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A Quick Question on Upstream & the Local MLS

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I am performing a miracle right now. Blogging while flying 30,000 feet in the air. Will wonders never cease!

In any event, given the quality of in-flight wifi, I thought I’d keep this as short as possible.

Had a fascinating discussion recently with a friend of mine in the MLS business. We got to talking about Project Upstream, as he had thoughts on my recent post about the “Brokercentric MLS“. Somehow, we ended up on the fascinating statement from the Upstream people about how they view the role of Upstream. Here’s what I wrote:

Upstream is the initiative that the Brokerage Sphere believes would help reform the broken agent- and Association-centric MLS. Its core value proposition is that Upstream, and not the local MLS, will be the point of entry of listing (and brokerage) data. Upstream, and not the local MLS, will be where that data is maintained and updated, including status changes. In fact, Upstream is not just a data-routing platform; it is something far, far more:

Upstream is “a single source of truth” for broker information, said Cary Sylvester, a Keller Williams vice president and Upstream board member.

The local MLS would receive the broker data, including listing data, from Upstream. It would continue to provide some MLS functionality, such as CMA tools, that requires all of the data in a given marketplace since Upstream does not plan to launch with 100% coverage or 100% participation by all of the brokers in a marketplace. The MLS remains the provider of things like IDX and VOW because Upstream will only provide a broker with his own data, not some other broker’s data… “unless they have signed agreements to share listings with other brokers.”

And then further:

Keeping in mind that Upstream will take over the Add/Edit function, and be the “single source of truth”, the MLS no longer needs to do compliance. Upstream takes over the compliance functions from the MLS since it must be the single source of truth, the reference database for all client MLSs.

My anonymous MLS executive friend wondered about this, because no one from Upstream has actually explicitly stated this change.

So that’s the question: in the post-Upstream world, who does data compliance?

Ye Olde Golde Standarde of Real Estate Data

Once upon a time, in a kingdom far, far away — which is to say, oh, before last May — the common understanding of the real estate industry was that the MLS was the “gold standard” of data accuracy. MLS execs and even a few brokers would get on stage at various conferences and talk about how the Zillow and Trulias of the world wanted MLS data, because it was so accurate. RPR’s original business model revolved around the idea of taking this “gold standard” of accurate data, packaging it up, and selling it to Wall Street. And brokers fought a battle to get MLS sold data to create broker AVM’s because that data was so accurate.

What most people understand, of course, is that the accuracy of MLS data is not by accident. It is the result of the pain-in-the-ass compliance work done by the MLS. You know, all those nasty emails sent out to subscribers when they screw something up? All those fines levied because someone didn’t dot the i’s and cross the t’s when entering and modifying data in the MLS?

A lot of the pain-in-the-ass business rules of the local MLS exist in part to enforce data accuracy, so that the various compliance departments (which may be one part-time admin person who also makes the coffee) can make sure that the information in the MLS is as accurate and as timely as possible.

So… who does this thankless job in the post-Upstream world?

Option 1: Upstream Does It

The obvious option — the one I sort of glancingly mentioned in the previous post — is that Upstream would do data compliance. After all, it will be where brokers and their agents do Add/Edit. It would make sense for Upstream (or its tech partner, RPR) to make sure that the information being Added, or Edited, is in fact accurate. Given RPR’s technology backbone — a parcel-centric database — it makes even more sense that data compliance be done at the Upstream level. Let me explain briefly, although I’ve written about this before a few times.

In a parcel-centric database, like RPR’s, one does not create a listing from scratch. One looks up the property (by address, by parcel number, whatever) and then converts it into an “active listing”. One would add a few fields, such as price, start date, end date, listing agent, showing instructions, etc., but the core property data — bed, bath, square footage, etc. — are pulled from the existing property record.

Accordingly, if the agent entering the information makes a mistake (e.g., a fat-finger typo in the pricing so instead of $300,000, it’s entered as $30,000), Upstream is in the best position to catch that error.

The MLS receiving the data feed from Upstream — which is the entire structure/workflow being discussed — could/would/should rely that the data being fed to them is accurate. Well, now that the issue is before us, perhaps the MLS in question should insist on a “representation & warranty” clause from Upstream that the data is in fact accurate in any contract it executes…. Calling Mitch Skinner!

This is not an idle theoretical point. If Upstream guarantees accuracy, then the local MLS can save some money — quite a lot of money in some cases — by re-allocating resources from Compliance to somewhere else, like Customer Service. A local MLS might choose to just lay off the Compliance people and lower fees even further. So it’s a real dollars and cents question here.

