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OMD: Is the cure worth the side effects? V Other options and choosing a course

By
Services for Real Estate Pros with Larson/Sobotka Business Advisors, LLC

What are the other options?

Among the approaches other than centralized and decentralized regional MLSs, the options for cooperating vary widely. For example, two MLSs may allow their participants to view each other's active listings only, or they may include off-markets. They may coordinate on IDX rules, IDX data feeds, or both; they may not coordinate on IDX at all. They may include offers of compensation between participants in the two MLSs; they may not extend offers of cooperation. They may coordinate their rules, creating a third entity for enforcement, they may coordinate their rules keeping their own enforcement, or they may have entirely independent rules.

A note about compensation in MLS cooperative agreements: Many folks start with the assumption that the offer of compensation must extend to participants in other MLSs if there is cooperation among the MLSs. This need not be the case. Sometimes listing brokers in remote or resort areas will resist MLS cooperation efforts because they fear uninformed agents from other market areas will sell their listings but not properly service the transaction between purchase agreement and closing. They may be more comfortable if they can choose to extend compensation to participants in other MLSs on a case-by-case basis. Many of the benefits of cooperation are available without the offer of compensation; and removing compensation concerns of some brokers may deliver the benefits sooner.

Some commentators have dismissed these concerns as those of listing brokers wanting to protect their territory: "Those resort brokers just want to protect what they've got! They don't want to have to share their commissions. The cooperating broker should be able to evaluate whether she is qualified to serve her buyer in the area in question." This overlooks the fact that a great many cooperating brokers should probably not even be in the business; and assuming they will make reasonable judgments about their qualifications is not wise. Furthermore, if the listing broker is offering compensation, most feel they are entitled to a certain level of service.

Choosing a course of action

It may be reasonable for two MLSs to choose not to cooperate at all, and it may be reasonable for them to merge. In most cases, the best choice will be somewhere in between. Inefficiencies and lost opportunities are associated with failing to cooperate. But putting together a plan for merger or regionalization could take years; in the meantime, it may be as if the MLSs are not cooperating at all.

For many organizations, "commando cooperation" may be the best choice. Commando cooperation is what I call any effort by two or more MLSs to cooperate quickly and aggressively on two or three important issues.

One example of commando cooperation is unified IDX. Imagine a small state with six separate MLSs. The MLSs come together and agree that over the course of four to six months they will standardize their IDX rules, pull their IDX listing data feeds together into a single data feed, and allow any participant in any of them to have an IDX site with listings from all of them. The result? Every broker in the state now has a web site where consumers and its own salespeople can view virtually every active listing in the state. This approach delivers significant value to all the brokers in the state (not just those on the "edges" between two MLSs). This approach does not deliver all the possible benefits of cooperation, but it can be achieved quickly and at low cost. It can also serve as the model for further cooperation among the MLSs.

Concluding notes

Cooperation between MLSs should result from a business decision. It is the responsibility of MLS leaders to identify objectives for cooperation, attaching value to them, and comparing that value to the costs of the approaches proposed. For some organizations, moving quickly to deliver on limited objectives will make sense; for others, a comprehensive approach to fixing a "broken" market may be necessary.

What are your thoughts? Does your market need MLSs to cooperate more, or should they be focused on other issues?

Comments (7)

Larry Wright
nwRealty.Com - Tacoma, WA
Whether in cooperation or not, I beleive the primary objective of MLS's is the protection of listing data for the best interest of the professional real estate industry.  Huh??  Well, you may remember a couple of years back:  BELO Corp (a tv/newspaper media company) got their hands on MLS data from significant REALTOR owned MLS's around the country and republished that information on regional tv station websites.  They then sold advertising and content space to non real estate companies (lawn care, hardware, etc.) which is fine.  What I find questionable is BELO's use of the free MLS data purely for profit and not for the benefit of those that generated the listing data.  It is each MLS's responsibility to prevent this from happening.  Almost ranted ... sorry.
Aug 16, 2007 02:08 AM
Fred Pickard
Fred Pickard Innovations Realty Inc - Hershey, PA
Hershey, PA

Brain -

As the suburbs spread out and start to meet suburbs coming from the other direction, the need to co-operate looms larger and larger.

