Notorious R.O.B.

So Zillow buys up IDX provider, Diverse Solutions.

First of all, congratulations to Justin LaJoie and the rest of the team at Diverse Solutions, as well as to Spencer Rascoff and the folks over at Zillow. I don’t know what the real motivations behind the acquisition were, but at a minimum, you can say that two great teams of real estate technology people are joining forces.

Second, I don’t have a whole lot of time to devote to deconstructing the Zillow acquisition of Diverse Solutions, but did want to present a quick reaction from three different perspectives: Friendly, Hostile, and Mine. I suspect most people’s response to the acquisition will fall into one of the first two buckets, while a very small minority (of one person perhaps) will fall into the third.

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I just got finished with the webex presentation put together by CMLS (Council of MLS), an altogether wonderful organization for those people who care about these arcane issues. I’m sure the recording and/or the transcript would be posted by CMLS soon enough. This is just a couple of first impression questions/thoughts.

There are three main takeaways for me from the call:

• The new IDX Policy represents the announcement of a new doctrine for treating listing data.
• The key need is to separate “transport” issues from “display” issues, and to restrict IDX Policy to the latter.
• The whole thing turns on the definition of “control”.

Based on what I’m hearing, I believe this policy will be one of the most important changes in quite some time. But I’m left rather dissatisfied because the central concept — “control” — is taken for granted by a lot of people. Leaving it undefined will result in having to revisit this issue time and again by each MLS over the next couple of years.

I also believe that vast numbers of NAR Directors who vote on the IDX Policy will likely be in breach of their fiduciary duty of care and subject to personal liability if a member should decide to sue. It points to a real weakness in the whole governance model at NAR, one that NAR should act to address quickly.

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As a blogger, rather than a “credentialed journalist” (whatever that means), I have the freedom to just pass on rumors, as long as I label them as such. Well, consider this one of those rumors I have not confirmed yet. [UPDATE] I just got a second person to confirm the rumor. Two people saying the same thing now moves this past the realm of rumor into a confirmed report. More detail below..

I’ve heard from a reliable source earlier this evening that there are some major changes afoot at NAR. The biggest upshot of the changes is that starting in 2012, portions of the dues from NAR members will go towards supporting RPR, REALTORS Federal Credit Union, and other so-called “Second Century” Initiatives. A few minutes of Googling suggests that the original Second Century Initiatives program — which included a line item for “The creation of a national gateway for real estate information, not a national MLS” – was funded by a $16 increase in dues in 2008.

But from the start, RPR was presented as a wholly-owned for-profit business unit of NAR that would be self-sustaining, after the initial investment of roughly $25 million to buy the Cyberhomes assets from LPS and a few million for LPS data. The idea was that the data generated by RPR would be very valuable when sold to financial institutions, government agencies, and the like, and the operation would throw off enough cash not only to continue providing the system to REALTORS at no charge, but also to generate enough profit to pay back NAR.

For reference, here’s a report of a Q&A session with Dale Ross, CEO of RPR, back in March of 2010:

Why should Second Century need to be paid back?

NAR’s Second Century fund is a venture capital fund which must paid back for its investments. However, that’s not the source of RPR’s funding. RPR money comes from an NAR technology fund set up with $100 million fund (from investments); NAR’s Finance Committee stipulated that monies must be paid back to replenish fund.

Since you’re providing RPR for free, where is money coming from? What happens if your revenue models are way off?

Three scenarios: app doesn’t work, we shut down; app works and rev model works, win-win; app works but rev model off. We project we’ll need $50 million/yr to run it… if it is valuable and not generating cash, we’ll figure up another funding source. If members want it and NAR Directors decide that is best way, that could be a member dues increase. I have never seen pro formas work; I have pushed the numbers around based on a 36-month breakeven. We’ll see. (Underline added for emphasis)

Well, if the rumors that member dues will start paying for RPR starting 2012 are true, then I’m gonna take a wild stab and suggest that the 36-month pro formas were way optimistic. Since we’re looking at a dues increase in two years (launch in 2009, dues funding decision in 2011 to take place in 2012) to support RPR.

A few questions arise. The first of which is, “So uh, is this true?” I’d love for anyone who can confirm or deny the rumor. Please feel free to contact me privately via email, twitter, Facebook, phone, whatever. My contact information is on the About page. More questions follow, all of which assume this rumor of dues funding for RPR and other Second Century Initiatives is indeed true.

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At first glance, the biggest change in the new IDX Policy to be proposed at NAR Anaheim is that it removes entirely the section allowing Franchise IDX. The entire section is struck.

There will be much rejoicing in the anti-Franchise IDX partisans, and much gnashing of teeth in parts of New Jersey, Texas, Colorado, and elsewhere. Except that both the rejoicing and the gnashing will be premature. Naturally, there will be differences of opinion on the subject, but I do believe that much like royal succession, the death of the old king results immediately in the new king taking power.

