Taking the Brokercentric MLS Seriously

It’s been a busy week and a few. First, there was Inman which usually knocks me out of any sort of blog-like activities for a week. Then I moved as soon as I got home. I know some companies offers “concierge” type of services to help someone move with all the changes that entails but damn… I think I’d have paid someone to take care of all of that crap for me.

In any event, I’m off back on the road for yet another couple of weeks, so blogging will be light. I did, however, want to talk about something that I’m having more and more conversations about these last several months. The general topic is “How should the MLS adapt to the post-Upstream environment?”

For a while, Upstream was shrouded in mystery, but at Inman Connect, a few more questions were answered and some additional details emerged. I’d go check out the story on Inman.

I’m not going to get into detail, of course, and what you should do in response is actually the kind of consulting work clients pay me for, so… instead, I’d like to do a “deep think” on one topic that this whole Upstream, Broker Portal, AMP, etc. all brings to the forefront.

That is the idea of the “brokercentric” MLS and the so-called “broker sphere” (a concept pushed by my friend, and awesome karaoke singer, Sam DeBord). I’m going to assume arguendo that such a thing as the “broker sphere” exists, and then ask, What does a truly brokercentric MLS actually look like? What changes, if any, are required if we take the idea of the brokercentric MLS seriously?

Set the Stage: The MLS Today

Now, before y’all start commenting and saying how your particular MLS is totally different and brokercentric because you’re broker-owned, or the Board is entirely broker-dominated, I’ll just say that “Exceptions, of course, exist.” This is just a more general overview of how the typical MLS is setup and functions vis-a-vis the “broker sphere.”

Let us posit that the MLS today is not brokercentric, despite the lip service paid to notions of “Participant” and “it’s the broker’s data” and so on. If anything, the MLS is agentcentric and by extension, Association-centric. Most MLSs are owned by Associations, and its governance handled by the local REALTOR Association. Sure, brokers can and do participate in MLS governance and operations via the Association, but… they can do so only through the Association. Association membership is not on broker-by-broker basis, but on an individual REALTOR basis. Accordingly, subscription to the MLS is not on a broker-by-broker basis, but on an individual REALTOR-subscriber-member basis. That’s how billing works, that’s how fines work, that’s how data entry works.

As a result, the typical MLS has a Board that is appointed by the local Association, and those Directors may be individual agents or small brokers who have been active in the local Association for years. The large brokerages and their managing brokers often do not participate in local Associations or the MLS because (a) time, (b) politics, and (c) money (which is the same thing as time). But then they get unhappy about some MLS policy or another and start bitching and when push comes to shove, these large brokerages do things like Project Upstream.

So, today, the MLS is a marketplace created by, paid for by, and operated by individual REALTORS who have gathered into local Associations of REALTORS to operate that marketplace. (Psst – let’s not pretend that the vast majority of “members” in an Association are there for anything other than the MLS, ok?) Due to state real estate laws, the broker has legal ownership over the listing data, but let’s be real once again: the only thing the broker did to “own” that listing data is that he recruited the individual agent who went out and got the listing, got all of the elements of the listing (photos, descriptions, property characteristics, pricing, etc., etc.).

This state of affairs is unacceptable to brokers, or more precisely, it is unacceptable to The Brokerage Sphere™.

The Brokerage Sphere

As I said, my friend Sam DeBord champions this concept of The Brokerage Sphere. I’ve always pooh-pooh’ed the concept since to my eyes, brokerages are fierce competitors in the marketplace trying to take each others’ agents, each others’ listings, each others’ transactions as best as they can. Sure, they “cooperate and compensate” each other, which is a unique feature of American real estate system, but apart from that, they’re trying their best to put each other out of business.

Nonetheless, Sam’s view is that there is such a thing as The Brokerage Sphere in which all brokerages are united around issues that affect brokerages in particular. So for example, the problem of the MLS and its piss-poor handling of data distribution is an issue that all brokerages are united around. It’s not just the biggest of the big brokerages, and the nationalest of the national franchises, but also Ma-n-Pa Brokerage down in Boca Raton, FL where the husband and wife brokerage just added its first Associate in the person of the new daughter-in-law. Long & Foster, Redfin and Joe-Bob’s Zero Split Discount Brokerage are all the same as it comes to the MLS data distribution issue. So all of them are part of The Brokerage Sphere.

