AMP and Upstream in the broader technology context

You should read this

In May, 2015 the National Association of REALTORS® approved funding for RPR’s project AMP™ (Advanced Multi-List Platform) and Upstream™ (the broker controlled listing maintenance and distribution project to be built using RPR’s AMP technology). Shortly thereafter, the California Association of REALTORS® (CAR) convened another in their excellent series of Executive Roundtables to discuss both projects within the broader perspective of data sharing and MLS consolidation. The report of those discussions is a compelling read and offers insights from four of the premier thought leaders in our industry: Ann Bailey, founder of consulting firm Pranix; Robert Bailey, longtime Santa Cruz (CA) broker and past chair of many Realtor, MLS  and technology vendor boards; David Charron, CEO of MRIS; and Dale Ross, CEO of RPR.

Panelists engaged in substantive analysis of what ails the industry and the appropriate course of action for addressing real estate’s data-sharing dilemmas. They delved into data management issues and the incongruity between advancements in technology and the industry’s outdated and restrictive infrastructure. Joel Singer, CEO of CAR, moderated the discussion.

The report is long, but well worth the time of any MLS executive who wants a broader understanding of the complicated issues facing our industry today and in the future. You can read the full report online at: http://www.car.org/ccre/pdf/Data-Sharing_Dilemmas-CCRE_Whitepaper.pdf or download the PDF by clicking the cover here:

CARCover

 

 

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.

NAR’s Organizational Realignment and Core Standards: Part Deux

MandatoryCoreStandardsHi intrepid readers. Notorious Junior here to do a follow-up report to Notorious Senior’s parsing of the NAR Organizational Realignment and Core Standards project, Part 1. (Part 1 didn’t appear on this site, so if you missed it you’ll need to play catch up by jumping over to Rob’s site and reading the first part.)

So why isn’t Rob handling his own follow-up promises? Well, he’s been kind of busy lately, being chased around by the Audubon Society for talking smack about Black Swans and other aviary oddities.

Plus, I recently attended the certification training for Core Standards Facilitators hosted by NAR in Chicago and came away with a renewed respect for NAR for taking on such a project and for the staff for figuring out all the nitty-gritty details that will need attending to in order to make this thing work. So these are my thoughts.

First, a little background.

NAR president Steve Brown appointed a PAG (presidential advisory group) to study how NAR could make itself, and its state and local associations of Realtors (AORs), better, more targeted to the mission of helping Realtors be successful in their businesses. The PAG report was published this past April and at the May REALTOR® Party Convention (and political rally, congressional lobbying party, and general governance meeting – oh, yes, and trade expo) the NAR board of directors acted on the recommendations by adopting the Core Standards by which all state and local boards will be measured.

The criteria for success are in six categories.

  1. Code of Ethics (strengthen and streamline)
  2. Advocacy (politics and policy influence)
  3. Consumer Outreach (promotion, publicity, charity work, fund-raising, etc)
  4. Unification Efforts (refers to alignment of services at all three levels, rather than unifying boards, i.e. merging them, which was not the intent)
  5. Technology (boards need a website; they’re cheap; get one now)
  6. Financial Solvency (pretty self-explanatory – don’t let your bankruptcy be a surprise)

Most of the criteria are going to fall into the “Duh, don’t we already do that?” category. But there are some sleepers in there that are going to keep some AOR CEOs awake at night. As you toss restlessly, keep in mind the ultimate purposes of this project:

KEY GOALS:

  • Every member receives services they deserve, regardless of geography or structure.
  • Every association contributes to the strength of the whole. Locals, state, national are all working together
  • Every association must be capable of delivering the standard services. Those that cannot now must find a way to do so or else.
  • Every association is highly functional and delivers member value – size is not the issue. Functionality is the goal. Small boards can be highly functional, while some large boards may not necessarily be that functional.

Despite what Dale Stinton told the AEs at their annual institute in Baltimore (as Rob reported his best recollection), the official line is this is not about culling the herd (of crappy boards) through mergers or defenestration. This is not just about getting rid of small boards (although everyone admits that the smaller the board the harder it will be for them to meet the standards tests). It is, instead, all about service to the members. Mergers may be a side effect, but if the service levels can be achieved without mergers at all, the Realtor mission will have been accomplished.

