Home Real Estate Description is Not Prescription: A Response to Brian Larson on IDX

Description is Not Prescription: A Response to Brian Larson on IDX

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Just because I say that smoking will lead to cancer doesn't mean I want you to get cancer, okay?

One of the guys I respect most in this business — indeed, one of the guys I learned the most from just by reading his excellent blog, MLS Tesseract — is Brian Larson of Larson, Sobotka. Brian was a key player in the creating of IDX back in the late 90’s and probably has forgotten more about the subject than I ever knew.

So when Brian takes me to task on a set of views related to IDX… well, I have little choice but the perk up the old ears, pay attention, and see where I might have gone wrong. He writes:

Rob Hahn has said there is no meaningful difference between IDX and syndication and that he thinks brokers pulling out of syndication are a harbinger of IDX’s demise; but I think he’s dead wrong. I’ll try to make my point here in a post considerably shorter than one of Rob’s Notoriously long ones 😉 You can see Rob’s post claiming (erroneously, I think) the equivalence of IDX to syndication here; regarding the Austin “kerfuffle” as evidence of the impending demise of IDX here; and offering further comments about Austin and IDX here.

He goes on to point out a few things where he disagrees with me. For example, he writes:

But Rob has suggested that VOWs are just as good. I disagree: VOWs are not a satisfactory substitute (so far) for IDX.

Upon further review, I don’t believe we have any disagreement here. What we might have is a failure to communicate — namely, the difference between describing something vs. advocating for something. There are a few errors of interpretation on Brian’s part — such as the statement above about IDX being just as good as VOW — which I am happy to correct.

Correcting the Record

Before we get into whether there are substantive disagreements between Brian and myself, I think it’s necessary to set the record straight on what it is that I actually wrote/believe. Let’s start with the statement above, that IDX is just as good as VOW.

I think one would have to search far and wide to find my making such a statement. Of course IDX is not anywhere near as “good” as VOW, if by “good” you mean lead generation. The two are not even the same thing, serve different purposes, and are treated differently under the law. That was a major point in this post of mine discussing antitrust and IDX.

IDX is marketing. VOW is client service. So to equate the two is to make a serious mistake, both logically and empirically.

Brian also writes:

In the IDX-less world that Rob imagines, the only places to get relatively comprehensive listing information without registering as a broker’s customer will be sites like Realtor.com and Zillow.com

I consider this to be the error of looking at description and thinking it prescription. I do not “imagine” an IDX-less world in the sense that I “imagine” a world without war and crime, wishing for such a thing to come to pass. I predict an IDX-less world in the same way that I predict bankruptcy for the United States on the current spending trajectory: hoping it would not come to pass, but having to describe the world accurately as I see it.

And the final point I should clarify is related to this:

Finally, I expect that Rob could point to the Austin dust-up over IDX as evidence of the trend he foresees. However, I know of no other markets where similar discussions are happening, and a single data point cannot indicate a trend.

I can understand how one might reach this conclusion if the three posts that Brian linked to are the basis for the expectation. But I based my predictions on a far wider set of observations, and on a fundamental question confronting the real estate industry today. That question arose out of the robust syndication debate (which I hope I have laid to rest for good) of the past couple of years, but the core question has always been central to how American real estate industry works.

I believe once my argument is clearer to Brian, he would find that the logic is inescapable, and that IDX as it exists today cannot survive for too much longer.

The Core Question, And Where Brian’s Logic Meets Reality

The core question is one I have cited often in these pages. It comes from the testimony of Geoffrey Lewis, the General Counsel of REMAX, during the 2006 Congressional Hearings on competition in real estate, where he said:

The concept is simple: you earn a customer, you get to use the MLS with the customer. The concept is not: you get free access to the MLS and then you use it to advertise the properties of your competitors in order to attract customers.

At the time that Mr. Lewis testified before Congress, there were some significant people (such as Michael Oxley, he of the Sarbanes-Oxley infamy, who was the Chair of the powerful House Committee on Financial Services) suggesting that maybe what was needed to make real estate more competitive was to open up the MLS completely to everyone. There were suggestions floated that maybe the MLS should be a public utility, to allow unlicensed individuals — including consumers themselves — to have access directly to the MLS.

