In Which I Fisk NAREP's Post

Well, my Inman column on syndication was correct in one respect. Just when I thought I was out, it pulls me back in. Hopefully, I don’t have a seizure right away as did Michael Corleone.

As an example, Ben Caballero of NAREP has written a post explaining the difference between syndication (which is doubleplus ungood blight on society) and IDX (which is a blend of pure awesome and the nectar of the gods). I thought it would be fun to fisk it to see what the underlying assumptions are and to see what the actual argument of the Syndication = Evil, IDX = Good crowd is.

 The Fisk Commenceth

Here we go.

Rob Hahn recently editorialized on Inman News, “What I have never understood, however, is why syndication is taken to the woodshed here, while IDX is lauded with praise and blessings.”

The answer is that the syndication and IDX concepts are fundamentally different in a number of ways.  While monetization is their common goal, the way they achieve monetization is vastly different.  Consider the following examples: [Emphasis mine]

So we begin with the claim that syndication and IDX are “fundamentally different” not just in one or two important ways, but in a “number of ways”. The second claim is that the way “they” (I assume Ben means the company/persons engaging in syndication or in IDX) make money is vastly different.

Cool. Let’s see these fundamental differences.

IDX website owners are state licensed professionals and must comply with the National Association of REALTOR’s Code of Ethics, a strict set of IDX rules, and state real estate commission regulations and laws, the violation of which can have serious consequences.  By contrast, the ZTRs are not licensed in real estate and, accordingly, are not accountable for their business practices to any real estate industry governing authority.  As a result, they are free to employ business practices that real estate industry governing authorities have long determined are questionable or unacceptable, and they often do so.

So the first error is that IDX website owners must comply with NAR’s Code of Ethics. Only REALTORS(r) who are dues-paying members of NAR are subject to the Code of Ethics. There are a number of jurisdictions where MLS access is not conditioned on Association membership, because the law says so (i.e., so-called Thompson states.)

The second error is that somehow ZTRs are not bound by state real estate commission regulations and laws as far as they pertain to the display and advertising of properties. True, they are not subject to regulation of licensees, since they’re not… you know… people, but they are, for example, still bound by Fair Housing Act, and state non-disclosure regulations, and the like. (To be more precise, ZTR mandates that the users, who are licensees, obey all relevant regulation and laws. They have to.)

But we continue:

Agents or brokers who are found guilty of violating their state’s real estate sales licensing laws can lose their licenses or have them suspended.  If they are found guilty of violating MLS rules or the NAR’s Code of Ethics, they can lose their REALTOR association and MLS memberships.  Losing their real estate license or MLS membership affects their ability to work in the industry. They can lose their livelihoods if they contravene any number of real estate industry regulations and laws that have been carefully drafted, refined, and improved over many decades by real estate experts.  In addition, if an IDX website engaged in some of the practices in which the ZTRs engage, such as: (1) modifying, editing, or manipulating listing information; (2) selecting the listings they choose to display based on anything other than on objective criteria; and (3) displaying an automated estimate of the market value of the home in immediate conjunction with the listing without the owner’s having the right to request discontinuance, their MLS would swiftly terminate the IDX site’s data feed — and with good reason that licensed real estate professionals understand.

Once again, in Thompson states, losing REALTOR membership does not automatically mean losing MLS membership, and vice versa. It is possible, I suppose, to get kicked off the MLS and still remain a member in good standing of the local/state/national Association.

But the more important point is that Ben utterly confuses “ought” and “must”. His point is that if an IDX website did XYZ that the syndication sites do, then the MLS would terminate the IDX feed. This is in the nature of “syndication sites ought to behave like IDX sites”, and utterly ignores the fact that the two have totally different licenses under which they operate.

You see, whether syndication or IDX, at the heart of the issue is the fact that the copyright owner — the listing broker — is granting to someone else the license to display the listing data. In syndication, that license is directly with the website — Zillow, Trulia, etc.  Oftentimes, the syndication license would grant to the websites the ability to do things like re-syndicate those listings to still other websites. And after services like ListHub became popular, the brokers could use a third party to manage all of those grants of license. In theory, at least, a website that violates the terms of the license agreement would have its syndication feed swiftly terminated. All licensees must abide by the terms of the license, or face penalties, including the withdrawal of the license (i.e., the data gets pulled).

