At the just concluded Inman Connect New York, I was privileged to be on a panel entitled “Is the MLS Doomed?” with Denee Evans, CEO of CMLS, and Rebecca Jensen, CEO of MRED. Despite being one of the biggest fans of the MLS in the industry, given that I am a lawyer by training and therefore able to argue any side of any issue, I was asked to take the “anti-MLS” position by the moderator, Brian Boero. Naturally, I said a few things that aimed at edutainment and a good time was had by all.
Normally, I’d leave things at that, and then go into writing dissertations trying to explain what I said. But a thread on Facebook in the Inman Coast to Coast group caught my eye:
I have written on this subject previously, and it is worth reiterating for all those who might be asking the same questions. Let’s do it.
What If the MLS Disappeared?
Kathryn Royster’s question is one that comes up time and again:
Inman family, I’d like to pick your collective brain. Ever since yesterday’s “Is the MLS Doomed?” panel, one question has been rolling around in my head. If the MLSs DID all disappear, why couldn’t everyone just list everything on ZTR? Panelists kept talking about “tools” that MLSs provide, but never mentioned specifics. Being a vendor, I’m not familiar with these tools. Are they really that useful (and that exclusive to MLSs)? Please educate me!
In the comments, there is much discussion about how things work in other countries where the MLS does not exist. Basically, brokers and agents would send listings to one or more websites where houses for sale can be found. Then we have discussions about the MLS being about sharing of listings, cooperation, compensation, and compliance.
All of these things are true, of course. But I feel like they circle around the core value proposition of the MLS, while at the same time highlighting the challenge facing the MLS and the real estate industry.
The core value proposition of the MLS is that it is the lawgiver which regulates the behavior of real estate professionals to each other. This comes from a post from 2015, right after AMP was introduced to the industry:
The value of the MLS is in the certainty of behavior and the transparency of the transactions. The latter is crucial in real estate, since houses are not commodities. Without comparable sales information, it isn’t clear that the housing market would function at all. Zillow can and does bring buyers to a property; once there, how would anyone know what to offer? Public records are months after the fact, and not entirely useful in a fast-moving market.
Cooperation and compensation are critical components of the MLS’s regulatory function, but we might call C&C “necessary but not sufficient” value. C&C serves as the carrot which allows the MLS to enforce the standards of behavior amongst professionals. In fact, one of the commenters above quite rightly points out that cooperation and compensation can be privately negotiated between two agents/brokers — as happens in commercial real estate all the time. What cannot happen as easily is that negotiation between every agent/broker in a given market, and that is what gives the MLS power to regulate professional conduct so that every participant in the marketplace has a degree of certainty as to what they can expect from the transaction and from each other.
If the MLS disappeared tomorrow, the need for certainty of behavior and transparency of the transactions do not disappear. My view is that without the MLS, the government will need to step in to regulate professional behavior at a much more granular level. State licensing laws can function at a level of generality and focus more on consumer protection because the MLS exists at a level of specificity and focus on business-to-business behavior.
For these reasons, I have long argued that the MLS is not a technology company, not a data company, but a lawgiver. All of the trauma and agita about “control” over the MLS by the industry often misses this point. It isn’t control over the “data” that matters, but control over the rules that matters.
Why, How, What
We see the distinction in the discussion above. If the MLS disappeared, why couldn’t brokers and agents just list everything on the portals? The answer is, of course they could… for advertising purposes. And in fact, what we are working through as an industry today is the fact that while the WHY of the MLS has not changed, the HOW and the WHAT have. Let me explain.
For a while, I’ve argued that the reason why the MLS has become so important was that in the newspaper age, it was the most cost-effective form of advertising a home for sale. I’ve argued time and again that it is a mistake to call listings “data”; they are fundamentally advertisements.
More recently, I’ve wondered if what the brokers and agents value the MLS for today is that it is the conduit through which they advertise properties for sale on the ultimate destination: the Internet and mobile apps where consumers actually are today.
The Internet, and now mobile, have not changed the core value of the MLS as the lawgiver. They have, however, taken the place of the MLS as the most cost-effective form of advertising a home for sale.
In a way, this is no different than the impact of Amazon.com or iTunes on retail. Department stores and shopping malls used to be the most cost effective way of distributing stuff for sale; today, they are not.
Accordingly, even as the Why of the MLS remains the rules and regulations of professional behavior, the How and the What are in flux. How does the MLS enforce the rules if it is no longer the most cost-effective destination of advertisements but one-of-many conduits to that destination (the Internet)? What does the MLS do if it is the conduit, rather than the destination?
Relatedly, how do brokers and agents relate to the MLS, and what do they need from the MLS if it is no longer the destination of their advertisements?
All of the “MLS IS DOOMED!!!” talk many of us find mildly entertaining and moderately annoying comes from trying to figure out those questions. Upstream, AMP, Broker Public Portal, Fair Display Guidelines, RESO, MLS Certified… so many of the initiatives we see, debate, talk about are the result of trying to figure out what to do and how to do it.
Take just one issue, which I talked about on the panel: too many MLSs. If the MLS is the destination, rather than the conduit, then 750 MLSs aren’t that big a deal. Clothing manufacturers aren’t complaining about 750 stores throughout the country, after all. But if the MLS is the conduit to the destination, then 750 MLSs are a major pain in the ass.
Things to Chew On…
A lot of the strategic work I do with the MLS and Association world involves trying to get people to see that things have to change if the How and What of the MLS has inexorably altered thanks to the Internet. Things like product mix, governance, business models… all of these things need to be thought about if the MLS is no longer the destination but the conduit of advertisements. Yet, the basic value proposition, the WHY of the MLS, has not changed: certainty of behavior and transparency of the transaction.
I would urge you to use the analytical framework just laid out to think about all issues relating to the MLS. How should the MLS fulfill its unchanged core mission? What should it do and provide to brokers and agents to do that?
Or, of course, you can always question the WHY of the MLS as well….