Home MLS & Associations In Which I Try to Make Sense of the Austin IDX Kerfuffle

In Which I Try to Make Sense of the Austin IDX Kerfuffle

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Making Sense... Out of Nothing At All... (apologies to Air Supply)

I had to interrupt my series on Redfin 3.0 and what it might mean for brokerages because parts of the RE.net just blew up over the past day or two. AgentGenius (AGBeat?) reports that there is a dispute going on in Austin, Texas, between a group of brokers and agents (who mostly serve the luxury market) and the local MLS about IDX policy. Although this sort of thing was inevitable in my view, I take no pleasure in getting my Nostradamus points.

I have written that one cannot be anti-syndication but be pro-IDX, since the two are actually the same thing, intended to serve the same purpose. Reasonable people disagree, and that’s wonderful; we advance through debate and discussion.

But reading through the AGBeat post and the comments there, I think there’s a lot more of an emotional response than reasoned discussion going on. I thought I should make a small (okay, large and lengthy) attempt to try to clear up some of the mess so that we can focus on the core issues in the debate.

First Error: IDX Is Not the Internet

A number of responses are in the vein of, “What the hell is wrong with these people? If you take away IDX, buyers can’t search for properties!” For example, here’s Lainie Ramsey who writes:

Danny, that is exactly what those hoping for these changes want – they want to closely guard their listings like it was done in the old days where if you want to buy a house – you HAVE to come through them and they will decide what you can and can not see in their black book of real estate listings.

Or there’s this comment from Crystal Kilpatrick:

Many of my buyers are relocating here from out of state. They want to see the listings online before they travel here to see the homes in person. I think that it would be a sad day to know that the listings are not available online for them.

In both cases, the impression is that if a listing is not available in IDX, it isn’t available on the Internet.

This is simply not true. First of all, a broker can have the listings on his own website; this raises the “dual agency” issue that some have raised, and I will tackle below. Second, a broker can send listings to various portals via syndication. Since the listings are his intellectual property (he owns the original copyright on them), he can do whatever he chooses with them.

Third, and most importantly, every single MLS in the country has a VOW (Virtual Office Website) feed. Because they are required to have one to under the NAR-DOJ anti-trust settlement. If information/data can be shared with a client in a physical office, then it has to be available to be shared via the Internet. The Anti-IDX people in Austin might decide to pull out of IDX; those listings will still be available, still searchable, and can still be displayed to any consumer working with a broker/agent in the MLS.

The key is that the VOW requires that a “customer relationship” be established prior to accessing the data. But in practical terms, what this means in most jurisdictions is a simple sign-up requirement: give an email address and register on the website, and you can get the VOW data.

Therefore, all those Pro’s who are up in arms that changing IDX means that their buyer clients will no longer have the ability to see all of the properties for sale in the Austin market are simply wrong. If they are already working with you, you can make the full VOW feed available to them and there isn’t anything the listing broker can do about that, short of pulling the listing from the MLS itself.

Jonathan Boatwright wrote:

Consumers are not going back to the days when they were waiting on their realtor to search the MLS for them. They are telling us which properties they want to see, and they are making an appointment with us to go and see them. If your listings are not on other broker’s website, then I promise you a VERY large number of very motivated and very qualified buyers are going to miss them. The traffic to these sites vastly outpaces local searches on realtor.com, trulia, zillow, and austinhomesearch.com combined, and the consumers using them are spending hours doing their research and saving their favorites.

But ending IDX does not mean that consumers have to go back to waiting on their realtors to search the MLS for them. They can just access the VOW feed on their realtor’s website, simply by registering with that realtor. The listings would be on other brokers’ websites. These motivated and qualified buyers spending hours doing their research should, could, and in fact DO register with their favorite broker or agent, and then search the entire MLS as much as they want.

To accept the argument that ending IDX means that “very motivated and very qualified buyers” would miss those listings for sale means that one has to accept the idea that these “very motivated and very qualified buyers” who spend hours searching on their own nonetheless refuse even to provide just an email address to a broker or agent. I have to ask, if so, just how serious, just how motivated are these buyers?

