The times they are a changin’ in MLS Land

An industry veteran who was unable to attend the T3 Summit in Las Vegas this past week asked me today if the event lived up to its promise of becoming one of the “can’t miss” industry events of the year. I told the Vet Stefan Swanepoel and company made huge strides in only their second year doing the show. They drew ALL the biggest names in the brokerage community this year. The conversations were not the same old crap. The brokerage leaders were very forthright and out spoken about the need for change in the industry. There were broad references to the pending technology introduction by the Realty Alliance. Brokers see this as being the game changing event they have looked forward to for a long time. It remains to be seen if it lives up to advance billing.

This indeed will be one of the premier conferences in years to come and will be on the “don’t miss” list for brokers and anyone who wants to listen to what brokers are saying. Whether they heed what they hear is still an open question.

The theme of the day is CHANGE

Change is in the air. We heard it every day, all day, from many speakers on the T3 platform. Things are changing. They need to change. They haven’t changed in a long time. Change is overdue. We are our own worst enemy and that has to change. To quote the poet laureate of my generation, “You don’t need a weatherman to know which way the wind blows.”

What we didn’t hear in Vegas was HOW. What are the changes being proposed? How will they improve the lot of the broker and agent? And how will these changes be implemented? Will they be en masse or individually? And most importantly, who will stand up and lead the charge?

We heard lots of conversation, opinion, and general consensus on the concept. As with many issues in our industry, the devil is in the details. And there were darned few details presented or even proposals for details discussed.

Bob Moline, President and COO of Home Services of America offered the most concrete suggestions/requests. Among them (I’m paraphrasing from my notes, not quoting):

• The infrastructure of MLS/AORs has not changed in 30 years and it needs to. The technology is so 80’s.
• There are too many MLSs; they overlap and they cost brokers too much to join. Overlapping Market Disorder is alive and thriving and must be exterminated.
• There are too many CEOs running these too many MLSs and we need to “transition them” to something else. One national MLS would be ideal, but a dozen or so strong regionals would be a very good interim step.
• The national public website of the Realtor organizations should be controlled by NAR.

Project Upstream

Strong words particularly coming from the HomeServices President/COO and an active director on the board of the Realty Alliance (TRA). As has been covered extensively before, TRA is working on a project now dubbed “Upstream” to take control of the listing creation, management and distribution processes at the point of origination (contract execution by seller and broker) rather than ceding such functions to the local MLS.

Multiple sources in Las Vegas confirmed to me that the RFP for the technology solution has been distributed and that as many as eight to twelve responses have been received and are being reviewed. Expectations are running high that we will know details before this summer, perhaps as early as NAR- DC (aka Realtor Party Convention).

Parallel to Upstream is the announcement a couple of weeks ago that CRMLS, the California regional led by Art Carter, is opening its database to allow listings to be uploaded from broker management systems. This is HUGE and the implications of this move were not explained in the news stories, nor were they understood by the MLS community.

With the help of Bridge Interactive Group, CRMLS is taking advantage of a little known and seldom used portion of the RETS data standard called the Update Transaction. RETS has been seen from its inception as a way to standardize data distribution. Put it into the MLS by whatever means necessary, but send listing content out to anyone who needs, including the participating brokers, it in a standard format and structure.

But it also provides a common way for that listing data to flow the other way – from the brokers into the MLS. That’s exactly what CRMLS (and before them FMLS in Atlanta and Northstar MLS in Minnesota) is doing. Mr. Carter has said to TRA, when you’re ready with Upstream, we will be ready to receive your listings. [Clarification: Art didn’t actually say that. I am interpreting the action taken, not attributing a quote. ~bb] There’s nothing like getting cooperation from the largest MLS in the country to inspire TRA to vigorously pursue development of a new way of doing business.

What remains to be seen is how quickly other MLSs will follow suit, if they do at all.

