Musings on the Parker Principles, Part 1: Principle 7 – Open Data

As many of you know, I was privileged to be at Inman Disconnect this year. This was a different kind of event than ever before — one aimed at getting something done, rather than hearing about what others have done.

At the very start of the event, Brad Inman told the gathered leaders that the goal was to come up with a set of principles that would guide the real estate industry forward. His model is the Ahwahnee Principles, which was formulated in 1991 and brought forth the New Urbanism movement. So we heard from speakers like Patty McCord of Netflix, Bob Myers of the Golden State Warriors, and others, then broke into small groups to discuss specific ideas and principles.

The result of all of that has now been published and the 12 principles have been named The Parker Principles, after the hotel resort where we all met.

Before anything else, let me say just how much I admire Brad Inman for doing this. He didn’t need to do an event like this, or challenge us to come up with actual principles. He’s got nothing to prove to anybody. He could have just done a glamping event with some cool speakers and made a ton of money putting that event on. But he didn’t take the easy way. He told me that Disconnect and his focus on leadership are not business plays, but personal passion projects. He really put his heart into this event in a way I had never seen before at any Inman event, and it showed.

So, thank you Brad Inman for your leadership in putting this together.

Now then… I have many thoughts on the Parker Principles, which surprises precisely nobody. The issue may be that I have too many thoughts, which are somewhat chaotic and fragmented. So I need to organize them for myself. And the best way to figure out what I think is to read what I wrote.

Therefore, this is an attempt to figure out what I really think about the Parker Principles. I figured I would start with the most contentious of the principles and go from there. If you’re so inclined, come with me on this intellectual journey.

General Observations: On Principles

The first theme I’ve been struggling with even as I was sitting there at The Parker having discussions is this one:

Effective principles are inwardly focused, governing one’s own behavior, rather than externally focused, governing the behavior of others.

When you type in “principles” into Google, the definition that pops up includes this one: a rule or belief governing one’s personal behavior. That’s not the only definition, obviously, and nothing says that principles can’t govern others.

I just think effective principles tell each of us what we ought to do, not what other people ought to do.

This makes principles a dangerous thing to have, in a way, since they constrain our own behavior in the world… while others who do not have them are not constrained. For example, the principle of nonviolence works fine in the United States; not so much in Afghanistan.

The second theme I’ve been playing with in my mind is the difference between rebels and incumbents. The way Brad tells the story, the Ahwahnee Principles were formulated by people who were out of power, not yet in power, resisting against what they saw as the status quo of urban development in the post-war years — the “conventional suburban development” which relied heavily on the automobile.

There were certainly rebels in attendance at The Parker, but the majority of the people there were and are the incumbent powers that be in real estate: heads of major franchises, the President of NAR, owners of major brokerages, successful technology CEOs. Given the audience makeup, I wonder if the Parker Principles are… how do I put this… a bit too conservative.

Example of that is the principle of open data, which is where I want to start the exploration of my own thinking, because it was the most contentious of the principles.

Parker Principle #7: Open Data

Parker Principle #7 is what the attendees spent the weekend calling the “open data” principle. The published draft reads as follows:

Free up property data feeds and remove barriers for innovators:

We should create a world where property data can be used, reused and broadly distributed. Remove artificial and overly protective barriers to property data access and utilization via a universal licensing agreement. Remove artificial barriers to new ideas, inventions and business models that improve the real estate experience.

I wasn’t personally part of the small group that discussed this, because I was leading my own group. But we did discuss it as a large group on Friday morning, and obviously there were private discussions at the meals and receptions and walks around the grounds.

Let’s just say that there was not and is not widespread agreement on what this principle actually means. There were real challenges on WHO this “we” is. Most of the attendees, I think, felt that the “we” is the MLS (and therefore the REALTOR Associations that own/govern them), while the MLS people were pushing back, suggesting that the “we” means brokers who “own” the data.

There were also real questions about “artificial and protective barriers” with some suggesting that there are no such barriers at all. Brokers are completely free to send their data to anybody at any time and for any reason. What they’re not free to do is to send somebody else’s data to anybody at any time and for any reason.

I also think that many of the attendees would dispute that any “artificial barriers” exist today to new ideas, inventions and business models that improve the real estate experience. And they would point to companies like OpenDoor and Knock and Redfin as examples of no such barriers being in place. Other people, especially those in the tech vendor space, would say there are hundreds of such barriers and that they impose millions of dollars on costs that inhibit developing technology for real estate.

