NAR’s Black Swan Song (part 1 of 3)

Black swan song

My Dearest Real Estate Broker,

NAR’s monopoly is up; it’s in its last gasping days—1,666 to be precise. They’ll still feed you and the press the same old propaganda of their prominence, as they have for decades. They’ll deny anything could ever replace the good old realtor monopoly and the MLS companies it controls. And they’ll hog tie you with ever more controlling rules and regulations to ensure you can’t break from the pack and innovate your way to success through creating edgy tools and services the market really desires. Instead those outside of the real estate industry will bleed them out, replacing them and controlling your destiny and your industry. This is unless you show a little initiative and intelligence as you realize your time is also at end if you sit complacent, and take it upon yourself to create radical changes before it’s too late.

 

Today You Are NAR’s Serf

Today (the first of 1,666 remaining) you have no control over your industry. The national association of realtors, NAR, tells your local MLS what to do and how to run their business. The local MLS tells you what to do and how to run your business (or they will kick you out, thus putting you out of business). You are locked down with NAR and MLS and IDX rules and everything you offer the marketplace looks just like everything every other broker does. NAR designed the system this way. You are just one of 1.3 million real estate marionettes and NAR pulls everyone’s strings. Things have worked like this for decades.

Then a few years back an industry outsider, Zillow and other corporations like them went directly against NAR type rules, offering the market innovative websites and now proceed to tell you to give them your listings. It’s a war of kings, each wanting control of the puppets—the serfs. They take your money through advertising, and again tell you what to do and how to run your business. Zulia is well on its way to replacing the MLS system; they will become your new king as they drain the life from your old one.

Zillow states that they do not want to be the national MLS, and the Demon believes them. Being merely an MLS would never satisfy their desires. They want to be the national (international?) MLS of homes, rentals, and all stuff coming soon to market. They want to be the database of all listing agents for sellers to choose from. They want to be the database of all buyer agents for buyers to choose from. They want to be the database of all loan options. Well, you see my point. Zillow is honest when they say “we don’t want to be [just] the MLS.”

 

NAR’s Kingdom

NAR knows there is only one thing allowing them to survive and keep their monopoly status: national control of the MLS systems. NAR has controlled the database of home information since well before the phone-book-thick, inky, messy MLS books. (Who uses phone books anymore? Remember when the “yellow pages” was the controller of information for millions of businesses and everyone had to advertise there? What a great monopoly that was—pay up or no one will see you.)

NAR will do anything within its power to control the MLS information and protect their monopoly status. Fair enough, that’s their job—what is yours? (You probably have seen ever greater rules and regulations of information control with each new issuance of your MLS IDX agreement. You did read the details before you signed it, didn’t you?)

Your local MLS, being under servitude to NAR, will additionally do everything within its power to control housing data. Your MLS also knows that their survival is wholly dependent on keeping their monopoly status for housing data within their own market and not having NAR throw them out of the party. Yet even a few MLS systems are breaking away from NAR and directly feeding to Zillow. I can offer little reasoning for this—other than those MLS systems bit on the disinformation that Zillow does not want to be the national MLS system.

Yet both NAR and your local MLS will destroy you if you attempt to do anything giving you a competitive advantage outside of their rules—the rules designed to protect their monopoly status. Brokers come and go; the NAR is forever. Their goal is to keep all brokers operating under their rules, thus giving no one a competitive advantage, and most importantly ensuring their continued monopoly status, or so they think.

All of this leaves you being pulled apart by your two kings—each dragging you in opposite directions. Who will eventually win? Zillow or the “outsiders” like them. They are the ones offering the marketplace what they want. But Zillow has weaknesses that could give you dominance in your own marketplace—if you take advantage of them.

 

Such Control, Yet realtor.com Isn’t #1,–or #2

Since NAR and its MLS minions have monopoly status and control over all the housing information, why is the number one real estate website from an industry outsider: Zillow? Shouldn’t realtor.com, with vastly more information and a complete lock on housing data fed by nearly all MLS systems decimate a company coming in from outside the monopoly controlled real estate industry? Zillow and Trulia do not get the majority of their information directly from the MLS systems, yet they dominate the internet—combined doing three times the business of realtor.com. How?

The concise answer is that Zillow “broke the rules”—(well the realtor rules—the ones you have to live by), when they gave automated valuations (Automated Valuation Models, AVMs) and lots of information about homes to the public. NAR and your MLS would never have allowed such a competitive advantage to a broker back then.