We’ve heard this song before

The MLS community heard the warning shot across the bow in October in Boise. But that was not the first time such warnings had been issued. In a post on the Realty Alliance Facebook page shortly after the CMLS conference TRA CEO Craig Cheatham stated:

The industry now has options that are feasible today that were not realistic a short time ago. If local and national policy/practices don’t change in support of the industry they are to serve, brokers will have no choice but to exercise those options. That’s not a threat, it’s a business reality. Decisions this fall will be about launching “phase one.” There still is time to work together to solve these issues and shift MLSs to being resources for brokerages instead of being competitors to brokerages.

Specific concerns have been published, so MLSs have what they need to address these locally with their stakeholders. Not all the items on the list are problems in every market, but most every MLS is creating conflict with one or more of those practices/policies/attitudes.[Emphasis added.]  And, some of these issues create real potential for intervention by federal authorities if not fixed.
The general gist of these issues lists and the broker message have not changed in several years — these are not new news.

It is a shame there wasn’t more listening and more attention to broker concerns before last Friday and that there hasn’t been more meaningful two-way communication before this week. And, why have MLSs waited until the industry had started down a road that could offer alternatives before getting serious about bridging the gap?

Between last October and now there has apparently been little two-way communication between the MLSs and the Brokers. Otherwise we would not have heard the same tune being sung this past week in Las Vegas. Had the MLSs heeded, or at least engaged in a conversation, project Upstream probably would not have come to fruition. Now it may be too late. If launched, there will be no do over for the MLSs who didn’t think the TRA brokerage cooperative was serious, that such large and fierce competitors could actually agree to cooperate on such a project. They were serious. And they continue to be now.

It’s not too late

There’s still time for MLSs to act. And there are ways of making consolidation to the benefit, not the detriment, of the current owning Realtor Associations.

MRIS was created because of broker involvement, combining some 17 systems (now up to 25 associations as shareholders) into one in the Washington DC metro area, extending into portions of four surrounding states. Dale Ross, now CEO of RPR, was the moving force who recruited broker support and it was the impetus of the brokers that finally forced the solution – the largest regional in the country (until the creation of CRMLS).

But talk to any of the CEOs from an MRIS shareholder Realtor Association, as I have, and you will hear one consistent story. The associations are stronger today, more financially secure, and are providing greater value to their members than they did before MRIS, when they were on the MLS dole and didn’t have to justify their Realtor value proposition. Thousands of other associations could learn from a page in that playbook. They should start not just talking but doing something to mitigate the consequences of decades of denial.

The MLS industry needs focus and strong leadership to turn its attention away from the noise and concentrate on the serious challenges it faces. It needs a plan of action, one that contains some new and perhaps radical (at least by traditional conservative thinking) ideas.  It needs to focus on that plan, execute on that plan, daily – not just once or twice each year at convention time.

I have a few suggestions.

Get upstream of Upstream

The continued existence of the MLS faces serious opposition in the face of Operation Upstream. Leading brokerage and franchise leaders I have talked with lately tell me the details about Upstream are about to be announced. An RFP has already been circulated to as many as a dozen major technical companies that could build the system. Most use existing technology modified to meet the requirements of the Realty Alliance brokers. So delivery of such a system, at least in its basic configuration, could be as soon as this summer. That doesn’t leave much time for the MLSs to offer their own solutions to the problems and demands voiced by the brokers at the CMLS conference last October.

Do the MLSs know which of their brokers have which complaints and what negotiated solutions might be for each? If they did, project Upstream wouldn’t be rolling ahead with the speed and force of a locomotive. The major MLSs claim their brokers are happy. But if that’s so, why are those same brokers backing this initiative?

The only way to get upstream of Upstream is to find out from the horse’s mouth what they hope to accomplish by asking specific and probing questions. Who are the brokers who are dissatisfied? What MLSs do they belong to? Who has been talking to those MLSs? What opportunity for negotiated peace is there before the nuclear option is exercised? Someone needs to start asking those questions and going to the source immediately to find people who can and will answer them.

