Random Musings: FSBO and the MLS, NAR Mandates Syndication, and Googlicious Horror

I’m packing for a two-day road trip, after which I will be in the mountains of North Carolina as opposed to the swamps of Houston for a couple of weeks. But I wanted to share a couple of random semi-amusing thoughts I’ve had in the last couple of days. Maybe you’ll find them amusing as well as thought provoking.

Here we go.

Shouldn’t the MLS Accept FSBO Listings?

David Charron, the Chief Strategy Officer of BrightMLS and the Godfather of the MLS industry, recently posted a couple of long comments on Facebook. One of them was all kinds of interesting for a lot of reasons, but the part that got me thinking was this:

In the meantime, the local market makers (the MLS) have not weighed in on this national debate. To the casual observer, we have been MIA or silent in this battle of wills. But to assume our reticence is a sign of weakness, acceptance or avoidance would be wrong. Way wrong.

Increasingly the MLS community is laser-focused on ensuring its brokers remain an integral part of the conversation with the consumer. MLS’ in Florida, California, Texas, the mid West, the mid-Atlantic, Connecticut, Minnesota, Colorado and many other areas are engaged in substantive discussions that broaden cooperation and collaboration amongst and between participants. Large and small, we are breaking down the silos of geography and accompanying protectionism. It’s not happening at breakneck speed (yet). But the momentum is there. Measurable progress is occurring every day.

So while this national debate ensues and industry leaders thrust and parry, locals continue to work silently to make the market work. [Emphasis added]

At the NAR Midyear meetings in DC, I saw a pamphlet from CMLS where they trotted out a new tagline of sorts for the MLS: “Making Markets Work“. Alas, I wish I had taken a photo of the cover or something, but I’m sure your local MLS can get it from CMLS.

Well, if the local MLS is the local market maker, and its value proposition is that it makes the market work… isn’t it time that the MLS accept FSBO listings, new construction, and private sales data as well?

According to NAR, some 9% of homes sales are by owner. But we also know that some percentage of FSBO listings fail, and an agent gets involved. I mean, there’s a whole cottage industry of coaches who train agents on how to get FSBO listings after all. So we don’t actually know how many listings start out as FSBO, then end up as an agent-assisted transaction.

That’s not relevant to anyone in the industry… unless you’re a local market maker. If you are, then not having almost 10% (or more) of the activity in your market not on your system is a Bad Thing(tm). Hard to claim that you’re Making the Market Work if one out of ten transactions had nothing to do with you.

That’s just FSBO transactions. What about rentals? New construction? Manufactured housing (aka, mobile homes)?

So. If the local MLS is or wants to be the local market maker… shouldn’t the people who run it drop the objection to FSBO listings and start accepting them? And apartment rentals, new construction, manufactured housing, etc.? Just because a REALTOR isn’t going to make a big commission doesn’t mean those things aren’t part of the housing marketplace. Shouldn’t they all be on the MLS, the local market maker?

NAR Mandates Listing Syndication

The second amusing thing comes to us by way of NAR. In the aftermath of the Zillow Instant Offer brouhaha, NAR released this advisory entitled, “Your Answer to Zillow’s Instant Offers.” It’s worth reading in full.

Of course, none of the answers to Zillow’s Instant Offers is: “Provide your own Instant Offer.” But hey, I’m sure someone somewhere is going to do just that.

Instead, NAR provides six talking points to talk the homeowner out of a direct cash sale to an investor:

• I work in this market and know the community better than any website could.
• I will help you get your house ready for sale.
• I will market your home to the widest possible audience, not just investors seeking to make a profit on your home.
• I will aim to get you the best offer possible, and I have the skills to help you negotiate the terms of the sale.
• One of the best parts of my job is helping you find a buyer who will love your home the way you do.
• As a REALTOR®, I follow a Code of Ethics that includes a pledge to “protect and promote the interests of [my] client” (Article 1). These online companies may facilitate your transaction, but not necessarily with your interests in mind. With “Instant Offers,” unless you choose to work with an agent, you’ll be on your own handling the details of the transaction. [Emphasis added]

Leave aside for the moment a few amusing details, such as the fact that Instant Offer includes the option of having an agent represent you when selling to an investor.

