Without question, the big topics coming out of NAR
Midyear Legislative Meetings were about RPR-AMP, Upstream, and the future of the MLS. I’ve already written a few posts about them, and expect to write more in the future. But lost in all of that was a big rebrand and relaunch by Move of Realtor.com. For what it’s worth, I really like the new logo and the rebrand. As Ryan O’Hara says in the Inman article:
“Everything’s about real — real knowledge, real data, real insight,” said Move CEO Ryan O’Hara.
We shall see whether Move can live up to that brand promise, given that it does not control the one million plus local touchpoints of their Realtor brand, many of whom are only distantly acquainted with concepts like “real knowledge” and “real insight”.
But this post isn’t about the rebrand. It’s about the ideas that appear in Realtor.com’s Open Letter to the Industry that was distributed at the MLS sessions. Here’s a PDF of the letter, courtesy of BayEast. The three bullet points are:
- Respecting the economic interests of the industry by not commingling FSBO listings with brokerage firm listings;
- Not displaying value estimates on “for-sale” properties because the local real estate professional is the best person to determine the value of a listed property; and
- Displaying the online reputation of brokers and agents in a way that both meets consumers’ needs to find the “right” professional while also being done in a fair way for the industry.
I wonder if these goals are even achievable. Can this balance between consumer interests and the industry’s interests really be struck?
FSBO and the Economic Interests of the Industry
Let’s start right at the top. Realtor.com won’t “commingle” FSBO listings with brokerage listings in order to “respect the economic interests of the industry”. At first glance, this makes all kinds of sense, right? FSBO’s by definition are not paying the listing agent; some won’t pay cooperating compensation to a buyer agent who brings them a buyer, or they’ll only pay a pittance compared to the 50% of commissions of a typical MLS-governed brokerage listing.
(For now, I’m going to assume that by “commingling” Realtor.com really means “putting on our website” so the relevant sentence actually reads: “Respecting the economic interests of the industry by not putting on our website FSBO listings.” Otherwise, if Realtor.com will have FSBO listings, but just grouped under a different category, the issue gets even murkier.)
What about the economic interests of the consumers? We can debate whether sellers are actually serving their economic self-interest by going FSBO, foregoing the expertise, knowledge, and transaction management of a (good) Realtor. Just to get your blood boiling, remember this from the Freakonomics guys?
Anyhow, whether the seller’s interests are or are not served, it seems pretty clear to me that if I’m the buyer, I want to see all of the homes on the market, whether brokerage listed or not. FSBO or not is some inside-baseball money thing for the Realtors figure out; when shopping for a dream home for my family, I can’t imagine why I wouldn’t want to see everything on the market.
So with this pledge, Realtor.com is definitely not advancing the economic interests of the buyer. It’s definitely not advancing the economic interests of the FSBO home seller. Question is, is it advancing the economic interests of the industry? Or is it advancing the economic interests of one subset of the industry, namely the listing agents and listing brokers?
Hold your questions and thoughts for a moment.
No Value Estimates
The second pledge, of not displaying value estimates on “for-sale” properties, basically means no Restimates to compete with Zestimates. The reason is, according to the letter, “because the local real estate professional is the best person to determine the value of a listed property.”
That may or may not be true as a matter of fact, but somebody needs to inform the brokerages of The Realty Alliance that the local real estate professional is the best person to determine the value of a listed property. Remember this story from last year?
After fighting the intrusion of automatic valuation models, or AVMs, from third-party content providers, some brokers are ready to get in on the action.
And now they have a change in MLS policy to thank for making the creation of AVMs easier to pursue. On the final day of the 2014 REALTOR® Party Convention and Trade Expo in Washington, D.C., this month, the Board of Directors of the National Association of REALTORS® voted to approve a proposal by the Multiple Listing Issues and Policies Committee to change the way MLSs make information available to participating brokers.
Some of the quotes from that story are illustrative, but none more than this one:
Henry Brandis, senior vice president of corporate services at Edina Realty in Minneapolis, Minn., said that regardless of their veracity, AVMs are what the market demands, and brokers should be able to provide them.
