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 times they are a changin’ in MLS Land

(with apologies to Bob Dylan for plagiarizing his lyric)

 

An industry veteran who was unable to attend the T3 Summit in Las Vegas this past week asked me today if the event lived up to its promise of becoming one of the “can’t miss” industry T3 Summit programevents of the year. I told the Vet Stefan Swanepoel and company made huge strides in only their second year doing the show. They drew ALL the biggest names in the brokerage community this year. The conversations were not the same old crap. The brokerage leaders were very forthright and out spoken about the need for change in the industry. There were broad references to the pending technology introduction by the Realty Alliance. Brokers see this as being the game changing event they have looked forward to for a long time. It remains to be seen if it lives up to advance billing.

This indeed will be one of the premier conferences in years to come and will be on the “don’t miss” list for brokers and anyone who wants to listen to what brokers are saying. Whether they heed what they hear is still an open question.

The theme of the day is CHANGE

Change is in the air

Change is in the air. We heard it every day, all day, from many speakers on the T3 platform. Things are changing. They need to change. They haven’t changed in a long time. Change is overdue. We are our own worst enemy and that has to change. To quote the poet laureate of my generation, “You don’t need a weatherman to know which way the wind blows.

What we didn’t hear in Vegas was HOW. What are the changes being proposed? How will they improve the lot of the broker and agent? And how will these changes be implemented? Will they be en masse or individually? And most importantly, who will stand up and lead the charge?

We heard lots of conversation, opinion, and general consensus on the concept. As with many issues in our industry, the devil is in the details. And there were darned few details presented or even proposals for details discussed.

Bob Moline, President and COO of Home Services of America offered the most concrete suggestions/requests. Among them (I’m paraphrasing from my notes, not quoting):

    • The infrastructure of MLS/AORs has not changed in 30 years and it needs to. The technology is so 80’s.
    • There are too many MLSs; they overlap and they cost brokers too much to join. Overlapping Market Disorder is alive and thriving and must be exterminated.
    • There are too many CEOs running these too many MLSs and we need to “transition them” to something else. One national MLS would be ideal, but a dozen or so strong regionals would be a very good interim step.
    • The national public website of the Realtor organizations should be controlled by NAR.

Project UpstreamSwimming Upstream

Strong words particularly coming from the HomeServices President/COO and an active director on the board of the Realty Alliance (TRA). As has been covered extensively before, TRA is working on a project now dubbed “Upstream” to take control of the listing creation, management and distribution processes at the point of origination (contract execution by seller and broker) rather than ceding such functions to the local MLS.

Multiple sources in Las Vegas confirmed to me that the RFP for the technology solution has been distributed and that as many as eight to twelve responses have been received and are being reviewed. Expectations are running high that we will know details before this summer, perhaps as early as NAR- DC (aka Realtor Party Convention).

Parallel to Upstream is the announcement a couple of weeks ago that CRMLS, the California regional led by Art Carter, is opening its database to allow listings to be uploaded from broker management systems. This is HUGE and the implications of this move were not explained in the news stories, nor were they understood by the MLS community.

With the help of Bridge Interactive Group, CRMLS is taking advantage of a little known and seldom used portion of the RETS data standard called the Update Transaction. RETS has been seen from its inception as a way to standardize data distribution. Put it into the MLS by whatever means necessary, but send listing content out to anyone who needs, including the participating brokers, it in a standard format and structure.

But it also provides a common way for that listing data to flow the other way – from the brokers into the MLS. That’s exactly what CRMLS (and before them FMLS in Atlanta and Northstar MLS in Minnesota) is doing. Mr. Carter has said to TRA, when you’re ready with Upstream, we will be ready to receive your listings. [Clarification: Art didn’t actually say that. I am interpreting the action taken, not attributing a quote. ~bb] There’s nothing like getting cooperation from the largest MLS in the country to inspire TRA to vigorously pursue development of a new way of doing business.