What NAR, Geoffrey Lewis, and others argued successfully then was that the MLS was a private cooperative amongst brokers to help each other serve their customers. It was not merely an advertising platform that should be opened up to consumers or to any old marketing firm. And the key distinction they all drew was that MLS data is used by participants (a word fraught with significance) to serve their customers.

Keep that thought in mind for a minute.

Brian writes:

Listing brokers get something from IDX they don’t get from syndication—other brokers’ listings. A broker deciding whether to send her listings to Zillow or Trulia is considering an exchange, which in highly simplified form sounds like this: “Should I allow Zillow to use my listings to attract consumers to its site in return for the exposure my listings will get there?” With IDX, the equation is different: “Should I allow other brokers to use my listings to attract consumers to their sites in return for the exposure my listings will get there and in return for the right to display their listings on my site?” This reciprocal nature of IDX was reflected in one of the first names given to the concept: “Broker Reciprocity.” The IDX rules provide for a flexible way for brokers to display each other’s listings; the rules are relatively simple, well-understood, and they do not require much of the consumers visiting sites; i.e., they don’t need to register, click through disclosures and agreements, etc. But Rob has suggested that VOWs are just as good.

Standing alone, without reference to the real world, Brian is 100% correct and absolutely right. In theory, IDX differs from plain syndication because brokers who participate in IDX get the right to display listings of other brokers. It’s a mutual syndication license, with rules that apply to everybody.

Trouble is, that theoretical value is running more and more into the reality of the situation on the ground.

Take Brian’s example of Big Broker LLC in bustling East Overshoe, MN, who has 30% of the listings in the market. He writes:

…pulling out of IDX means neither you nor your competitors can have very effective IDX sites; you either have to operate a VOW (which consumers don’t like) or operate a public site with only your 30% of the listings. (We know from consumer research that consumers don’t like sites where the displaying broker puts its own listings first on search results; imagine how they’d feel about a site where only the displaying broker’s listings appear?)

In the real world, what I’m seeing is that in many, many markets Big Broker LLC might have 30% of the listings, the local Big Franchisee might have 25%, and a third Big Independent LLC may have 20%. Between the three of them, they have 75% of the listings in the market.

Yet, the IDX feed goes out to 2,000 brokerage and agent websites — with the vast majority of them being a “buyer broker” or a “buyer agent”. Those brokers and agents contribute precisely ZERO listings to the IDX pool.

A couple of years ago, at an Inman event, I went out to dinner with a bunch of real estate people. One of them was a broker with licenses in a half-dozen states, who boasted that he owned over 300 URL’s, and was making money hand over fist, because his model was so lightweight and scaled so easily. What was his model?

He created hundreds of IDX websites using all sorts of clever keywords and landing pages and other SEO techniques to get his sites high on Google. When buyer inquiries came in, he had a small team of agents who would talk to the buyer, do some basic qualifications, and put them on drip campaigns and such via the MLS (since he was a participating broker after all). If the buyer was ready-and-willing, he would refer the lead out to someone in that marketplace for a 25% referral fee. Suffice to say that he never entered a listing into the MLS in the five or six years he had been doing this. When I met the guy, he had a total of six “agents”, not one of whom ever got in a car with a client.

What exactly would Big Brokerage LLC lose by excluding this guy from getting their listing data via IDX? Does Broker Reciprocity — the original name for IDX — have this particular business model in mind? But under the current IDX rules, where it’s all-or-nothing, in-or-out, there is no way to prevent this sort of freeloading. That broker is obeying every single letter of the rule.

Big Broker LLC might reasonably conclude that they can afford to forego the right to display the nonexistent listings of buyer brokerages, and still have pretty much what they want to have — near-total listing coverage.

How?

By entering into bilateral syndication agreements with Big Franchisee, Big Independent, and any smaller brokerage who has listings, and are willing to live with the terms of Big Brokerage LLC’s syndication license.

Said license might include things like, “You will agree to display my logo and listing agent contact information next to all of my listings that you display on your website.” In fact, such bilateral agreements could simply copy and paste the IDX rules for the given market, but agreements would be done only amongst those brokerages who have listings to contribute to the pool.