IDX is merely a grant of license codified into the IDX agreement. There’s nothing magical about it, or “fundamentally different”. They are all private contractual arrangements, and they differ by the MLS: each MLS, a cooperative of brokers, is able to put in whatever license term it wants. Ask any IDX vendor about variations in IDX rulesets if you’d like. If you don’t agree to those terms, you don’t get the data; if you violate those terms, you get kicked off.

In fact, much of the work of people like Clareity with its Syndication Bill of Rights is to create a universal contract and licensing terms under which brokers would license their copyrighted data to websites; it is, if you will, to mimic how IDX works with non-participants.

Now, as it happens, Ben could argue that the terms of license for external-syndication ought to be the same as that for IDX-syndication. That would be a valid argument. But he doesn’t make that argument. Instead, he makes the argument that whatever the ruleset, whatever the terms of license, the monetization model renders syndication illegitimate.

The IDX website owner’s goal is to sell homes.  By contrast, the goal of the ZTRs is not to sell homes. The ZTRs’ goal is to maximize shareholder value by selling leads to any agent who will pay for them.

The IDX website owners earn nothing until a home is sold, a strategically designed compensation structure that incentivizes a service-oriented process for the consumer from cradle-to-grave.  By contrast, the ZTRs charge their fees on a monthly basis and in advance, typically requiring a 6 to 12 month contract.  The ZTRs’ fee structure is not strategically aligned with the consumers’ level of service.

A few observations here.

First, it is patently not true that the “IDX website owner’s goal is to sell homes.” I’m aware of “brokerages” that do nothing but generate leads off their IDX websites and then refer them out for a 25% referral fee. I’d be willing to bet that there is even a “broker” in your local market who monetize IDX in this very way.

Second, the “shareholder value” bogeyman simply fails when one considers the fact that “shareholder” means owner. Is there really a company, no matter what size, whose goal is not to maximize owner value? Do a lot of brokers willingly dip into their retirement savings to fund a brokerage company? Are they running a non-profit? For that matter, what to make of NRT, the wholly-owned subsidiary of Realogy — a company that just went public and therefore has *gasp* shareholders! Does Ben wish to claim that any company that has shareholders, or works for the profit of its ownership, should be cut off from listing data?

Third, the fact that ZTR charges a monthly fee vs. a referral fee strikes me as an extremely weak reed on which to hang the “syndication bad, IDX good” argument.

For the sake of discussion, let’s imagine that — which is a brokerage in many MLS’s, a full participant in the MLS, and utilizes the IDX feed — switched their monetization model from a pay-for-leads or subscription basis to a 25% referral on closing basis. If you think the outrage against is high today, you should see what it would be afterwards. Imagine if Zillow were to actually start charging a percentage referral fee, just like the IDX paper brokerages do.

We would see an instant meltdown of the MLS system as brokerages left and right simply pulled out of the MLS, which kills off the ever-sanctified IDX.

But we continue:

The IDX broker’s reputation and income is at stake. Therefore, the broker is incentivized to take care of buyers, or if the buyer is outside of the broker’s area of expertise, the broker can refer the buyer to a company that will do so.  By contrast, the ZTRs do not have a vested interest in how the customer is serviced.  The ZTRs are interested only in the sale of leads to agents, regardless of their level of skill or experience.  Shamefully, the ZTRs will give a false impression of an agent’s skill level to consumers by selling agents the title of “Premier Agent” or another title of that sort, regardless of the agent’s actual level of experience. An agent may have never even sold a home before, but yet the agent is prominently featured as a “Premier Agent” to the consumer so long as the agent pays the fee. Moreover, the “agent” might not even hold a real estate license. “It’s not clear any of the aggregators actually check credentials of the people they do business with,” according to one industry study. Where is the sensibility in that “woodshed” practice?

Ben makes a rather large, unsupported assumption with the first sentence. The existence and ongoing success of paper brokerages, who make all their money off of referrals, is not exactly a secret amongst industry participants. Yet, Ben refuses to acknowledge that simple fact and asserts that all IDX brokers are deeply concerned about their reputation.