I was surprised to hear that many (hundreds) boards are so small they can’t afford one full-time employee. They exist solely to exchange listing information through an MLS that may be a PC on a modem line in the president’s garage. Those will be the first to die. Those that cannot make the grade on their own because of size, inefficiency, or just plain incompetence will have a number of options available to them short of termination with extreme prejudice.

  • They can fold into another board as a local chapter, thus keeping a portion of their local identity.
  • They can joint venture with other boards to share service costs and jointly present programs that meet the standards.
  • They can hire services to be delivered on their behalf, either from other AORs or outside vendors, although this might entail some increased costs.

What they cannot do is continue to slide by on good looks and charm. The days of the AE or board president cajoling the state AE in order to not have to meet the board’s RPAC quota are over.

Let’s take a closer look at each of the major areas and point out the highlights of the upcoming requirements.

Code of Ethics (COE)Rob's version of COE Justice

My notorious friend jumps on his high horse about the lack of teeth in the Standards around the COE. Rob would like a Judge Dredd to go out and find those desperado Realtors, given them 48 hours to ‘splain themselves (even if their name isn’t Lucy) and then shoot them on the spot if they don’t straighten up, clean up, and fess up.

But the purpose of this section isn’t to force Realtors to be more ethical. It’s to make sure the AORs are doing their best to educate the members that (a) there is a COE, (b) they are expected to follow the COE, and (c) in cases where someone is harmed (whether that’s another Realtor or the general public), try to facilitate a resolution short of a full-blown professional standards marathon inquiry.

Through years of evolution and expansion, the Code of Ethics and Arbitration Manual is now over 250 pages long, chucked full of due process and rigor and quite frankly is a total PAIN to follow.

The three options, of Code of Ethicswhich the boards much pick at least one, all intercept the complaint before it enters the formal ethics process. Mediation can resolve disputes in a short time. An ombudsman can intervene early and get the parties to negotiate a settlement even before mediation. And many states (NAR promises to publish details and examples) have a fine system in place that allows a member, when s/he gets caught with a hand in the cookie jar, to say a couple of hail Mary’s and a mea culpa, pay a fine and get back to business. The fines can be substantial and a couple of them should be a deterrent to further mischief. But if not, the board can still throw the manual at them later (which, at 250 pages, has got to be painful).

Advocacy

Just a couple of comments on this topic because for the most part Rob is right on in his analysis. Advocacy may be the saving grace for Realtor Associations, their raison d’être. Of all the services an association can offer, keeping good politicians in office and bad laws out of the books is the most noble.

NAR has put some substance around the metrics** of Calls for Action. They publish the response rates for each association and the Y-o-Y change so one can easily see the trend. My former state, Arizona, is dead last (8.8% response rate) among les États (there are a couple of territories and one District doing worse, but then there are a couple of territories with fewer members than the Black Hills, SD association with about 300 warm bodies, so we won’t pick on them until they grow up). But other states like IN, OH, NH, and VA  have equally abysmal response rates, all 10% or less. Top dogs in the political arena are North Dakota (surprise) and Iowa (no surprise) with 32% or more responses to CTAs.

Funding Advocacy

RPACThe RPAC requirements are interesting as well. On the one hand AORs must include a voluntary contribution line on their dues statements, and in so doing imply that the payment of the contribution is anything but voluntary. Members can line-out that RPAC item and pay the dues amount only, but there is no requirement in the policy that requires AORs to explain this to the members. It will be interesting to see how those associations who accept only electronic on-line dues remittances handle the option to allow members to remove the RPAC amount from their “shopping cart” before they check out.

Yes, this procedure is an admission that most Realtors don’t understand the importance of strong, well-financed political action by their trade association. That’s the other part of the requirement, that the boards go further to explain, to educate the members why this is such an important part of the Realtor mission.** After all, this is why they changed the name of the spring meeting from Mid-Year Governance Conference to REALTOR® Party Convention. What remains unanswered, and prickly, is that end-around loophole. If the board doesn’t want to include the RPAC line item in the dues statement, they can just write a check on behalf of all of their members. But where does that money come from?

