The MLS 5.0 (as Saul Klein and others are calling it) is being pitched as a much-needed, national parcel-based repository of data controlled by NAR with an “easy” single point of entry. There is talk of a consumer-facing side in addition to the back-end Realtor-only piece. There is also talk of “standardization” and easier/greater access to developers and software designers for API’s, etc.
These things and the MLS 5.0 in general are being pitched in ways that marketing companies will tell you work well – they’re supposed to give you that warm and fuzzy feeling, especially if you’re a Gen X’er or Gen Y’er. But should you trust everything you hear even if it comes from such intelligent and respected people as Saul and the powers-that-be at NAR? Definitely not before you look at the fine print and the overall picture…
Who’s really in control?
- NAR is a membership controlled organization. But it’s not really the agent members that have control, it’s the brokers. The brokers with the most amount of agents and market share have the most say.
- There are about 15 major brokerage firms that comprise the majority of control of the US real estate market because they have the majority of the agents and transactions in the US. To give you an example, Keller Williams International which has 70,000 agents only has 4 percent market share. It’s really the top 3 or so brokerage firms in the US control the majority of the market and agent count.
- Within these 15 major brokerage firms, there are about 50 top brokers that have the most say (aka control and power). In essence, it’s these 50 brokers that control the NAR and the RE industry in general. Since NAR will have control of the “MLS 5.0,” it will in fact be these top 50 brokers that have control of it.
- Is NAR concerned about money or about control? Control. And controlling the flow of data is just as important as controlling the data itself. The MLS 5.0 gives the NAR not only control of the data itself, but the flow of that data. This is exactly what the big brokers want because it helps ensure their survival.
“Sure, we’ll give you back the leads you deserve”
- That’s great and I’m a fan of giving the listing agents the buyer leads they deserve. But if the top brokers control the MLS 5.0 and the leads that come through it, only the top brokers will benefit. This goes back to the control issue discussed above as well as the commission and split issues discussed below.
“FU…FU…you’re cool”
- The NAR bylaws clearly state that it will not and can not be involved in offers of compensation between brokers. Because of that, the MLS 5.0 will not have offers of compensation. With the MLS 5.0 having all the information and data that local MLS’s once had, there is no use for the MLS as a data source/repository. Rather, local MLS’s will be used to communicate what one broker will offer another for selling their listing.
- Should the local MLS’s switch from an “offer of compensation” to an “offer of cooperation” (there is already talk of this), what will stop one large brokerage firm from offering another large brokerage firm “300 chickens” while only offering other smaller firms (aka competitors) only “100 chickens”? Nothing… (And no, it’s not illegal)
The “good ‘ol boy” network versus innovation
- Once agents see that they’ll make 3 times the money by switching to the larger brokerage firm(s), they will. That will cause the small, up and coming (and typically revolutionary) brokerage firms and brokers to go out of business almost overnight.
- This is a horrible proposition for the RE industry because it’s typically the new, forward thinking people and companies that lead the way into the future and revolutionize industries. Without them two things will most likely happen – the larger firms will have all the power and say and there will be much less innovation within the industry.
Take it or leave it
- If the larger firms have all the power and agents, they can adjust the splits to increase their profits while diminishing the profits of their agents. If their agents don’t like it, oh well – there’s nothing they can do about it. The larger brokers know that the smaller split on “300 chickens” is still more than a larger split on “100 chickens.” In a nutshell, it’s an instant pay cut for agents and more money for the brokers.
Can’t afford a Ferrari? Too bad, so sad
- Much like the MRIS (the local MLS in the DC metropolitan area) charges between $1,500 to $50,000 for its data feed, what will stop the MLS 5.0 from charging for its data feed. And they could charge whatever they wanted because they’re the only player in town-from whom/where else will you get the data from? If you’re big and profitable enough to pay the fee, great. If you’re a small to medium sized firm that can’t, oh well.
- Yes, there is talk of “one standard” that will make it easier to design API’s, etc. But what will stop the MLS 5.0 from charging whatever they want for that just like they could for the data feed?
That little thing called consumer sentiment
- Consumers hailed when Zillow, Trulia and other listing sites came about. These companies came at a time when consumers thought about Realtors in the same light as they did used car salesmen. Consumers were happy to feel as if Realtors no longer controlled the information and the flow of it.