Option 2: The MLS Does It

I suppose the other option is that the MLS will continue to do data compliance, because in some cases, the error is caught by other brokers/agents. For example, suppose the listing agent enters the listing in Upstream and creatively converts a study (with no closet) into a bedroom. I know, you are shocked, shocked, that such a thing happens given that almost everyone using the MLS is a REALTOR with the vaunted Code of Ethics and its requirement for honesty. But we live in an imperfect world where criminals don’t respect those “No Guns Allowed” signs, so we must try not to be surprised.

In any event, sometimes, it isn’t the listing agent entering the information who discovers the error, but a buyer’s agent who walks through the property and notices that the fourth “bedroom” doesn’t have a closet, or a window. And sends a note to the MLS’s Compliance Department saying so. “Snitches get stitches” is not yet a business rule in the real estate industry, so the Compliance folks send their emails and make their phone calls and issue their fines and get the listing agent to correct the “mistake”.

So it is possible that Upstream would not rep & warrant that its data is accurate. Instead, it would ask/require that the local MLS receiving that data continue to do data compliance to make sure that the information is in fact accurate.

Three follow-up questions then come to mind.

First, if the MLS finds an error, does its compliance thing, and gets it corrected… does it have to send the correction back to Upstream?

Second, assuming that the answer to the above is Yes… shouldn’t the MLS get paid for the valuable service it is performing for Upstream? Again, remember that the Ye Olde Golde Standarde of data accuracy used to be the MLS; if Upstream becomes that thanks in part to the compliance work of the local MLS, shouldn’t there be some sort of compensation?

Third, if Upstream cannot or will not “rep and warrant” that its data is pristine and accurate… exactly how is it “the single source of truth”?

Option 3: They Both Do It

Theoretically, both Upstream and the local MLS can do compliance work. For example, Upstream could rep & warrant that its data is accurate, but require that when the local MLS gets a note from a snitch subscriber, the MLS pass that on to Upstream, so that Upstream’s Compliance Department can track down the listing agent and get her to correct the “mistake”. The bulk of the work — and therefore the cost — will be on Upstream, but the local MLS will play a role.

Or maybe Upstream does compliance on Add/Edit type stuff, while the local MLS does compliance on the snitch-related stuff. Typos in price, or failure to update the status of a listing — these are Upstream’s compliance responsibilities. But “mistakes” in property descriptions, in neighborhood classifications (believe it or not, even REALTORS get awfully creative in describing a property as being in XYZ Exclusive Neighborhood two blocks away vs ABC Ghetto Slum Neighborhood), and so on, are the responsibility of the local MLS.

In that event, one wonders who will “rep & warrant” to the other — and to the world — that the data is pristine and accurate. Calling Mitch Skinner! Mitch, please pick up on line 2!

Not Idle Speculation, Part Deux

In the way of wrap-up, I suppose, let me say again that this is not idle speculation. I’ve already covered the cost angle above, but now think about litigation.

Suppose some litigation-happy consumer somewhere gets irate that his house didn’t fetch the price he wanted, and he claims that the reason is because the listing agent put his gorgeous two-story Colonial not in Richville where he thinks it ought to be, but in Ghettoland. He brings a lawsuit against the agent, of course, but also against the local MLS.

If Upstream has warrantied that its data is accurate, because it is the “single source of truth”, then the local MLS simply passes on the lawsuit (the cost of litigation) to Upstream: “Hey, you guys said your data was accurate, so you defend this silly lawsuit!”

If Upstream has not warrantied data accuracy, well, then the local MLS is up a creek, proverbially speaking.

Now change that litigation-happy consumer to some litigation-happy hedge fund who lost $2 billion on a credit default swap because its computer models used local MLS data to run its analytics.

So… with all that said… who does compliance work in the post-Upstream world?

-rsh

26 COMMENTS

  1. Rob, if you’re going say you tried calling, you have to try calling! As we discussed, the devil will be in the details — and by details, I think I actually mean basic structure. Which way is data/content flowing, where’d the data/content originate, and what are the license terms to that data/content, etc.? Once you have answers to the basics, then you can jump to questions of risk allocation (e.g., reps, warranties, limitations on liability, indemnifications, dispute resolution, etc.). Thanks for the shout-out!

    • Right now each MLS sets their own rules so the concept of data accuracy can vary from house to house on any given street based upon the MLS source. What happens when a single entity starts setting rules for an entire industry? Don’t Professional Sports Leagues have some sort of ant-trust exemption? I also seem to recall that on occasion the single national MLS in Canada (btw they were also able to trademark MLS up north) gets into trouble with their version of anti-trust investigators.

