Matthew Ferrara, Philosopher
 

NAR MidYear Meeting 2011: An Offer You Can’t Refuse

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.

Oops.

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.

  • Samruta

    Wow Matt, Very Thought provoking. The dinosaurs and elephants should be heading to the grave yards now. No pretense intended, but I look at some of our brother and sisters in the business when we have these discussions, and I get that far away look. Like man please don’t tell me I have a disease after I went to the doctor to get checked out. Good stuff, should be read by everyone who wants to survive. I agree, sooner than later.

  • Anonymous

     Wow, what a good read. I didn’t make it to DC last week but I followed the Twitter-stream on these issue and more (how about those jewelry booths?) This post seems to be spot on with your analysis and future predictions. I especially hope the emergence of RPR does occur and vindicates that strategy…As for the raising of cash in order to pay to play under the Citizen’s United decision (God help us all) it did seem inevitable… (God help us all) it did seem inevitable…

  • Thanks, Paul. I think the move to political action on this scake is huge. It has some level of inevitability in the decision, but also a big risk at alienating the public. The public sentiment regarding political action committees of all kinds is quite negative these days and NAR runs the risk of being lumped into the lobbyists category. Well let’s hope it all works out. Somehow I don’t think the law of unintended consequences will let that happen though

    Matthew Ferrara & Co. Mobile Transmission Complete.

  • Joditussing

    EXCELLENT delivery!  Now let me ask a question teacher… Will the big Real Estate companies like CENTURY 21 & Re Max still have IDX on their websites?

    I’m ok with everything I think, that NAR is doing, but as far as MLS- from what our CT CAR attorney says- the MLS is an offering of a Fee for Service that is it, so what it has turned into…. the way I see it, the more exposure on these listings the better- as long as the aggregating vendors – Lsithub, Realtor.com, Trulia et. have the same responsibility to update the status of the listing within a set time frame-  if aggregators are better at getting the potential customers attention than we REALTORs are… oh well

  • Jodi:
    Excellent question. Here’s my answer:

    ABSOLUTELY! Franchisors will do whatever it takes, as will independent brokers, to show the data their clients want on their sites. They can do it peer-to-peer with other companies; or they could use a “go-between” service like Point2. What they should NOT do is subordinate their business decisions to ANY committee or third party vendor or association in “exchange” for services. For example, when I contribute my blog or videos to a third party site, I do NOT lose my copyright or right to do ANYTHING else with them I want. This is NOT the case, as you know, with the MLS approach we’ve had to date. Every twist and turn tells the brokers what they CANNOT do. And an OPT OUT provision is not enough, because even though that controls how a broker might share his data, he’s still subject to all sorts of other things (ie., no company watermark on his OWN video productions of listing commercials??)…

    I’m not saying companies shouldn’t work with VENDORS; I’m saying they shouldn’t integrate the vendor/technology decisions with POLICY decisions that interfere in ANY way with what the broker wants to do with his own data. So a Franchisor like Century 21 might prefer to outsource it; but as the CLIENT of that vendor, they will have TOTAL control over their data.

    Just imagine what would happen if you created some content, then you submitted it to a site, say, Amazon, who then decided it’s POLICY was to take your stuff and turn it into a book and sell it and give you “marketing” in return. Would you feel good? Better yet, can you pay the bills with “marketing” exposure? Same issue here.

    Finally, I’m only going to quibble a tiny bit with the idea that MORE exposure is BETTER for selling a listing. I know what you’re saying essentially, but one thing I’ve learned over the years is that more is NOT always better. In fact, if the property is unstaged, mispriced and poorly photographed, MORE exposure is harmful to both the broker and the customer. The only thing that counts is offers, not exposure. And many people can “place” a house for sale with their customer-base with just a few calls, clicks or handshakes. Maybe if we stopped our infatuation with MORE, we could put even more effort into being better… :>

    Thanks, Jodi!
    Matthew

  • You had me at “Organized Real Estate” next to Luca Brasi’s famed head shot!
    The MLS watermark on MY photos started to P!$$ me off a few years back…I’m with ya’!
    As far as syndication & MORE exposure…I’m making a HUGE assumption here, but let’s say price, condition, etc, were actually well thought out prior to max exposure. Then, how is it a negative? (Again, a huge assumption, I know!)
    As far as really getting it…Yes, broker’s are capitalists & entrepreneurs, at heart & in spirit. Many agents, on the other hand, don’t really concern themselves that far into the guts of things. They follow the status quo like lemmings. It is what it is with no thought of what it could or should be or how it could, would, or certainly does effect them…That’s where you come in, Professor Ferrara.
    “…And may their first child be a masculine child!” 
    (WIJG?)