- Having multiple places to find information about real estate (including listings) is what consumers want. They want to be able to question a Realtor by throwing other data points and information at them. This make the Realtor earn their credibility versus just acting as if they’re omnipotent. This is what consumers want and we have to learn to work with consumers, not against them.
- What will happen when consumers see that Realtors and NAR now have control over all the information on one single platform and are trying to get rid of Zillow, Trulia and others? (Remember, Zillow is a parcel-based type platform as well)
- Is NAR trying to improve our perception with consumers or make it worse?
Is there a solution?
- Get one or several agent-centric, new-way-of-thinking brokers with national presence that haven’t drank the Kool-Aid into the upper realms of NAR power and control and throw a wrench into their evil plans
- Many of you will say there’s no way to do that. Some of you will also say that the “good ‘ol boys” will never let that happen and squash such a thing even if there is a way to do it. I say that you’re right about them not wanting that to happen. They will do anything and everything they can to stop anyone from getting in their way. But just because you and I don’t have the money, power and control in the same way as they do doesn’t mean it can’t be done. (If you haven’t read it yet, check out “Here Comes Everybody” by Clay Shirky)
Call it what you will…MLS 5.0, Gateway, TREC, the greatest thing since sliced bread…I believe that this could potentially be the single worse thing to ever happen to the real estate industry (except for the very few elite at the top of the food chain and those that get into bed with them). If you’re an agent or small to medium-sized broker like most of us, then you should be seriously worried about your livelihood and future should this project materialize.
But then again…you probably shouldn’t listen to just me either. Do your own research and digging and come to your own conclusion. Just don’t confuse opinions and sales-pitches with facts. And dig deep – the truth is sometimes buried many layers down.
Jeff Bernheisel
August 18, 2008 at 2:53 pm
Nice post Danilo,
That’ll really get some people thinking… Which could be pretty dangerous with this crowd!
-Jeff
Matt Heaton
August 18, 2008 at 2:56 pm
This is just part of a pretty inevitable transition as technology is causing greater access and openess to data sources. Any agent or broker who’s value proposition revolves around controlling the flow of data is not going to be in business much longer. No, real estate agents are not going away, the real estate transaction is an incredibly complex beast, they just need to do a better job of defining what their real value proposition is. It’s the agents (and there are many) who successfully do this are the ones that are going to stick around and be successful in the future.
Larry Yatkowsky
August 18, 2008 at 3:01 pm
At the risk of being a north of the 49th heretic who doesn’t have all the answers, a central data base with standardized input works.
In yesteryear I was a founder in a company that ran US and Canadian boards on one system. But that was yesterday and another story.
Multiple boards feed standardized data into a system. The public accesses it via a single portal called Realtor.ca. We’ve been doing it for years.
Leads: If the consumer wants information they fill out the contact box that’s attached to the listing and just like that I get the request via email. Doesn’t seem complicated.
When proposed, we got cranky, worried about the big guns and thought the sky was falling. It didn’t. Sanity prevailed.
One job, one purpose, one system and a spirit of cooperation is all that’s needed. It works. As for fine tuning, expect it and while that happens take deep cleansing breaths.
It’s a random thought but maybe it’s the cold that makes us huddle together to stay warm and survive as an industry. A little Kum by Yah helps too.
Matt Wilkins
August 18, 2008 at 3:02 pm
I see this move as a step backwards in many ways. An offer of cooperating compensation should not depend on the specific brokerage that the agent works for. In my opinion a coperating agent is a cooperating agent on a deal no matter which firm they are afilliated with. This will also deter agents from fruther their careers by obtaining broker’s licenses since they will have almost no incentive to go and open up their own firms since it will be that much arder to gain market share.
THe worst part is that since many people hire the based on the agent and not the firm they are affiliated with, The controlling brokers will have the incentive to recruit the top agents and further claim their stake.
I agree that MLSs and commission structures could be tweaked for today’ market and consumer. However, the way stated above is not the best plan of attack.
Mike Bowler Sr.
