The MLS 5.0 (as Saul Klein and others are calling it) is being pitched as a much-needed, national parcel-based repository of data controlled by NAR with an “easy” single point of entry. There is talk of a consumer-facing side in addition to the back-end Realtor-only piece. There is also talk of “standardization” and easier/greater access to developers and software designers for API’s, etc.
These things and the MLS 5.0 in general are being pitched in ways that marketing companies will tell you work well – they’re supposed to give you that warm and fuzzy feeling, especially if you’re a Gen X’er or Gen Y’er. But should you trust everything you hear even if it comes from such intelligent and respected people as Saul and the powers-that-be at NAR? Definitely not before you look at the fine print and the overall picture…
Who’s really in control?
- NAR is a membership controlled organization. But it’s not really the agent members that have control, it’s the brokers. The brokers with the most amount of agents and market share have the most say.
- There are about 15 major brokerage firms that comprise the majority of control of the US real estate market because they have the majority of the agents and transactions in the US. To give you an example, Keller Williams International which has 70,000 agents only has 4 percent market share. It’s really the top 3 or so brokerage firms in the US control the majority of the market and agent count.
- Within these 15 major brokerage firms, there are about 50 top brokers that have the most say (aka control and power). In essence, it’s these 50 brokers that control the NAR and the RE industry in general. Since NAR will have control of the “MLS 5.0,” it will in fact be these top 50 brokers that have control of it.
- Is NAR concerned about money or about control? Control. And controlling the flow of data is just as important as controlling the data itself. The MLS 5.0 gives the NAR not only control of the data itself, but the flow of that data. This is exactly what the big brokers want because it helps ensure their survival.
“Sure, we’ll give you back the leads you deserve”
- That’s great and I’m a fan of giving the listing agents the buyer leads they deserve. But if the top brokers control the MLS 5.0 and the leads that come through it, only the top brokers will benefit. This goes back to the control issue discussed above as well as the commission and split issues discussed below.
- The NAR bylaws clearly state that it will not and can not be involved in offers of compensation between brokers. Because of that, the MLS 5.0 will not have offers of compensation. With the MLS 5.0 having all the information and data that local MLS’s once had, there is no use for the MLS as a data source/repository. Rather, local MLS’s will be used to communicate what one broker will offer another for selling their listing.
- Should the local MLS’s switch from an “offer of compensation” to an “offer of cooperation” (there is already talk of this), what will stop one large brokerage firm from offering another large brokerage firm “300 chickens” while only offering other smaller firms (aka competitors) only “100 chickens”? Nothing… (And no, it’s not illegal)
The “good ‘ol boy” network versus innovation
- Once agents see that they’ll make 3 times the money by switching to the larger brokerage firm(s), they will. That will cause the small, up and coming (and typically revolutionary) brokerage firms and brokers to go out of business almost overnight.
- This is a horrible proposition for the RE industry because it’s typically the new, forward thinking people and companies that lead the way into the future and revolutionize industries. Without them two things will most likely happen – the larger firms will have all the power and say and there will be much less innovation within the industry.
Take it or leave it
- If the larger firms have all the power and agents, they can adjust the splits to increase their profits while diminishing the profits of their agents. If their agents don’t like it, oh well – there’s nothing they can do about it. The larger brokers know that the smaller split on “300 chickens” is still more than a larger split on “100 chickens.” In a nutshell, it’s an instant pay cut for agents and more money for the brokers.
Can’t afford a Ferrari? Too bad, so sad
- Much like the MRIS (the local MLS in the DC metropolitan area) charges between $1,500 to $50,000 for its data feed, what will stop the MLS 5.0 from charging for its data feed. And they could charge whatever they wanted because they’re the only player in town-from whom/where else will you get the data from? If you’re big and profitable enough to pay the fee, great. If you’re a small to medium sized firm that can’t, oh well.
- Yes, there is talk of “one standard” that will make it easier to design API’s, etc. But what will stop the MLS 5.0 from charging whatever they want for that just like they could for the data feed?
That little thing called consumer sentiment
- Consumers hailed when Zillow, Trulia and other listing sites came about. These companies came at a time when consumers thought about Realtors in the same light as they did used car salesmen. Consumers were happy to feel as if Realtors no longer controlled the information and the flow of it.
- Having multiple places to find information about real estate (including listings) is what consumers want. They want to be able to question a Realtor by throwing other data points and information at them. This make the Realtor earn their credibility versus just acting as if they’re omnipotent. This is what consumers want and we have to learn to work with consumers, not against them.
- What will happen when consumers see that Realtors and NAR now have control over all the information on one single platform and are trying to get rid of Zillow, Trulia and others? (Remember, Zillow is a parcel-based type platform as well)
- Is NAR trying to improve our perception with consumers or make it worse?
Is there a solution?
- Get one or several agent-centric, new-way-of-thinking brokers with national presence that haven’t drank the Kool-Aid into the upper realms of NAR power and control and throw a wrench into their evil plans
- Many of you will say there’s no way to do that. Some of you will also say that the “good ‘ol boys” will never let that happen and squash such a thing even if there is a way to do it. I say that you’re right about them not wanting that to happen. They will do anything and everything they can to stop anyone from getting in their way. But just because you and I don’t have the money, power and control in the same way as they do doesn’t mean it can’t be done. (If you haven’t read it yet, check out “Here Comes Everybody” by Clay Shirky)
Call it what you will…MLS 5.0, Gateway, TREC, the greatest thing since sliced bread…I believe that this could potentially be the single worse thing to ever happen to the real estate industry (except for the very few elite at the top of the food chain and those that get into bed with them). If you’re an agent or small to medium-sized broker like most of us, then you should be seriously worried about your livelihood and future should this project materialize.
But then again…you probably shouldn’t listen to just me either. Do your own research and digging and come to your own conclusion. Just don’t confuse opinions and sales-pitches with facts. And dig deep – the truth is sometimes buried many layers down.