  • Great comment – Thanks!

    It’s unfortunate that agents are content to “go with the flow” because when the flow changes – like these two NAR policy implementations – and they aren’t in the “know” they might just “flow” right down the drain….

    – MF

  • Bill malkasian

    State associations don’t use dues to Fund political contributions to candidates as it’s illegal u der election laws….you need a political reporter to help you in this area …stick to real estate your out of your league on politics

  • Bill
    That’s interesting because it was the opposite of the information we had; perhaps it’s a “line item” distinction in the budget? Not “dues” but general fund dollars used to fund the RPAC contribution? Still, that’s members money, isn’t it?

    Let’s say, for the sake of argument, that you’re correct; it doesn’t change the point of the article, does it, that NAR is now playing on the union-level political advocacy field? And assessing members funds “without a choice” as opposed to purely voluntary RPAC donations. And that’s not splitting hairs.

    – Matthew

  • Bill Malkasian

    Matt the money is going to primarily issues that we educate the voters on in making a choice on a candidate. Its not hard dollars like RPAC where you give a direct contribution. AND all of these programs NAR, States and locals already do to a certain extent. Its simply providing more resources down the line all over the country. Homeownership is under attack, period.
    Its not like a union, and I know that as if you look at who NAR supports through the Realtor party program both sides of the aisle are covered very well. Its game changer politics and NAR is ahead of the curve on this one. 

  • Bill:

    First, let me say that I’m not actually saying this is a “bad” thing for NAR, just a monumental change that I’m not sure all members fully understand. In fact, in my article, I point out that, if REALTORS want their voice heard, they *need* money, and therefore, members are going to have to ante up. But the question is: will it be mandatory or voluntary? $40 million is a lot of money.

    Yes, the political field has changed: but mandatory political fees also changes NAR itself. I admit I don’t know if it’s been done in the past – but that wouldn’t be a justification, either…

    From what I’m hearing from people I meet – and it’s an advantage for me to be in multiple cities and states each week to get a very good cross section of voices, not to mention online – many people feel as if this was an assessment for political advocacy without a choice in the matter; ergo, it feels very much like how unions act with their members.

    It’s also odd to consider that this money will go to “educate voters” when clearly so many of NAR’s members could have been better educated on what this assessment is supposed to mean, from their leadership’s perspective.

    When any organization assess its members a fee for political activity – although it otherwise has a fully functional VOLUNTARY PAC – members will take notice. In ordinary experience, this is how most people perceive unions in other industries to act. They know NAR advocates for its issues, but they might just object to being summarily taxed rather than encouraged to contribute to it.

    Also consider this: The same Executive committee that gave brokers the ability to OPT OUT of the IDX Syndication rule voted on at the same session didn’t give its members the ability to OPT OUT of paying for political fee assessment. Ironic? I’d say, because not all members actually support the POLITICAL objectives of NAR (ie., first time buyer tax credits, MID, etc) even though they fully support NAR’s TRADE association activities, such as education, professional standard, and marketing.

    As for playing “both sides of the aisle” that may be entirely true; but that’s not really the issue, because some members might not like either side, or want to spend their money in politics at all. In Citizens v United, the ruling essentially said that unions and corporations could now spend from their general treasuries to finance independent expenditures* in political advocacy. NAR isn’t a corporation; but with this action, does it remain a trade association? In my mind, not when it moves from voluntary to mandatory fee assessment for political action.

    When it looks like a duck, and quacks like a duck, I usually think it’s a duck.

    What NAR did might fully be justified; even ultimately in its best interests in the political realm. But given some people reported that some DIRECTORS did not know they were voting for the funding mechanism when the issue was moved, seconded and passes – and a subsequent motion to reconsider the funding mechanism defeated – it seems a little odd for a trade association’s activity. Perhaps I’m just a purist, at heart? Even if the passage was a foregone conclusion, such actions remind some like me more of the union bosses we hear about than an organization intent on educating people on the issues.

    But then again, that’s just one little opinion. I’m sure there are plenty of members who love this move, or might prefer NAR to *only* do political lobbying. In the end, if NAR can keep getting its policy perspectives heard, then perhaps even the other members won’t mind carrying the membership card around.

