Category Archives: Real Estate

Notorious POD: Episode 12 – Photos, Copyrights, Liability with Brian Balduf, VHT

Play

 PodcastLogo.001

It’s been months since my last podcast, but that’s just how things work out sometimes. But with T3 coming up, I figured I should upload this.

Brian Balduf, CEO of VHT, joined me to discuss an issue that’s really going a bit under the radar. His post Now Is The Time to Shield Your Real Estate Brokerage From Intellectual Property Liability dealt mostly with direct syndication to portals such as Zillow. But in this podcast, we discuss copyright violations and liability at the MLS level, and within IDX, given the new rules about sold data over IDX.

I suppose you have to be a real geek about real estate industry stuff, but I do think this is an important topic for brokers, MLS, and even agents. You may be on the receiving end of some letter from a “copyright enforcement company” demanding thousands of dollars for unauthorized usage of photographs.

I’d listen, then read Brian’s post, and think about a strategy for dealing with this important issue.

-rsh

The Evolving MLS – Part II – Defining the Problem

In Part I of this series we looked at the MLS industry from a historical perspective, leading us now to a closer look at the particular problems the institution of MLS is facing.

In general, the problems the MLS faces today, that are not institutional, are strictly technology related and fall into two broad categories:

Lack of innovationInnovative Cartoon

MLS systems are woefully inferior compared to other modern technologies. Compare today’s MLS system, used by licensed practitioners, to parallel systems in the investment community or the insurance industry, even the travel industry (both from the standpoint of those few remaining travel agents, but even more so from the consumer’s vantage point).

The lack of innovation isn’t the fault of the system vendors. They have been constrained by the downward pressure on pricing imposed by MLS operators demanding more and more but willing to pay less and less.

Lack of choice

The closed, single-vendor system in each market has stifled choice by agents, by brokers, even by the MLSs themselves. New main system entrants are effectively blocked from entering the market by the long ramp up times from inception to first contract — often years. Third-party application developers who might otherwise fill in the gaps in main system functionality are frustrated by the lack of standardized data layouts and the daunting task of licensing access from 800+ different system operators with different rules and contract stipulations.

Let’s look at each of those areas from the perspective of the major stakeholders – the brokers, the agents and the vendors.

As a broker

In October 2013, The Realty Alliance organization presented the MLS community with a list of “issues” they felt the MLSs had long ignored or refused to fix. They published their list through Clareity Consulting. Many of their concerns were tied to limitations in MLS technology:

  • Inability to unbundle products and services – one package, one price, fits all
  • Forcing brokers to pay for development of services that compete with their own
  • Selling services in competition with brokers who use similar services as a competitive advantage (leveling the playing field)
  • Subsidizing associations by overcharging for MLS services
  • Making agents and brokers pay for services they don’t want or need
  • Non-standard data feeds from contiguous MLSs
  • Lack of back-office integration to MLS functionality
  • Not doing enough to stop data piracy

As an agent

A real estate agent has a simple list of requirements: give me the tools to do my job and get out of my way. The unspoken expectation is that the tools provided would actually work together, and therein lies the rub.

According to a recent Inman News survey, a lack of integration among various agent tools was a frequent complaint about real estate technology.

Most agents said that at least some of the tools they use are integrated with each other, but which ones actually worked together varied a bit. Some involved the combination of two products, such as the MLS and a CMA tool. Many agents suggested that products leave much to be desired when it comes to integration.

“[There are] too many choices that do not work well together to provide seamless transactions for clients,” one agent said.

Another agent asked for a “true contract-to-close” system, combining lead generation, listing management and transaction management.

“All of our ‘stuff ‘ is either disjointed or takes a full-time, patient tech nerd to use,” an agent said.

Another agent lamented that they “waste so much time entering in [the] same information on different platforms.”

“I’d like all of them to work together. Email with CRM with Zillow with my website with the MLS and DocuSign,” an agent said.