Unless the board has a for-profit subsidiary feeding money into a separate contribution channel, as Notorious #1 conjectured in his modest proposal <here>, then the check the AOR writes is coming from the same bank account into which dues dollars are deposited. And that co-mingling is the basis for separating out the RPAC item as voluntary in the first place. It will be interesting to see where the challenge to this comes from and how loud the screams are, or if the membership will look at this situation with the same laissez-faire “Meh” and yawn that greets most association political efforts.

Then there’s the POWER Thing.

Yes, the plan as first published (or at least first interpreted) smelled like a power grab by state and National, forcing locals into compliance or threatening them with termination either through dissolution or merger.

The truth is, and I saw this first hand in Chicago, the purpose here is not to consolidate power, not to cull the herd of weak Swanepoelian Wildebeests, but to strengthen the associations, and to align them at all levels toward the common purpose and Realtor mission – better, more productive members.**

Cajoling is just one option. Mentoring is preferred. The states can show the locals, and the national show the states, how to mobilize the membership and instill them a sense of pride in supporting the political actions of their PAC.

And therein lies another problem – whom do you support? And do your members agree with your decisions on whom to support? And if not, how do you either (a) do what the members want or (b) quit taking money from the Reds and giving it to the Blues (or vice-versa).

The better solution, in my opinion, would be some variation on Rob’s proposal to raise RPAC money not through voluntary donations but through unlimited corporate contributions allowed by Citizens United v FEC. But NAR isn’t ready to go there yet, so we’ll continue down this path for a bit longer, and work harder to explain it to the members.

These are just two of the six major areas that have detailed requirements for compliance. To quickly touch on the others:

Consumer Outreach

Boards must do four meaningful** consumer engagement activities annually, but can’t do the same thing four times. Examples are promoting market statistics and/or real estate trends and issues (e.g., release through press releases, interviews, etc. of MLS statistics, local market statistics, NAR research reports, local/state analysis of NAR statistics, etc.); promoting the value proposition of using a REALTOR® and/or engaging in community activities which enhance the image of the REALTOR®; engaging the public** in legislative/political issues that impact real estate and related issues; and organizing human assistance like a Habitat for Humanity** project or fundraising for the benefit of charitable/community organizations.

These are all pretty self explanatory and really easy to hit out of the park. Realtor associations love these kinds of activities, so no challenge here.

Technology

If you can believe this, there are some organizations out there that don’t have a website. The bar for what constitutes a website is pretty low (one page with links to state and national websites), so this hurdle should not be much of a problem. The Kansas Association of REALTORS® will sell you a copy of theirs for $45/month. If you don’t know your HTML from your URL or your DNS from your TLD, give them a call. And the AOR must use email (or some other internet channel like Twitter or Facebook) to communicate with members. My advice – stick with email. It’s free (Google) and verifiable.  

Financial Solvency**

There were early concerns that locals would have to show the states their balance sheets to demonstrate solvency. Some locals don’t want the state association to know that much detail about which coffee can in the back yard has the buried cash. Fortunately, they will be able to keep their money under the mattress and free from state level prying eyes. The states will monitor only the reports from the auditors or CPAs about board financial condition and only from boards with $50K in revenue or more. (By the way, if your board has less than $50K in annual revenue, what in the heck are you paying your staff with? Bartered chickens?)

Unification Efforts

Here’s where it gets a bit tricky and where the CEO insomnia syndrome might set in.  Unification refers to alignment of services at all three levels of the association, rather than to unifying boards, i.e. merging them, which is not the intent of this section. The particulars are designed to get the three levels of Realtorism to work in concert with each other, to compliment the other levels, avoid duplicate of efforts and ensure that services to which member are entitled are delivered regardless of which level delivers them.