  2. To be clear and all the “data details” of what happens in the weeds and “after the fact” – aside. Upstream should have been the “new MLS” – the alternative. Instead it was neutered by the NAR when it threw in capital and tech for RPR and Upstream’s Charter said “never shallow become an MLS.” If the MLS went away and the MLS became Upstream, local MLSs and Associations dependent upon the MLS revenue would have collapsed and the NAR would have been screwed – no local “dues collectors.” So the response was predictable. The NAR jumped in and saved the MLS. If Upstream had been funded by sources other than organized real estate, your questions of “them, us or both of us” would not be questions. Say good bye to the MLS, and say hello Upstream would have been a reality. So for now, it is back to the future as far as Upstream is concerned. No gallant white knight, no mighty stallion to ride into the game and save the brokers from the antiquated status quo. And the NAR effectively kills a yet another broker-initated attempt to cure something that should have been cured years ago – namely the MLS.

    • Ken – aren’t you being a little too unfair on NAR and a little too easy on the brokerages? NAR didn’t jump in and save the MLS; they jumped in with their $12m because the brokerages didn’t want to write checks. Looking at the companies involved in Upstream, they could have funded Upstream all by themselves for a couple hundred million dollars if they wanted to. If they didn’t want this outcome, why didn’t they just pick Corelogic or MRIS or one of the other companies that bid for Upstream, write out some nice fat checks, and do what you suggest?

      Lord knows KW, Remax, HomeServices, and Realogy by themselves could have funded Upstream for the next ten years if that’s what they wanted to do and keep NAR out of the thing. They chose not to. So what does that say about what they really believe?

  3. All of these changes taking place in the RE business, is anybody involved in this process an RE Agent ,someone who has experienced what Agents do,it’s almost like the people that create the business ,Agents, are faceless, stupid and incompetent ,in the mind of these “decision makers”, the lousy mls’s, nar and zillow ,trulia too,Shameful!!!!

    • Yes, the funnel is upside down.

      Create a business, market the business, connect buyers and sellers, make revenue, repeat….everything else is a dependent of that…without having ever worked the field, it’s often difficult to manage the farm 🙂

  4. OH, HOW I WANT TO USE SHOUTY CAPTIALS FOR MY RESPONSE! (I’ll just scatter them through for emphasis.)
    It’s easy to leave conferences feeling you may not have a job at the local association/MLS in 5 years and then you start thinking about all the services your association’s MLS provides and make a list of all the tasks WE PERFORM and realize, damn!, WE ARE GOOD AT WHAT WE DO and responsible for so much more than has even been discussed AND who, exactly is going to do all this “grunt” work?!. What you have written about in today’s blog is just a fraction of all the details that will have to be considered and worked out with the local MLS. We already have a set of rules and regulations in place – we ALREADY KNOW the headaches of dealing with sub-professional real estate agents that don’t want or refuse to comply.
    I would suggest that these folks with BIG IDEAS come and walk a mile in a local’s shoes to see what it is we REALLY do in a day, a week, a month. Oh the FIRE-FALL that is headed their way! (Insert evil giggle here!)

  5. I have heard from numerous members that they are glad we are here (local AORs/MLSs) because we serve as the neutral party BETWEEN brokers. One of the roles we play is to ensure everyone is playing fair – that new rules are created as creative business models emerge and agents push the envelope – as they should! I have also heard from small brokerages, that they don’t understand why THEIR Realtor dues (paid to NAR) are being used, they feel, in favor of the large brokerages that asked for Upstream. I think we’re all under no illusion that while NAR says it’s not intended to become a national MLS, that they are fully aware that it COULD in the future. That being said – will NAR become the neutral entity to ensure that everyone is playing fair & by the rules? We at the local level believe in self policing – we talk & email with agents all the time who anonymously blow the whistle on others – is NAR/RPR/Upstream prepared for that inundation??

    A Zillow rep told our leadership that the reason they are pursuing MLS feeds so aggressively is because the Broker feeds are NOT as accurate as the MLS feeds. This could be due to inferior technology, sure, which hopefully the RPR folks will address and solve… as well as education & training of agents and assistants… but what if at least part of it is due to the brokerage point-of-entry and the fact that they are ABSOLUTELY biased, and as you alluded, could be manipulating data in their best interest?? I’m not saying that this can’t be addressed by the solutions that you suggest above, or that there couldn’t be another creative solution that I just can’t see yet… but it’s certainly a looming issue. In a world where we continue to fight to keep the image of the REALTOR positive… I certainly have fears about how all of this will be executed.

    • More stuff about issues with “accuracy” is just a red herring in other words if you have nothing to say,you invent a problem,imaginary, but you keep repeating it until some start believing it,as for nar they are corrupt I can not recall ever being asked to become a member I was told that if I needed the key for access to the listings I would have to be a member,that business model used to be referred to as a ‘shakedown” but in these PC times who knows?????

