Third-party sites rule the real estate roost

Editor's note: This story has been updated to correct that at the national level, listing portals operated by third-party publishers account for most of the traffic to the top 20 websites in the real estate category -- not the "vast majority" of all traffic to listing portals. This is the second installment in a two-part series focusing on real estate data issues.

Consumers in search of information about their local housing market are making national, third-party sites like Zillow and Trulia their first stop -- even though the websites of real estate brokers and agents who once served as the gatekeepers of such knowledge often have more complete listings data.

Industry watchers say third-party publishers often do a better job meeting consumers' seemingly insatiable demand for information by "mashing up" listing data, public property records, automated home valuations, market intelligence and even user-generated content like agent ratings and advice.

Third-party publishers have fostered innovation and helped bring the real estate industry -- sometimes kicking and screaming -- into the Internet age. They have also taken steps to address industry complaints about quality-control issues with listings and requests for better metrics.

But some industry leaders fear that as websites like those operated by Internet giants Yahoo, MSN and AOL continue to gain market share, the balance of power is tilting too heavily in their favor.

The day is coming when third-party publishers will be able to dictate terms to real estate brokers and agents, some fear, just as newspapers were able to when they controlled access to consumers.

If real estate brokers and agents want to get back on a more even footing with third-party sites, those ringing the alarm bells say, a few things need to happen:

• Brokers must do a better job of ensuring their interests are represented before agreeing to provide listings to listings syndicators or third-party sites.
• The National Association of Realtors must relax restrictions around the display of Internet Data Exchange (IDX) listings on brokerage sites and Realtor-affiliated multiple listing services (MLSs).
• The industry must standardize the way listings data is compiled, which would help third-party vendors develop consumer-friendly bells and whistles for MLS and brokerage websites on a universal, instead of a case-by-case, basis.

An entire industry has sprung up around the creation, collection, distribution and analysis of real estate listings and other data. It's an industry built largely on the premise of converting website visitors into leads that can be sold back to the same brokers and agents who provide the listings information that serves to generate much of the traffic.

Real estate brokers and agents have long complained about providing listings information to third-party publishers who sell them leads or advertising. But consumers have come to expect that when they put their home on the market, it will be advertised on third-party sites, which in most markets attract more traffic than websites operated by brokers and agents.

At the national level, listing portals operated by third-party publishers account for most of the traffic to the top 20 websites in the real estate category, according to metrics compiled by Experian Hitwise. Only ZipREalty, RE/MAX Real Estate, and Weichert.com appeared on Hitwise's list of top 20 real estate sites in May.

At the local market level, a few MLSs and brokerage websites are able to go head-to-head against the big-name, third-party publishers, but they are the exception, rather than the rule, said Marilyn Wilson of WAV Group Consulting. WAV Group provides Hitwise reports on market level trends to MLSs as a service.

"In most markets, rarely do we see a broker get into the top 10," Wilson said. "There are very rare exceptions," including Northeast powerhouse Howard Hanna, Minnesota-basd Edina Realty and Wisconsin-based Shorewest Realtors.

Shorewest's website was the second most popular in its market, Wilson said, until "they pulled out of a lot of their listing syndication agreements, and they went to No. 1."

That may not be an approach that every brokerage wants to take, Wilson said, as "it can be scary for listing agents, who have to tell their clients their listing is not being displayed" on popular third-party sites.

Most popular real estate websites, Chicago market   

*Four weeks ending July 16, Chicago designated market area (DMA). Source: Experian Hitwise and WAV Group, data cannot be repurposed without the express written permission of WAV Group.

Many MLSs run by Realtor associations and brokerages don't operate Internet Data Exchange websites that provide public access to listings data, because their members don't want them to.

Wilson said a key for brokerages is to stop seeing MLSs as competitors, and to stop blocking them from operating their own public-facing websites where consumers can access listings.

"The real enemy isn't the MLS, but inertia, and not giving consumers what they're looking for," Wilson said of a subject she explored in more depth in a recent blog post.

MLSs that do operate their own public-facing websites are typically bound by the same rules as brokerages, which restrict them from providing market data and other information sought by consumers alongside listings.

The rules are drawn up by NAR and have been adopted by local Realtor associations and MLSs largely to placate brokers' fears about how their listings will be used if they agree to allow other brokers to display them.

Only MLSs, brokers and agents are allowed to display IDX listings, which cannot be redistributed. Brokers who participate in the system must agree to publish all of the listings contributed by other brokers in their market, and identify the listing firm.

Because sellers might object, the IDX policies adopted by MLSs typically prohibit brokers from displaying advertising or tools like market statistics or automated valuations alongside listings.

The rules governing the display of IDX listings limit innovation, but provide certainty to brokers, which has helped boost broker participation in the IDX system. In many markets, the IDX websites operated by MLSs and brokerages offer a more complete set of listings than third-party sites, which are not bound by IDX policies but don't receive listings from as many brokers.

The lone exception is Realtor.com, the third-party site operated by Move Inc. under an agreement with NAR. Thanks in large part to its relationship with NAR, Realtor.com receives listings directly from nearly all of the nation's MLSs.

Third-party publishers like Zillow and Trulia have built large listing databases through agreements with MLSs, brokers, and syndicators like ListHub and Point2. But their coverage is not as comprehensive as Realtor.com's.

Realtor.com testing ads next to listings

For Move, the trade-off of having comprehensive listing coverage is that NAR has imposed restrictions under the Realtor.com operating agreement that have prevented it from engaging in some of the practices pioneered by Zillow and Trulia, such as placing ads for agents directly alongside listings.