What remains to be seen is how quickly other MLSs will follow suit, if they do at all.

We’ve heard this song before

The MLS community heard the warning shot across the bow in October in Boise. But that was not the first time such warnings had been issued. In a post on the Realty Alliance Facebook page shortly after the CMLS conference TRA CEO Craig Cheatham stated:

The industry now has options that are feasible today that were not realistic a short time ago. If local and national policy/practices don’t change in support of the industry they are to serve, brokers will have no choice but to exercise those options. That’s not a threat, it’s a business reality. Decisions this fall will be about launching “phase one.” There still is time to work together to solve these issues and shift MLSs to being resources for brokerages instead of being competitors to brokerages.

Specific concerns have been published, so MLSs have what they need to address these locally with their stakeholders. Not all the items on the list are problems in every market, but most every MLS is creating conflict with one or more of those practices/policies/attitudes.[Emphasis added.]  And, some of these issues create real potential for intervention by federal authorities if not fixed.
The general gist of these issues lists and the broker message have not changed in several years — these are not new news.

It is a shame there wasn’t more listening and more attention to broker concerns before last Friday and that there hasn’t been more meaningful two-way communication before this week. And, why have MLSs waited until the industry had started down a road that could offer alternatives before getting serious about bridging the gap?

Between last October and now there has apparently been little two-way communication between the MLSs and the Brokers. Otherwise we would not have heard the same tune being sung this past week in Las Vegas. Had the MLSs heeded, or at least engaged in a conversation, project Upstream probably would not have come to fruition. Now it may be too late. If launched, there will be no do over for the MLSs who didn’t think the TRA brokerage cooperative was serious, that such large and fierce competitors could actually agree to cooperate on such a project. They were serious. And they continue to be now.

It’s not too late

There’s still time for MLSs to act. And there are ways of making consolidation to the benefit, not the detriment, of the current owning Realtor Associations.

MRIS was created because of broker involvement, combining some 17 systems (now up to 25 associations as shareholders) into one in the Washington DC metro area, extending into portions of four surrounding states. Dale Ross, now CEO of RPR, was the moving force who recruited broker support and it was the impetus of the brokers that finally forced the solution – the largest regional in the country (until the creation of CRMLS).

But talk to any of the CEOs from an MRIS shareholder Realtor Association, as I have, and you will hear one consistent story. The associations are stronger today, more financially secure, and are providing greater value to their members than they did before MRIS, when they were on the MLS dole and didn’t have to justify their Realtor value proposition. Thousands of other associations could learn from a page in that playbook. They should start not just talking but doing something to mitigate the consequences of decades of denial.

The MLS industry needs focus and strong leadership to turn its attention away from the noise and concentrate on the serious challenges it faces. It needs a plan of action, one that contains some new and perhaps radical (at least by traditional conservative thinking) ideas.  It needs to focus on that plan, execute on that plan, daily – not just once or twice each year at convention time.

I have a few suggestions.

Get upstream of Upstream

The continued existence of the MLS faces serious opposition in the face of Operation Upstream. Leading brokerage and franchise leaders I have talked with lately tell me the details about Upstream are about to be announced. An RFP has already been circulated to as many as a dozen major technical companies that could build the system. Most use existing technology modified to meet the requirements of the Realty Alliance brokers. So delivery of such a system, at least in its basic configuration, could be as soon as this summer. That doesn’t leave much time for the MLSs to offer their own solutions to the problems and demands voiced by the brokers at the CMLS conference last October.

Do the MLSs know which of their brokers have which complaints and what negotiated solutions might be for each? If they did, project Upstream wouldn’t be rolling ahead with the speed and force of a locomotive. The major MLSs claim their brokers are happy. But if that’s so, why are those same brokers backing this initiative?

The only way to get upstream of Upstream is to find out from the horse’s mouth what they hope to accomplish by asking specific and probing questions. Who are the brokers who are dissatisfied? What MLSs do they belong to? Who has been talking to those MLSs? What opportunity for negotiated peace is there before the nuclear option is exercised? Someone needs to start asking those questions and going to the source immediately to find people who can and will answer them.

