MLS Systems as Innovators

innovation

There are two immense and immediate problems, and one near-future problem, the MLS systems acting as the market innovators for the real estate industry can solve.  But the window of opportunity to execute is nearly closed, and once this opportunity is lost it will never be available again.

I inadvertently identified and framed what may be the absolute crux of why all real estate brokers, from the largest franchise to the single broker office, have lost so much power and mindshare in the real estate marketplace.

During my conversation with a SVP at NAR he stated that NAR does not develop or disseminate technology for its members.  A rush of thoughts and concerns swirled in my head but what came out of my mouth was simply “maybe they should.”  I then explained my reasoning.

(Please note that I have complete respect for this NAR SVP as he is absolutely one of the few upper management of any of the very large organizations I have presented to that truly grasps how technology is changing the real estate marketplace.  But his hands are tied with the current designated purpose of NAR, and honestly there is no time to turn a bureaucracy this size into an innovator.  The window of opportunity mentioned in paragraph one will be gone before such reorganization happens.)

Zillow Group has a lot of centralized cash—over a billion dollars’ worth, being used to enact the design, development, and dissemination of technology innovations.  This centralized focus of money and invention gives them an extraordinarily unfair advantage over what we as an industry erroneously perceive as 1.2 million united brokers.

From my “newly enlightened perspective” there are not 1.2 million united brokers, because there is no centralized repository of money and inventiveness applied to technological innovation.  NAR members are diverse competitors with very fragmented pools of cash and as such cannot design and develop the innovative technologies needed to compete against ZG.  It’s like a mass of ants trying to take out the sun.

However, the MLS systems can immediately cure the lack of a centralized point of technological innovation for brokers three ways.

 

First MLS Solution

The first immense problem the MLS systems can cure more quickly than any other player on the brokerage side of the industry is being the centralized location for creating technological innovation.

Technological innovation only thrives when there is a high quantity of high quality data.  All MLS systems have this.  No one can match their collective data.  But this data must be converted to competitive tools via technological innovations now.  The window of opportunity is likely six months or less.

The diverse and fragmented independent companies from which brokers may purchase particular technologies is not the solution.  The MLS systems acting as a cohesive body purchasing or developing the best of these technologies is.  No other player in the entire industry can negotiate en-masse or create the quality of technology brokers need as well as the MLS systems acting in collective unity.  And this should happen starting today, for tomorrow in a technologically competitive environment is always too late.

 

Second MLS Solution

The second immense problem the MLS can cure more quickly than any other player on the brokerage side of the industry is disseminating innovative technologies.

Collectively there’s essentially a one-hundred percent broker membership in MLS systems.  Nobody else in the real estate industry has this power base.  Any technological innovation can be instantly disseminated to every broker through the MLS systems.

 

Third MLS Solution

The third problem MLS systems can cure more quickly than any other player in the brokerage side of the industry is not yet seen, but comes in the near-future.

With more and more “not in the MLS” websites, and more brokers “pre-marketing and pre-selling” homes, and ever improving technologies and systems supporting “by-owner” sales, and ever less properties even making it into MLS systems with brokers using Upstream to market properties outside of and prior to traditional channels, within three years the quality and quantity of centralized sold data within MLS systems will be substantially diluted.  This reduces the value of the MLS systems and brokers in general.

What good are broker value opinions based on perhaps only half of total home sales in their market area?

Envision technology allowing fifteen percent of sales coming from “by-owners”, another fifteen percent of sales from “not in the MLS” sites, and another ten percent selling “pre-market or pre-MLS” via channels outside of the MLS systems as fed via Upstream.  This could allow forty percent of home sales to not be recorded in the MLS systems.  Add to these growing new home sales of five to ten percent and you may have half of home sale data not within the MLS in the coming years.

This creates a new opportunity for the Corelogics and Zillows of the world to add to their power base by solving these issues.  But a diluted centralized repository of home sale data weakens both the MLS systems and brokers’ purpose within the marketplace.

The MLS systems can cure this portending problem by ensuring nearly one-hundred percent compliance of recorded sales—not through legalistic threats, commands, and requirements, but through offering such incredible innovations that by not using their services no broker feels proficient at achieving their clients’ expectations without using these MLS supplied technology tools.