  1. AOR must have access to legal counsel**. This can be the state association in-house counsel or an outside attorney. But if you use an outside attorney, be sure it’s someone who understands your business. Realtor Associations are unique creations, unlike other businesses or trade groups. Representing one is not for the faint of heart. There is no requirement that you use the lawyer but if you need one you better have his/her phone number close by. There are firms that represent multiple associations across wide geographies. Contact me if you want some names.
  2. AOR CEO, President (or Chair), and Treasurer must certify in writing they have been filed all necessary corporate docs, reports, and tax returns.Alice meets the Cheshire Cat
  3. Board must have a business or strategic plan in place, including advocacy component.** The BoD must sign off each year that plan is in place (even if plan is for multiple years). This makes sense. As the Cheshire Cat once said, If you don’t know where you’re going “it really does not matter which way you go.” NAR has certified a whole cadre of strategic planners ready to help you put your plan together. <Click Here for the Roster>
  4. Chief staff person must have minimum six hours of professional development each year. (Hold on to your passports small board CEOs – you don’t necessarily have to travel for this.) The state AOR must provide these opportunities which can be virtual web-based online classes that you can take in your jammies.**
  5. NAR will survey members as to their understanding of the value provided by their associations at all three levels. Locals MUST promote these surveys.**
  6. Locals maintain a list of LFROs and may solicit them for voluntary contributions to PACs.** What’s an LFRO you ask? That’s the acronym du jour for Limited Function Referral Organizations, those holding companies that brokers set up for their part-timers so they don’t have to pay REALTOR® dues. NAR would still like them to contribute to the RPAC even if they aren’t members.
  7. State AORs must provide locals list of non-member licensees twice each year. The implication here is that the locals will then chase down the brokers of these agents to impose the dues formula on their non-member agents or force them to move the licenses to a non-Realtor holding or referral company. But the standard doesn’t require the locals to do anything more than they already are. It only requires that the state give them the list, not that they act on it. **

By now you have noticed a few provisions with double-stars appended and some of you have been sent looking for the footnote to which those stars refer. This is that footnote. Those provisions of the standards that are *starred* currently have no teeth. There is no measure of success, or of progress, against which to measure compliance. How does the state know if the local met the standard if there isn’t any scale by which to pass or fail?

That’s because there is yet one more missing piece to this puzzle. The PAG report tantalized you. The standards adopted by the NAR BoD enlightened you. The FAQs prepared by NAR staff enlightened you and clarified things. Now the missing fourth piece sure to raise your resistance if not your ire: the measurement criteria. NAR staff is still working on that. There are six squads of staffers putting together the “how much” to go with the “what” and the “why” and we hope to see their report soon.

Examples of missing measurement details:

  1. What if you hold a town hall meeting to engage the public in political dialog, but one person shows up? Have you met the requirement of “meaningful” consumer engagement?
  2. Yes, NAR publishes the Call to Action response rates, but what rate is sufficient for a state to pass the test?
  3. If an AOR pours its heart and soul into educating the members about RPAC, and they still think it’s a lousy idea, has the AOR met the test of “explaining the importance” of the program? Explaining is not the same as persuading or convincing.
  4. A bake sale to raise charitable donations is not the same effort as building a Habitat for Humanity house. Do they count the same under the community involvement test?
  5. The financial solvency test has no guidelines. Will there be minimum reserves required? What happens if the AOR depends on MLS revenue more than it should? Is that acceptable in the eyes of the auditor?
  6. Merely certifying that the AOR has a strategic plan in lace does not require the board to actually follow it. Does a ‘shelf registration’ count in meeting this test?
  7. What constitutes professional development for the association CEO? Would a self-directed online Power-point lecture on Facebook for Dummies qualify?

That will surely be the fodder for Part 3 of this series, which I will probably bounce back to Notorious the Elder since by that time I hope to be on the road facilitating understanding and compliance. Either that or traipsing around in a shroud like Dr. Jack Kevorkian at Halloween passing out cyanide capsules to those miniature associations who are sounding the death knell after just reading the requirements and finding they don’t have much to offer beyond MLS. Don’t fret, small board AE or president. Instead of dying, you can become a Chapter of your larger neighbor and keep your name – just as soon as NAR defines what a Chapter is and the process for becoming one (coming soon, they promise).

I’m working on a website geared toward shameless self-promotion as an approved Association Merger Facilitator to guide associations and their MLSs through the process. I’ve got the shell and some bare bones information posted now. If you just can’t wait to get started and are interested in a quick one-day outside audit of your current status and what areas  you might have to work on to pass inspection, give me a call. Contact info is found at www.NARCoreStandards.com. There’s also a link there for the current FAQ list from NAR that goes into more detail. That should get you started.

For this post:
Cause – Our organizations are out of alignment
Effect – We must hang together or we will surely hang separately.

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

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

Put the Deck Chairs here, please!

