Over the weekend, the National Association of REALTORS voted to become more like a union, and to start the process of killing off MLS. Did you miss that vote, too? We thought so.
As usual, we are amazed (and thankful) for the law of unintended consequences. So it may come as no surprise to our regular readers that we think the changes implemented by the National Association of REALTORS to two of its key policies last weekend aren’t at all about what most people thought they were. For weeks leading up to the Midyear Meetings, much-to-do was made amongst the NAR membership about the funding of the “Realtors Party Political Survival Initiative” (RPPSI) and the implementation of IDX Syndication rule. Much of it was well-founded to-do, too. But we’re not sure most people realize what the final decisions on these policies really mean for the future of organized real estate.
In fact, it could be that both were distractions, keeping Luca looking forward while Sollozzo’s man sneaked up behind.
In the spirit of full disclosure, the following is our own analysis. No NAR leaders were interviewed, consulted or even annoyed with the interpretation we’re about to offer. That’s because, we suspect, even if they were, they would not have thought of it this way themselves. In fact, from the Twitter stream coming from the Executive Committee meeting, some Directors didn’t even know they were voting on some of this stuff when they voted for some of this stuff. So much the better (as you’ll see why later).
First, to the creation of the RPPSI.
According to the NAR (not speculation, this) the assessment of a “dedicated” fee for political lobbying is necessary, beyond the existing Realtors Political Action Committee (RPAC) funding, because of a recent decision by the Supreme Court (Citizens United v. Federal Election Commission). NAR assumes (probably rightly) that much more money will now flow into candidate and policy advocacy in future elections. So NAR took serious action immediately to ensure their views on the housing industry are heard. What NAR didn’t say was, the Supreme Court decision will unleash tons of union cash in future elections, so…
NAR needs to become much more like a trade union than a trade association in order to buy as many politicians as the other unions.
Now, to be fair, this isn’t entirely new, but merely ramped up political action with members’ money. RPAC contributions were not only voluntary in the past. Most members had no idea their state associations often used their dues to fund their RPAC “suggested” contributions to NAR each year, above voluntary donations (or to close the gap between contributions and leadership-determined goals). So nothing has really changed; except that the NAR has just become much more obvious in its union-like operations. Philosophically, it’s a big deal, because if you asked most members, we bet they thought their membership dues went towards all the industry-improvement things NAR does, like research, Code of Ethics, arbitration, education, etc.
NAR’s members, many of whom are feigning outrage, shouldn’t be so shocked. How do they expect to keep their government tax subsidies if their trade organization’s Voice couldn’t be heard by candidates and policy makers in the future? REALTORS won’t retain the Mortgage Interest Deduction when cash-rich lobbies will out-advocate them (never mind the fact that 67% of taxpayers don’t itemize their taxes). Nor will they get cheap interest rates, affordable housing subsidies and literal handouts – think $8,000 First Time Home Buyer Credit – if they can’t muscle the other unions out of the legislators’ offices. Facts don’t matter in political advocacy. Just money.
And the Voice of Real Estate needs money if it wants to keep being heard.
Ok, so NAR’s a union. It only halfheartedly acted like one in the past: now, it’s full steamroller ahead. Big deal? Maybe. Might the RPPSI dollars back a candidate who like NAR tax loopholes, but not the personal political preferences of some of its members? Sure. But to expect the NAR to be consistent is unrealistic in the era of politics of pull. When everyone needs a Wesley Mouch in Washington, you might as well hope yours has the nicest suit and a wad of cash.
What about the IDX Syndication rule?
First, the back story: NAR recently implemented a rule that allowed direct access to IDX data via RSS (syndication) technology. Essentially, brokers and non-brokers could integrated feeds of housing inventory into websites and apps. On one hand, large franchisors can now put the entire housing inventory on their websites, because their affiliated brokers have broker-membership in the 800+ local MLS systems around the country. On the other hand, the data might be displayed by anyone who was granted MLS access. And that might be third parties nobody has anticipated yet.
Additionally, very serious concerns were sensibly raised by the Realty Alliance and Leading Real Estate Companies of the World about protecting consumer privacy with this technology. It’s one thing for a consumer to post their personal data on a social network or other site; it’s another thing when their compensated broker starts super-spreading it at the speed of syndication. This is no small concern: Google, Apple and TomTom have all faced seriously upset customers lately on concerns that their personal data was too liberally captured, stored and used by unintended parties. Even the mighty Facebook, whose terms of service essentially said ‘too bad’ backed off of its initial advertising model because consumers felt it used their personal data beyond their expectations. So the objections to the syndication policy aren’t just about brokers’ losing control of their data – that happened almost three decades ago when they joined collectives called MLS. It’s really about the potential for possible customer push-back of seeing their kids’ bedroom photos suddenly displayed all over webspace.
Perhaps some brokers realize – but to what extent? – that using RSS feeds would make it easier for third parties to jump into real estate as new competitors. It’s clearly a formula that will simplify the emergence of aggregators to start “selling leads” back to the brokers. More capable companies need not fear this; but many of the mom-and-pop stores in the NAR should be worried that their ability to compete against huge internet marketing budgets will leave them at the mercy of future HomeGains, Trulias, Zillows. Some say it’s not new, just more pay-to-play costs. But it’s very likely the IDX syndication rule will only disintermediate more brokers than keep them central to the transaction in the future.
Again, so what? This is just picking at the scabs of the never-healing self-inflicted wound REALTORS stabbed themselves with decades ago, called MLS.