The MLS vendors have no incentive at the moment to fix this problem, to bring together all the pieces of the puzzle onto a single development platform that would allow all of these ‘parts’ to contribute to a custom ‘whole’ as has long been wished for by agents across the spectrum. The holy grail of real estate technology, “front-end of choice” – the ability for data to be completely synchronized in real-time, across all of an agent’s or broker’s applications, with each application allowing input, as well as the display of listing data – will never exist as long as there is no R&D money to develop it and no profit incentive to maintain it.

As a vendor

The institutional system of one vendor/one market creates one BIG problem. Under the current system, one vendor is picked for one market. Once selected, the vendor has a three-year (more or less) contract on that market and no other vendor can get in to offer competition for even a portion of the entire system because the databases are incompatible.

The database drives every piece of MLS technology because without the central data repository none of the peripheral applications can operate. But industry technology has been architected from its very inception to be a closed, proprietary database system with specific applications created by the vendor that operate only on that particular database. Nothing is interchangeable between vendors. This makes up somewhat for having been bargained down to or even below the breakeven point for the core MLS service, and creates some other advantages (speed, single point of support) – but they are far fewer than the disadvantages.

No interaction with main database

In the single vendor technology scheme, only applications built by the database provider will interact with that database because of proprietary access methods. Some third-party applications can use MLS data but only by exporting the data to the application’s data server or by downloading the data to the user’s computer. This adds an element of lost control and is a continuing concern for MLSs seeking to manage distribution of their listing data outside of the MLS-IDX-VOW-Broker-Agent-Client pipeline.

Changing systems nightmare

The single vendor system made changing MLS vendors a monumental undertaking requiring months of planning, training, parallel operation, and headaches. Every agent must learn a new system and do so in a fairly short period of time while trying to maintain a continuing book of business. Consumers easily jump from one portal site to another with no training whatsoever, but ask a group of agents to change from one MLS system to another and you have a six-month training program to roll out while simultaneously handling the storm of social media protest on Twitter. It’s insane.

Because the two MLS vendors never use the same database structure or field specifications, data conversion from one to the other has been a nightmare. Somewhere along the process, data is nearly always lost, either because some data is impossible to convert (saved searches in one system don’t work in the other; the contract manager of one doesn’t export data in a form that can be read into the other; or templates for presentations and email campaigns all lost) or because there was just no place in the new database to put the old data. The industry is rife with horror stories of MLS conversions having gone badly. In the end, many ask if it was worth the effort. As much as an MLS may want a new vendor with shinier new baubles and beads, the pain and suffering involved in changing is a huge detriment to progress.

No new core players

The single-vendor system institutionalizes the current vendors and stymies new entrants with innovative ideas and newer, more versatile and competitive products from even trying to break into the business. Because most MLS contracts are multi-year, and vendors often try to renew them before the current term is up, it takes years for a new MLS offering to get into the vendor supply chain to even be considered. And in this business, no one wants to go first. So cracking the first contract is a huge hurdle. Finally, unless the new vendor is self-funded, they will find it hard to attract venture capital because the timeline from first investment to first contract and then to first profit can be five years or more, an eternity in the high-tech world.

Besides, in that amount of time the new product would probably be obsolete anyway.

No new applications developed

This structure also blocks independent application providers from entering. App developers quickly find there are just too many MLSs with too many data layouts and too much data to download and normalize to make their product work. While third-party developers can offer products under a license that usually involves exporting data from the MLS because the primary vendor won’t allow an outside application to query the vendor database directly, no matter how much more efficient that might be. (That, of course, introduces other problems of distribution control and copyright management, but we won’t get into that right now.)

And let’s face it. Real time access through the RETS interface just doesn’t work fast enough to satisfy the ‘get it now’ mentality of most agents.

No profits

MLS vendors have not fared well in the current system either. Competition is fierce and MLSs are notorious for pitting vendor against vendor in a bidding war at contract renewal time to get the absolute lowest possible user fees, in many cases a price that produces no profit for the MLS vendor but may indeed be a loss leader for other portions of their business (e.g. data collection, aggregation, analysis, and derivative products). With vendor profit margins cut to the bone, one wonders why some of them decide to stay in this business. Yet with minimal margins, MLSs are quick to complain that those same vendors do not do enough R&D work to stay current with changing technologies.