Overcome MLS Consolidation Roadblocks

MLSs need to find a way to overcome their historical reluctance to merge into larger, regional systems. Even those who want to merge are floundering in the absence of a consistently successful template for creating or expanding such relationships. They need a model that works, one that addresses the financial pitfalls and more importantly the personnel uncertainty. When two systems merge, usually one CEO is out of a job. When ten consider consolidating, nine are reluctant for fear of their job security. As was said from the stage at the T3 Summit, “There are too many MLSs, too many CEOs, and we need to find a way to transition them to somewhere else.” There are ways to address these issues that satisfy all parties, including the transitioning CEOs, and radically speed up MLS consolidation. That must happen soon, or it will be too late.

Open the MLS back-end and implement “Frontend of Choice”

The closed vendor system, which allows only one main MLS vendor in each market, needs to be scuttled and the MLS systems in general made more open and accessible to all vendors. With an open system, where multiple frontends and apps operate against a common database, the pain of changing MLS systems would be minimized or eliminated. The pride of ownership (my system is always better than yours regardless of what mine or yours is) becomes a non-issue when changing the user interface is not required for consolidation.

An open system also allows more options for brokers and agents. Subscribers are not limited to just the modules that the main MLS vendor provides, but can pick just the pieces they need from any vendor. This eliminates one of the biggest TRA objections, that the MLS forces everyone to pay for everything, even if they don’t use it.

An open system allows vendors, not just MLS vendors, entry into markets where they might not otherwise have a chance to compete. But big MLS vendors will also now have an opportunity to sell their wares into markets where they are not the primary contractor, thus expanding their potential universe of buyers exponentially overnight.

Such an open system also increases the potential non-dues revenue shares for the MLS itself. If proper license arrangements are put in place, each vendor could remit a portion of each paid module to the MLS as a license fee for access and data use. This could be a huge first step toward freeing the MLS (and potentially the AOR) from the yoke of “more members = more revenue” which simply perpetuates mediocrity in the practice of real estate.

Fix the Freaking Rules

The NAR rules process is broken. We have known that for years, yet we have taken absolutely no steps to improve it. NAR’s dominance over the “model rules” is supported by (1) the threat of revocation of the charter of any Realtor Association with an owned MLS that does not comply with the model rules, and (2) the fear of loss of E&O insurance, provided free by NAR to its associations and MLSs that comply with the rules standards. Additionally, if the MLS doesn’t comply, the owning Association also loses insurance coverage as well. Both of these “problems” can and should be addressed since they work against the progressive approach needed to consolidate the industry.

But the bigger issue is the insistence of local MLS committees that “their market is different” and “we do business differently here, like nowhere else.” Numerous large regionals (e.g. CRMLS, MRIS, MLSPIN, and CTMLS) have proven this just is NOT the case. MLSs can, and do, change their rules to coordinate with their neighbors. Others find ways to allow minor local options on specific issues without undermining the integrity of the overall database. It’s time the experienced pioneers in regionalization shared their wisdom with the rest of the MLS community.

It should be a simple exercise to merge the best rules from the best regionals into a Best Rules Practices document that all can share. Combine that with widespread adoption of the RESO/RETS data dictionary to create uniformity in the data fields supported by the common rules and yet another roadblock to consolidation will bite the dust.

Who will lead the effort?

Such a dramatic turn in the direction and future fortunes of the MLS industry will not occur on its own. It will not happen in between conference panels discussing the need for such change yet again.  It will not happen with just the pleadings the major brokerages and franchises asking for change. It will only happen with a small group of dedicated leaders, industry spokespersons of repute and notoriety, gather in a war room somewhere, draft a declaration of purpose, appoint a commander-in-chief and raise the funds necessary to field a standing army to get this job done. The Founding Fathers of our country did it 238 years ago. The anniversary of that event is coming up in a scant three months. Does anyone think we could start an MLS revolution by the Fourth of July? If I were still an MLS leader, I would light a few fire crackers under the chairs of my fellow CEOs and make sure it happens.

