Brief (?) Observations on the Value of the MLS

At the just concluded Inman Connect New York, I was privileged to be on a panel entitled “Is the MLS Doomed?” with Denee Evans, CEO of CMLS, and Rebecca Jensen, CEO of MRED. Despite being one of the biggest fans of the MLS in the industry, given that I am a lawyer by training and therefore able to argue any side of any issue, I was asked to take the “anti-MLS” position by the moderator, Brian Boero. Naturally, I said a few things that aimed at edutainment and a good time was had by all.

Normally, I’d leave things at that, and then go into writing dissertations trying to explain what I said. But a thread on Facebook in the Inman Coast to Coast group caught my eye:

I have written on this subject previously, and it is worth reiterating for all those who might be asking the same questions. Let’s do it.

What If the MLS Disappeared?

Kathryn Royster’s question is one that comes up time and again:

Inman family, I’d like to pick your collective brain. Ever since yesterday’s “Is the MLS Doomed?” panel, one question has been rolling around in my head. If the MLSs DID all disappear, why couldn’t everyone just list everything on ZTR? Panelists kept talking about “tools” that MLSs provide, but never mentioned specifics. Being a vendor, I’m not familiar with these tools. Are they really that useful (and that exclusive to MLSs)? Please educate me!

In the comments, there is much discussion about how things work in other countries where the MLS does not exist. Basically, brokers and agents would send listings to one or more websites where houses for sale can be found. Then we have discussions about the MLS being about sharing of listings, cooperation, compensation, and compliance.

All of these things are true, of course. But I feel like they circle around the core value proposition of the MLS, while at the same time highlighting the challenge facing the MLS and the real estate industry.

The core value proposition of the MLS is that it is the lawgiver which regulates the behavior of real estate professionals to each other. This comes from a post from 2015, right after AMP was introduced to the industry:

The value of the MLS is in the certainty of behavior and the transparency of the transactions. The latter is crucial in real estate, since houses are not commodities. Without comparable sales information, it isn’t clear that the housing market would function at all. Zillow can and does bring buyers to a property; once there, how would anyone know what to offer? Public records are months after the fact, and not entirely useful in a fast-moving market.

Cooperation and compensation are critical components of the MLS’s regulatory function, but we might call C&C “necessary but not sufficient” value. C&C serves as the carrot which allows the MLS to enforce the standards of behavior amongst professionals. In fact, one of the commenters above quite rightly points out that cooperation and compensation can be privately negotiated between two agents/brokers — as happens in commercial real estate all the time. What cannot happen as easily is that negotiation between every agent/broker in a given market, and that is what gives the MLS power to regulate professional conduct so that every participant in the marketplace has a degree of certainty as to what they can expect from the transaction and from each other.

If the MLS disappeared tomorrow, the need for certainty of behavior and transparency of the transactions do not disappear. My view is that without the MLS, the government will need to step in to regulate professional behavior at a much more granular level. State licensing laws can function at a level of generality and focus more on consumer protection because the MLS exists at a level of specificity and focus on business-to-business behavior.

For these reasons, I have long argued that the MLS is not a technology company, not a data company, but a lawgiver. All of the trauma and agita about “control” over the MLS by the industry often misses this point. It isn’t control over the “data” that matters, but control over the rules that matters.

Why, How, What

We see the distinction in the discussion above. If the MLS disappeared, why couldn’t brokers and agents just list everything on the portals? The answer is, of course they could… for advertising purposes. And in fact, what we are working through as an industry today is the fact that while the WHY of the MLS has not changed, the HOW and the WHAT have. Let me explain.

In 2013, I wrote the following:

For a while, I’ve argued that the reason why the MLS has become so important was that in the newspaper age, it was the most cost-effective form of advertising a home for sale. I’ve argued time and again that it is a mistake to call listings “data”; they are fundamentally advertisements.

More recently, I’ve wondered if what the brokers and agents value the MLS for today is that it is the conduit through which they advertise properties for sale on the ultimate destination: the Internet and mobile apps where consumers actually are today.

The Internet, and now mobile, have not changed the core value of the MLS as the lawgiver. They have, however, taken the place of the MLS as the most cost-effective form of advertising a home for sale.

In a way, this is no different than the impact of or iTunes on retail. Department stores and shopping malls used to be the most cost effective way of distributing stuff for sale; today, they are not.

Accordingly, even as the Why of the MLS remains the rules and regulations of professional behavior, the How and the What are in flux. How does the MLS enforce the rules if it is no longer the most cost-effective destination of advertisements but one-of-many conduits to that destination (the Internet)? What does the MLS do if it is the conduit, rather than the destination?

Relatedly, how do brokers and agents relate to the MLS, and what do they need from the MLS if it is no longer the destination of their advertisements?

All of the “MLS IS DOOMED!!!” talk many of us find mildly entertaining and moderately annoying comes from trying to figure out those questions. Upstream, AMP, Broker Public Portal, Fair Display Guidelines, RESO, MLS Certified… so many of the initiatives we see, debate, talk about are the result of trying to figure out what to do and how to do it.