The valuable lesson that the Franchises will have learned from this whole affair is not to ask NAR for permission before spending millions of dollars on a new approach to listing data. That does, of course, concern me, but let’s delve into the analysis first.

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Business and travel have really kept me away from the blog, but… since I have a few days at home, I did want to write about the new IDX Policy that will be proposed at NAR Anaheim next month. I’ve managed to obtain a copy of the proposal through my sources (thank you guys, you know who you are!) and… there be some interesting things in it.

The big news, as many have already heard, is that the Franchise IDX policy will be repealed in its entirety. The overall thrust of the proposal appears to be one aimed at restoring the status quo ante. But the way the proposal goes about it is… interesting. Let’s dive in.

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I’ve been traveling more or less nonstop for a couple of weeks, and busy as hell in any event, so I kind of missed the controversy around Redfin’s Scouting Report. I’d suggest heading over to Jay Thompson’s blog to get his thoughts on the product, and the various responses from the real estate industry to it. I don’t have a whole lot to add to the controversy.

But there are at least a few things that most of the commenters are missing on this controversy. I’m far more concerned, actually, about the responses to Scouting Report and what they say about the industry than about the Scouting Report itself.

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Is here:

http://prezi.com/1_mwtyk4vqcd/welcome-to-dystopia/

By the way, I’m really, really liking Prezi. I expect to use it from now on for all presentations. Amazing that a web app is better than even Keynote….

-rsh

“No servant can serve two masters.”

- Jesus Christ, Luke 16:13

Judith Lindenau, a consultant to MLS and Associations with decades of experience, recently wrote a post in which she took up my modest suggestion of making brokers pay for the MLS. It’s worth reading the whole thing, as she presents some countering views both to things I have suggested, as well as to things I have not suggested.

I thought it worth musing on some of her points — as well as the points raised in the comments by luminaries such as Gregg Larson of Clareity and Victor Lund of WAV Group, men who have been in this industry far longer than I have, whose opinions I always take seriously.

In her post, she lays out two main counter-arguments:

1. Making brokers pay doesn’t solve anything, and it’s been tried before and is being tried today by various MLS’s.
2. The problems facing the MLS requires dynamic solutions, tackling complex issues such as governance, vendors, NAR policies, and the like.

As Gregg Larson puts it succinctly in the comments, “This is a lame discussion.”

Well, as much as I’d hate to extend a lame discussion, there is something worth exploring here, so I’m gonna indulge myself and do just that.

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Over at 1000watt, there is a rather interesting debate going on with some heavy hitters contributing, on whether big brokers should or should not support innovations and tools by the MLS or Association. Go check it out if you haven’t already.

The general thrust is that Brian Boero and Marc Davison both believe that innovations are an unqualified good, and that big brokerages have no reason to oppose innovation wherever it occurs — even if that is at the MLS, at the local Association, or at NAR. As Marc writes:

If you share this belief, then I submit it would be impossible for you to ever stand in the way of any innovation or impede anyone from offering that innovation. Even an MLS.

If you share this belief, never fear a tool. And always proceed by having supreme confidence in what you could do with any tool versus others.

The basic idea is that the big brokerage, with its superior execution ability will benefit more from any tool or feature offered by the MLS/Association.

The counterpoint, articulated well by a few folks who are in a position to know, is that brokerages invest heavily in technology, in tools, and in innovation. And that the MLS or Association offering those same capabilities out results in an unfair leveling of the playing field. For example, here’s Pam O’Connor, CEO of Leading Real Estate Companies of the World:

Many brokers (and not just the largest ones) invest heavily in tools for their agents for the purpose of differentiation with consumers and attracting the best and brightest. It’s called competition. To have their local association or MLS then offer the same thing dilutes that investment and competitive edge.

It’s an interesting discussion.

Well, I have a concrete suggestion to every MLS that I think would go a long way towards solving this particular conundrum. I happen to think it’ll help some other conundrums as well.

The MLS should cease collecting payment from the agent/member; it should, instead, collect payment directly from the broker, and only from the broker. Change the customer of the MLS to be the brokerages, and some of these problems become easier to think through.

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The Future of the MLS?

Last week, at the Inman Connect conference, I got into a rather interesting — if dry and technical for non-lawyer types — discussion with Brian Larson about whether MLS could escape being classified as a public utility. I’m not going to go into that, since that discussion tends to have a lot to do with issues like anti-trust exemptions, regulation, various legislation throughout the years, etc.

Instead, let me ask a patented Notorious Dumb Question.

Why should not the MLS be a public utility?

Right now, I can imagine the readers of this blog divided into three groups. The first group is smiling acidly in incredulous bemusement, because they know what the hell it means for a MLS to be classified as a public utility. “You just don’t get it,” I can hear them say. To which I say, read the whole post, coz I think I do get it. The second group is going, “What the hell does that mean?” And the third group has already hit the BACK button. See ya!

For those remaining… a brief (I promise) detour.

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