Because of the ease with which these bilateral agreements can be done — standardized even — and because the technology to ship listing data to and fro between brokerages is well-developed and cheap, I believe that we will see things moving in this direction. (Which does not mean I want things to go in that direction, merely that I think they will.)

When Geoffrey Lewis mentioned that some of the entities wanting to get full access to the MLS back in 2006 were people bringing a fork to a potluck, I don’t think he had IDX in mind. But the logic applies with absolutely equal force here.

Recent Developments

This whole “fork to a potluck” line of reasoning isn’t simply from the lo these many years ago days of 2006. Consider just three very recent developments.

First, when Franchise IDX was absolutely driving everyone bonkers, one of the key arguments made by the likes of Realty Alliance, Leading RE, and HomeServices of America was that these national franchise companies were not “participants” in the MLS, and therefore contributed nothing into the MLS. Their franchisees, as brokerages, did, but the national franchises did not. They were, in the views of the Antis in that debate, bringing a fork to a potluck.

Second, in all of the syndication brouhaha of the recent months, time and again we have heard brokers from the large (like Howard Hanna) to the small (like Abbot Realty Group and GoodLife Team) say that one of the main reasons they pulled out of syndication was because someone other than the listing agent was getting contacted on the listing in question. In case you didn’t recognize it the first time around, here’s Jim Abbot:

Listen to Jim Abbott here discussing how listing syndicators send buyers to random agents who know nothing about the area, nothing about the neighborhood or the subdivision, and “almost certainly has not seen the house”.  Note the “Official Listing Agent” seal at the end of the video.

And here’s Jack Miller of GoodLife Team discussing why they pulled out of Trulia:

Listen to him discuss how GoodLife Team achieves its results by “responding live or within 5 minutes” to all inquiries. He says, “When Trulia started advertising other agents and sending inquiries on our homes elsewhere, they broke our brand promise, and our ability to control the response and quality that we promise our sellers.”

If you can distinguish the way in which IDX does not do exactly the same thing, I’d like to hear your reasoning. In both cases, ARG and GoodLife pulled listings because they could not control the response and quality that they promise their sellers. With IDX, a random buyer agent located 40 miles away — who doesn’t know the area, doesn’t know the neighborhood, and almost certainly has not seen the house — can also get that buyer inquiry.

It’s the same problem from the listing broker’s point of view. Which strongly suggests that one day, they’ll reach for the same solution they employed against syndication.

Third, the syndication companies — ListHub in particular — have developed technology that can make selective feed extremely simple:

So I asked how difficult it would be to subject the IDX feed to this Filter system. Mark/Luke sort of hemmed and hawed, since that question, I’m certain, was not one they had prepared for… but they did admit that technically, IDX could be subjected to the Filter system easily. And they did concede that subjecting IDX to the ListHub system would provide brokers with the kind of detailed traffic report that ListHub provides when it comes to publishers.

Once brokers get used to selectively sending their data only to those sites they want to send to, they will find themselves asking why they can’t have the same ease of use with IDX. It’s human nature.
None of these developments were five years ago. They were in the last 12-18 months. This issue is live, and hot.

My Point on VOW

The actual point I have made time and again is that if (and that’s a big if) enough brokers conclude that while it is perfectly fine to use their listing information to serve one’s customers — which is the whole point of the MLS in the first place, as per Geoffrey Lewis and others — it is not fine to use their listing information to acquire new customers, then VOW will be the main recourse left for those buyer brokerages and buyer agents who cannot get into bilateral agreements.

None of this suggests that VOW = IDX, or that it’s “just as good” as IDX in generating leads and inquiries. Of course it isn’t. Because VOW exists for a totally different reason than IDX.

As one result, VOW cannot be touched. It can’t be modified. Brokers can’t really pull out of VOW, without having the seller choose not to advertise his home anywhere on the Internet. But IDX does not enjoy such legal protection, at least in my opinion, and cannot enjoy such legal protection for a variety of reasons.

Therefore, for the reasons above, I have described what I’m seeing and predicted that IDX should be on the endangered species list. That does not mean, of course, that I want IDX to be endangered, or that I am advising brokers to pull out of IDX or any such thing. On that point, I’m 100% in agreement with Brian.

-rsh