Otherwise, the MLSs will continue to be just small colonies with allegiance to a throne that cares little of their fate.

For this post:
Cause: the waters around you have grown.
Effect: You better start swimmin’ or you’ll sink like a stone.

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

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.

The next lion . . . the next hill

lion-zoo

The Council of Multiple Listing Services held its annual conference in Boise, ID this past week. In keeping with the high standards of excellence (which may be redundant, but I liked the phrase) of past conferences, our host, Greg Manship from Intermountain MLS, the local host, and his staff put on a top notch program. Many of the panels actually discussed real industry issues which in the past has not always been the case. That’s not a ding on CMLS. It happens at every industry conference. The panelists talk but ignore the multiple elephants that roam around the room.

Not this time.

One discussion on Friday led to much “chatter” in the halls, an unhealthy level of speculation on what was really being said, and a healthy level of panic and paranoia as MLS CEOs tried to figure out what to do next.

Let me explain.

The panel was titled Eliminating MLS and Broker Conflict, moderated by Bill Yaman of Imprev who did a masterful job of mediating as well as moderating. Panelists were Gregg Larson, CEO Clareity Consulting, Brian Donnellan, COO and CFO of MRIS, and Craig Cheatham, CEO of The Realty Alliance (TRA). Craig’s comments were the most impactful.

Suspicion, suppositions and speculation are the staples of much discussion in the inner circles of MLS leadership. MLSs seem to be overly concerned with identifying the next biggest threat to their continued existence and through that to the prosperity of their broker participants. But as the old adage goes, “Just because you’re paranoid doesn’t mean they aren’t out to get you.”

The Realty Alliance is an affiliation of about 70 major independent-minded brokerages, both non-aligned and franchise affiliated, that meet periodically to exchange views on industry issues and best brokerage practices. There are some huge players in this arena and collectively they represent over 100,000 agents, more than 10% of current NAR membership.

They have been involved in the debate over many MLS rules as modeled by mother NAR. It was impetus from TRA members that caused the MLS policy committee and eventually the NAR board to reconsider and then reverse their policy regarding “recognized search engines” being allowed to index IDX listing displays. Senior executives from both TRA and Realogy, this time working in unison  rather than opposition, served together on the multiple (no pun intended) presidential advisory groups that wrestled (albeit unsuccessfully, due in no part to the herculean efforts of the members) with the nuances of policy surrounding the extension of IDX rules into social media.

So it surprised some in the audience to hear that TRA had a laundry list of grievances they wanted MLSs to address. In uncondensed form Craig said then list ran 48 pages single spaced. My first question to myself was why so many and why now? Hadn’t TRA members aired many of their issues in the usual forums? Certainly not all of their grievances applied to all MLSs, so why we’re they not talking to their local MLSs about particular local issues instead of to a conference in general?

The answer to the latter was “They were talking” – not only at the local level but at the state and particularly the national levels as well. But there was a sense in the air that the time for talk was over, that TRA members had resigned themselves to the realization that talk was not only cheap but ineffective, that trying to have their voices heard and change policy from the top down through the established channels was a fruitless endeavor. How we got to this position requires a bit more explanation.

A Brief History of Chaotic Times

At the spring NAR in Washington DC, NAR modified its definition of “Core Services” (those that can be included in the base monthly fee of all participants whether they use such services or not) to include public facing MLS websites. TRA was not alone in their opposition. They were joined by many franchisors who felt MLS were (a) being unfair in charging all members for service that only served some of the members (listing agents, not buyers agents), (b) competed with similar efforts by brokers to publish compelling content and attract consumers, and (c) generally expanding their charter and mission “which introduces vagueness and inappropriate objectives.”