This is not the post where I assail that concept once again. This is the post where I accept that concept completely and embrace it, for the sake of argument. And I see where that goes.

Upstream As the Vision of the Brokerage Sphere

Upstream is the initiative that the Brokerage Sphere believes would help reform the broken agent- and Association-centric MLS. Its core value proposition is that Upstream, and not the local MLS, will be the point of entry of listing (and brokerage) data. Upstream, and not the local MLS, will be where that data is maintained and updated, including status changes. In fact, Upstream is not just a data-routing platform; it is something far, far more:

Upstream is “a single source of truth” for broker information, said Cary Sylvester, a Keller Williams vice president and Upstream board member.

The local MLS would receive the broker data, including listing data, from Upstream. It would continue to provide some MLS functionality, such as CMA tools, that requires all of the data in a given marketplace since Upstream does not plan to launch with 100% coverage or 100% participation by all of the brokers in a marketplace. The MLS remains the provider of things like IDX and VOW because Upstream will only provide a broker with his own data, not some other broker’s data… “unless they have signed agreements to share listings with other brokers.”

And governance and control over Upstream will be on a wholly different basis than the typical MLS:

Who can join Upstream?

“It is broker owned. Any broker can join, even a non-Realtor broker,” Elsea said.

“One listing, one vote. The idea is to be as inclusive as possible.” [Emphasis mine. Note: Elsea above is Dan Elsea, president of Real Estate One and vice-chair of Upstream’s board of managers.]

One listing, one vote is inclusive as possible to The Brokerage Sphere. Keep that in mind.

Business Model of the Brokercentric MLS

Given the above, the Brokercentric MLS should change its business model immediately on a number of fronts.

1. No more individual subscribers. Only brokerage Participants may be subscribers and be charged a fee at the company level, not at the individual agent level.
2. Fees for the MLS should be charged on a listing basis, not on the agent basis.
3. Data sharing should function more like a utility with offsets for data provided vs. data used.

Let’s get into it. You cannot claim to be a Brokercentric MLS and still maintain a subscription business model that emphasizes the individual agent (or REALTOR). The local Association might continue to own the damn thing, but the business itself should be to provide brokerages with what they want, especially since the data of the MLS will be coming from Upstream, a Broker Sphere initiative. So change subscription models to the firm, not the individual.

Subscription, however, doesn’t make a whole lot of sense in the Brokerage Sphere vision as laid out in Upstream does it? What is now perfectly clear within The Brokerage Sphere is that when push comes to shove, a broker is a company that has listings. If you don’t have listings, but only buyers, then you’re really a parasite more than anything else. To be sure, you’re a beneficial parasite, like a cleaner fish that helps the host fish be healthier, but The Brokerage Sphere won’t miss you if you disappear, because you don’t have listings. Accordingly, the fees for the MLS should be based upon listings in some fashion.

Here’s how I would do it, if I were the Brokercentric MLS:

• Monthly Subscription Fee is Tiered: S, M, L, XL. (Think like Verizon Wireless and its data plans.) Like that VZW Data Plan, different levels grant you the right to use some amount of data from the MLS; overage is charged at an exorbitant rate (as is the case for wireless plans).
• “Use” of data includes accessing it via the MLS platform, getting an IDX feed, or using it for CMA. Anything where you are using the data of the MLS constitutes usage.
• S might be 1GB of data for $100/mo; M is 3GB for $300/mo; L is 10GB for $1,000/mo; XL is Unlimited Data for $10,000/mo. That’s per brokerage, mind you, not per agent. But if you have more agents, they will use up more data.
• Note: If the Brokerage wants to divvy up its cost of MLS between its own agents, that’s up to each individual Brokerage to decide what and how they want to do that.
• For each listing contributed to the MLS, the brokerage receives a credit which offsets their monthly fee. In the extreme case, a brokerage might earn money from the MLS for contributing more listings than they have used in data.

Naturally, most brokerages will use far more data than they contribute, but the top listing brokerages might find their costs far lower because they are contributing so much data. That fits in with the core concept that a brokerage is a company that has listings. It also strikes me as eminently fair since the non-contributing (or less contributing) brokerages have the opportunity to make money via cooperation and compensation only because the listing brokerages have generously provided listing data they can use to attract buyer business.