August 18, 2008 at 4:20 pm
Wow! I have no idea where to begin, other than I forwarded a copy of this to Saul to address, himself. His plan calls for more than just the top brokers to make this decision on behalf of our total membership. At the very end of his Executive Summary, https://www.realtown.com/about/resources/FutureofMLS he has outlined a very nice plan for all of us to start getting involved. It appears to me to be very visionary, although we are heading in the direction of a consolidated Industry, the world is getting smaller every day. I understand your concerns and respect your thoughts. It would be interesting to see by going back in history, if some of these same concerns, fears and skepticism, did not come to play when the MLS began, with co-operating brokers and boards forming. History has a way of repeating itself, however, I for one am really enjoying this paradigm shift we are seeing. There is so much good stuff here in your post, that I want to reserve the right to come back later with additional thoughts.
“Expect the Best” Mike
Matthew Rathbun
August 18, 2008 at 4:55 pm
D (I say this as one of your biggest fans)
HUH? OK, I know that we try to keep a post short, but I need you (online or off line) to show me how we come up with the control being at the top 50 brokers… I am honestly lost and I am with you on the topic otherwise. Members vote in local leadership, who vote in State leadership who vote in National leadership – so me it always starts with the local voters.
I agree that the air does seem to get thin at the top and the mentality of National Leaders is somewhat stale, as they carry the ideas they had from 15 years prior when they started the movement to become national leaders.
Here’s my equation: Saul Klein + NAR = e-PRO Therefore, just say NO! I enjoy listening to him speak, but the e-PRO thing and lack of forward thinking and keeping it up to date, is of concern.
I don’t understand why this is needed. I have no idea what knowing the sales history of a Kansas home does for me in Virginia and what dues dollars will yield ROI for the project. Perhaps I’m just short “sited”.
I think that the offering of various levels of commission based on opposing company agreements, maybe legal now (I am not sure that it is), but it won’t take long before some attorney wins an Anti-Trust case about it.
It’s a mess…
Steve Belt
August 18, 2008 at 5:19 pm
This is the second major “sky is falling” post I’ve read on the topic. Why are people so cynical? Is it because of R.com? If there were a comparison to R.com, I could see some understanding for the cynicism, but there isn’t. It’s all this baseless accusation about what could be, if, maybe, who knows, might, I’m scared argument. Sorry, none of it holds water for me.
Danilo Bogdanovic
August 18, 2008 at 5:31 pm
Matt – Perhaps we’ll chat offline sometime, but I’ll give you an example that you’ll relate to…
You know what happens when Wes Foster or Jim Weichert want something from a local or state association in our area? They get it, period. Same goes for power-brokers and NAR.
Steve – Not cynical at all – just realistic and objective. And it has nothing to do with R.com. I would love to hear your/any arguments or comments as to the pros of an MLS 5.0 that are fact-based aside from “it’s a great idea” (that’s truly an opinion and baseless).
Bob
August 18, 2008 at 6:14 pm
Maybe we are over re-acting and Saul just wants to let NAR use his listserv.
Steve Belt
August 18, 2008 at 6:30 pm
My opinion is that I’m completely fine with the minority of productive agents and brokerages having more control than the majority of non-productive agents/brokerages. To use your example brokerage, why should KW have a strong controlling interest in NAR, if they aren’t doing much business. At the same time, all of your arguments against this seem to be focused on what MIGHT change, and how a brokerage COULD take advantage.
For example, my own local association allows for variable commissions. I can already say that XYZ brokerage or agent will earn more or less than a different brokerage or agent. In fact, it is OFTEN used to offer a discount to sellers, if the buyer is found by the listing agent. I personally have considered using it against brokerages that offer lower co-brokerage fees than I do, as a sort of price-match. I haven’t, but I could, and came darned close to doing so recently.
So again, I don’t find any merit to the what-if, and maybe this argument.
As to the pros of a single MLS versus the crazy listing environment we have now, I would offer this one to start: lower subscription rates…particularly for agents that work on the boundaries of 2 or more MLS’s. Those agents often list in more than one MLS, just to make sure it’s seen, which means they’ve joined more than one association, significantly increasing their costs. All because of the boundaries which are completely arbitrary and do not serve the best interests of our sellers, whose interests we should be looking out for as our #1 priority.
As well, if a national MLS drives Zillow or Trulia out of business, why is that a problem? How is that a concern for a REALTOR, whose job it is to secure the highest and best offer for my client? Is Zillow doing that for me now? Or more often am I working against the Zestimate to achieve success?
