I like being on panels. I like moderating them too. They’re fun, usually pretty short, and oftentimes the other participants are friends I can joke around with backstage. One downside though is that the panel format doesn’t give you a chance to dive into detailed explanations of complicated concepts. A panel is better for sound bites.
I ran into this problem last week after my panel at Inman Connect called “Are the MLSs Doomed?” I said that most MLSs, as controlled by the Association of Realtors through a broken governance model, cannot be sustained.
Afterwards, a few people expressed… reservations? concerns? dismay? protest? Whatever the right word, I promised to extend and explain myself. So, this post.
The MLS is not doomed unless we fail to doom the vast majority of them. As an industry, we have two choices. We can either cull the weak from the herd. Or we can all perish together.
Nothing I Said Was New
My perspective remains unchanged from a year ago, in which I outlined most of these concepts at my speech at CMLS. Many of you were there in person so none of this comes as a surprise to you. But for the rest, here’s the video — I invite you to watch the whole thing.
The core concepts from that presentation, which are the same core concepts that underly my work with the MLS and the Associations, are as follows.
- Too many, too small, too poor.
- MLS and the Association are stuck in a dysfunctional codependent relationship.
- Governance is broken.
As you see in the presentation, I am not just criticizing. There are real ways forward to save the MLS. But saving the MLS as a whole means that we must get rid of hundreds of tiny poor fiefdoms that are a drag on the industry. Hence, my statement about most MLSs being doomed.
I flirted with the idea of writing 10,000 words explaining that presentation. But thought y’all probably have things to do this afternoon. So, watch the presentation, and let me know if you have any questions or thoughts.
I will explain a couple of things from the Inman panel that I didn’t address at CMLS.
Money Isn’t Everything, But It Isn’t Nothing
Troy Rech of Clareity asked this question on Facebook: “What about the MLS whose 150 members are happy?”
My response: “They’re still doomed.”
The total annual revenues of a 150-person MLS, if they’re charging around the industry average of $30/mo for the MLS, is $54,000. Can it even afford a part-time CEO? Or a couple of paid interns, for that matter?
I mean, seriously, how could that MLS offer anything other than the barest of bare minimums on old, outdated systems with barely any customer support? What about compliance? Web API’s? Mobile access? On some fraction of $54,000 per year? How?
Those 150 members aren’t happy now. If, by some odd twist of happenstance they are, they won’t be for long. So yes, the tiny MLSs are doomed because they don’t make enough money. Therefore, they cannot offer enough value to their customers. They could become a local service center of a larger MLS, but that requires consolidation – not data sharing or whatever else our industry has come up with to preserve fiefdoms.
Cull the Herd… or Else
Too many, too small, and too poor — that’s the status quo. My preferred future is fewer, larger, and richer MLSs that operate as for-profit companies. These MLSs provide products and services that brokers and agents want – and, most importantly, for which they are willing to pay market rate.
That future requires that governance be fixed so the MLS can operate like a normal business, while the Association operates like a nonprofit organization. That, in turn, requires getting a divorce. The dysfunctional and codependent marriage between the MLS and the Association must be resolved so both parties can be happier and healthier.
If we don’t make these changes, if we try to stay the course of protecting micro-fiefdoms and keep believing that the MLS and the Association are somehow irreplaceable and immutable… well… that’s the alternative future. In that future, the MLS is doomed because somebody, whether Upstream, Zillow, Google, or HUD replaces the whole structure with one that makes sense for brokers and agents in the 21st century.
Cull the herd, or perish together.
-rsh
25 thoughts on “The MLS Is Not Doomed! But Most of Them Are”
Wise words from a man with the knowledge!
I agree – its obvious like you said $54,000 would not even give the members great upgrades.
Sorry, but they are finished,done in by their ignorance ,and by the way so is ZTR,they have become an expensive lotto ticket,replaced by the INTERNET,freedom to advertise, next to go is nar and the local boards,.