The marketplace (buyers and sellers) loves innovation—the type that gives them what they desire. What fun Zillow offers: an automated valuation of your home within seconds. And even more fun, you can spy on your neighbor’s house and see what it is worth. And the most fun of all: getting all of this without having to talk with you.

What was the market’s alternative when Zillow first offered automated valuations? Call some random broker (perhaps you) handcuffed by the NAR/MLS rules. The potential seller leaves you a message, perhaps on a piece of paper written down by the office receptionist. You call them back. You agree to meet at their house two days later after their dinner for a walk through. You spend two hours there, until 8PM. You say you’ll get back with them after researching the MLS data. You crank that out the next day and call them back. Their kids have soccer that night, and there’s a school concert the following night. The night after all of that you were supposed to take your own family out for dinner and a movie—I mean it’s Friday. But you are too scared another broker will swoop in, so you trash your plans and meet with the home owners when they are available. You meet with them Friday after their dinner, explaining your comps and values until 8PM. At least you scored dessert while there.

So it took five days to come up with a possible value for their home through you. Zillow punched it out in 5 seconds. Zillow gave the market what they desired; you did not. Why then does realtor.com to this day (April 2014) still demand home owners suffer through this very same process? They want to protect their monopoly. Zillow gives the market what they want; they do it instantly; they don’t make them register, thus preventing some sales person they don’t want to hear from the means to bother them.

 

Actual Screenshot from the valuation request at realtor.com (4.5.14)

Directly above is what you see when you type in your address requesting a valuation at realtor.com—it’s not what the market wants. Sure, NAR says it’s to protect you. But your only protection is to perpetually innovate and offer the marketplace (your real boss) the stuff they desire the most. (Here’s a book you really need to read: Purple Cow by Seth Godin—get it). What did the market tell you they desire based on Zillow being the number one real estate site on the internet?

Now think about what NAR and your local MLS would have done if it was you, instead of Zillow, who offered the first automated home valuation on the internet some nine years ago. Can you spell guillotine? But imagine how different your business would be today if it was indeed you who had offered that first AVM instead of Zillow. (What, the market value of Zillow is upward beyond $5 billion.) Now realize there are thousands of very innovative people who want to destroy the current NAR system and completely change the real estate industry forever.

On the other hand, NAR and realtor.com and your IDX have offered the same old stuff to the marketplace for years. And don’t think this recent purchase of realtor.com by News Corp is going to save them. Yes, more people will see some kind of realtor.com fed data. But it’s the same old tired data the market has been migrating away from for years. The market receiving the same old stuff in greater abundance they are bored with already will not improve realtor.com’s usefulness to them. Somebody else will drop the kind innovation bomb the market truly desires and open the real estate market wide open, and realtor.com will continue to flounder after a short surge of exposure.

The Demon once read somewhere “sure, everybody knows K-Mart’s name, but still nobody shops there.” Sorry, I forget the source. The point being, everybody could find realtor.com on the internet before News Corp bought them, but they chose not to. Forcing the marketplace to stare at the same data they chose not to seek out just because of increased distribution channels does not equate to innovation based on market desires. Increased exposure does not equate to market innovation. So NAR and Move had better do their short-lived celebration by drinking champagne they buy at K-Mart.

Comments

  1. THE REAL (ESTATE) GUY says

    This is the truth of the future of RE……………………….
    Zillow is the Master of Marketing and ‘Eyeballs
    Big Red – Fella Fillums, connected and bought into the Zillow Machine early and is their biggest advocate
    Zillow WILL offer ‘”Big Red” a “Deal in the BILLIONS that they can’t (or would be crazy to”) refuse
    Zillow WILL become the Leading VIRTUAL Online Brokerage with seamless end-to-end service & some of the top agents in the World moving over under their banner WITH A 1% OR 2% LISTING FEE – VOLUME RULES
    All brokers and agents feeding the Zulia monster will find themselves working for hourly pay (or similar) or out of this business!!!

    WHY EVERYONE IS AFRAID TO STATE THE “WRITING ON THE WALL” IS AMAZING TO ME

    • demon says

      Hi REAL, Estate Guy: It’s interesting–brokers are now the underdogs in their own industry with Zillow ruling. This leaves the brokers one choice–to be the disruptors. Any time the lead incumbent is overthrown it’s because an “outsider” created a technology (product or service) that better met the needs of the market than what the leader did.

      Zillow did this to brokers (perhaps brokers did this to themselves through their complacency).

      But, as i ramble on…in some article around here I stated that “once you are hit with an innovation bomb there are few resurrections.” . The brokerage leadership is too arrogant to believe anything worse can happen to them and no further displacement cannot occur. By the end of 2018 that will all be proven very wrong.

