Former National Association of Realtors president Richard Mendenhall likes innovation and change and he also likes to provoke. One way the Kansas City real estate broker has been doing this lately is by praising the Canadian MLS model: it is a non-profit, serving both consumers and the industry with a higher public purpose.
The notion is not the squirrelly thinking of a lone industry radical. As Homestore tries to regain its financial footing and credibility with investors, the “what-if” discussion necessarily takes place on a routine basis at NAR, even though there is no public discourse.
What should NAR do with Realtor.com if Homestore implodes further? What should Homestore’s business model be going forward and how does its relationship with NAR fit into those plans?
Hear Mendenhall and Homestore CEO Mike Long speak during upcoming Inman News audio conferences.
A more exacting question is what to do with the national MLS database that Homestore in partnership with NAR has so meticulously put together on the Web over the last six years. Indeed, this is only one asset of Homestore. There is also the consumer traffic, the Web page business, Top Producer and other online properties such as the rental and new homes businesses.
But it is the national Web-based MLS that everything is built around and that is so valuable in so many ways to NAR. It is an industry asset that has grown more important and quite frankly bigger than NAR or Homestore. The data is at the center of a thriving Web-based real estate marketplace that we have only just begun to appreciate.
Of course, this database represents consumer traffic but more importantly, for NAR, it was built with the Realtor in mind and protects their interests because of the trade group’s pact with Homestore, its ownership stake in the company and its seats on the governing board.
NAR has protected the listings database against market interests, even though the first management team at Homestore stretched the partnership to the limits. In the final analysis, the pay-off for NAR may not be in the market value of Homestore, but in the data itself and industry centric rules that surround the collection and maintenance of the MLS data.
Compare the situation to the data of the stock exchanges, which are non-profit-like trade groups that publish the essential, almost real-time market trading data. This, like the national MLS data, can be viewed as something so sacred and fundamental to a functioning market that it must be both protected and distributed widely.
There is one difference though between NAR and the stock exchanges. The real estate trade group–for all sorts of political and financial reasons–chose to allow the collection and national aggregation of MLS data to be single-sourced or under the hood of one company, Homestore, whereas stock data is ubiquitously distributed.
Of course, Homestore selectively distributes the data, but it has not made its database as ubiquitous as it could have made it.
One could imagine two scenarios under which this could change. And this assumes that NAR works out a deal with Homestore to take back the data–which is not likely–but let’s imagine for a moment. Or Homestore could be reorganized around a different business model.
NAR could operate a non-profit, Web-based consumer MLS portal like the Canadians. Or the national trade group could operate more like the stock exchanges, distributing the data widely for the sole purpose of facilitating the real estate market place.
Whatever the structure, the more widely the listing data is distributed the more robust and rich the housing market is. Of course, participating entities would have to pay NAR and the MLS nominal licensing fees and abide by the rules– not ridiculous onerous rules, but the framework that is in place in the NAR/Homestore deal. The non-profit element may not be central, but the higher purpose of protecting and widely distributing data would be the essential mission of whatever organization operates it.
Change would require boundless leadership and political deal making, protection of the data, protection of the industry, NAR and Homestore.
Most importantly, it would be about protecting the marketplace that has been created by the innovative act of putting listings on the Web in the first place. Which is why we think Mendenhall’s catalytic ideas are priceless.
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