The process by which this policy was adopted was contorted, contentious, and (in the minds of many, not just big brokers) counterproductive. But it was adopted.

Subsequent to that, TRA published a guidance paper telling MLSs TRA’s Fair Display Guidelines would have to be followed in order for TRA firms (optionally) to allow their listings to be included in such a public website or not. Most industry observers felt these were fair guidance so there was little debate.

But the unexpected consequence of the debate over public websites was a resurrection of a number of grievances that TRA felt were unaddressed. Had there not been the huge turmoil at the national level over the co-issues of franchisor syndication and MLS public websites, perhaps TRA would not have piled on with more, “Oh, and while we’re at it, they do this too . . .” items.

Don’t shoot the messenger

To Mr. Cheatham’s credit, he explained to the audience that he was just the messenger and didn’t have a dog in this hunt except to deliver the message from TRA in unambiguous language. And he almost succeeded in delivering the message in cool, measured carefully crafted statements without interjecting distracting emotional appeals. I say ‘almost’ because as the Q&A session progressed, it was clear from the emotion in his voice that he felt very strongly about the points he was making as he summarized the gist of the 48 pages into a series of quick bullet points.

Among them (and I’m doing this from memory since I can’t type as fast as Craig speaks) MLSs should not site license products that compete with brokers offerings to their own agents; MLSs should not introduce new services without a courtesy notice to (better yet, a discussion with ) the brokers; MLSs should not block data feeds to the brokers or agents (it’s their data and they need it for their businesses); for those MLSs that do provide full data feeds they shouldn’t charge participants a second fee to receive them; MLS CEOs should not take it upon themselves to make decisions for brokers in any regard without proper due diligence and research; and MLSs should consolidate more to eliminate overlapping territories that force brokers to join many MLSs. There were more. CMLS has asked for the list and will publish it if they get chance.

Craig went on to explain that in the months since the public website debate TRA had contributed significant resources into studying these problems and gauging the feasibility of several options should the MLSs not be persuaded to change their tactics. He described in broad concept the “red button” analogous to the one that follows the president around and is connected to the nuclear arsenal.

And in a statement that some saw as a thinly veiled threat, Craig concluded with, “You have 10 days.” (Insert audible audience gasp here!) Subsequently it was proffered that the 10 days referred to the time until TRA meets again to make decisions on next steps, not 10 days until the bomb drops. (Insert audible audience Phew!) Even with that clarification, the “bomb” concerns persisted.

What kind of bomb?

What could that bomb possible be? Rob Hahn, 7DS Associates, posed a question to Craig by reading a comment appended to one of Notorious Rob’s essays on the wisdom (or lack thereof) of MLSs changing their focus away from B2B and toward B2C fearing it may trigger a revisit of the public utility question. He quoted from the blog comment:

And now you know why, when the Realty Alliance met this year, the major topic of conversation was all about finding a path out of the MLS by the largest brokers in the country. . . . and now you know why the largest brokerage firms in the US are all telling NAR the three way agreement needs to end, or at the very least be significantly modified, or they are going to find a way out of NAR completely.

and then asked Craig to comment. Craig did not comment directly, saying only that he could not confirm or deny speculation about the content of debate or discussion of options within the closed meeting room. He wasn’t being coy or playing games.  It was clear that he was under specific instruction from TRA as to what he could discuss and what he could not. However, most in the audience probably felt that was as much a confirmation as they could expect, but a confirmation none the less.

I’m sure most MLS CEOs in the audience were either confident the bullets weren’t meant for them or were in total denial that such complaints could apply to them. After all, the conference is composed for the most part of CEOs who know what the heck they’re doing or they wouldn’t be there. So I asked the panel whether there was a way to figure out, as an MLS leader, whether this list applied in any way to their individual system. Would Craig be willing to share not just his list of grievances, but the individual MLSs to which each applied if he had that info. Such level of detail was not available, so in the absence of detail Gregg Larson suggested all the MLSs, not just those in the room, call all their largest brokers, especially TRA brokers, on Monday and ask the Ed Koch question, “How am I doing?