IDX was and is intended to be a lead generation tool for brokers and agents to allow non-clients to search properties for sale. At its heart, IDX was and is intimately connected to SEO rankings, and allowing brokers and agents to compete with national portals who claim to have all the listings in an area. IDX was never about serving consumers, who could easily get the data (and more detailed data, by the way, since the VOW is a far more complete dataset) from the agent/broker via VOW; it was and still is about acquiring customers.

Actual buyers, serious and motivated consumers, can accomplish everything that is talked about here — seeing all of the properties for sale, with accurate data, along with some information not available via the Third Party webistes — through the VOW feed, which is guaranteed to every buyer and seller thanks to the DOJ settlement.

Second Error: End of IDX Means Monopoly and Dual Agency

Some of the comments focus on the acquisition aspect of IDX. The claim is that ending IDX is intended to create more dual agency for the listing agent, since the buyer would have to go to the listing agent’s website to find the non-IDX property, thereby leading to the inquiry going to the listing agent. This, it is claimed, will lead to monopolization by the listing agents and brokers.

For example, Israel Gutierrez writes:

Trying to keep “both sides” of the commission seems to be the singular goal for the anti-IDX movement. This is not only greedy, but also seems to hint at monopolization.

And you also have comments like this one from Charlie Pitkin:

Their case is less effective than a fart in a windstorm. We live in a buyer representation world. Driving buyers to listing agents is not protecting the buyer’s interests! Dual agency in Texas is illegal, for good reason. The buyer would be left representing themselves, possibly without understanding the risks involved. Listing agents ought to be wary of such practice.

This line of reasoning is flawed for the reason that while agent dual agency may be illegal, and even if not, frowned upon, broker dual agency — also called Designated Agency — is neither illegal nor particularly frowned upon. Texas law specifically allows for designated agency. In designated agency, practiced by the vast majority of brokerage companies in America, if an inquiry comes in on a listing, the listing agent does not work with the buyer; someone else in the brokerage is assigned or designated as the buyer’s representative. This is how almost every single agent team works, for example: the team leader is often a strong listing agent with a team of buyer agents under him, who works with the buyer as the buyer’s rep, while the team leader continues to represent the seller.

There is also the matter raised by Ken Brand:

I sorta get it, but what about For Sale signs. Should we remove the listing agents/brokers contact information so that we avoid the representation issues you describe? Or what about property promotion post cards and print advertising, should the listing agent/broker remove their contact information?

While the Pro-IDX folks are dismissive of such points (” that’s a irrelevant comparison because buyers no longer drive around looking at for sale signs”), Ken’s point is 100% on point. If the point of IDX is to prevent broker dual agency, if what is truly important is to make sure that buyer’s contact someone other than the listing agent who serves the seller’s interests, then allowing such “dinosaur” practices such as yard signs with only the listing agent’s information or newspaper ads with only the listing agent’s information makes little sense.

By the “avoid dual agency” reasoning of the Pro-IDX crowd, an agent should be able to plant his own yard sign on someone else’s listing. The few buyers who do drive by the sign will then have the option of calling the listing agent (thereby getting screwed, apparently) or calling the YDX (Yard Display Exchange) agent. The argument that no one uses yard signs doesn’t hold water, since every single listing agent continues to plant such “ineffective” yard signs.

The point of this analysis is that to the extent that ending IDX would create more dual agency, it would be the industry-approved practice of broker dual agency, or designated agency. It would not, and legally could not, create single-agent dual agency without a bunch of disclosures and such. If the real reason why the Pro-IDX people want to preserve IDX is to avoid broker dual agency, then the actual focus of their ire should be state agency laws that allows for designated agency in the first place, since so many of the practices of the industry (yard signs, newspaper ads, etc.) specifically advance broker dual agency.

Error #3: The Listing Broker Must Provide Maximum Exposure for All Listings

The third error made by some of the commenters is the idea that as a fiduciary of the seller, the listing broker must provide maximum exposure of all properties for sale.