      • Comments about ‘accuracy’ are not a red herring. They are an important point. Our MLS has a little button I can click to report accuracy issues and the MLS if VERY prompt in following up on them. They often know who repeat offenders are too – in those cases where the offense is repetitively intentional. I very much doubt that ‘Upstream” would ever get a handle on that.

        The local MLS also has the ability – and in mine the technological know how – to make Zillow irrelevant. I do question whether or not they have the will – but progress is being made.

    • Commonly, unreported agreements and houses listed as available that are unavailable for showing.
      Also, listings errors:
      Single detached homes that are shown as townhouses,
      Incorrect number of bedrooms .
      Houses listed as having a garage – that don’t have a garage.
      Listings with electric hot water heaters that are represented as having gas ditto for furnaces.
      — just to name a few —

      • I have have seen issues where a contract was ratified late one evening and not reported till next morning,I have never seen a townhouse described as a single family,or with a garage that did not exist,or incorrect bedrooms,I have seen water heater errors,and have never seen any of these errors in Zillow/Trulia and I am not a fan of ZT.and by the way I have been in the R/Estate biz for a very long time.

      • The only way you would know about the physical discrepancies is if you had actually been in the house. Any observant agent should be able to note such errors. As for not reporting a contract till the next day — i don’t know where you are but here they have 3 days to report change the status in the MLS. Generally the main way you will know is if you request a showing and the showing center denies it because it is under contract. It is quite common (both my mistake and on purpose) that status changes are delayed beyond that required by MLS rules. FYI our MLS has around 30,000 agents and is about to become much larger.

    • Sometimes a listing agent will add a listing and put a nearby neighborhood as the area “by mistake” because that area/neighborhood is very desirable, has higher property values, etc. Other agents will list themselves as the selling agent to get a higher ranking in the statistics, higher profile for public looking for top producers. Incorrect listing & expiration dates and listing statuses. “Churned” listings to manipulate days on market and cumulative days on market. Branding in photos. Misrepresentation in photos or remarks to purposely mislead the public in their favor (i.e. to sell faster or at a higher price. These are examples of things that we’ve deduced are intentional and not by accident because there are multiple offenses – different from one time offenses by folks that appear to genuinely not be aware of rules, etc. Please note: 1) We’re a small MLS and know our members & subscribers very well – we don’t have very many that are multiple, allegedly repeat offenders. 2) We hardly ever fine our subscribers – it’s not a revenue source for us.

      • The actions that you describe appear to be deliberate,in other words criminal, why are these people still licensed,is that not fraud,trying to sell a house that does not exist,a complaint like that to the DPOR in my state would end the offenders RE career very quickly.,and by your own admission these problems are limited in scope,there are always going to be a few agents like this,I repeat this is a red herring.

    • I saw two yesterday. I’m in the industry and happen to be buying a home, so I look at this through a bit of a different lens than an average buyer. When viewing homes yesterday, we went through a home that listed two master bedrooms as a marketing highlight, when it only had one (clearly, not maybe). Another builder listed their homes as single family when they were all connected by their little garages/utility rooms. Clearly townhomes. The agent even said it was originally planned for townhomes, but they wanted to give it a single family home feel. My agent called her out on it and the response was that it was approved by the MLS… And lastly, I can’t tell you how many listings I’ve viewed over the past several weeks where the photos have been stretched to make the spaces look roomier… WAY roomier. It’s simply bad biz and is an example of standards that need to be enforced.

      • Years ago I would contact the agents first to give them a chance to make corrections. Typically I got excuses or inaction. Now I just click the little MLS accuracy button and report it and let the MLS investigate and take action if they think it necessary. Generally – they do.

  6. Focusing on (and basing your argument on) issues like listing a house that doesn’t exist is cherry picking ‘facts’. Inaccuracies in listings is a problem that every MLS must expend resources guarding against. Sometimes the inaccuracies are a mistake. Others, they are manipulative and intentional. A prior post indicated that the person did not see these errors in Zillow. How could they? In order to observe them you would have to have been at the actual house. I suspect there are more errors in Zillow than in the local MLS (the the extent that the listings in Zillow are not from a MLS feed) because Zillow doesn’t have a mechanism with which they can discover them – and generally the MLS does.

  7. Brokers assumes all liability, incorporates clear data integrity requirements, and specific punishment for violations thereof, into their company policy.
    Or pay the MLS.
    Upstream will likely indemnify themselves of any inaccuracies if they maintain the position of being a data clearinghouse.

  8. Rob, I love reading your articles, but I have to say, the comments are often an equal quality read! I love reading the opinions of your followers that are in the industry!

    Good stuff sir.

    • Well, like I say all the time, this is the best informed readership in the industry. Of course, most of them can’t comment publicly for a whole variety of reasons, but the private comments I get are often the best.

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