Editor’s note: The MLS is in crisis, say many large brokers, agents and industry observers. The cooperative organization plays an essential role in the U.S. housing market, matching buyers and sellers through the assistance of a Realtor. But cooperation has been replaced by acrimony, litigation and an uneasy migration to the Internet. In this three-part series, we look at some underlying problems causing concern for MLS members, what’s working and what’s not working.

Editor’s note: The MLS is in crisis, say many large brokers, agents and industry observers. The cooperative organization plays an essential role in the U.S. housing market, matching buyers and sellers through the assistance of a Realtor. But cooperation has been replaced by acrimony, litigation and an uneasy migration to the Internet. In this three-part series, we look at some underlying problems causing concern for MLS members, what’s working and what’s not working. (See Part 2: Chicago case study for MLS reform and Part 3: Nirvana: Centralized MLS.)

“If it is broken, do fix it,” say industry experts, calling for changes in the multiple listing service in the years to come, including standardization, consolidation and new technology for the MLS of the future.

The MLS plays a central role in housing markets and the real estate business and will continue to do so in the future, industry figures agree. They also agree though that changes need to happen.

“The purpose of the MLS goes back to its origination as a way for brokers to cooperate and share listings and offer commissions to each other,” said Andy Woolley, director of MLS services for eNeighborhoods. “Sometimes that gets lost in the hype, but it’s still the core focus.”

The housing market depends on a smooth, functioning MLS that effectively compiles home listings data and redistributes it back to its real estate agent and broker members. But the struggles over politics, listings control and regionalization have made the future of the MLS uncertain. Observers now wonder whether the future MLS will be public or privately owned, consolidated or broken into even more local entities.

“I don’t see an immediate change in the MLS structure,” said Brian Chen, former CEO of Multi-Regional Multiple Listing Service, the second-largest MLS in California. “I do see a need for standardization.”

Chen said that California has different systems that describe the same data differently. This creates problems, he said, for brokers with multiple offices in multiple MLS districts.

“The brokers have to handle multiple data formats. This forces brokers to become data processing centers rather than just doing their business of real estate sales,” Chen said.

For example, he said, some systems would describe a home with a full bath, a three-quarter bath (shower, sink and toilet) and a half-bath (sink and toilet) with integers: “1.1.1.” But other systems only use decimals. “So what happens to the half bath? Do you add that one? Do you put ‘2.25?’ If you do, people will think it’s two full baths and one one-quarter bath,” Chen explained.

Formats must be standardized to avoid such confusion, Chen said, and so should rules and regulations.

“One association may require a listing to be entered into the MLS within 24 hours of signing a contract. Some require 72 hours. For the company that belongs to the association that allows 72 hours for delay, that company will have a pocket listing for the first 72 hours. Many agents feel this gives the company an unfair competitive edge,” Chen said.

While he supports standardization, Chen said he does not support the idea of a statewide MLS. Another prominent industry figure disagreed.

“The future of the MLS is consolidation,” said Ed Krafchow, president of Prudential California Realty. “It’s not in the agent’s best interest that we (Prudential California) have 17 MLSs that we belong to. We need a statewide MLS; a national MLS is not necessary.”

Among other reasons for consolidation, Krafchow said, each MLS has its own system, making communication difficult. “It makes it very difficult for agents to function.”

Additionally, as a member of 17 MLSs, Krafchow must download all the data feeds from these MLSs each day, a process he has described as “a living hell.”

Currently, most MLSs are owned by Realtor associations, and Chen believes this will continue. Woolley predicted that hybrid models, wherein broker and associations both have ownership, would emerge.

“The association is able to handle the political aspect. It creates a fair battleground,” Woolley said. “And certainly the brokers should have more input, so these hybrid models that are starting to emerge are good.” Woolley cited the northwest MLS in the Seattle area, “where the board of directors is hybrid,” as an example.

The upcoming merger between two Chicago MLSs, the Realtor association-owned Multiple Listing Service of Northern Illinois and MAP, a smaller, broker-owned MLS, is another example, he said.

Woolley said he does not think the role of the MLS will change with regard to data ownership, but he believes MLSs will do more with copyrighting the data compilations. “Most have done so already,” he said, “But those that have not will be more effective with copyrighting data compilations. They will use security measures to ensure the system of distributing the data is more secure, watermarking the photos, for example.”

Chen also championed the copyright approach.

“Third parties such as moving companies and cable companies want to target people who are moving so they can sell them their services,” Chen said. “So listing data is very valuable. The listing broker owns his or her own particular listings, but the MLS must protect the entire collective database to make sure data isn’t stolen.”

New technologies should be an important part of the MLS of the future, according to Woolley. “Certain things make sense to deploy at the MLS level. If every broker in an area has a different transaction management platform, it makes it hard for them to work together, so it makes sense that the MLS should provide such a platform,” Woolley said.

“At the MLS level it provides economies of scale, the brokers don’t have to spend dollars getting their systems to interact with another broker’s systems,” Woolley commented.

Also, eNeighborhood’s director of MLS services said, it would make sense to have MLS providers offer consumer Web portals.

“They can have a regional Web portal and provide these leads to brokers and agents directly so the agents don’t have to pay a third party service to get leads over the Internet,” Woolley said. “The larger the footprint of a Web portal, the more likely it is to generate traffic. A Web portal for all of South Florida, for example, at the MLS level would probably generate more interest than an individual agent’s.”

Chen said MLSs should address their members’ technological needs. “A forward-looking MLS should answer the changing needs of its members.

“Years ago, providing listing data was the only need the agent had from an MLS,” Chen said. “But now, the MLS could provide transaction management, Web sites, even domain registration – you name it. Anything the agent needs to set up shop on the Internet could be a service provided by the MLS.”

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Send tips or a Letter to the Editor to janis@inman.com or call (510) 658-9252, ext. 140.

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