So the countdown clock is running. T-minus seven days (perhaps less by the time you read this) and counting toward the next debate and perhaps a decision on what changes MLSs, Association owners, and even NAR need to make to to address avoid potential disruptions in the status quo.

What might that decision be? Speculation ran rampant in the halls, ranging from pulling out of IDX and syndication so their listings wouldn’t be seen on an MLS public site to pulling out of MLS altogether to demonstrate their total frustration with the institution and what they feel it is becoming.

But I can’t imagine all of the TRA brokers pulling listings off all internet marketing sites. Their sellers would revolt. Their agents would revolt. Maybe they’re thinking of interconnecting all of their own broker websites to create a mini-network within the Internetwork, so a consumer could search anywhere in the country where there is a TRA affiliate?

Then again, the answer might be right under our nose if the commenter on Rob’s blog is an informed source.  If there have been discussions between major brokerages and the highest leadership levels at NAR about changes to the three-way agreement or decoupling mandatory NAR membership from participation in what are now all-Realtor MLSs, then all the discussion about public websites and IDX indexing will seem like a bunch of children’s playground nattering.

I don’t know, but I’m looking forward to reading about the results of the meeting.

I mentioned in my inaugural post that I had a feeling something seismic was about to occur in our industry. But honestly, I didn’t think it would happen this soon after making that prediction. (Heck, I haven’t yet finished the full post on what that shock wave might look like.) This might not be “the event” but I’d put money on TRA making some serious moves between now and the annual NAR convention, this year in San Francisco in November, if they don’t see some demonstrable sign that the MLSs, the AORs and mother NAR are willing to open negotiations and address these deficiencies in earnest. Otherwise the descending lion might just be having an MLS sandwich for lunch.

billchee“There is a high probability that the Realtor organization will lose control and direction of the MLS as it currently exists. I view the current MLS situation as a few Chihuahuas fighting over a bone, unaware that a hungry lion is coming over the hill.

– Bill Chee, April 26, 1993 in Washington DC.

In the meantime, tempus fugit MLS execs. Time to start dialing for brokers.

~bb

For this post:
Cause:  A failure to communicate
Effect:  Duck and Cover 50’s style

This post is also available on Notorious R.O.B.

 

What is a Listing?

I’ve been invited to speak at CMLS on the topic of what MLSs should do to help brokers make smart decisions about syndication.

The invitation is surprising for a couple of reasons:  I’m no longer in the MLS business nor do I work for a recipient of said broker syndication efforts and decisions.  Also, after I left Zillow I swore to myself (out loud this time) that I wouldn’t get involved in rehashing this old topic yet another time. I personally have attended multiple funerals for that dead horse (Cause of death:  multiple beatings) and do not look forward to waking another.

deadhorse1

But of course I accepted the invitation because I’m a glutton for punishment.  And lately some thoughts have occurred to me, more often now that I’m no longer under the influence (figuratively as well as literally speaking) of either of the two polar opposite positions in this debate – MLS gatekeeper or national real estate portal.

In an uncanny coincidence of timing, details of the long awaited SourceMLS™ branding initiative from the Council of Multiple Listing Services (www.cmls.org) was unofficially unveiled this past week through a posting by Victor Lund on the WAV Group blog. I say “unofficially” since there was no similar announcement on the CMLS or SourceMLS websites, but since Marilyn Wilson (the “W” in WAV) serves on the CMLS board I presume this post had CMLS blessing.

SourceMSourceMLS LogoLS has been over a year in the making and members have been receiving updates on its developmental progress since early in 2012.  SourceMLS was developed by MRED and Russ Bergeron and licensed to CMLS for their exclusive use with their membership and selected vendors. SourceMLS intends to identify listings and websites, either broker or third-party, who receive listing data directly from an MLS and who agree to treat that data according to the guidelines established by CMLS.  The intent, of course, is to rid the web of stale, outdated, old listings that are no longer active but appear to be so because the source of the listing hasn’t keep up with the recommended maintenance.