Newsflash: $54,000 is a huge budget to run and operate an MLS platform. It may not be enough to run an association, but $54,000 just to run an MLS? Hell yes! MLS’s don’t need offices. The support staff doesn’t need to be more than 1 or 2 competent part-time people who know what they are doing.
Get your heads out of the sand. It’s not the MLS that costs the most money. It’s the Realtor association. 83% of us join a Realtor association to get access to the MLS. That’s me.
And while we’re on the subject, I am just puzzled at how NAR thinks they are going to legally consolidate all these MLS’s data? I guess NAR figures because nobody’s bitching about it then they’ll just do it. NAR nor the local association own the listing data. State licensed listing brokers, collectively, own 100% of the listing data.
If you guys want to save your profession, and your source of income, then the divorce of the MLS and the association is imminent.
1.) Separate your MLS out of the association.
2.) Set up a company with elected board members to administrate your MLS so that fairness and due process can be afforded to all of your participating members.
3.) Make some rules, reinstate and re-enforce your geographical boundaries.
4.) Disallow compilations of your MLS data to be sent to Realtor.com, Zillow, or Trulia. Disallow your membership to post homes for sale on Realtor.com, Zillow, Trulia, or any other entity in the future that rises to threaten the profession. An MLS with brokers focused on protecting their market can keep ZTR out. Don’t believe me? I already see it being doing in 3 geographical markets, with two of them being fairly large markets.
All you idiots that posted homes for sale on Zillow and Trulia are the cause of this chaos, along with all you idiots that pay ZTR each month for advertising. Did you guys not see this shit coming 5 years ago? I guess not. I’ll admit I’ve been an idiot before. I have never purchased advertising from ZTR, but I have posted homes for sale there. I wised up though, and you should too!
For those of you that want to continue being a Realtor, do it! NAR has lobbying power, and they have done great things for the profession of real estate. NAR has a wonderful code of ethics that, in my opinion, should be the mainstay core values adopted by all real estate agents. However, NAR and local associations need to get out of the MLS business because they don’t know what they’re doing. Brokers never intended for them to take the data over; it sort of just happened. NAR’s Realtor.com is a flop. NAR needs to focus on ethics and advocating our profession. Local associations are riddled with high staff overhead. Local association staff who try to pass themselves off as technical are in way over their head trying to administrate an MLS platform. There’s a place for local associations. But, there is no need for these vast, sprawling complexes packed with staff.
It’s not too late. Follow the steps above, and you will see the market shift back in your favor almost overnight.
“I have never purchased advertising from ZTR, but I have posted homes for sale there. I wised up though, and you should too!”
When a seller asks why their home is not listed on ZTR (for zero cost), what do you tell them?
Thank you for the question. I just tell them the truth. I let them know that ZTR has hurt my business and I chose not to associate myself with them.
I’ve only had the question two or three times, and luckily the houses sold quick enough for the client not to get in an uproar about it. If an uproar did happen I would let the listing go before I’d post it to ZTR.
“I let them know that ZTR has hurt my business and I chose not to associate myself with them.”
And sellers are okay with that? Putting myself in the sellers shoes, I would choose to list with someone who is putting my best interests first (sell my house) rather than their own businesses.
Hi DeRidder – this issue has come up in the past, but… I am curious about one thing. You write:
“I just tell them the truth. I let them know that ZTR has hurt my business and I chose not to associate myself with them.
I’ve only had the question two or three times, and luckily the houses sold quick enough for the client not to get in an uproar about it. If an uproar did happen I would let the listing go before I’d post it to ZTR.”
If after the sale, you get sued by the former seller for breach of fiduciary duty for failing to market the home to as many buyers as possible… what will be your defense?
This issue came up vis-a-vis pocket listings, and I’ve always though the logic is the same. Curious what your take on that is.
Hi Rob, thank you for the question. My answer is this. Unfortunately anybody can sue anybody for pretty much anything in this country. Being sued for not posting something on Zillow would be an example of that.