Furthermore, still others felt that this emphasis on “open data” ignores real issues and questions about privacy. I think Greg Robertson might be the leading voice on this front of data privacy, since he’s the one who got on stage and uttered the immortal phrase, “F**k Big Data!” while pointing at recent problems of Facebook all over the news.

Suffice to say that I don’t think there was widespread consensus forged on this issue. We all voice-approved the principle because… well, that’s kind of what we do when there are flights to catch and such… but I personally feel there is no consensus whatsoever on “open data” whatever that means.

Artificial vs Natural Barriers

Just looking at the text of the principle, where my mind goes first is the word “artificial”. The principle is to remove “artificial” barriers. Okay, fine. Even if we assume that a consensus exists, what is the difference between an artificial barrier and a natural barrier when we’re talking about property data?

To use but one example, some states are non-disclosure states. Let Zillow explain what that means:

The big, big picture is that in a non-disclosure state, transaction sale prices are not available to the public.  There are two main causes for states being considered non-disclosure:

• The first cause is that in most non-disclosure states or counties, when a real estate transaction occurs, the sale price is not required to be submitted to the county office (this is the case in Texas and North Dakota among others).
• The second cause is that even though records are kept by a governing body, the records can not be distributed to the public.  Such is the case in New Mexico, which “is a strict nondisclosure state, information about property can only be given to the registered owner of the property.”

Since we rely on public county records as our primary data source driving our Zestimate algorithms (which take comparable sales prices into account), it poses a challenge to calculate accurate Zestimates when sale prices are not available.

Is this an artificial barrier or a natural one? It’s not a natural barrier in the way that a river or a mountain range is a natural geographic barrier, since the nondisclosure rule is a creature of law. So in theory, if NAR and Texas Realtors follow Principle #7, they would start lobbying state legislatures to change the law.

But the nondisclosure law is the result of the citizens of Texas (as an example) deciding through the democratic process that they don’t want the government and tax collectors and nosy neighbors to know what someone has paid for a property. Does Principle #7 now require that the real estate industry stand against the will of the people? It’s going to take some real convincing to get Texas Realtors to take this stance and make it a legislative priority. So maybe this is a “natural” barrier not of the industry’s own making.

Are MLS rules that prohibit display of off-market listings (sold, pending, withdrawn, etc.) artificial or natural barriers? On the one hand, you could argue that they are artificial, since they are clearly products of an MLS policy committee of some sort (NAR’s committee, or the local MLS Board), and should be removed. On the other hand, you could argue they are natural barriers, since the MLS is about marketing listings for sale, not about properties that are no longer for sale for one reason or another.

It’s complicated.

Overly Protective?

The phrase “overly protective” raises a dozen questions as well. It is a political dodge, of course, since there was no way that the 200 or so gathered attendees would have come to agreement on what the phrase is trying to get at. But everyone can be in favor of doing away with “overly” protective barriers.

But we missed the opportunity to engage in some important debate on this one, so let me try to lay out the issue here. Forget the “overly”; focus on “protective”.

Protective of whom?

If the answer is “consumer,” then it really challenges what barriers might be “overly” protective. Protecting the client’s best interests is baked into the DNA of the Realtor and is required by fiduciary duty laws. Furthermore, consumer representatives were not present at Disconnect, which makes this problematic in a different way.

If the answer is “the agent or “the broker,” then we’ve opened up a Pandora’s Box. More on this below.

If the answer is “the MLS or Association,” it seems to me that most people would reject just about every barrier as being overly protective, including many of the MLS and Association CEOs out there. MLS CEO’s like Art Carter, David Charron, and others all have long said that their job is to protect the Broker Participant first, then the Agent Subscriber, and then the Public. Self-protection is not a major concern of theirs already today. “If I have to get a different job, so be it!” is a very common attitude amongst MLS executives.

If the answer is “the real estate industry,” then it is no answer at all since that’s so general as to be useless in serving as a principle of any kind.

Are there any other “whom” we should be considering? I don’t see one, but again, leave your thoughts in the comments.

The Pandora’s Box

What we’re left with, then, if we think through things and get right down to it is that artificial barriers overly protective of agents and brokers be removed. What exactly are we talking about here?