Or the fact that the most REALTORS have no clue what the Code of Ethics is, except that it’s some yadda yadda you have to deal with to get access to the MLS.

Or the fact that the Article 1 pledge to “protect and promote the interests of the client” is now required by the real estate and agency laws of all 50 states.

Instead, focus on the emphasized part of NAR’s Talking Points. If that isn’t a full-throated endorsement of syndication, I don’t know what is.

You simply cannot market my home to the widest possible audience, not just investors seeking to make a profit on my home, if you don’t advertise it on the two largest real estate websites: Zillow and Realtor.com. The whole “But I have IDX” or “My MLS has a website” defense doesn’t even pass the smell test given the traffic we’re talking about, especially once you take mobile into account.

If you combine that talking point with the last one about “promoting the interests of [my] client” and what you have is NAR more or less mandating that a REALTOR syndicate listings.

It’s taken a while, and it’s been a long torturous path to get here, but finally, at long last, NAR endorses (and possibly mandates) listing syndication. Bet you didn’t see that coming.

How Zillow Should Improve the Zestimate

Also in recent news was the Zillow Prize, a competition to improve the Zestimate:

Today, I’m pleased to announce the launch of Zillow Prize, a contest that allows data scientists from around the world to work alongside us to improve Zestimate accuracy and have the chance to win $1 million. This is the first time we’ve ever invited data scientists outside of Zillow to work on the algorithm.

Well, I’m no data scientist, and I’m not going to go after the $1 million prize. But I have a suggestion for those who are and will. If you win using my idea, I’d appreciate a case of wine or something sent my way. 🙂

Back in 2015, I wrote a series of posts about Collateral Underwriter, a Fannie Mae program to help make appraisals more… ah… accurate, I suppose is the word. Back then, it got the appraisal community in an uproar.

Thing about Collateral Underwriter is that it’s built on top of something called UAD, or Universal Appraisal Dataset. That in turn involves UMDP and UCDP and so on and so forth.

The point is that Fannie and Freddie and related government entities like Ginnie Mae and USDA and so on have a gigantic database of all appraisals conducted in connection to every single loan made under their umbrellas. That’s pretty much every single residential mortgage loan in America, leaving out only the tiny fraction of non-conforming loans.

So, if you want to win $1 million, figure out a way to use the Fannie/Freddie database of appraisals in the Zestimate. You can say a house is worth X or Y or Z, but when the bank says that the house appraised for X and it’s going to make its lending decision on that… well, chances are the house ends up being worth X. A house is only worth what someone is willing to pay for it, and what someone is willing to pay for it is directly influenced by (if not dictated by) how much the bank is willing to lend.

Another way to skin the same cat might be for Zillow to go start acquiring appraisal companies. There’s already a shortage of appraisers, and the Feds appear willing to help. Well, go get yourself a tax break or something and start hiring/buying appraisers by the thousands. Seems to me other giant information-based companies (Google?) might be interested in partnering in something like that given the amount of data such an operation would throw off.

Speaking of Google…

While the industry freaks out about Zillow Instant Offer, I wonder if Sergey Brin and Larry Page are eager to see the results of the test. After all, they put Google in the hands of Sundar Pichai so they can look at sort-of-unrelated fields.

And while Zillow is the #1 website in the real estate category, I’m willing to bet that most consumers don’t start searching there. I think they start searching on Google and go from there.

So… say it with me: Google Instant Offer.

You can already book hotel rooms and airline flights directly from Google. Why not solicit an offer on your house right from Google?

That frisson you feel is delicious horror, similar to what you might feel at the next Friday the 13th movie.

On the Road Again

Okay, that’s it for this set of random musings. I have to get back to packing, then load the car for a long-ass drive. But it’ll be fun, because I do so love seeing the vastness that is America. Two days, and we’ll only cover a few states in the Southeast. Amazing, that.

Have a great one everybody, and see you in a few days!

-rsh