Finally, I’m not going to say this is a great idea either. Instead, I will say there’s merit to the idea, and one I’d like to see explored further. If there are flaws (I haven’t seen any flaws in the idea yet, but haven’t looked that close either), let’s fix them. I’m just having a hard time figuring out why the idea of a national MLS is indeed something we shouldn’t be striving to have. All of the arguments I’ve heard against the idea are focused on NAR. That’s akin to saying that because George Bush likes it I don’t, when you are a Democrat. Sorry, that type of argument doesn’t work for me.
Danilo Bogdanovic
August 18, 2008 at 7:34 pm
Steve – What is your definition of “productive”? If brokerage “A” has agents/Realtors that do 30 deals a year on average with no ethics complaints on any of them over the last 5 years and brokerage “B” has agents/Realtors that do 10 deals a year on average with several ethics complaints over the last 5 years, which one is the more productive brokerage? Brokerage “A”, right?
Well, the answer is “no” if brokerage “A” has 100 agents/Realtors and brokerage “B” has 10,000 agents/Realtors. In the eyes of NAR, it’s the one with the greatest number of agents/Realtors that the broker represents. That is the flawed system currently in place and there are countless examples of this in your, mine and everyone else’s marketplace.
And I’m not talking about discounting your commission if you’re acting in the capacity of Dual Agency. I’m talking about a Long and Foster offering Weichert Realtors “300 chickens” if they bring the buyer, but offering another brokerage firm only “100 chickens” (in order to steal their agents and/or drive them out of business). If I tried to tell my sellers that we wouldn’t offer one brokerage as much as the other, they’d fire me in a second because I’m hurting their chances of an agent from the other firm from wanting to bring a buyer to the table.
I agree with you that the costs to many Realtors is exuberant because they have to use multiple MLS’s, but that cost is not worth the potential downfall this MLS 5.0 could have. On a side note…if you’re selling real estate in an area that’s big enough for multiple MLS’s, are you really the “local” expert?
Yes, all of this is “could be” and a guess. But isn’t a business plan or your marketing plan a “could be” and a guess too? Do you not look at the potential/”could be” downfalls when doing something business or personal? If you go in blind without looking at the big picture and potential downfalls, you will get burned before you know what even hit you.
And yes, the argument does have NAR in the middle of it because NAR is the one who’s going to own and run it. Who else should we all be talking about?
This project is way too big and way too expensive ($55 million) to just go ahead with it and try and fix the problems later and as we go along. That’s how the government does things (Democrats, Republicans, whomever) and we all know how well that works.
Steve Belt
August 18, 2008 at 8:09 pm
If brokerage A brokers $2M a year, and brokerage B broker $200M a year, brokerage B is more productive, that’s pretty simple. Sure, brokerage A may be a single broker/owner/agent, but brokerage B is clearly more productive. Here in Phoenix I work for the #1 brokerage in town by both sales dollar volume and sales transaction count. We are far from the largest brokerage by agent population, however…in fact, we are not even close.
Being at the #1 brokerage is important to me, because it’s important to my clients. I’m not, however, at a national powerhouse brokerage. Instead, I have every confidence in my designated broker’s ability to identify a catastrophe, if there were one looming, and steer us clear. That’s his job as the broker, so that my job as an agent can be to focus on serving my client’s needs.
Regarding variable commissions in my local association, I can create a variable commission for any reason I want. There’s an agent, that happens to be a broker/owner, I honestly don’t care for, because in a cross-sale with him he was rather unkind with regard to the number of chickens he was sharing. I’ve come very, very close to creating a variable commission structure just for him, simply to correct a past annoyance. Most agents don’t bother to check on a variable commission’s details, assuming it is of the “dual agency” variety, and I feel confident he wouldn’t figure it out until the HUD 1 shows up, which would be too late. The unfortunate truth is, he’s likely to be involved in many cross-sales in the future, and although I’m annoyed with him, I’d be foolish to burn a bridge.
Which leads to my argument why I don’t believe we’ll ever see bigger brokerages bullying smaller brokerages around. It would simply be foolish. The short term gain would be met by a long term fail. In fact, the failure could be so severe as to completely destroy the notion of cooperation that exists today, and put residential real estate into the same category that commercial real estate is, where cooperation is the final fall-back, when every other means to a sale has been exhausted. It’s so archaic, inefficient, and utterly less rewarding to sellers.