For example, we have the comment by Kerk Chmelik:

For sellers, it’s imperative that all possible interested parties see their home for sale – it’s a numbers game – more exposure, more chance of a sale. And yes, of course they should be qualified buyers. However proving that they’re well-qualified could be accomplished on a case by case basis by the listing agent possibly requiring qualification information before setting a showing appointment if so desired.

We also have comments like this one from Sherry Scales:

Part of your fiduciary duties to a seller is to do everything possible to gain an advantage for the Seller. By opting out of IDX, you have violated your fiduciary duty to your seller. Buyers can’t find our seller’s listing, meaning much longer on market.

First of all, if we accept that the listing broker has a fiduciary duty to the seller to expose the listing as widely and as profusely as possible, then there is no way that anyone could defend a broker pulling listings from the third party websites (i.e., syndication). It does not matter whether the publisher’s website is Zillow or Overstock.com or Craig’s List. If MAXIMUM exposure is part of the fiduciary duty of the listing broker, then he is bound to place absolutely no limits on how the property for sale should be advertised. This is why I felt that you cannot be anti-syndication but be pro-IDX. If duty requires you, the listing agent, to expose the listing as widely as possible, then you cannot refuse to send listings to anyone with a website.

Second, the Maximum Exposure rule simply doesn’t make sense. I have a blog with fairly minimal traffic, particularly from consumers. But under the “maximum exposure” logic, if I wanted to put your listings on my website, you must send them to me. It is your fiduciary duty to the seller.

For that matter, I could have a business direct mailing catalogs of homes for sale to paying subscribers. You cannot refuse to send me your listings, as I am providing exposure — no matter how ineffective, no matter that I’m making money on your listings, no matter that I might surround your listing in print with all sorts of ads for Viagra or whatever — since you are fiduciarily bound to provide MAXIMUM exposure.

Clearly, that cannot be the rule here. Maximum exposure has never been, cannot be, and will never be a fiduciary duty of a listing agent to the seller. The listing agent is expected to exercise judgment on effective marketing techniques. As a seller, I might not want my home listed on Overstock.com. I might not want it showing up on some random website, mixed in with ads for porn sites. Maximum exposure is not what I am owed as the seller; effective marketing is.

Different people could have different opinions on what effective marketing is. Many would consider IDX to be very effective marketing, but I see nothing that says thinking otherwise is a violation of fiduciary duty. Some agents might think that paying a videographer $5,000 for a gorgeous video is effective marketing; others might decide that it is not, especially for a $80,000 short sale. There is no violation of fiduciary duty because an agent decides not to create a movie for the short sale listing. By the same token, there is no violation of fiduciary duty if an agent or broker decides that IDX is not effective marketing.

The Unsupported Consumer Benefit Argument

The final area of mystery — and this is not an error as much as it is an Open Question — is the claim that IDX benefits buyers and sellers. For example, you have comments like this one from Lainie Ramsey again:

I don’t see how making the changes to IDX is in any way good for the consumer or good for competition…and I can guarantee it would mean longer days on the market for sellers! It really does seem to me that the dinosaurs in our industry who have failed to keep up with technology are trying this as a last ditch effort. It’s not about their listings or their sellers – it’s about THEM. As a listing agent you are hired to represent the seller’s best interest – I’m just not sure how longer days on the market, less offers, possibly lower offers (because there’s little competition to buy the sellers listing) could at all be good for the seller! I think these agents need to give a little more thought about who they a representing here – the seller or is just themselves? (Emphasis added)

The trouble with this claim is that it is, as far as I know, wholly unsupported by any data. If anyone is aware of any statistics on the subject, I would love to find out about it.

Does IDX have an impact on DOM or on sale-to-list ratios? Given that IDX is a relatively new invention (1999 or so, according to the definitive expert on the subject, Brian Larson), is there NO data on what DOM and sale-to-list were in say 1998 vs. 2008? Matt Cohen of Clareity opined on Twitter that such data is unavailable, and no good in any respect, because of the huge number of variables. If we accept that premise, that the impact of IDX on DOM and Price-to-List is impossible to measure, then I would argue that claims one way or the other are unsupported.