As the forerunners of innovation for the industry everybody will want to be MLS members, reaping the rewards of the technological competitive tools supplied, and whole heartily supporting the MLS’s through appreciation, not because of heavy-handed rules.  Earning leadership creates an enthusiastic support no forced regulation ever can.

 

Monopolies and Lethargy

Most MLS companies have been essentially monopolies within their geographic locations.  In particular areas there are some overlap between companies, but very seldom are several independent MLS companies competing within the exact same geographic area.

Monopolies create lethargy and complacency in many cases.  For decades the MLS system monopolies received no penalties for tyrannical rules and laziness which harmed brokers’ ability to compete against technological innovators such as Trulia and Zillow.  Many MLS systems will now be replaced or consolidated with their competitive skills never having developed or atrophying over time.

Then you have the strong, innovative companies such as HAR, MRIS, and MFRMLS.  These companies will absorb the weaker systems.  Yet even here the real estate industry’s lack of innovation and divisiveness creates an additional self-imposed threat.

Will intelligent, innovative leaders such as Bob Hale, David Charron, and Merri Jo Cowen put up with the broker industry’s infighting and lack of centralized strategic actions?  Do these leaders seem the type to accept being relegated to nothing more than the compliance officers of the industry?  At some point they may be so disillusioned with the industry’s factions that they become the latest hires at ZG.

 

Politics

I am not an industry insider.  I am sure there are all kinds of self-imposed, legacy-based barriers to the MLS companies centralizing their data and money, and creating and dispersing technological innovation as I describe here.  But I don’t care.  Either remove those barriers immediately or die in the viciously competitive, speed-of-light technology environment real estate has become.

Comments

  1. Robert Drummer says

    As far as your Third MLS Solution goes, PropertyKey (iMapp) solves that by using tax sold information with an MLS sales overlay. If the property was sold in the MLS, it’s flagged with a link to the listing. Members can use best available sales data, tax only or MLS only depending on what they’re trying to accomplish.

    MLS and Non-MLS sales comps are factored into Projected Selling Price calculations and are also available for MLS members to download or to export into other CMA tools. We can filter on “unqualified sales” so $10, $100 and other similar transactions can be ignored.

    I know there are some other solutions that have recently integrated non-MLS solds but we’ve been doing it this way for years. It always seemed like the best way to get the most reliable picture of the market.

    • Demon of Marketing says

      Hi Robert, you are absolutely correct that there are ways around the weakened data coming directly from the MLS systems. But for every time a new “work around” has to be created and implemented because of MLS shortcomings, it’s another blow to the usefulness of the MLS itself. With enough work-arounds enacted, or looking at it another way–enough replacements made available in lieu of MLS data, the bigger the opportunity for non-broker entities to gain additional power in the marketplace.

      Honestly, the monopoly status of housing data is what brought brokers to prominence. The infighting and divisions within the broker-centric model weaken the entire model. And I am okay with that if the new systems benefit the marketplace.

      This article was simply to point out what will happen and how the MLS systems can take action for their own survival. If Upstream replaces everything the MLS systems do then we can remove the redundancy. . This option concerns me as then the data and power are focused in a very small number of very large franchises and brokerages. The point of Upstream is that they direct the data only where they want it to go, thereby bypassing the MLS at will. In hot markets this could mean fifty percent of home sale occurring prior to entering the MLS. For those sales you then have very limited county record data fields (no deep descriptions or photos) to base future value analyses on. This almost certainly cannot benefit the marketplace.

      Thanks for your feedback and knowledge.

    • says

      What an inipiratsonal story! The power of giving and making a difference is huge. It’s really nice how he did it and didn’t show off or anything, you have a really nice writing style. Thanks for sharing this cool story.

    • says

      Thanks so much Jamy. I’ve come to realize most people don’t take the time to comment anymore. It’s sad, but it is what it is! Also, when I moved platforms from Blogger to WP, a lot of the comments didn’t convert over, so all my old comments were lost. But, it’s true, comments from people these days are few & far in between. So thank you for taking the time to “leave some love!”

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