      Thanks for commenting!

  2. says

    There is much more to be discussed about Upstream, BPP, NAR, and real estate portals.

    The big question is why DoJ is not (openly) reviewing these bad actors for unfair competition against small independent brokers and against public interest, as it did in 2005 ?

    Did the mega-brokers learn from the DoJ / NAR settlement how to build firewalls and to create seemingly separate business yet cooperative business units to insulate against anti-trust activities and statutes?

    • demon says

      Hey Steve–you would not believe it but I have outlined a new article for Inman on this precise subject. It may take me two weeks to get it written up but it’s going to be an intense response from the gallery :)

  3. Richard says

    Great article. I enjoyed your video.

    Your avatar of a demon is so appropriate. That is exactly what the vast majority of long-time NAR members and the businesses that feed off of their lack of technical knowledge and acumen see you as. They have been told and sold everything but the truth. Anybody who tells them the truth must be the devil.

    • demon says

      Hi Richard, thanks for all of the feedback. I believe you to be 100% and the demon image was exactly that: the perceived evil image bringing honesty to the industry. And based on many reactions at Inman, I am sure that’s how many see me.

  4. Demon says

    Hi Tere, thanks for the response. Your first question is something that really hit me just last night at a different level than usual as I was working through my own project’s technical difficulties. I always consider which portal (or franchise or brokerage) will give the market what they truly desire as the most probable candidate for domination.

    Structurally realtor.com should (should) be able to do this as they have 90% of the home information. But unless News Corp can break free of the stodgy way information is presented at the site and create a superior AVM and buyer search tools, they will flounder. Okay, I always think this.

    But then it hit me: is r.com superior in data only on the “for sale” end? With their NAR agreement are they allowed to capture and retain and utilize SOLD data. That’s what would drive the ability to analyze both values for an AVM and buyer behavior and desires to create superior search tools. Without these, they are nothing but an electronic version of a newspaper.

    You are correct, so many questions and the actions and reactions to each by all of the high-impact players will greatly change the marketplace. Will the brokers enslave themselves, take the brave position and innovate on their end, or will they slowly be annihilated?

    • Tere says

      Thanks for your response! I have been trying for years to see in the re future. I don’t think the ultimate re national platform has been devised yet. Zulia can do it they have public confidence. What Mrdock has in mind is still a secret other than the obvious, advertising. But will he make a forward leap and monopolized and nationalize the RE industry? He certainly has the capital to do it.

      I personally think brand names like c21 are arcaque and unnessessary. I work for a 100% commission brokerage and pay flat fees, and pay for my own advertising. And love it. I don’t think of real estate as a group or corporate need.

      Why I got in to RE in 1988 was to make a difference in transactions and be honest. I always felt I was being lied to. After the last eight years of dealing with the public, I have a better understanding of why certain pychopathic personalities do so well in this industry. Because of the unethical practices of some agent/brokers I have no doubt soon realtors will be another minimum wage job! It’s called get rid of the middle man. No matter how much I give my buyers and sellers, after they see how much commission I get on the closing statement they still hate me after the deal. Because I make too much, for doing nothing! Of course they don’t know it cost me $12,000 annually in fee and dues just to open that door for them and I work sometimes for free and don’t get paid at all!

      • Demon says

        I think you are very correct. However the answer to the “minimum wage” option is very serious innovation based on market desires. The market always wants the best service. When they have a legal problem $300 an hour for an attorney is not questioned. When they need someone to give up every evening and weekend and stress through everything that goes with a home purchase (or sale), well they don’t want to pay anything.

        I think the secret is to offer the innovation and keep the fees low enough that they finally realize they are getting a deal. But if you look at any of the 1.3 million broker IDX websites there is zero innovation and zero differentiation. Zillow rules because of that, but aside from some cool aerial imagery and a semi-accurate AVM, it’s pretty much hype.

        What needs to happen will take some ingenuity, innovation, and some cash. But it will happen. Then only about 20% of the current broker population will be around, but they will function with so much more purpose.

        Thanks

  5. Tere says

    very well put. I’ve said for years Zillow conveyed too information and average peeps can’t handle this responsibly add money for everyone houses for free the Real Estate market becomes the latest ponzy scam. More financial equalizing of the people..

    Who will have the ultimate Real Estate platform? Will brokerages contract with them for a percentage. Will agents be home based on call pay per door opened? Or will advert fees be so high you have to work for a brokerage? Will Zulus give corporate discounts to the top three? Will there be a transaction online virtual? 1,666 days and counting

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