Does it matter that the rule was implemented in January, and that many NAR members have spent millions of dollars upgrading their websites and mobile tools? Now they might sue, because NAR’s strong-arm failed at the last minute: In a marginal vote, NAR patched the IDX policy with an opt-in rule which means MLSs and brokers will have to leap through affirmative steps of entering into IDX syndication. It will delay MLS data integration into IDX syndication. But eventually, it will all happen.
It’s not the loss of control of listing data, nor the potential for creating new competition, or even the cost of lawsuits that NAR didn’t anticipate. No, when NAR passed the IDX syndication policy, it re-opened a wound that many brokers thought they’d resolved in their heads, but now find they were just avoiding a nagging suspicion that something’s been wrong with outsourcing control of their companies to local and national committees all along…
And that’s why IDX syndication actually means the beginning of the end of Multiple Listing Services.
Now, as counterintuitive as that seems, stick with us. MLS has been a battering ram members have been hit with for over two decades. Both the technology and the collaborative compensation policy have consistently thwarted innovation. MLS rules have been used to attack non-traditional sales models. MLS rules have been used to restrict how brokers use their own data. MLS rules – as policy and technology – are essentially a collective suicide pact. Nobody can do what everybody cannot, at least if it involves their most important business asset.
MLS should really be called M.A.D.
Back in the days, when the internet was a fad and technology was expensive, it made a modicum of sense to collectively buy a computer and some modems (remember those?) and store them at the local Board office, connected to multiple phone lines. Today, an iPad has more memory than those systems did, and wireless connectivity. That’s the simple way of saying that there’s absolutely no technological need to centrally warehouse data in the 21st century. Perhaps REALTORS still think the cloud is a weather pattern? Never mind.
As for sharing it between multiple brokers, alternatives have already proven the possibility: Postlets, Point2 and – shock! – peer-to-peer syndication feeds make it possible for companies to transfers data to each other without without much cost (in some cases, none). If an unfunded-nobody can syndicate their data to Huffington Post using a free WordPress-coded blog and free WiFi at Starbucks, don’t you think today’s brokers can figure out how to send data to each other?
If they wish to.
And that’s the real unintended consequence of the IDX syndication rule. Some brokers must now seriously consider withdrawing from the MLS club entirely. And why not? Most of New York City has survived just fine into the 21st century without MLS. Millions of real estate brokers around the world get along fine without overly organized compensation policies and data policing. They know how to cut each other a referral check, and generally play nice. Consumers, on the other hand, are far better at inducing brokers to keep their data fresh than a few dollar fine by a MLS cop, lest the broker face consumers’ wrath on Twitter and Yelp.
So all of the “nice” things that MLS policies supposedly provide brokers are becoming less valuable to many brokers with every new technology decision that accompanies them. They must also see the cost savings all if they withdrew from MLS, rather than constantly spending money to reconcile the redundancy problem. Most companies, and certainly the franchisors, have near-duplicate inventory tracking systems to MLS. Yet they spend millions annually trying to manage feeds and updates between significantly uncompatible systems. Add in the training costs for staff, redundant data entry for accounting and transaction management systems, infrastructure, help desk, compliance, and monthly membership fees: the budgetary reasons to leave MLS are starting to make a lot of sense.
We suspect it will be more philosophical, though. Brokers are entrepreneurs at heart. They can’t stand loss of control. Empowerment of competitors (inside and outside) incenses them. Data restrictions by third parties frustrates them. Unwanted data distribution feels like theft to them. It’s amazing that so many have suffered so long under such committee-cooked insanity. Possibly this final fiat will cause some to go their own way. Especially those that are really good at the business of real estate.
What about the brokers who like IDX Syndication? Watch your back. He who lives by the committee also dies by the committee. They might have some control today, but tomorrow find themselves on the other side of the table. Oh, they just did: The opt-in rule at just vaporized the millions they spent implementing last Novembers rule. Funny how that stuff happens.
So will RPPSI and IDX Syndication cause NAR to lose members and damage MLS systems nationwide? Probably, and we suspect they’ve considered that. It’s something they can probably live with.
It makes sense for NAR, too. Why wouldn’t you start the process of undermining the 800 data fiefdoms across America after committing $20 million to the creation of a national database of properties? If the REALTORS’ Property Resource (RPR) could streamline the process and lower costs for members of managing data, then it could become the Orbitz of the industry. That would redeem NAR’s reputation, too, since they blew it with REALTOR.COM. This time, RPR has no outside stock holders, investors or partners. Furthermore, if NAR were not planning to make RPR a super-MLS in the future, its members should be even more upset. Who spends $20 million just to add “robust information” to a housing database, especially when most of what was added was available at the local level to the local REALTOR anyway?
Our recommendation is for those brokers who don’t like the IDX Syndication rule to take the hint! It’s going to survive, because as long as MLS policy is one where “everyone gets along, shares, plays nice” then the warm-fuzzies will out-argue the capitalists in the future: local control be dammed! Remember, the MidYear Meeting occurred in Washington, D.C., where centralization has been the theme for more than 100 years. Coincidence? We think not.
It’s the logical conclusion to a policy of “it takes a village.” The very concept of a cooperation and compensation system is incompatible with the idea that a broker would be allowed to remain in control of his business. Eventually, every collective eats its own.
Maybe none of this makes sense, especially to some people used to the REALTOR family metaphor. But when families become unions, and participation – in dollars and data – becomes mandatory, it’s time for some to consider defecting. Better to do it sooner, rather than later, especially if the National Association of REALTORS continues making offers to its members they cannot refuse.