DisruptionWithout profit the MLS vendors have had no money to invest back into product development, market research, usability studies, or technological innovation. Read any number of stories in any of the trade press and you’ll hear a constant theme – the MLSs are losing the beauty contest to the portals because of the lack of reinvestment into their core technology.

So the vendors aren’t making any money; there are no innovations coming out of their R&D efforts because there are no R&D efforts; and there are no new players coming on the scene to give them a reason to innovate. THAT is the perfect formula for disruption and disruption is exactly what I see on the horizon.

The Institution of MLS is in trouble.

I base this conclusion on the amount of turmoil that seems to be swirling around the MLS business lately.

The NAR Core Standards Initiative

NAR launched an initiative in the summer of 2014 to consolidate smaller associations into larger ones. The premise was standards of service that all AORs would have to meet to maintain their charter. Many small ones who cannot meet these standards by mid-2015 would risk being disenfranchised.

The small associations are now figuring this out and looking for alternatives to continue their existence. I’ve been getting calls from very small associations who think they can meet the core standards requirements simply by creating a regional MLS and letting the MLS carry the load of providing the services they need to comply. Such moves are not solving the core problem that core standards were meant to fix – small associations that can’t provide equitable Realtor benefits to all. They’re merely putting a Band-Aid® on the wound when it needs sutures. In the process of trying to improve the industry, the core standards are having the unintended effect of creating issues on the MLS side without fixing the main problem of small AORs.

I think it is highly probable that we will see a flurry of activity in May and June in small associations scrambling to meet the standards, and when they fail to do so, the AOR and its association MLS will shut down rather abruptly (unless, of course, some sort of extension or amnesty is offered).

MLS usage is dropping – pocket listings:

We started to see this phenomenon grow a couple of years ago and now it’s becoming more pervasive to the point where it’s been institutionalized in some MLS systems and ostracized in others.

Some MLSs felt the need to reinforce their relevance in the sales process so they embraced “Coming Soon” listings to offer subscribers a way to load their pocket listings and expose them to the other participants. Other MLSs created rules and penalties for such pocket business practices. This did little more than make some brokers angry because the MLS was now interfering in their business affairs.

The central issue of the Pocket Listing phenomenon is the desire, actually the demand, by agents and brokers to control where, when, and how their listings are not just advertised, but marketed and managed. The home seller hired the brokerage to facilitate the sale of the property as quickly as possible and at the highest possible price. They do not feel compelled to obey arbitrary rules set by a listing system that interfere with their professional opinion about how best to accomplish that sale. They feel if holding the listing off the market in order to expose it privately to a subset of buyers that, in their professional opinion, have a better chance of making an offer at an acceptable price before going to the general market, then they should be able to make that call.

Likewise, brokers take that requirement to a higher level, looking not just at individual listings but also at entire listing inventories. Should they put all their listings into the MLS if the MLS is not working in their best interests? Or should they collect their listings in their own private network and feed them to the MLS only when the MLS is ready to receive them – read: when the MLS will do business their way?

Thus the concept of Project Upstream was born. At its core, Upstream is a more organized, more widespread, more grown-up version of pocket listings.

It was conceived by brokers who were angry. And they’re not just angry about listings, they’re angry with a lot of stuff.

The Realty AllianceRealtyAllianceLogo

We can all remember where we were in October 2013 when Craig Cheatham, CEO of The Realty Alliance (TRA) spoke to the CMLS convention in Boise about the growing unrest within the brokerage community. He detailed disillusionment brokers had with the lack of responsiveness from the MLS community in addressing their needs. He highlighted (and later published the list of grievances TRA had accumulated over the years. He gave the MLS community a deadline – “You have 10 days.” – to fix the problem or he/they would.

He disclosed Project Upstream, where the brokerages would combine their resources into a national aggregation that would/could displace the MLSs by reversing the flow of listing data. The members would share information with each other first, before sending it to the MLS. It is the “office listing” or “pocket listing” taken to a new level by having large companies involved and cooperating in the effort.

