Is the MLS In Danger?

by Victor Lund on February 20, 2013

dangerI do not really know Alain Pinel as well as I would like to. He sold the company that bears his name and pursued other interests. He is back now and runs the Luxury division of Intero Real Estate, one of Alain Pinel Real Estate’s chief competitors in San Jose, along with Coldwell Banker and others. What I do know of Alain Pinel I like and respect a lot. I have a similar level of respect for the maverick efforts of Intero, who used passion combined with technology (AgentAchieve) to launch a powerful brokerage in a very competitive marketplace.

In a blog post today, Alain Pinel asked – Is the MLS in Danger?

He says:

  • there are signs suggesting that the MLS is going through some mid-life crisis.
  • (Non MLS transactions are) depriving most local Realtors of the ability to objectively judge values and trends
  • listing agents who bring only a few of their peers in the loop, can nevertheless achieve the objective: the sale. They may even argue that the fact that they cooperate with only a few, creates some urgency among the select group
  • we must respect the seller’s decision to withhold a listing from the mls
  • (the MLS) has its own agenda
  • you may wonder if the tail (the MLS) is not wagging the dog (The Broker). One thing is sure; the tail (The MLS)is now bigger than the dog (The Broker).
  • many brokers think that the MLS is now eating their soup, somewhat competing with their business, and too zealous regarding new constraining rules
  • MLSes which offer all their members a vast menu of state-of-the-art apps which compete with similar services that the finest companies created, at great cost, to differentiate themselves from other brokers
  • more and more syndicated sites and real estate related service providers which feed off of the MLS, progressively divert the consumer from our sites to theirs and capture value-pieces of our business

Intero operates the bulk of their company operations in MLS Listings, an expertly operated MLS covering Silicon Valley, San Jose, and Monterey. MLS Listings is somewhat unique in that their Board of Directors are brokers, and all of the large firms are represented, including Intero. This is important to understand in order to frame the gravity of Alain Pinel’s post. His thoughts are couched in a deep understanding of what MLSs do, and based largely upon his experience with an MLS that operates under the guidance of a broker run board of directors. This perspective is in contrast to some boards made up of Association nominees or agent boards that can easily slide away from being broker-centric. You would think that the brokers in MLS Listings would be pretty happy with the operation of the MLS since they play such a significant role. I would add that I know that customer satisfaction with the MLS in MLS Listings is very high among both agents and brokers. Hence, Pinel’s comments are not so much a critique of what is happening in the local MLS as they are with the entire notion of the MLS and perhaps Offers of Compensation.

My read on Pinel’s article is more the question of how Offers of Compensation are handled. He hints that sellers are becoming a bit more concerned about privacy and openness. There are merits to this question, especially given his unique perspective that highlights some real market pressures. There is little inventory available in the luxury market in Silicon Valley. What inventory there is often can be marketed and sold in-house by any of the large brokers before it ever reaches the MLS. They have an overdose of buyers and a limited supply of sellers. If they do not have a buyer waiting in the wings, they can easily call a few other top agents from nearby offices that they work with all of the time and find the right buyer. A lot of this is driven by limited supply and a thin layer of successful luxury agents.

If we draw out the lens and take a wider look across the nation, we see the hint of a similar market pressure in large brokerages or brokerages that have 30% or more marketshare. They do not “need” the MLS to sell homes when they have hundreds of agents under their own roof who are looking to satisfy buyer requests. Clearly the MLS offers the maximum buyer demand and marketing reach, but the large broker has pretty strong buyer demand already under one roof. Moreover, brokers can easily tap into buyer demand created by listing syndication to publisher sites. It begs the question…do you really need to market the property in the MLS or not?

This is a healthy debate.  I can assure you that the data says that homes sell for more money if they go through the MLS than if they do not (a variety of MLSs track this data). The reality is, lots of transactions are happening before a listing hits the MLS in many market areas today. They always have. And, they always will. The bigger question surrounds a bold initiative for a brokerage to pull out of MLS. I do not foresee any large broker doing it, and that may be the exact reason why brokers may fail in the end. FSBO websites are training consumers that they can do without a broker. At some point, more of them will. It is already a significant problem in Montreal and other areas where there is an organized MLS.