I look at systems like MRIS(Maryland) and Trend(Southeast Pennsylvania), then I look to my area where I must belong to 3 different MLS organizations in order to properly list and sell property in a 7 county area. I am about in the center of that area. And of course, they don't all use the same vendor's system.

Aug 16, 2007 02:58 AM
Brian Larson
Larson/Sobotka Business Advisors, LLC - Minneapolis, MN

Fred,

First, thanks... one benefit of having the name Brian is I occasionally get called a "brain" though I'm sorry to say that probably happens entirely unintentionally. I'll assume you meant it :-)

Second, as to belonging to three MLSs, I'm sympathetic to your plight as it smacks of economic inefficiencies. But the MLSs involved still have to make business decisions taking into consideration all their participants.

Unless you have a national or international MLS, there will always be "edges" between the MLSs. The folks on those edges will have to belong to more than one MLS.

The question the MLS has to answer is whether the edges are in the right places. In your case, they may not be. But the fact that a broker is on the edges is not sufficient reason to move them. It's just one factor in the business analysis I've been describing in these posts.

-Brian

Aug 16, 2007 03:21 AM
Brian Larson
Larson/Sobotka Business Advisors, LLC - Minneapolis, MN

Larry wrote:

"I beleive the primary objective of MLS's is the protection of listing data for the best interest of the professional real estate industry"

I believe you have articulated a view widely held by many real estate brokers and salespeople, so it deserves a thoughtful and respectful response. I will post soon about what I think the pillars of the MLS value proposition are - and you and I will disagree, but I hope the discussion will be a valuable one.

-Brian

Aug 16, 2007 03:23 AM
Artur Urbanski
Cimpler Real Estate, Inc. - Burlingame, CA
Helping property owners to maximize property value
Brian, in today's market the only option for MLSs is to cooperate.  Not a long time ago to look for a house in the Bay Area you needed to hire 8 or 9 agents, assuming that each of them could access one MLS.  Clients lived with it, because they didn't have a choice. For the same reason, as no-one was threatening MLSs - MLSs continued to stay non-cooperative.  Within last year, the number of MLSs I need to access to support a client looking for a house in the Bay Area dropped from 8 to 2, one is called Quatro and another NCREX.  Basically these are two organizations, each allowing to access to multiple MLSs. They didn't start to cooperate because they suddenly saw the light. They started doing it because Trulia showed that it can be done differently.  Additionally, Zillow with its 60 mln houses data base demonstrated that there is a way to go around MLSs. It is "cooperate or die". If you don't you will be a history. You can find additional information in (California: MLS in Turmoil), Who Started the Real Estate Revolution? and  One-stop shop in real estate.  I strongly believe that the number of MLS will drop from 900 today to 100 five years from now.  Additionally, they will evolve and provide additional services to agents, beyond search.
Aug 16, 2007 08:46 PM
Brian Larson
Larson/Sobotka Business Advisors, LLC - Minneapolis, MN

Artur:

There is no question that the Bay Area requires reform (and is in fact getting it). But please don't generalize from your experience to that of the brokers in the rest of the country. There are plenty of places in the U.S. where MLS cooperation may be less of a priority, or no priority at all, for the brokers; and there are plenty of other issues to deal with. All I am suggesting is that an MLS should evaluate the situation, in consultation with its brokers, and make a business decision about whether it needs to consider cooperating more closely with its neighbors. It should not do so just because consolidation is "all the rage."

-b

Aug 17, 2007 01:53 AM
Artur Urbanski
Cimpler Real Estate, Inc. - Burlingame, CA
Helping property owners to maximize property value
Hi Brian, I certainly agree that in some areas (the Bay Ara for example) the consolidation is more important than in others.  My point was, however, that if I can as a client, to deal with someone more responsive to my needs than MLS and give me service and information I want, I will choose them without hesitation. The pressure on consolidation is often "the rage", however the pressure to improve MLS responsiveness to clients (and agents as well) needs is relieve.  Thank you very much for your reply.  Consolidation is "easy", changing the "service culture", much more to achieve.  If consolidation will help in the process that would be OK with me.
Aug 17, 2007 05:12 AM