Overcome MLS Consolidation Roadblocks

MLSs need to find a way to overcome their historical reluctance to merge into larger, regional systems. Even those who want to merge are floundering in the absence of a consistently successful template for creating or expanding such relationships. They need a model that works, one that addresses the financial pitfalls and more importantly the personnel uncertainty. When two systems merge, usually one CEO is out of a job. When ten consider consolidating, nine are reluctant for fear of their job security. As was said from the stage at the T3 Summit, “There are too many MLSs, too many CEOs, and we need to find a way to transition them to somewhere else.” There are ways to address these issues that satisfy all parties, including the transitioning CEOs, and radically speed up MLS consolidation. That must happen soon, or it will be too late.

Open the MLS back-end and implement “Frontend of Choice”

The closed vendor system, which allows only one main MLS vendor in each market, needs to be scuttled and the MLS systems in general made more open and accessible to all vendors. With an open system, where multiple frontends and apps operate against a common database, the pain of changing MLS systems would be minimized or eliminated. The pride of ownership (my system is always better than yours regardless of what mine or yours is) becomes a non-issue when changing the user interface is not required for consolidation.

An open system also allows more options for brokers and agents. Subscribers are not limited to just the modules that the main MLS vendor provides, but can pick just the pieces they need from any vendor. This eliminates one of the biggest TRA objections, that the MLS forces everyone to pay for everything, even if they don’t use it.

An open system allows vendors, not just MLS vendors, entry into markets where they might not otherwise have a chance to compete. But big MLS vendors will also now have an opportunity to sell their wares into markets where they are not the primary contractor, thus expanding their potential universe of buyers exponentially overnight.

Such an open system also increases the potential non-dues revenue shares for the MLS itself. If proper license arrangements are put in place, each vendor could remit a portion of each paid module to the MLS as a license fee for access and data use. This could be a huge first step toward freeing the MLS (and potentially the AOR) from the yoke of “more members = more revenue” which simply perpetuates mediocrity in the practice of real estate.

Fix the Freaking Rules

The NAR rules process is broken. We have known that for years, yet we have taken absolutely no steps to improve it. NAR’s dominance over the “model rules” is supported by (1) the threat of revocation of the charter of any Realtor Association with an owned MLS that does not comply with the model rules, and (2) the fear of loss of E&O insurance, provided free by NAR to its associations and MLSs that comply with the rules standards. Additionally, if the MLS doesn’t comply, the owning Association also loses insurance coverage as well. Both of these “problems” can and should be addressed since they work against the progressive approach needed to consolidate the industry.

But the bigger issue is the insistence of local MLS committees that “their market is different” and “we do business differently here, like nowhere else.” Numerous large regionals (e.g. CRMLS, MRIS, MLSPIN, and CTMLS) have proven this just is NOT the case. MLSs can, and do, change their rules to coordinate with their neighbors. Others find ways to allow minor local options on specific issues without undermining the integrity of the overall database. It’s time the experienced pioneers in regionalization shared their wisdom with the rest of the MLS community.

It should be a simple exercise to merge the best rules from the best regionals into a Best Rules Practices document that all can share. Combine that with widespread adoption of the RESO/RETS data dictionary to create uniformity in the data fields supported by the common rules and yet another roadblock to consolidation will bite the dust.

Who will lead the effort?

Such a dramatic turn in the direction and future fortunes of the MLS industry will not occur on its own. It will not happen in between conference panels discussing the need for such change yet again.  It will not happen with just the pleadings the major brokerages and franchises asking for change. It will only happen with a small group of dedicated leaders, industry spokespersons of repute and notoriety, gather in a war room somewhere, draft a declaration of purpose, appoint a commander-in-chief and raise the funds necessary to field a standing army to get this job done. The Founding Fathers of our country did it 238 years ago. The anniversary of that event is coming up in a scant three months. Does anyone think we could start an MLS revolution by the Fourth of July? If I were still an MLS leader, I would light a few fire crackers under the chairs of my fellow CEOs and make sure it happens.

Otherwise, the MLSs will continue to be just small colonies with allegiance to a throne that cares little of their fate.

For this post:
Cause: the waters around you have grown.
Effect: You better start swimmin’ or you’ll sink like a stone.