Listings would start on Upstream and then be distributed only to MLSs who complied with the brokers’ demands for more voice in governance. Upstream would also control the flow of listings to the portals (Zillow, Trulia – even <gasp!> Realtor.com) by distributing listings only to those that met their demands for display and lead routing.

It’s not just the TRA Brokers.

TRA is an alliance of non-franchise mega-brokers (although its complexion is changing with the expansion of the Berkshire Hathaway HomeServices brand). But Upstream is supported by not only the independents but also most of the major franchise brands. For example, at the annual KW Family Reunion, Gary Keller, CEO of Keller Williams threw up this slide in the middle of his keynote:

KW Slide

 

“What should have happened 10 years ago.” That’s how out of touch the head of the world’s largest real estate brand (by agent count) considers the MLS to be. And any MLS that thinks he’s talking about someone else should take a good look in the mirror.

Project Upstream, the broker/MLS co-owned public portal project, the syndication debate, the recently passed AVM data policy, etc. all point to deficiencies in the MLS system. The statement by Mr. Cheatham that his members no longer regard the portals as the main threat, but regard the MLS as the main threat, is easily understood in the context of the heightened awareness of these issues

The list goes on, but you get the idea. In Part III of this series we will look at how most of these issues can be addressed through a new approach to MLS technology.

This post first appeared on Procuring Cause blog.

~bb

The Evolving MLS – Part I – From Deconstruction to Resurrection

Evolving MLSPreface

For the past 18 months I have been busy working on a project.  The subject of the project is not new — the evolution of MLS technology. The assumptions and proposals of the project are not novel — many were proposed years ago by others. The result of the project is not radical — an extension of current technology into a much broader application.  Yet the project has the potential to revolutionize the MLS industry.

And the concept will be controversial. The stakeholders in all quarters will have opinions about the wisdom of such an approach. And the sayers of “Nay” might as well start sharpening their pitchforks now because I’m sure they will want to shake them at me in the near future.

But given a fair reading and an open-minded debate, I think you will find the concepts I am going to relate here to be disturbing to some, interesting to most, and important to all.

My report will be in four parts.
First, a history of how this project developed and the research I undertook.
Part 2 will be a definition and deep dive analysis of the problem the project was designed to address.
In Part 3, I will propose a solution and explain why it makes sense.
And finally, in Part 4, I will look at the pros and cons of the proposed solution and, identify the people I think can provide that solution and look at the potential for the future benefits for all parties involved.

Let’s dive in.

 

Part I – The Historical Perspective – Background and research.

Summary of the state of the MLS industry

State of the IndustryThe real estate industry is in a state of flux. Competing groups from all quarters are converging in a conflict that will change the landscape of the infrastructure and it is expected to happen within a relatively short time.

At the heart of the conflict is the MLS, as it becomes a focal point for the serious discussions prompted by changes in technology and consumer behavior and a continuing effort by the trade associations that own the majority of MLSs to reestablish their relevance to their membership.

The MLS is being pushed and pulled in many directions, used as a pawn in the chess game between the Realtor associations and the brokerages who formed them and whom they were created to serve. The calls for reform in the practices of the MLSs to make them more responsive to brokerage needs are competing with calls for consolidation and merger to strengthen the existing MLS organizations by increasing their size and influence.

Such conflict is not new. But adding to the growing enmity among these players is the increasing influence of the consumer, particularly the self-service oriented Millennials and Gen-X-Y’s abetted in their pursuits by the growth and influence of the national real estate portals. Zillow in particular has been on a crusade to become the top -of -mind brand when a consumer thinks of anything related to the home buying or selling process, or real estate in general. And they’re succeeding, thanks to a world-class marketing team and a seemingly limitless supply of advertising dollars.

I experienced first-hand the animus many MLS CEOs held toward Zillow during the 18 months I called on them as an employee of Zillow, seeking direct listing data feeds. The demands were many and the inclination to negotiate was practically nonexistent. But I consistently felt that the hostility was directed not at me personally or at Zillow as a company, but at an undefined, nebulous “threat” that the MLSs perceived coming from the portals in general. In the minds of some CEOs, the portals were threatening the MLS’s raison d’être by becoming the de facto marketing platform of choice for both agents and consumers.