 

In comparing the WAV post, the CMLS Guidelines document, and the Trademark License, I found some significant differences and have multiple questions about which version is actually applicable.  But in trying to compare and contrast them for this post so I could properly relate the concern back to the applicable language that generated it, totally I confused myself.  So I’ll hold those questions for another time and another post.

Looking at the program in general, most of the provisions and requirements are pretty benign, but some of them seem to be designed specifically to get national websites to change not just their display practices but their core business practices.

One item which caught my eye was the provision that CMLS would have approval authority over any vendor who applied for licensure under the SourceMLS program. The language in the official guidelines document reads as follows:  “The Listing is displayed on or through a real estate information site or service that is reasonably acceptable to CMLS.”  (emphasis added)

While this may on its surface seem innocuous, it does offer CMLS literal veto power over any application that it feels is not in keeping with the high standards set by CMLS for listing display. Those standards are not identified or enumerated.  I’m sure CMLS will use this authority judiciously, but the fact that this provision is included in the guidelines and thus embodied in the license agreement by reference gives one pause to consider whether CMLS is either (a) overstepping the authority granted to it by the MLS or (b) creating an opportunity for arbitrary and capricious disapproval of any application by any website that CMLS feels is not acceptable but can’t find a specific rule that would justify denying the application.  Such an action may run afoul of regulations or even law since the protocols for such a review and decision have not yet been established.  Given the contemporary mood in MLS circles to want to “take back our data” this provision should raise questions in the halls of those non-broker websites who want to continue to use listing data from an MLS, but who must now conform to some unpublished standard of conduct to be “reasonably acceptable.”

The other interesting item is the requirement that states upon expiration or sale of a property the displaying website must remove that listing from the website (and potentially, or at least implied, from its database).  From the SourceMLS guidelines document:

If the Listing has been removed from active status, all listing content including but not limited to images, video and property descriptions have been removed from display within twenty four (24) hours of the Listing being removed from active status. If such Listing continues to be displayed, the listing broker name is displayed with the Listing.

(Let’s set aside for the moment the internal inconsistency between the first and second sentences of this paragraph.  In the first, one must remove the listing. In the second, if you can’t comply with the first – removing the listing – then show the broker’s name when you display it in contravention to the first sentence.  Huh?)

In order to comply with the requirement to remove the listing, it seems necessary to agree on a definition of what a listing is. We in the industry have used” listing” rather generically over the years to describe a property data record within the MLS database, as in the whine, “They’re taking our listings and selling us our own leads.”  In fact, a listing is technically a contract between the seller and the broker retained to sell that property. When a broker or agent says, “I have a new listing” she doesn’t mean I just created data record. She means I have a contract granting me new authority and responsibility to market this property for sale.  Yet we use “Listing” as it was used in the second sentence of the quoted text above:  “If such Listing continues to be displayed…” does not refer to the contract being displayed, but instead to the listing data record.

So what is it that’s to be removed when a listing comes down?  The price and pictures, and prose.  Three p’s.

What is a listing?

CMLS, and they’re not alone in this interpretation, sees “listing” as something physical, an object that can be passed from one person or site to another, perhaps something that can potentially be monetized because it has value (although the value is debatable and difficult to quantify, as Todd Carpenter noted recently).

But a listing record is not a singular object.  The listing record is composed of two essential elements:  the facts and the fiction.  Facts remain unaltered by virtue of a contract to sell a property.  CoreLogic has them.  Data Quick has them.  RED has them.  The facts include size, age, rooms, bath and bed count, property size, taxes, school district, nearly every physical description of the property.  The fiction, those parts made up by the broker and the seller to flesh out the offering of the property would include list price, agent’s remarks, and photos, perhaps virtual tours, special offers, bonus commission offering.  All are subject to change and updating without affecting the core elements of the property record.