Am I the only one, while watching Leonardo DiCaprio and Kate Winslet in the titanic blockbuster movie Titanic, who thought “All these people are about to drown and they don’t know it yet?”DeckChairTitanic

That’s kind of what it felt like during the MLS Issues and Policies Committee meeting this past Saturday in San Francisco. Assembled before the standing room only audience was an august panel of industry thought leaders discussing the crumbling relationships between the brokers of The Realty Alliance (and other large firms) and their Realtor Association MLSs. After about a half hour of listening to repeated platitudes heard ad nauseam in the past I was eagerly anticipating the announcement of Peace in Our Time! Would there be a breakthrough in the shuttle diplomacy that must surely have been going on in the back rooms? Would NAR CEO Dale Stinton tip his hand and let us know that mother NAR was riding to the rescue with a new MLS model of inclusion in governance and a noncompetitive product/service policy?

Alas, it wasn’t to be. Instead we heard, ‘Yes, we talk to large brokerages regularly, but they haven’t told us what they’re planning,’ and ‘No, it isn’t NAR’s place to get involved in the local issues between brokers and their MLS(s).’ (Both of those are paraphrases as I heard them, not direct quotes.)

<Sigh!!!>

I could almost hear the arctic waves washing over the feet of the band members accompanying the frenzied hustle of the ship’s mates as they rearranged the deck chairs on the doomed ocean liner.

Everyone in the room either heard firsthand or read accounts of the presentation by Realty Alliance CEO Craig Cheatham at the CMLS meeting in October. Everyone knew the deadline (imaginary as it turned out to be) ten days later when TRA was to meet and decide what to do next and with whom. Everyone in this room expected something to happen or to be discussed at this meeting. Nothing happened.

The general forum ended and the official committee meeting began. Surely now the sparks would fly. Someone from the major broker contingent must have prepared the motion to rescind the policy adopted in May that allowed MLSs to decide whether to treat their public facing website as a basic service, paid for by general funds rather than individually based on usage. In what may have been the fastest and shortest meeting in recorded NAR history, the matter was dealt with in a matter of seconds, referring the question back to a task force for more study, with nary a comment from the floor for or against before a rather lopsided voice vote.

<Double Sigh!!!>

Admittedly NAR is between a rock and a hard place in this drama. They have the most to lose if either of the two most popular guesses about TRA’s ultimate detection proves to be true. If (a) TRA brokers opt out of IDX and syndication by mounting their own web portal, thereby undermining one of the most productive tools for both listing and selling brokers, or (b) go all the way and withdraw from MLS altogether, the cornerstone of NAR’s local associations, the singular most attractive value proposition that associations have – access to and participation by all in MLS services – goes away, and with it any reason to belong to a Realtor board.

Without MLS, and all the benefits attendant to it, NAR stands to lose a significant portion of its membership and with that goes a similar portion of dues dollars and political clout. By my rough count, the five largest brokerage firms account for nearly half of NAR’s million members. Without the big brokers, NAR becomes a second tier lobbyist with small, disorganized members who are focused more on day-to-day survival than on the long-term prosperity of the industry as a whole. I cannot imagine that they are deferring responsibility to their local MLSs with just advice to “Talk to your brokers and see what they want.”

Yet, NAR walks a thin line in the aftermath of the DOJ settlement, being constantly careful not to be seen as trying to dictate business practices that might be anti-competitive or guiding the MLSs to do so. Still, I have to believe some conversations with some of the major players are happening somewhere, sometime, leading hopefully to something.

If not, then we might indeed have witnessed the rearrangement of the deck chairs on a sinking ship. I, for one, certainly hope not, because I know how that movie ends.

For this post
Cause – Invisible iceberg!
Effect – Glub, glub, glub.

 

The Impossible Dream or a Glorious Quest?

This “thought” by Steve Murray of RealTrends appeared in his October 31 email newsletter and was posted on his website the next day.

State of Unrest

Why is there so much angst between Realtor associations, MLSs and brokerage firms?

By Steve Murray

“The whole is festering with unhappy souls. The French hate the Germans, the Germans hate the Poles. Italians hate Yugoslavs and South Africans hate the Dutch. And I don’t like anybody very much.” -Kingston Trio “They’re Rioting in Africa” lyrics

Sounds like the current state of our industry, doesn’t it? The level of angst between local, state and national Realtor associations, MLSs, brokerage firms and national realty chains has risen to new heights. Everyone is unhappy with everyone else in some fashion. Of course, there are exceptions (though hard to find).