Into this contentious environment, one MLS CEO made an unusual phone call in early spring of 2013. He said his MLS was about to begin the dreaded vendor selection process and he wondered if Zillow would be interested in being considered as the system provider for their MLS. He was working from the common perception that “Zillow is just one field away from being a national MLS.” Would Zillow like to add that field?

“No!” The answer was swift and resolute. Zillow had no interest in getting into the MLS business or even the technology business for an MLS. They held to their mantra they were a media company, not a broker, not an MLS, not a title company, nothing but an advertising vehicle for brokers and agents (and others) to reach a potential audience through pay per impression display ads.

That should have been the end of it. But ten days later I received a second call from another association executive asking the same question. I had no reason to believe these two people had talked to each other or compared notes. And I gave the same emphatic negative reply when asked the second time.

That spring, at the NAR mid-year conference in May 2013, I had lunch with both executives and talked in general about their frustrations with the current vendor options and their ideas for a different kind of MLS system. Their comments stayed with me even after I left Zillow some months later.

After Zillow, this newly minted industry consultant was invited to facilitate various strategic planning discussions for MLSs large and small. Many, I found, were wrestling with the same questions, looking for answers that would define purpose and mission for an industry seemingly at sea.

The MLSs were feeling pressure from many quarters.

  • Big brokers, including the major franchises, had launched a broadside against MLSs in general when in the fall of 2013 The Realty Alliance presented their demands for immediate industry reform — “or else.”
  • Agents and brokers expressed more frustration with the lack of innovation in MLS technology and pointed to the upstart portals as examples of what an MLS should look like. MLSs were seemingly talking to the wall if they asked for major improvements in their MLS system from their vendor. The MLSs had dug their own deep hole by playing vendors off against each other during contract renewal time, thus demanding and receiving the lowest possible price for service, sometimes near the break-even point for vendors. Without profits, vendors were at a loss how to finance innovation, research, and new development, while the MLSs who had selected them felt the backlash from their subscribers who demanded more.
  • Agents are irritated with the lack of professionalism in the industry and the influx of thousands of new practitioners who became licensed during the bubble and who were now just hanging on. They started pocketing listings, marketing them through peer networks on Facebook rather than submitting them to the MLS. Major chunks of inventory in some parts of the country were being sold off-MLS.
  • NAR through MLS rules adoptions and subsequent reversals of such rules were making it more difficult for MLSs to manage the playing field at the local level. The “Core Standards” initiative posed a threat to the charters of smaller associations. While many members would not miss their tiny association, agents would die without their local MLS that could wither with the demise of the association.

As I worked with the MLSs to dissect each of these problem areas, a couple of major trends showed through: most (not all by a long shot) of these problems resulted from either a lack of innovative technology to be able to solve the problem, or if such a solution were present and available then a lack of adoption of that solution by the MLS.

In Part II of this series, we will dig deeper into the challenges of running an MLS in today’s Internet age using systems developed during the first (sic) Clinton administration.

This post first appeared on Procuring Cause blog.

~bb

Constituents, Customers, Competition: The Root of All Issues of the MLS

constituents

Our UI suxxorz!

 

In the comments to my previous post about MLS making money, Carol Van Gorp wrote something that really made some things click for me. Here’s her comment:

The larger issues is where the profits come from. If an MLS’s profit is out of the pockets of the constituents it serves, then that is wrong. If the profit comes from selling products and services to other people/associations, then that is a different story! (Emphasis mine)

Ladies and gentlemen, we may have isolated the root of all the problems of the MLS. I’ve kind of thought similar things for the past few years, but that word “constituent” brought things into focus. Seriously, I have the best readers in the industry.

Let me lay out the case.

Continue reading

Is It Wrong for the MLS to Make Money?

Back from almost two weeks solid of being on the road… although it was a truly wonderful time at every stop, there really ain’t no place like home, y’all. :)

in any event, a quick question/observation about one aspect of the crazy MLS world.

Is it wrong for the MLS to make money and be profitable?

Let me explain why I’m asking.

Continue reading