So what does CMLS mean when they say remove the “listing content?” The intent of this provision is to require that a website no longer display data from the listing record that it received as part of its syndication feed. However, as has been noted in a couple of recent nationally prominent copyright lawsuits currently pending in various federal circuit courts, most of the information contained in an MLS data record is public knowledge, public information, or public records – facts, which are not copyrightable, rather than creative works which are.

What the agent adds in creating the listing record is minimal. Certainly there is a requirement to state that this property is for sale, and what status it is in.  There’s the list price, considered in some quarters to be the most copyrightable work of creative art in a listing record.  There’s some poetic narrative of original prose called Realtor Remarks (or Agent Remarks in those MLSs that allow non-Realtors to participate) which couldn’t be more worthless after a listing contract expires, so we shan’t waste any breath on its debate, now shan’t we?  And, of course, photographs.

On most national websites, nearly all of the data elements that are contained in what the industry perceives as a listing record are already maintained in a master database of property information. That database is populated with public records information AND with information about previous sales activity on that property – yes previous listings, from agents, brokers, or even homeowners who posted that data on the portal without the requirement to remove it when the house was no longer for sale.  So when a website receives a new listing record, much of the content in that record merely duplicates data elements that the website already has collected in its database.

When CMLS asks the website to remove the listing content when it is no longer on the market are they requiring that the website remove factual information that it had prior to receiving listing record? In discussing this with one MLS, with which I was negotiating a data license, the answer to that question was “If you got the information from the MLS, you must remove it.” But how can they prove that the bedroom count, the current taxes, and the lot size are all data fields that came from the MLS and not from public records?

Even with regard to photographs, some real estate websites combine photos from a separate data feed into the display of an active property listed for sale. These photos may be of higher resolution or more numerous and may be coming from a franchise or the agent herself.  They are offered because in many cases the MLS is not capable of storing and displaying extremely high-resolution photos, or restricts the number of photos it will distribute to syndicated websites under the delusion that a consumer will click over to the MLS or broker site to see the rest of the photos when in practice the consumer will just move on to the next property that has more photos. Often the outside-sourced photos are exactly the same picture, but sent in a hi-res format rather than the lo-res version the MLS vendor created to be able to store them efficiently.  So are those photos the portal received separately from the broker, not from the MLS, part of the “listing” or not? Indeed the mere act of substituting one set of photos for another may be in direct violation of another provision which prohibits the website from altering the listing data it receives from the MLS in order to qualify under the SourceMLS license.

Pictures and prose are part of the historical record and despite being removed from the active display they probably live somewhere in perpetuity on some archiving website like the Wayback machine.  Example from 1997: http://web.archive.org/web/19970102155412/http:/www.realtorads.com/

So back to the original question – what’s the meaning of “take down the listing?” It depends entirely on the definition of “listing.”  And even if we agree it means those portions of a property record that are original to and singularly associated with the listing contract in question, then taking down the list price (done anyway since the property is no longer for sale), any pictures that didn’t come directly from the MLS, and the Remarks should be sufficient.

So what’s the hubbub about?

I applaud the efforts of CMLS to address the ongoing issue of stale data and outdated listing displays.  It’s a formidable task, one that cannot be easily accomplished to the satisfaction of all quarters.  As with most new brainstorms, the devil is in the details. But I would encourage CMLS to examine the guidelines and license provisions that it has created for the SourceMLS program and make sure that they are (a) lucidly clear as to their definitions and intentions; (b) clearly understood and consistently explained to all parties to whom the SourceMLS program is being offered, and; (c) that the program is true to its mission of improving the quality of the data displayed on all websites and not subconsciously designed to undermine any particular website by making the rules of participation so onerous that no one will sign up.

I will be joining the CMLS panel at the upcoming conference in Boise, as planned.  I hope to see you there and hear your opinions on the SourceMLS™ project.

For this post:
Cause?  myomymyheadshurts
Effect?  Perhaps not the one intended