Take just one issue, which I talked about on the panel: too many MLSs. If the MLS is the destination, rather than the conduit, then 750 MLSs aren’t that big a deal. Clothing manufacturers aren’t complaining about 750 stores throughout the country, after all. But if the MLS is the conduit to the destination, then 750 MLSs are a major pain in the ass.

Things to Chew On…

A lot of the strategic work I do with the MLS and Association world involves trying to get people to see that things have to change if the How and What of the MLS has inexorably altered thanks to the Internet. Things like product mix, governance, business models… all of these things need to be thought about if the MLS is no longer the destination but the conduit of advertisements. Yet, the basic value proposition, the WHY of the MLS, has not changed: certainty of behavior and transparency of the transaction.

I would urge you to use the analytical framework just laid out to think about all issues relating to the MLS. How should the MLS fulfill its unchanged core mission? What should it do and provide to brokers and agents to do that?

Or, of course, you can always question the WHY of the MLS as well….


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Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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8 thoughts on “Brief (?) Observations on the Value of the MLS”

  1. Love the thoughts. I just read another comment that again points out that REALTORS don’t understand the difference between MLS and Association. I am a strong supporter of the REALTOR organization, but I’m wondering if it’s time to argue the separation of the two – drop the mandate to be a REALTOR to have access.

    As for your comment on state regulation – I agree that’s where it would fall. And the cost to have settle disagreements, having attorneys draft agreements, clogging of courts. Nightmare.

  2. Hi Rob -Something I have been pondering for the past year is with the internet and the public becoming more savvy about selling and buying in town homes, do you see the day in the foreseeable future where the huge numbers of agents will be dinosaurs,
    Not entirely gone, but really, why do sellers and buyers of in town homes needs us? They don;t!
    Sellers will advertise on all the web sites – Craigslist is free. Buyers find the homes on the internet. Buyers and sellers can negotiate the details then go to a lawyer or title company and close the sale.
    I feel that a trained monkey can handle the sale of the in town home. What is there to negotiate: PRICE and that’s pretty much it.
    I only work with rural properties and the many issues can be overwhelming and a trained monkey can not deal with those issues.
    SECRET – I frequently have seller and buyer sit down and negotiate the deal as I go thru the contract. 100% of those have closed. So, the old wive’s tale of keeping the buyer and seller hidden away somewhere is just bogus and some ridiculous theory that has survived the decades.
    So, let’s not get our ego too inflated about our worth in a real estate transaction for in town homes. I see the number of agents dwindling to maybe 25% of the numbers now. And, within the foreseeable future. Better start updating your resumes.

  3. The MLS’s are doomed, finished ,kaput the funeral is already taking place it’s taking awhile but it is happening.and so is the godfather of them all nar ,Re agents do not need them anymore this broker has done many transactions over the last couple of years without them, forms are available on the internet,and advertising is there too it can’t happen quickly enough .large useless bureaucracies die hard the people are entrenched,unable to see a future for themselves,most are unemployable,my greatest fear is that they try and ingratiate themselves into State Law as apart of the RE license process and you can bet they are try to do that now,is anybody in the industry taking note of what just happened in the USA,folks are tired of these parasites telling us what to do and when to do it.

  4. Insightful as always Rob!

    I agree with your basic premise…but thought I’d add to it 🙂

    Viewing the MLS a “mere” lawgiver fails (IMHO) to recognize the magnitude of the value an MLS provides to its members as a “trusted intermediary” creating/facilitating/enforcing and evolving the rules of cooperation between competitors.

    Agents and brokers in each local market compete with each other, often fiercely, and yet all agree to cooperate through a central entity they effectively trust to fairly balance their highly divergent interests as competitors. They do so because cooperation is essential to facilitating transactions between their sellers and buyers. In other words, cooperation is essential to discharging their fiduciary duties to their individual clients.

    This unique U.S. phenomenon – the existence of the MLS as central hub of trust facilitating cooperation between fierce competitors – is (IMHO) essential to our industry’s ability to truly serve our customers and provide the exceptional consumer experience one generally cannot find anywhere else.

    All this is not to say that the MLS cannot or should not be improved, but I believe it is far from doomed and most certainly irreplaceable!

  5. Thank you for the kind compliment Rob. “Mildly entertaining and moderately annoying” is likely the best characterization of my passion for providing a viable alternative that applies radical change to address the industry’s data management dilemma. I am certainly nowhere even close by comparison but I know of a few others who were considered similar as they “annoyed” many existing and unchallenged solution providers. One of these people believed that there was a better alternative to MySpace, another a more effective solution to search than what Yahoo controlled, yet another a more impressive way to present yourself to the world of business than Monster, two guys shared that they knew that was not “King” and even a person who envisioned a better way to shop for anything than what all the retailers in America combined provided at the time. After 40 years of non-change the MLS has way outlived its “best to use before date.” It is stale and is only protected in its current state as an unchallenged monopoly. But even with all of that it does not make the MLS “all OK” nor should it be misunderstood to be an acceptable platform to serve the needs of an increasingly competitive brokerage industry going forward.

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