What would I do if I got sued? I would fight it of course, and I hope I would win. My defense would be every obvious reason any defense would give. Since you’re a lawyer that’s trained to argue either side, I presume you have a whole tool bag full of defenses . I think for starters is would be groundbreaking since I know of no previous cases on the matter. A suit about not listing on Zillow would be drastically different than a pocket listing suit. Just so the audience knows, a pocket listing is when a real estate brokerage keeps a listing in house in an effort to sell the listing with a double-sided commission. That’s a far cry from a real estate brokerage not listing on Zillow because competition from Zillow has harmed their business. With pocket listing suits one may usher in possible violations of association rules, regs, and ethics because associations have agreements with regard to cooperation. I have never seen any language in any of my associations’ rules, regs, and ethics about cooperating with Zillow.
It would be interesting to see what precedence would be established as a result from a suit for breach of fiduciary duty for not posting to Zillow. To date I know of no case decision.
I do know this though, Rob. It would be a very dark day for the real estate profession if a court found in favor of the plaintiff a breach of fiduciary duty for a real estate broker not posting their house on Zillow.
Drew Meyers, thanks for the follow up. As per your previous response:
“I would choose to list with someone who is putting my best interests first (sell my house) rather than their own businesses.”
It’s hard for me to answer this question because I’m detecting a fundamental disagreement. Seems you have some value assigned to Zillow on your conscious . So, by the tone of your response it sounds like you have conceded that a client’s best interests will be served if their listing broker spends his time listing their home on Zillow?
I don’t think Zillow is a good place for me to be spending my clients’ precious time on market. My clients’ time on market is better spent with me doing more productive things that get their house sold.
The value I assign to Zillow is based on the fact they have more traffic than any other website/app (I get that may not be the case in every hyper local market, but they are a top 5 traffic player in every geography I’d guess).
A seller’s goal is to sell their house. Zillow has buyers who may potentially see the listing, and costs nothing.
So why, as a seller, would I NOT want my house listed there?
Drew, it sounds like you certainly have your mind made up that you would want your house listed on Zillow. Zillow is not part of my marketing plan, however I completely respect your preference, or any other seller’s preference, to have your home listed on Zillow. In that case if my company was not including Zillow in the marketing plan I would recommend other real estate agents who would perhaps be able to accommodate your preference.
Hi DeRidder — really good stuff here. Thank you.
You’re right that such a case would be first impression. I’m not aware of any rulings on that front either. But, the similarity to pocket listings is striking. For example, NAR issued some advice on this a while back, (https://www.nar.realtor/articles/law-policy-professionalism-and-pocket-listings) with this:
“The REALTOR® Code of Ethics’ Article 1 requires REALTORS® “to promote and protect the interests of the client.” REALTORS® must always keep this in mind when recommending a pocket listing to a client. Even beyond the Code of Ethics, state law generally dictates that real estate agents owe a fiduciary duty to their clients, meaning real estate professionals must place their clients’ interests above their own and act in the best interests of their clients at all times.”
So when you write, “That’s a far cry from a real estate brokerage not listing on Zillow because competition from Zillow has harmed their business” that falls well short of the fiduciary duty standard under state law, and under COE Article 1.
I feel like you’d have to show why not putting listings on Zillow is in your client’s best interest. What’s the argument for that?
Also, refusing to take the listing obviously doesn’t help if this is a lawsuit AFTER the transaction has taken place alleging breach of fiduciary duty.
Hi Rob, perhaps there needs to be an agreement between the broker and seller at the onset of the listing stating exactly where the listing will be advertised. But keep it like it’s not.
I don’t see how deciding against listing on Zillow has any similarity to a pocket listing. I don’t know how to argue that a pocket listing is in the best interest of a client. I suppose there could be circumstances where a pocket listing might be a good fit, but I’ve never had a pocket listing. In starch contrast, I invoke the help of every broker within my reach when trying to sell a client’s property. I send out emails to all of them that beg for help selling including the offer off coop. In some cases I offer bonuses to brokers at my own expense to try to get a property sold. A pocket listing is the complete opposite of the marketing efforts just described.
