You already know that the real estate industry is undergoing unprecedented change. Not only is the once-central role of brokers and MLSs being challenged by consumer behavior and portals such as Zillow Group and News Corp., national broker and MLS data initiatives such as Project Upstream, AMP and the Broker Portal are also attempting to disrupt the flow of information and the way the industry transacts.

If successful, these initiatives will likely change the playing field forever and take control away from many of the MLSs.

This has created the perfect storm, causing considerable fear and doubt for association and MLS executives, their staff, leadership and broker members and forced them to look for ways to enhance their value, competitiveness and ensure survival.

The MLS as the exclusive marketplace is over. MLS as we know it is dead, and consumers now have much of the information they want for free. The portals are becoming the new marketplace or exchange.

National Association of Realtors’ core standards impact every one of the more than 1,000 local Realtor associations, especially the smaller ones. Realtor associations own most of the 750 MLSs, and their value proposition is being challenged.

Factors that are driving MLS consolidation right now

There are numerous factors driving the current consolidation trend, including:

  • Pressure from influential member brokers and consumers
  • National initiatives including AMP, Project Upstream, Broker Portal and national portals
  • Consumers who don’t know or care about the association jurisdiction (actually, they never did)
  • MLS leadership’s awareness that the current MLS infrastructure is outdated and unsustainable; some have a better vision for the future
  • The rapid pace of change in mobile and information technology and the challenges involved in keeping up
  • Retirement of staff
  • Association mergers and concerns from smaller associations regarding compliance with NAR’s core standard requirements
  • The need to reduce operating expenses, balance budgets, gain financial buying power and create staying power for the organizations
  • Expansion of natural market areas resulting in member and geographical overlap with neighboring MLSs; in many cases, county borders are meaningless
  • Response to the industry-wide cry for data consolidation and centralization (RPR, Upstream, AMP, Broker Portal, Zillow and Move)
  • Costs and inconveniences to brokers, agents and consumers resulting from too many separate MLS systems, which are no longer sustainable under the old model

What questions should leaders ask prior to considering consolidation?

When considering consolidation, there are a number of questions that MLS and association leaders should ask themselves to determine whether it makes sense for them to move forward with the process, including:

  • What percentage of your current MLS income comes from subscribers who are not primary members of your associations?
  • What percentage of your members and firms also participate and pay other MLSs (other than yours)?
  • Does your association or MLS serve mostly one county?
  • When you consider the MSA, are you a fraction of the overall population map — or do you cover it completely?
  • Do you pay your MLS vendor more than $6 to $8 a month for system access?
  • Do you offer rich public record data and map layers, including neighborhood data through your MLS system?
  • Do you deliver the best mobile technology? Think Zillow or realtor.com
  • Be honest: Do you think there might be a problem that you could solve, if you knew how to do it?

At least 45 MLS consolidations have occurred in the past four years — resulting in eight new regional MLSs. Measurable progress is being made in the industry, and we are down to 750 MLSs.

The consolidation process creates something new — taking the best practices from all of the associations and making all of them shareholders in the new or expanded regional organization. No jobs were lost as a result of consolidation and everyone benefited from being part of a bigger and better MLS.

Should your MLS consider consolidation?

Brokers, directors and association/MLS executives all need to understand their options and assess their situations — a process that isn’t particularly difficult if you know the right questions to ask.

Kevin McQueen serves the leadership of 370 Realtor associations and MLSs, helping them implement best practices and positioning them for future success. You can follow Kevin on Twitter or LinkedIn.

Email Kevin McQueen.