IDX could be good for the seller, or it could be bad for the seller — there’s just no way of proving it one way or the other.

Now, this is a terrible, probably-doesn’t-mean-anything, piece of data that Matt Cohen would heartily disapprove of <grin>, but I quickly Googled a couple of things. And I found these reports by Prudential Douglas Elliman:

In New York City (which does not have a MLS, and therefore lacks IDX) the DOM for Q4/2011 was 130 days, and the Listing Discount (price-to-listing ratio, in reverse) was 4.9%.

During the same period (Q4/2011), in Westchester/Putnam, which has a MLS and therefore IDX, the DOM was 194 days, and the Listing Discount was 12.8%.

Does this prove anything? Probably not. NYC with its condo/co-op market is drastically different from Westchester/Putnam. But they do have significant overlap in some respects — many NYC buyers will look at both buying in NYC and moving out to the burbs, and Westchester is a bedroom community in many respects to NYC.

And while the NYC vs. Westchester might not prove anything at all, it certainly does nothing to lend credence to the idea that IDX clearly benefits the seller in terms of DOM or price-to-list such that even discussing it is beyond the pale. Actually, we should study it, and discuss it, and figure out what the actual impact of IDX vs. non-IDX is on the seller and on the buyer in concrete terms.

The Core Issues

Once you strip away some of these errors and unsupported claims, what you are left with are the core issues at stake here.

Should listing brokers allow competitors to use their listings to acquire new customers?

That is the actual purpose of IDX. As shown above, consumers have access to all of the wonderful technology tools via the VOW feed, simply with registration with a broker or agent. The answer to that question depends on this next question:

Does allowing all participants in the MLS (brokers and agents) to display the listings of other brokers and agents provide actual, measurable benefits to the seller?

Since the listing broker is duty bound to benefit the seller, if IDX tends to benefit the buyer at the expense of the seller (in lower prices, without impact on DOM), then the listing broker is actually duty-bound to withdraw listings from IDX. Unfortunately, we do not have reliable good data to answer that question, but that being the case, a real need for brokers, MLS’s and Boards considering the IDX issue should be to commission a study to find out the answer.

Relatedly, there is the dual agency question:

Even if withdrawing from IDX benefits the seller, is the harm to the buyer through increase in improper dual agency such that listing brokers should not be allowed to withdraw from IDX?

The key word there is “improper”, since the industry appears to accept broker-level dual agency (or designated agency) as a perfectly fine business practice, the only problematic dual agency would be single-agent dual agency that can be shown to harm the buyer. Then as a matter of public policy, the state regulators and the MLS and the Board of REALTORS should require that listing brokers participate in IDX to protect the buyer. Once again, rational discussion, rather than emotional opposition, should move towards getting actual data from competent academics or consulting firms. (I do not do this work, so I’d look to people like WAV Group, Clareity, REALTrends, or other research-oriented firms.)

And finally, this core question:

If IDX does in fact provide a measurable benefit to the consumer, is there a difference in impact — whether in price-to-list or in DOM or reduction in improper dual agency or any other relevant metric — between IDX and syndication that would justify treating them differently?

Following the maximum effective exposure rule of the Pro-IDX camp, if all the brokers and agents are duty-bound to consider the benefits to the buyer and seller of IDX without regard for their own business considerations (i.e., “greed”), then by what logic should those brokers and agents be allowed to pull listings from third party websites simply because those third party websites do things like “sell our own leads back to us” or advertise other agents on the listing itself?

[Note that the “data accuracy” problem can be avoided simply by providing third party websites with the IDX feed, which no MLS to date has shown the willingness to do, and which a number of brokerages and agents would go into an apoplectic fit over, if that policy were to be put in place.]

This got long, as I suspected it might. But I am neither pro-IDX nor anti-IDX. I am neither pro-syndication nor anti-syndication. What I am is for reasoned discussion, and against emotional accusations and flamewars on a topic like this.

I hope you found this at least minimally useful in thinking through this complex topic. Your opinions, critiques, and questions are, as always, welcome.

-rsh

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