the list published by Clareity for TRA.

There were a few things that jumped off the page/screen at me as being Batman/Robin moments: Holy Jumpin Jehoshaphat!

#1, top of the list, first on the hit parade: Tying MLS participation with products/services that should be optional and go beyond the founding MLS principles (data, cooperation/compensation) … unfair, and likely illegal.

Comment: HOLY D-O-J, did someone mention illegal? This one clearly came from the spring discussion about core services (particularly lock boxes and public MLS websites). But there’s more here than just those two. What about tying MLS participation to Realtor Association membership? That has been decoupled in two federal circuit districts but failed similar court tests in others. TRA sees MLSs as protected by the political and financial prowess of NAR but out of control of NAR as evidenced by their expansion into numerous for-profit areas in which TRA feels they should not compete.

#5, Subsidizing associations by over-charging for MLS services and passing extra revenue to associations.

Comment: HOLY SWITCHEROO! Rather than raise board dues and risk backlash from Realtors who don’t see the value of the association’s efforts, they raise MLS fees because agents can’t do business without the MLS, so agents are powerless to complain or resist. This revenue stream is the main reason local Realtor associations maintain their control over the MLS (see #1 above).

#33, Allowing consultants to steer them (MLSs) to being overly entrepreneurial.

Comment: HOLY U-EYLOUIE! Turn the boat around. I’ve worked in two major MLSs and been involved in numerous consultant guided strategic planning sessions over the past decade and the advice from said consultants, across the board, has been pretty consistent: innovate, extend service, be more than just an MLS, provide value, expand, grow, prosper, consolidate, think of the consumer as your customer (because if you don’t, someone else will). As Gregg Larson said in his commentary, ” Clareity and half a dozen other consultants, along with numerous vendors, are guilty of introducing seductive new technology and services that the MLS can license for all its members.” Apparently TRA feels all those consultants at worst were wrong, or at minimum weren’t preaching to the correct choir.

#44, Viewing its customer as the agents or the consumer public.

Comment: HOLY BILLPAYER! Most MLSs would look at the agent as their primary customer because most MLSs charge the agent directly for services. And on behalf of the agents, many MLSs look at services from the vantage point of “What’s good for the consumer is good for the agent.” Apparently the TRA brokers see the relationships slightly differently.

#•, Having a bias against participants that make up a significant percentage of market activity and skewing benefits toward those with a smaller percentage of market activity.

Comment: HOLY LEVEL PLAYING FIELD! This may be the oldest complaint in the book, stemming from the first time an MLS ever considered a service that was thought to be good for all, regardless of whether some could have (or had) paid for it themselves. It stems from the Three Musketeers mentality of a trade association – All for One and One for All – regardless of rank, size, financial prowess or need. That worked OK when the association was handling public relations or government lobbying on behalf of the industry as a whole. It fails when those who benefit are only the ones who cannot afford the tools necessary to compete in the open marketplace, and those tools are paid for by the ones who can afford their own.

And the pièce de résistance: The ideas being tossed around for possible implementation are broad-based, not restricted to The Realty Alliance, but have been incubated by a number of global networks and brands representing firms of all sizes and business models, of which The Realty Alliance is just one segment.

Comment: Global Networks? Like Leading Real Estate Companies of the World? You can’t get much more global than that. Leading RE closed $272 billion in sales in 2012, 36% more than Coldwell Banker ($200 billion).

Those who think TRA is going at this alone are missing the nuanced references buried in the published statements and in the verbal appeal Mr. Cheatham made at CMLS.

Brands of all sizes and models? That could embrace the Realogy brands, Keller WilliamsPrudentialBerkshire/HomeServices and RE/MAX. A coalition of just those five would represent over half the agents in the US, and according to Leading RE’s numbers over 90% of all sales transactions. Now that’s clout. Any association or MLS that thinks this group is just restating the same ol’ same ol’ without any teeth behind the growl is going to be in for a rude awakening. If these five or six groups are in agreement on a course of action and act in unison to preserve their business, anyone who feels they are doomed to failure because the remainder of the industry won’t follow is missing one major point: THEY ARE THE INDUSTRY.

So let’s unveil the threat. What are the consequences of continuing the attitude as usual at all levels of organized real estate?

Realty Alliance CEO Craig Cheatham summarized in broad brush strokes what is being considered.

The Realty Alliance and some other large brokers and franchises have invested money in R&D on a project that could dramatically affect MLS and several vendors that were in the room know the details of this project but are under NDA so they are not talking about it. And no, technology is not a hurdle.

Ingredients: big money (some of it already spent); broad base of support; input from tech vendors/consultants (chosen not only for their knowledge and skill but also for an inordinate ability to keep their mouths shut – there has been absolutely no leak anywhere as a result of the NDAs); dramatic effect on MLS; and no tech hurdles.

I’ll let your imagination fill in the blanks. But whatever it is that’s under consideration as the alternative to the current structure must assuredly incorporate:

  • Broker ownership and control of the listing maintenance and distribution processes
  • Disconnection between Realtor associations at all levels and MLSs (this piece alone is worth another post – coming soon)
  • No disruption in current business pipeline (perhaps a parallel system, at least for some overlapping timeframe?)
  • “…several… options that have never been available before.” Didn’t see that one coming, did ya? That tells me this is going to be BIG. Really BIG. No matter what it turns out to be.

For this post:
Cause:  You’re speaking too softly.
Effect:  I’m carrying the  big stick.

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