It occurs to us that this is what happens when the pie shrinks (revenues generated by the industry and the lack of growth in membership). The fight becomes one where everyone invades someone else’s turf (mission creep). It happens in other industries as well.

What is needed is a group of wise people from the various constituencies to gather and come up with a way to co-exist. A new road map is needed. A map that lays out how the market place can be made clearer and more efficient. That would be a worthy goal. It behooves these leaders to find some solutions before external forces develop their own path (pocket listings anyone?).

We may be wrong, but it seems like we are creating fixes on the run when what is needed is a full examination of how we are organized, whether that still works as intended and are there new structures and rules that are needed that reflect today’s reality.

Just a thought.

quixote-windmillI agree with Steve that left unaddressed these problems will merely create an environment ripe for invasion by yet other “external forces” that can send the industry in directions no one wants to see it go.

I was reaching for the phone to call Steve and offer my assistance in assembling the right people in the right room at the right time to try to solve these issues. But then I stopped.

My pitch to Steve was going to be, “You bring the brokers. I’ll bring the MLSs.  We both know a couple of influential association executives who could bring the Realtor organizations at all levels. Let’s get everyone in the same room at a large round table (think either King Arthur or Paris Peace Talks – no “sides” so everyone is equal) and hash this thing out. Sounds easy. But the doubts crept in as I put down the phone.

What would we talk about? Well, for starters, there’s the list of grievances prepared by The Realty Alliance and aimed at the MLSs and their Realtor Association owners. Many are superficial or apply to only a few isolated situations and could easily be fixed by taking a couple of people out to the wood shed. Others are but the tip of the iceberg and the most recent artifact of a much deeper malaise.

There’s an underlying current of doubt, mistrust, and apprehension that courses through these discussions. It sits like a mastodon in the room, ancient is his repose and invisible to any and all who choose to look around or through the hulking question that challenges every professional in the business: “How do we make this industry better?”

How do we elevate the practice of real estate to a level of professionalism that will foster trust from our clientele and confidence from our fellow practitioners?

How do we reform our trade associations into support organizations that work to the benefit of ALL parties in the transaction – buyer, seller, agent, broker – and not just two or three of the participants?

How do we construct a matrix of interrelationships where all of the pieces not only connect but support all the others and through those connections make the whole of the structure stronger?

How do we build a platform from which to lobby for laws, policies and regulations that promote and sustain the concept of home ownership as a cornerstone of economic prosperity where one’s home is one’s castle and in most cases the basis of one’s family wealth? Could such a platform be supported by both red and blue ends of the spectrum, left and right wings of the parties, and all shades and wings in between?

How do we stop the bickering between the parties which seems to be consuming far more energy and effort than could possibly be justified by the results? There seem to be no results – just continuing misunderstanding, finger-pointing, and ill feelings.

Could any of this be done at a level (national, state, local) and with enough support from all quarters to truly make a difference in how real estate brokerage framework is structured? Or are we too far gone, too deeply mired in our current morass to come up for air long enough to have civil discourse about these problems?

What is needed here is far more than just another real estate conference with panel discussions and break-out sessions where lots of platitudes are spoken but nothing is accomplished. We need something more akin to a constitutional convention with delegations from each of the constituent “states.”

we-the-people-9The assembly would need more than just a couple of days, but certainly less than the nearly four months it took the founding fathers to draft, debate, and adopt the new structure of an entire nation.

But the next step would be the trickier one. How do we ratify such a new structure? In 1787 it was fairly easy, even with 13 independent minded states joining together for the common good. On a simple yes or no vote, each state decided could it go it alone or would it be better off joining with its confederates to become stronger through union and common purpose. This time it’s trickier. One no vote by one vital “state” would/could undermine the entire effort. This truly needs to be all for one and one for all.

In the end, all the states joined. They joined for purposes similar to those which the real estate convention would be asked to address: to form a more perfect industry union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the benefits of home ownership to ourselves and our posterity.

Is this the impossible dream? Or are we as an industry up to the task? And if so, when can we start the quest?

For this post:
The Cause: an impossible dream?
The Effect: a glorious quest!

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.

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.