The broker is incentivized to refer the buyer to a company that will do so? That will come as a major shock to the thousands of real estate agents out there who find themselves on the other side of the table with an agent who doesn’t know jack diddly squat about the property or the area, but wanted 100% of the commission split instead of 25%. If Ben is aware of a brokerage company in America that has an official policy of forcing its buyer agents to refer leads out if they don’t know the area, I’d like to know about it and interview the broker.

Ben asserts that aggregators may not check the credentials of their customers. If that’s true, then they need to improve that. But… that slight suggestion for reform hardly amounts to a “fundamental difference” and ignores the fact that “check the credentials” doesn’t mean a damn thing in the industry today.

Does a MLS routinely check to see whether an agent has the requisite experience, local knowledge, past transactions in a particular zip code before granting that agent an IDX feed? I’m not aware of a single MLS that performs that ‘credential check’. Are we merely talking about making sure the agent has a valid real estate license? Hardly the stuff of fundamentals.

Ben continues:

The IDX websites’ data is the most accurate available.   By contrast, Zillow and Trulia inflate their data by as much as 36% with homes no longer for sale to increase their lead capture sales opportunities.  The more “inventory” on their websites that Google can index, the more opportunities they will have through organic search to sell leads to agents, regardless of whether the homes are actually available for sale.

The IDX search results are straight forward.  By contrast, the ZTRs “cook” their search results by giving preferential treatment to agents and brokers who pay for manipulated search results, euphemistically marketed as “Featured Listings.”  All too often, they have provided incorrect property details and out-of-date information that frustrate consumers.

I agree with Ben, as I’ve agreed with him in other places, that IDX websites do have the most accurate data available… except for In all of the “the syndicators have crap data” arguments I’ve heard, I never hear mentioned, despite the fact that Move is a publicly owned company, who monetizes the data in exactly the way Ben despises, and has shareholders to please. Why might that be?

Hmm, it might have something to do with’s agreement with NAR that gives them the rights to the MLS data?

Well then, the solution to the data inaccuracy issue seems simple and plain as day: give them the MLS feed. Setup a simple revenue share with the copyright owners, and there you go.

But of course, such a solution would be no solution at all, neither to Ben and NAREP nor to brokers who oppose with all their might the sharing of MLS data with non-participants.

Ben concludes by saying:

Inaccurate data on scores of real estate websites that seek only to exploit listing data to monetize consumers’ contact information by selling it to agents unfamiliar with the home is a questionable business practice. It confuses consumers, wastes their time, and damages our industry’s credibility.  NAREP’s goal is to create a network of local IDX websites, much like, except that each listing will conspicuously display the listing agent’s contact information, along with a lead capture form next to it.  To offset the operational and promotional expenses, a nominal $10 to $20 fee, collected from the listing agent at closing, is anticipated.

Look, I support entrepreneurs of all stripes. God bless Ben and his staff for their efforts, and I wish them the best as a company. If they can convince a bunch of brokers and agents to pay them to participate, I’ll be cheering them on loudly.

But we’re discussing ideas here. And uncomfortable truths must, no matter how uncomfortable, be confronted because truth does matter.

If the above is the sum of arguments that Ben, who has spent a ton of time thinking about the issue, can muster up differentiating syndication and IDX, a fair-minded observer must conclude the following:

  • The differences are hardly “fundamental”; if anything, they are cosmetic and minor and quite easily corrected.
  • The real difference appears to be not the way people are making money, but who is making money. Real estate websites that “seek only to exploit listing data to monetize consumers’ contact information by selling it to agents unfamiliar with the home” are in fact engaging in a questionable business practice, but IDX-powered websites are among the top offenders of that practice. Yet, Ben gives them a pass.

The only conclusion then is that in Ben and NAREP’s view, it’s perfectly fine for licensees to make money off of listings of others in whatever way they choose, but it’s completely illegitimate for anyone else to make money off of them.

That, to put it mildly, is a funky argument to make in opposition to syndication and in support of IDX.


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