You mention a similarity between a pocket listing and a broker not listing properties on Zillow. I disagree with the similarity, there is not one in my opinion. Hence I state again, a pocket listing is a far cry from a real estate brokerage decision not to list on Zillow because competition from Zillow has harmed their business.
Suppose that a court found that a broker did breach his fiduciary duty to a client by not listing the client’s home on Zillow. Can you imagine how Zillow would run with that? The very next day Zillow may send out their typical spam emails to agents, only this time it might say something like, “as a result of JohnDoeBroker vs JohnDoeSeller, it is now your fiduciary duty to list your clients’ home for sale on Zillow”. If that day ever comes it may well be the day the real estate profession died.
Of all the local and national sites where I post clients’ property for sale, ZTR are the only folks who are also my competition and have a business model that undermines and circumvents the real estate profession. What a colossal conflict of interest. So in fact, I argue that a broker who decides against posting to Zillow is enabling himself to provide fiduciary duties to his client at an even higher level. If Zillow puts that broker out of business then he can’t provide fiduciary service to anybody. He too, will then find himself weak, and culled from the herd .
It is not now, nor has it ever been, the fiduciary duty of a broker to list clients’ properties on Zillow. The absence of cases is proof of such. Until a court case to the contrary surfaces, it will never be the fiduciary duty of a broker to list clients’ properties on Zillow. There is no similarity between a pocket listing and a broker’s decision not to list on Zillow. And as such, a broker will find himself well above the fiduciary duty standard under state law, and in full compliance of COE Article 1.
Rob, haven’t you done some work for Zillow before? Or am I mistaken about that? If my memory serves me right I remember it being brought to my attention that Zillow has employed you in the past.
Hi DeRidder –
Yeah, this may be a separate post. I don’t want the important discussion to get lost in the comment thread here. 🙂
The similarity is in the very definition of fiduciary duty. As NAR advisory says, “real estate professionals must place their clients’ interests above their own and act in the best interests of their clients at all times.” As a result, your whole point about ZTR is your competition is irrelevant to the issue of fiduciary duty. The issue is why refusing to put listings on ZTR is in your client’s best interest.
And yes, Zillow is a client, but one of the conditions of that is my blog being off limits. But you can decide for yourself whether I’m making a neutral inquiry or not. 🙂
Rob, thanks for the interesting and challenging convo. I wouldn’t read or participate in your blog if didn’t find your content and your reader’s remarks on the cutting edge.
Thank you DeRidder! Look forward to your participation on the post that just went up today.
I have been living with multiple MLS’s in my Southern California region for 30 years of real estate practice. Some have consolidated, but not enough. What you write about; dysfunctional codependent relationship, protecting micro-fiefdoms has been going on for that long. At every opportunity I have had, I have been encouraging consolidation and removal of barriers, It’s a very slow process.
I can’t wait for one California statewide MLS, it may take another 30 years. Wher will I be then?
Nar might have started off as a benevolent association a resource for RE Agents,but they evolved into a shakedown racket they too are doomed,how can these people present a “code of ethics” to their “members”,it’s a contradiction they have no voluntary members,all participants are extorted,I want them investigated by the DOJ we need to get rid of them and the local boards.
So now we are at a point where we “must’ cooperate with Zillow or fear being sued?
It’s such an interesting question, isn’t it?
I don’t know the answer to that offhand. Maybe that’s a separate post.
I do think that brokers and agents would have to show how not putting listings on the portals that have the buyer eyeballs is in the best interests of the seller client.
Rob, keep the laser on Zillow/Trulia. There are plenty of good portals out there with buyer eyeballs who aren’t trying to take over real estate like Amazon has taken over retail. Let’s keep the focus on the one who is out to take over, Zillow, the one portal whose business model undermines and circumvents real estate brokers and their agents.
Keep it interesting, don’t expand the topic to other portals. I”m not trying to speak for Michael Sosnowski, but believe he did specifically state Zillow in his remark.
Sure. It’s been a while since we’ve had some good ol’ Zaterade-fest on Notorious. I’ll alert Jay Thompson so he can get some more coffee when that posts. 🙂
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