  • Todd Emerson

    Great post Matt!  Thanks for articulating what I’m sure so many must be thinking!  Being a NAR Director and having been witness to the events as they transpired all I can say is it was a well “orchestrated” event and your Union description is right on!  While I appreciate the apparent need for the RPPSI, the method and manner in which it was approved was mind-boggling.  Nothing like the “powers that be” challenging the membership to even consider expressing an opinion by throwing up the 2:00 minute warning clock “in the interest of time”.  It would strike me that time would be of least importance for a body such as NAR to be concerned with in light of the fact it collectively meets just twice a year to make decsions that are of significance importance to the body as a whole.  Couple that with the fact of even if I was an Olympic Gold Medalist in the 100 meters I wouldn’t have been able to make it to a microphone between the time the 2 Options were presented and the call for a vote, and then afterwards a member stands up to question the manner in which the events unfolded, makes the comment it would have been nice to have had the opportunity for debate and the reply is “we followed protocol” (now go sit down) I guess I should have looked around to see if Jimmy Hoffa was in the room………he would have been proud.

  • Thanks, Todd, for your comments. I, too, was surprised by how some of the actions went… I also think it’s such a big change in direction that perhaps better outreach and more input, even if the decision was a foregone conclusion, should have been permitted….

  • Lorettaw

    I just left your class in Portland Maine and I was totally impressed………..Now I am reading this…………………..I am so excited……………Thanks so much……………
     

  • Very well put. All True, and I for one am getting out of Dodge.  It was the “mandatory” that did it for me. I think someone should start a class action law suit against nar.  We are still in “america”?!?
    Freedom of choice on political issues?!????
    Not according to nar…
    After almost 30 years…I don’t need them, Don’t want them, and will be rid of them very, very soon. 

  • It’s not the case that “NAR recently implemented a rule that allowed direct access to IDX data via RSS (syndication) technology.”

    A work group formed by NAR to study the issue has twice recommended that NAR make changes to that effect to NAR’s IDX policy. The work group has been trying to find a way to amend the IDX policy that would explicitly permit brokers and agents to distribute IDX listings to mobile devices and social networking sites like Facebook.

    But NAR’s Multiple Listing Issues and Policies Committee has failed to adopt the work group’s recommendations in two successive votes (at the annual meeting in November, and again this month at NAR’s midyear meeting in Washington D.C.).  

    In other words, a rule change to allow “access to IDX data via RSS (syndication) technology” has been proposed, but never approved by NAR’s board or implemented.

    There was a change to the IDX policy, which was approved by NAR’s board of directors in November and implemented in January. But it was not the rule change you describe here.

    The rule change implemented in January allowed franchisors (Century 21, RE/MAX, etc.) to index and display their franchisee’s IDX listings in markets where they’d obtained permission from their franchisees to do so.

    Before, franchisors were pretty much limited to displaying the listings actually represented by their franchisees, and could not display listings represented by other brokerages.

    IDX listings include all listings of participating brokers in a given market served by a multiple listing service. So the rule change gave franchisors the ability to display all or nearly all listings in any market where they had affiliated brokerages.

    Although franchisors were required to link back to an IDX website in the market where the listing originated, they would provide these linksbacks to their own affiliated brokerages — regardless of whether that brokerage represented the listing or not.

    In other words, franchisors active in many markets suddenly had the ability to display a comprehensive or near comprehensive set of listings nationwide, boosting traffic to their websites which they could refer to their own brokerages.  

    Franchisors who supported the rule change said that even independent (non-franchise) brokerages would benefit from the greater exposure their listings would get.

    But HomeServices of America — the nation’s second biggest brokerage — and brokerage networks (The Realty Alliance, and Leading Real Estate Companies of the World) said the rule change gave franchisors an unfair competitive advantage and created potential legal liabilities for brokerages.

    At the midyear meeting this month, NAR’s board of directors voted to scale back franchisors’ ability to index and display IDX listings. The IDX policy was ammended to require that brokerages must “opt in” to franchisor IDX indexing and display within 30 days if they want to allow that. After that, franchisors will no longer be able to display IDX listings of brokerages that have not opted in.

    The Multiple Listing Issues and Policies Committee is expected to revisit both issues — A) franchsisor IDX indexing and B) distribution of listings to mobile devices and social networking sites like Facebook — at NAR’s annual meeting November.

  • Matthew Ferrara

    Matt: You’ve done a better job than I separating the two different rules on IDX and syndication. Thanks. But you’ve skipped the important question:

    So what?

    That’s the point I’m making. BOTH of these rules made plenty of members quite unhappy. Many brokers didn’t want RSS to let their data flow freely to social media sites without protections. And many didn’t want the Franchisors to have their listings, either. As for the franchisors, they thought they had worked the committee system to their advantage, only to be stymied by the last-minute opt-in rule, effectively stalling their effort and jeopardizing millions in technical development.

    So, yes, you’re more accurate than I; but like too many observers, I’m afraid you’ve avoided the real issues, which is that once again, brokers are feeling the sting of “outsourcing” their business decisions to the whims of political committees.

    Just saying…