Move made it known that it wanted changes to the agreement in order to stay competitive with other third-party publishers, and last year Move and NAR announced the first changes to the Realtor.com operating agreement in more than a decade.

The amended agreement opened the door for Move to begin test-marketing a new ad service in which unbranded lead forms are placed next to "unenhanced" listings in which the listing broker has not paid for "enhancements" such as additional photos.

The "Connection for co-brokerage program" is being tested in seven regional markets, with leads generated by the program being provided to buyers agents who have committed "to responding in a very timely manner," said Realtor.com President Errol Samuelson.

In return, Realtor.com will "turn on additional content" for listing brokers that it usually charges for, such as additional photos and publishing the listing agent's name, at no cost.

The lead forms will not appear next to listings that have already been upgraded with paid "Showcase" enhancements, and listing brokers who do not want to participate in the test on unenhanced listings can opt out, Samuelson said.

The concept arose from the observation that consumer inquiries about listings often go unanswered, so they move on to another listing or another site, Samuelson said.

"Our thesis is it will drive more consumer inquiries, which will be responded to more quickly, and that will drive more interactions" between consumers and real estate agents, Samuelson said.

Similar moves to by Zillow, Yahoo and Trulia to place ads next to listings have industry consultants who advise brokerages and MLSs sounding alarm bells.

"The pendulum of power has recently and rapidly shifted to the top portals creating the potential for a portal 'cartel' that can change -- or ignore -- the unwritten ethical rules and choose to cross the 'industry friendly' boundaries they wouldn't have dared to cross before," real estate information technology firm Clareity Consulting warned in a recent white paper.

"If this group leverages its newfound power before the industry does something about it, it is likely have a detrimental impact on the income and expenses of listing agents and brokers, and create a substantial and permanent revenue shift."

Data standards

MLSs and brokerages that want to provide the kind of bells and whistles that attract consumers to third-party sites are at a disadvantage because they don't enjoy the same economy of scale.

There are more than 800 MLSs and thousands of brokerages in the U.S., and many if not most depend on third-party vendors to build their websites or power features like neighborhood or lifestyle search capabilities.

If those MLSs all employed the same standards in compiling listing data, then tools developed for one MLS could be adopted by any MLS or broker using those standards. But because not all MLSs employ the same data fields, tools developed for one MLS can't necessarily be used by another.

Although NAR adopted a policy in 2008 that Realtor-affiliated MLSs adopt the same method for distributing data -- the Real Estate Transaction Standard (RETS) -- MLSs still employ different methods for defining data.

"There's a lot of frustration on behalf of everybody that the industry has failed in 10 years of attempts to agree on a standard description of MLS data," said Bob Bemis, CEO of Arizona MLS Inc. "They've agreed on a standard for moving it around, but not on a description" of the data itself.

Vendors, including LPS and WolfNet, have worked to implement standard definitions for their own customers, but the nonprofit that governs the development, maintenance and promotion of RETS, the Real Estate Standards Organization (RESO), is still working on getting the industry to do the same.

Bemis said that the recent election of a slate of MLS-backed candidates to the RESO board "will go a long way to solving" the issue.

IDX restrictions

Even if vendors are able to offer MLSs and brokerages a better arsenal of tools to attract consumers to their sites, some worry they won't be able to make use of them if NAR doesn't relax restrictions in its model IDX policy that govern what content can appear around listings.

Kristi Graning, senior vice president of e-business and emerging technologies for franchisor RE/MAX International, said the restrictions on the presentation of IDX listing data have "paralyzed" the industry, stifling innovation by preventing brokerages from displaying mashups of peripheral data and user-generated social media content.

Graning acknowledged that changing the rules governing IDX display might prove controversial, and lead some brokers to pull out of the system.

NAR recently had to back down from a proposal to allow the display of IDX listings on social media sites and mobile devices because of some MLSs' and brokers' concerns that they would lose control of their listings.

But Graning thinks the rules governing IDX display can at least be loosened without destroying the current comfort level they provide to MLSs and brokerages.

"I watch what Zillow and Trulia are doing, what they are doing promoting other agents (alongside listings), and I don't see a lot of brokers pulling out there," Graning said. "You can think of 10 things you don't want mashing up against your listings data, and (ads for other agents) are the No. 1 taboo."

Lifting restrictions on advertising would open up a new source of revenue for franchisors, MLSs, brokerages and agents, Shiraz Vartanian, general manager of Real Estate and Living Media (REALM) at LPS Real Estate Group, maintained in an April 13 guest opinion piece published by Inman News.

Although NAR this year briefly allowed franchisors to display IDX listings on their national websites in markets where they had obtained permission from individual franchisees, the policy was controversial. In May, NAR ruled that brokers would have to "opt in" if they wanted to allow their listings to be displayed on national franchise sites.

Graning said she hopes a task force that's been formed to reconsider both franchisor IDX indexing and display, and the display of IDX listings on social media sites and mobile devices, will also take up a third topic: the restrictions on content displayed around IDX listings.

A NAR spokesman declined to disclose who is serving on the work group, or what issues will be on its agenda when it holds its first meeting on Aug. 2 in Chicago.

"The nature of this group is that it is a presidential advisory group, appointed by the NAR president, to study all sides of the issue and make a report," NAR spokesman Lucien Salvant said in an email message. "As such, they need an environment to freely examine all points at issue and to discuss them privately, until they make their report. At that point, the president decides what he will do with the report."

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