I do not really have any well formed ideas about the best ways for the MLS to evolve to answer many of Alain Pinel’s considerations. He reasserts the ‘leveling the playing field’ argument, and does it well. Perhaps he is right. An easy way for MLSs to stop leveling the playing field is to strip down the MLS. Remove CMA, CRM, Mobile, and other ‘core’ services and charge a low base fee for data. All of those other ‘special technology advantages’ that are offered by the MLS to agents would only be offered through an MLS store, at retail prices – not at wholesale site licensing rates. That would be one way to fix the problem.

Alain Pinel is a guy worth listening to. Subscribe to their blog.

{ 4 comments… read them below or add one }

Mike Sparr - Goomzee.com February 21, 2013 at 2:35 am

Great dialogue. I had so many ideas I had to write a blog post: http://blog.goomzee.com/2013/02/21/is-there-a-future-for-brokers-and-mls-i-think-so/

Good stuff, Victor!

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Mike Audet February 21, 2013 at 7:04 am

Victor, fun discussion. I love the questions Alain raises but note that he begins with:

Is the MLS in Danger? (from Alain’s post)
The fast answer is No, it is not. The long answer is…. Longer and more complicated. Where do I start? First, let me say that the MLS is the best thing that ever happened to organized real estate. It gave professionals knowledge, power and sustainability. Only through the sharing of information pertaining to listings, sales and all the data that derives from those, can Realtors be and remain relevant. You don’t know how good the MLS is unless, or until, you see how bad it is without it.

Regarding how good MLS is, I, like Alain, have done a lot of work internationally trying to help visionaries in other countries start up their own MLSs. I am doing that now in Brazil and it is very exciting to see the concept of MLS expand beyond our borders. Anyone that has spent anytime outside the US and looked at the home buying/selling process understands that our MLS system is by far, the gold standard. That all said, I think we are going through some growing pains. I’m not sure I would call it a mid life crisis yet but I think there is enough tension in the MLS/broker relationship to drive some meaningful change in the years to come. Frankly, I hope brokers realize they need to embrace and partner with the MLS more strongly moving forward and that they are stronger in alignment with the MLS rather than in opposition. One look at Hitwise numbers and how MLSs and Brokers are doing against the Trillows out there (yes, new name – decided to give Trullia leading billing on this one) and you can see they can’t do it alone.

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Bill Fowler February 21, 2013 at 9:32 am

Great post Victor. From the vendor perspective, it’s our job to create the kinds of tools and services that, to a large broker, certainly come across as “leveling the playing field”. It’s always been this way.

Now, with the advent of API platforms, offering services office-by-office or even user-by-user is now possible. I think we’ll soon see a shift from MLSs buying in macro to becoming an online broker shopping area. The large brokers win back their economic advantage and the little guys aren’t burdened by dues payments made up of services they aren’t using.

Technology can’t solve all our problems, but this one at least I believe it can – at least mitigate.

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Alain Pinel February 27, 2013 at 2:16 pm

Thank you for your precious input Victor. As you noted, I believe in the MLS and largely depend on the data it collects and shares with members to be relevant and proficient in my field. Having said that, I must admit being concerned about the direction some MLSes chose to follow, providing marketing & transaction management services to all their members, thereby depriving those brokers who already paid dearly for such services from leveraging a significant differentiator.
Equality is only a myth in real estate, as it is in any business. It is a good thing as it allows the best Realtors to earn the interest and the loyalty of the consumer based on the menu and the ulity of the services they offer. The MLS should not interfere with what many brokers see as their domain in a competitive environment.
Your suggestion that the MLS offers the services in question at retail prices is going in the right direction, although many would argue that it would be even better not offering them at all, i.o.w. leave it to the various brokers to do their own shopping based on their perceived needs and their means.
I suppose much of the controversy derives from the fact that, today, the vast majority of brokers/owners/top managers are not as involved as they should be defining the role of the MLS and the services it should provide. This has created a vacuum progressively filled with agents whose legitimate judgment is ” the more services the better”, often conflicting with the vision and best interest of their respective companies.

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