“Our competitors have them. The consumers want them,” Brandis said. “RPR makes money off MLS data. Some MLSs make money off of MLS data. Are we really going to say that brokers are the only ones who cannot make money off of MLS data?”
Huh. So maybe the economic interests of the industry have changed? Competitors (one must assume he means Zillow — a company that has sworn up and down on a stack of holy writ that it is a media company and has no interest in being a brokerage — since until the rule change, the other brokerages couldn’t have had them) have them, and consumers want them. Brokerages want value estimates on for-sale listings on their websites. Hmm. Maybe the local real estate professional isn’t the best person to determine the value of a property after all?
I know, it’s all kinds of confusing.
Nonetheless, I wonder exactly what economic interests of either the industry or the consumers Realtor.com is serving here by affirming principle that the brokerages themselves have abandoned.
Online Reputation, aka, Agent Ratings
The final bullet point may be the most interesting and the most illustrative. Realtor.com proposes to display the online reputation of brokers and agents to help consumers find the right agent, but do it in a way that is “fair” for the industry. For this purpose, Realtor.com is asking the MLSs for sold data, because (paraphrasing from memory here) an agent’s online profile is hardly complete without a record of their transactions.
How does this work, exactly?
Back when HAR.com proposed its first draft of agent ratings, it utilized sold data to show consumers the number and locations of transactions for an individual agent. The resulting firestorm was impressive indeed.
In 2011, Redfin launched Scouting Report, with the title of the blogpost named “Live By the Sword, Die By the Sword” and the post literally opened with a “Whoa”:
Whoa nelly! Redfin just released Redfin Scouting Report, offering Redfin users and customers free performance statistics on more than one million real estate agents: how many homes each agent sold, where, for how much, how fast, with how many price drops, how recently, all on a map.
Not quite a week later, Redfin pulled down Scouting Report, and the following elegy appeared in the post:
But I still think the folks most violently opposed to Scouting Report didn’t hate it because it was wrong but because it was right. I know that consumers loved it and now they can’t get it anywhere else. And I still believe that brokers should be the ones to tell regular folks how agents have performed in different neighborhoods, because we’re the only ones with reliable data.
Then in 2012, Homelight, a startup backed by Google Ventures, launched its service to help consumers find real estate agents using objective data. It got in immediate hot water with MLSs and had to take down a lot of the data and the profiles. Homelight just raised another $3 million in funding, so I assume they’re still making a go of the agent ratings game, but it isn’t exactly with the industry’s enthusiastic support.
And of course, who can forget Agent Match? Launched by Realtor.com in 2013, it ignited the closest thing I’ve ever seen to an online lynch mob. After enduring slings and arrows of outrageous fortune, Realtor.com pulled the plug on Agent Match.
So the history of these “agent rating” projects is not exactly filled with rainbows and songs of joy. But here’s Realtor.com for another attempt at providing something consumers really, really want and the “industry” really, really doesn’t want. I’m super curious to hear how the new program that will use MLS data to display performance stats will be completely different from the old program that used MLS data to display performance stats.
Whatever the distinction, the basic issue is unresolvable. Drew Uher, the founder of Homelight, actually articulates the problem best on this 2012 VentureBeat profile:
“My wife and I bought our first home a couple years ago. [We learned] it’s really easy to find a real estate agent, but it’s really hard to find a good one ,” said Drew Uher, HomeLight co-founder and CEO, in a recent phone chat with VentureBeat.
After finding a “great” agent through a friend’s recommendation, the Uhers found the agent only worked in two San Francisco neighborhoods, and not the ones the couple was looking for.
“I felt like there was always a disconnect … like she was working against us rather than for us,” he said.
Fundamentally, the issue is that the consumer wants to find and work with only the best, most experienced agent for his area of interest. Buying or selling a house is usually a family’s most expensive and stressful financial transaction. There’s no way a buyer or a seller wants anyone who is not THE BEST.