It is not at all clear to me who the “we” is then, and what the courses of action are.

Think back to the top, where I suggested that principles are truly effective only when they govern one’s own behavior, not when they try to tell others how they ought to behave.

So does Principle 7 suggest that brokers and agents should voluntarily put their property data into the public domain (think, e.g., open source and Creative Commons)? I don’t know that anyone would agree to that. So maybe it means minimal limits on usage rights — which goes to the “overly protective” vs “right amount of protective” issue.

What makes this question particularly relevant right now is the fact that the policy and legislative worlds have turned their eyes on real estate. Inman reported that the FTC and the DOJ will hold hearings on real estate competition with a particular focus on real estate data sometime this spring. This Thursday, the Washington DC think-tank Information Technology & Innovation Foundation will hold a panel discussion called “Using Technology to Make Real Estate More Competitive.” The description of the ITIF panel says:

Technological innovation has made it cheaper, easier, and faster to buy and sell most products. However, the real estate industry has firmly resisted disruption, successfully lobbying for state laws banning commission rebates, preventing the public disclosure of residential sales prices, and requiring consumers to purchase real estate services that they may not want, as well as blocking third parties from accessing listing data. These practices have allowed the industry to preserve the long-standing fixed commissions for brokers even as home prices have climbed much faster than inflation.

Does Principle 7 now dictate that powerful influencers in real estate — like NAR, a major power in lobbying — change how they might approach those hearings? Maybe that NAR would not lobby for “anti-competitive” laws and regulations (if it ever did)? Or to flip the script on its head, maybe that NAR would lobby for federal regulation/legislation that forces the doors wide open as it comes to property data? It’s hard to imagine that, but that’s kind of what Principle 7 implies, doesn’t it?

If the focus of policymakers is on creating more competition in real estate, does Principle 7 now dictate that those incumbents like brokers, agents, MLS, Associations, and even technology incumbents step back from arguing for the status quo? After all, the question I asked above is, “Protective of whom?”

Can you see just how thorny these questions are, and just how unsettled Principle 7 might actually be in practice?

Thought Experiment: The Data Utility

Let me try a thought experiment to force the issue of how Principle 7 interacts with real decisions/questions. Back in January, I wrote this post called One Future of the MLS, expanding on my presentation at Inman New York.

Let me streamline the thought experiment I proposed in that post and lay out the following scenario:

Following the FTC/DOJ as well as Congressional hearings over the course of 2018, the Federal Government proposes the creation of a National Property Data Registry. The purpose of the NPDR would be to eliminate artificial and overly protective barriers to property data, to encourage competition and innovation in real estate, and to protect consumers.

The NPDR would be operated under HUD, in partnership with state regulators and NAR. There would be the national NPDR database of course, as well as individual state databases — e.g., tx.npdr.gov, ca.npdr.gov, etc.

NAR would contribute its Realtors Property Resource asset to NPDR, and operate NPDR for HUD and the 50 states plus DC and US Territories. NPDR would operate as a public data utility, with access and rates regulated by HUD and by each of the 50 states. RPR would be paid a portion of the access fees collected by NPDR, with the remainder going to HUD and the 50 states.

As a public utility, NPDR would be granted a monopoly on real estate data. Data standards would be set by the NPDR Data Standards Commission, which will absorb RESO, expand it to include policymakers, regulators, academic experts, and technology leaders from companies like Google and Amazon, and make it a part of the regulatory framework within HUD. With a single national Primary NPDR Data Standard, as well as 50 State Secondary Data Standard, any developer or technology company wanting clean, fast, easy access to data will be able to get what they want from NPDR and its state-level sub-databases.

Real estate brokers and agents will contribute all listing activity data to NPDR and keep the data up to date as a condition of their respective real estate licenses by the state licensing authorities. Failure to comply will result in penalties up to and including revocation of the real estate license. NPDR will promulgate regulations governing data contribution and accuracy requirements, which will be adopted by the 50 state regulators.

Congress has introduced legislation to make all of the above possible, called Modernize Organized Realty Data Ownership and Responsibility Act of 2020.

Now then, what does Principle 7 tell you what your response to this legislation should be? Not what somebody else should do in response, but what you and your organization would do in response.

Your thoughts and comments are particularly welcome on this one.

-rsh

https://www.youtube.com/watch?v=eabefjsJsAQ