Governance Model of the Brokercentric MLS

This one is easy. Just adopt the “one listing, one vote” methodology of Upstream. If the MLS is owned by the local Association, the local Association can become the proxy representative who aggregates all of the listing-votes of its members. Of course, “member” in this case means “primary membership”. Some large brokerages may have agents who are primary members in multiple local Associations; they would simply divide the listing-votes on the basis of their agents who belong to Association X vs Association Y.

So say the local MLS is owned by three local Associations, and there is a Brokerage with offices and agents in all three as follows:

• 50 agents belong to Association A, with 150 listings
• 20 agents belong to Association B, with 70 listings
• 10 agents belong to Association C, but one of them is a Super Agent, so there are 200 listings

Come election time for Board of Directors, Association A would vote the 150 listings from Brokerage, B would vote the 70 listings from Brokerage, and C would vote 200 listings from Brokerage. Not that difficult to construct.

Or, the local Associations can just change the MLS By-Laws to just have brokerages themselves elect the Board directly using the “one listing, one vote” methodology.

Role of the Brokercentric MLS

Keeping in mind that Upstream will take over the Add/Edit function, and be the “single source of truth”, the MLS no longer needs to do compliance. Upstream takes over the compliance functions from the MLS since it must be the single source of truth, the reference database for all client MLSs.

Instead, the MLS focuses its efforts on enforcement of the business rules, on facilitating and enforcing cooperation and compensation, and providing aggregated MLS data (as above). It also takes on the role of managing the flow of payments for data input and data usage since Upstream only makes a broker’s own data available. (Granted, Upstream could take that over as well pretty easily, but they have said they don’t want that job, yet, for now).

Technology Requirements of the Brokercentric MLS

With the above setup, I’m not entirely clear on what the Brokercentric MLS actually needs in terms of technology. It doesn’t need an Add/Edit module, since Upstream is that. It doesn’t need data correction or data compliance software, since Upstream does that.

In theory, the MLS would need data aggregation and inter-broker data sharing mechanisms, but there’s no reason why the MLS couldn’t run that on top of the existing Upstream/RPR database where all the data resides in any event and is the “single source of truth” reference database. The MLS just needs to maintain a “Participant Directory” where it says to RPR, “These 8,000 Brokerages belong to our MLS” and RPR just parses out that data and enables sharing/usage/etc. via permissions.

The MLS does require rule compliance software and staff. That’s different from data compliance, because it isn’t about the accuracy of the data, but about business rules of the MLS. So for example, data compliance (Upstream) kicks in when the agent has put the wrong address into the system. Rule compliance kicks in when the agent fails to leave showing instructions in the listing, for example. That’s not a data accuracy issue but a business rules and local customs issue.

And of course, it would need usage tracking and accounting software to ensure that data limits are not exceeded, and if exceeded, the overage charges kick in. And to ensure that the Contributing Brokerages are receiving their proper credits to offset their spending.

I suppose the MLS would still need to provide the Client Gateway so agents can setup clients on drip emails and “New Listings” emails and such things. That’s pretty lightweight and already figured out by a lot of vendors. Same thing with CMA’s and market reports and all that — there are lots of vendors who can provide that service if the MLS (or Upstream) just grants them data access.

That there is a pretty lightweight technology stack for the MLS, y’all.

Conclusion

If we take the concept of the Brokerage Sphere at face value, if we agree that such a thing exists, and if we further posit that the vision laid out in Upstream represents the ideals of The Brokerage Sphere (e.g., “one listing, one vote”, etc.)… then the Brokercentric MLS is a completely different animal than what we have today.

I’m not opposed to it; I can see a lot of ways in which the Brokercentric MLS is superior to what we have today. Governance, for example, seems like it would be more streamlined and less subject to the round-robin change-every-year system most MLSs have today. The business model is actually a bit more sensible and fair if we agree that really, when push comes to shove, a brokerage is a company that has listings and buyer brokers and buyer agents are second-class citizens who have a symbiotic parasitic relationship with those who provide the listings in the first place.

Anyhow, this got long enough. I can probably go on and on until we enter the realm of science fiction, but… what do you think? Does this Brokercentric MLS make sense? Is it desirable? Is it horrible bad news? I’d like to know what the Best Informed Readership in Real Estate make of all this big picture stuff.

-rsh