Seth Parker
August 18, 2008 at 9:30 pm
Here’s my take:
As for Zillow, Trulia, and the like: It doesn’t take a national MLS to get rid of those guys. When brokers wise up and stop feeding these guys their listings, the problem will solve itself. The reason that an MLS works so well, it the fact that it is a controlled organization with paid membership REQUIRING up to date information, a controlled method for showing homes, etc. Z and T have no way of controlling the information and holding it to a very high and accurate standard.
As for the National MLS. I’m a one man shop. I don’t list homes (on purpose, anyway), and I work strictly with buyers that I get from my online presence. A national MLS would not make things easier for a guy like me if only the listing agents are getting the leads and I would have to pay an outlandish fee for the data feed. BUT, therein lies the problem. IF there is one source to find homes across the country (national MLS), why would a prospective buyer go to any other site? So now, I’m paying a fee for the data feed and getting no traffic. Where would I get my leads then? How is that in my best interest? NOT WHAT I WANT. Even if I did start listing homes, I would have to have more agents to even have a chance to survive.
Yes, on the surface, it would be beneficial to buyers to have one place to look at every home listed across the country, but I agree with Danilo, I think it would crush the smaller companies like me that DO TEND and HAVE THE ABILITY to do revolutionary things.
If you only have the large franchises, where is the innovation going to come from? Coldwell Banker has two dead guys talking to each other on the wall. C21 just seems so old-fashioned to me. REMAX is a brand with a terrible, hard to read logo, who’s only mission is to have more agents than anyone in the world(I used to be a remax agent, and that’s the way I felt). It seems like everyone else is just trying to catch up. Where would the drive to revolutionize come from?
The whole thing is one big way for the NAR to create a monopoly over the information and preserve its existence for the foreseeable future, which this would definitely do the job.
There is a way for this to be done right, but it will never be done.
Russell Shaw
August 18, 2008 at 11:56 pm
Danilo, GREAT post! Based on how nicely Realtor.com has worked out, I am not very high on the idea of a National MLS. A National MLS would be the worst possible thing to happen if a DOJ lawsuit could get a federal judge to side with them. It is the fragmented basis of the various MLS systems that is our best line of defense.
Steve, I can’t comment about how variable commissions are handled everywhere but in Phoenix I am positive that we CAN NOT select different amounts for different brokerage companies and different agents. I don’t believe it is alright anywhere but I know it is not in ARMLS. The “variable commission” (and all of my listings have it) refers to the total commission paid by the *seller* in the event the listing agent sells the house vs. a sale where a co-broke commission is being paid. It has *nothing* to do with how much commission is being paid to the agent writing the offer. That amount is set by what is stated in the MLS listing. The agent “accepts” that amount when they show the house. I believe they legally “accepted it” when they stepped over the threshold.
The reason a listing with a variable commission must state that it is a variable commission is to bring about a fair (full disclosure) playing field in the event of competing offers for the same listing. If the listing agent is going to charge the seller less if he procures the offer then the other agent has a right to know that, so he can let his buyer know, in the event they would like to improve their offer.
Jim Duncan
August 19, 2008 at 4:53 am
Many of the comments here are focused on the commission being offered by the seller; why should this be a point of discussion? I hate to sound like a broken record (but I’ll do it anyway) – Divorce the Commissions.
Why allow the seller and seller’s agency to dictate what the buyer pays the buyer’s agent?
Work with Buyer’s Agency agreements and negotiate the fees with your buyer rather than whatever the sellers are willing to dole out.
On the technology side – I agree mostly – the NAR’s ability to implement and innovate is pretty much nil but … Saul’s not speaking on NAR’s behalf (yet). NAR has an obligation to their membership to tell us what they are doing – something that they have not yet accomplished …
Missy Caulk
August 19, 2008 at 5:46 am
Interesting post, as Chair of MLS in Ann Arbor and on Board of Directors for Ann Arbor Area Board of Realtors, I just got back from a state meeting on MLS 5.0, in fact never heard the term before last week.