Meanwhile, the “industry” doesn’t want all of the transactions being done by a handful of the very best, very top agents. However will all those new real estate school graduates make a living? However will any agent who isn’t #1 in her market area ever get any clients?
The core issue, of course, is how agents are compensated: straight commission based on value of the property. There being zero price difference between the newbie who has zero idea of what she’s doing and the best agent in the market with decades of experience, why would anyone not want the very best? If a Porsche cost the same as a Hyundai, why would anyone ever buy a Hyundai?
I simply can’t see how Realtor.com can produce an “online reputation of agents” tool that meets the consumers’ needs to find only the very best, most experienced agent with the most number of transactions in the specific neighborhood without screwing over huge swaths of the “industry”. If as the industry insiders know, 20% of agents do 80% of the business, then any sort of tool that uses objective data will screw over the 80% who do 20% of the business.
Now, the specific phrasing is “fair way for the industry”. I can defend the idea that the 80% losing all of the online leads is actually fair. I doubt such a defense would be all that convincing to the 80%, or to the many thousands of brokerages who have those 80% in their offices.
Get the Balance Right…
Now we can return to the first issue of FSBOs and economic interest, at least obliquely.
In all three examples, the core issue is trying to balance the economic interest of the “industry” with what the consumer wants. The consumer wants to see all of the homes on the market; the FSBO seller wants to advertise his listings to buyers without having to pay a Realtor. Consumers want AVM’s on listings; (some) brokers and agents think AVM’s are the spawn of Satan. Consumers only want to work with the very best agents; brokers and agents don’t want all of the leads going only to the top 1%.
The real estate industry, in the past ten years or so, has had these high-level highfalutin’ conversations about “not brokercentric or agentcentric, but consumer-centric”. But when push comes to shove, when the rubber meets the road, when (insert your own cliche here), far too many in the industry means “consumer-centric… on our terms”. I’m not sure that’s going to work in the long run. Or even the medium run.
One reason why Zillow is so despised, so feared, and constantly thought of as a competitor despite assurances from every executive at Zillow, is that it has clearly picked a side. Zillow is and always will be consumer-centric first and foremost. Here is Spencer Rascoff earlier this year talking about integrating the cultures of Zillow and Trulia:
“The companies’ cultures are actually quite similar,” Rascoff told GeekWire in an interview today. “Specifically, they are consumer-oriented, so every major decision at Trulia and every major decision at Zillow starts with and ends with an eye towards the consumer, so we are completely aligned in that regard.” [Emphasis mine]
Yes, Zillow has a very impressive Industry Relations team, led by Errol Samuelson. Yes, Zillow has built partnerships with brokerages, franchises, and MLSs. Yes, Zillow is constantly looking to improve its relationship with brokers and agents. But if Zillow had to choose between consumer economic interest and the industry’s economic interest, it would choose the consumer every single time.
Move, unfortunately and understandably, cannot say that. It can’t live that Code, because of its relationship with NAR and because of its brand. Move has to take the industry’s side when push comes to shove, because its brand literally belongs to the industry.
Move cannot get the balance between consumers and the industry right, until the industry itself gets the balance right. And the industry cannot get the balance right until it has gone through the painful process of figuring out what it wants to be in this Brave New World of ours.
The irony of ironies, of course, is that despite this reality… the industry doesn’t think of Realtor.com as “its” website. Why else would Broker Portal Project be moving forward? Why else are brokerages collectively spending tens of millions of dollars building their own competitors to Realtor.com?
The task that lies ahead for Ryan O’Hara and his team is to be the unappreciated advisor, the ignored-yet-faithful wife to the industry, who slowly helps the industry see what the balance needs to be. Move has to move the industry to become more consumer-centric, on the consumer’s terms, not the industry’s terms. It has to do this not just for its own good but for the industry’s own good. Move has to gingerly convince brokers, agents, MLSs, and Associations to sacrifice some sacred cows so that everyone has a chance to move forward.
I wish them luck, but I do not envy them.