The driving force behind this is not the big companies, but the smaller ones in my state. There are several big Regional MLS’s in Mi and the “elephant in the room” is NOT behind it.
The bottom line for most MLS boards is their members having to pay MLS fees to belong to different boards in order to get to the data. Everyone I spoke to and heard from is tired of that. To belong to 3 in my area is at a cost of 120.00 per month in MLS fees.
At this point, the Boards are in survival mode, they don’t want to lose their “identity”, and if this occurred they would be laying off staff. We would only be paying around 33.00 per month instead of the 120.00.
With the advent of IDX and agents selling homes far out of their area, here is what I am seeing. Potential buyers find a home on Trulia, or Zillow, calls agent with MLS number or address, agent can’t find it, we look stupid. Consumers can find it, but the Realtors can’t.
As an agent you look it up on r do com or Trulia, have to call the broker who has it listed. Many times it is sold or been off the market for years. Now how is that selling our value proposition to the consumer? How is that saving time?
IMO, NAR is trying to take back control that they lost many years ago by claiming the data again. Anyone know how it is working out with State wide MLS’s ?
IMHO, NAR is trying to perserve it’s identity, but the reason agents will go for it is access to all the data through a reliable source with rules for sold listings, compensation etc… They gave it away, now they want it back.
Matt Wilkins
August 19, 2008 at 6:45 am
Jim, I agree with you view and related post. I have a similar sentiment on cooperating compensation but did not bring it up in my comment as that was not the core issue brought up in Danilo’s post and I also did not want to open another can of worms which would sidetrack future commenters from the points made in the original post. It would be great for you and I to discuss what you brought up further at some point.
Jim Duncan
August 19, 2008 at 7:24 am
@Matt Wilkins – I see the compensation as being an absolute core issue; it’s one of the primary arguments brought forth about the “database/gateway/channel/PleaseJustFreakingPickAName” – The technology is the simple part, and it’s why so many people companies are trying to become the “one source/destination” for consumers –
If the “thing” is the best destination and resource for consumers, then the value will be there for Realtors. My request has always been the same – get the best, most comprehensive and accurate data/information and let the Realtors innovate from there.
Obeoman
August 19, 2008 at 7:40 am
Missy, Jim, all-
SOMEONE is still going to make money at the MLS.
Might it be less? Yes. What industry has not had to deal with the web economy.
Fewer employees? Yes (…see above parens…)
More info, faster – and for free? Yes. The consumer demands it.
And hats off to the Wisconsin Realtors Associaton beginning to unite MLSs with the WIREX project.
Steve
Obeoman
Jim Duncan
August 19, 2008 at 8:37 am
Regarding the API’s – look no further than what Zillow is doing – they’re doing everything they can to win the hearts and minds of the consumers (and thereby force Realtors to accept them).
Matthew Rathbun
August 19, 2008 at 11:30 am
D,
OK, with just the example of Foster and Weichert I get your meaning better. Sorry, I needed it in a local context. I agree that numbers do yield power….
So, in essence your saying franchises have a great influence than brokerages – got it. I agree.
Benn Rosales
August 19, 2008 at 12:06 pm
Playing the DA here…
Saul says that his ES says nothing about NAR control, so in that vein, who would operate it if not NAR? Would it be the same 50, or are we talking something newer and bigger for R.C to completely fly into the side of a mountain? More questions than answers seems to be the rule here because as per usual real engagement isn’t taking place.
Come on Saul, we know you’re reading- close the deal…
Michael Sosnowski
August 19, 2008 at 12:18 pm
I like to think of myself as a technology person, but that does not mean that everything new is essentially good and an improvement of current practices. Sometimes taking a “questioning” view is seen as “living in the past”.
There are many comments here about the useless of Trulia and Zillow and I agree with those comments – these companies COMPETE directly with individual agents who have local website – yet we are foolish enough to continue sending them listings. How stupid is that?
Realtor.com is also a competitor, and using PPC in local markets to find position and clients online. What is to stop a national MLS from doing yet the same thing. As it is now, we even have to compete against our local MLS board for space online.
Yet there will always be those who insist that consolidation is the way to go. In most cases they are the one with little or no web presence in their local markets.
Bob
August 20, 2008 at 10:03 pm
@Michael – you asked the right question. How will it be monetized?