There are two immense and immediate problems in the real estate industry, and one near-future problem can be solved by the MLS systems acting as the market innovators. But the window of opportunity to execute is nearly closed, and once this opportunity is lost it will never be available again.

  • MLS systems can be the centralized location for creating technological innovation.
  • MLS systems can be the most efficient disseminating point for technologies.
  • Either remove any barriers immediately inhibiting the MLS systems and brokers, or die in the viciously competitive, speed-of-light technology environment real estate has become.

There are two immense and immediate problems in the real estate industry, and one near-future problem can be solved by the MLS systems acting as the market innovators.

But the window of opportunity to execute is nearly closed, and once this opportunity is lost it will never be available again.

I inadvertently identified and framed what might be the absolute crux of why all real estate brokers, from the largest franchise to the single broker office, have lost so much power and mindshare in the real estate marketplace.

Zillow Group has a lot of centralized cash — over $1 billion worth, and it’s being used to enact the design, development and dissemination of technology innovations. This centralized focus of money and invention gives the company an extraordinarily unfair advantage over what we as an industry erroneously perceive as 1.2 million united brokers.

From my “newly enlightened perspective,” there are not 1.2 million united brokers because there is no centralized repository of money and inventiveness applied to technological innovation.

However, MLS systems can immediately cure the lack of a centralized point of technological innovation for brokers in three ways.

1. Create a centralized location for innovation

The first immense problem MLS systems can cure more quickly than any other player on the brokerage side of the industry is being the centralized location for technological innovation.

Technological innovation only thrives when there is a high quantity of high-quality data. All MLS systems have this. No one can match their collective data. But this data must be converted into competitive tools via technological innovations now. The window of opportunity is likely six months or less.

The diverse and fragmented independent companies from which brokers might purchase particular technologies is not the solution. MLS systems acting as a cohesive body purchasing or developing the best of these technologies is.

No other player in the entire industry can negotiate en masse or create the quality of technology brokers need as well as MLS systems acting in collective unity. And this should start today, for tomorrow is always too late in a technologically competitive environment.

2. Utilize power base

The second immense problem the MLS systems can cure more quickly than any other player on the brokerage side of the industry is disseminating innovative technologies.

There’s essentially 100 percent broker membership in the MLS systems. Nobody else in the real estate industry has that kind of power base. Any technological innovation can be instantly disseminated to every broker through the MLS systems.

3. Unite the fragments

The third problem MLS systems can cure is not yet seen, but comes in the near future.

There are more and more not-on-the-MLS websites, more brokers premarketing and preselling homes, ever-improving technologies and systems supporting “by-owner” sales and fewer properties even making it into MLS with brokers using Upstream to market properties outside of and prior to traditional channels.

Within three years, the quality and quantity of centralized sold data within MLS systems will be substantially diluted. This reduces the value of the MLS systems and brokers in general.

What good are broker value opinions when based on perhaps only half of total home sales in the market area?

Envision technology allowing 15 percent of sales coming from “by-owners,” another 15 percent of sales from not-on-the-MLS sites, and another 10 percent selling “pre-market or pre-MLS” via channels outside of the MLS systems as fed via Upstream.

This could allow 40 percent of home sales not to be recorded in the MLS systems. Add to these growing new home sales of 5 percent to 10 percent, and you might have half of home sale data not on the MLS in the coming years.

This creates a new opportunity for the CoreLogics and Zillows of the world to add to their power base by solving these issues. But a diluted centralized repository of home sale data weakens both the MLS systems and brokers’ purpose within the marketplace.

The MLS systems can cure this portending problem by ensuring nearly 100 percent compliance of recorded sales — not through legalistic threats, commands and requirements but through offering such incredible innovations that by not using their services, no broker feels proficient at achieving their clients’ expectations without using these MLS-supplied tools.

Everybody would want to be MLS members, reap the rewards of the competitive technological tools and wholeheartedly support the MLSs through appreciation, not because of heavy-handed rules. Earning leadership creates an enthusiastic support no forced regulation ever can.

Monopolies and lethargy

Most MLS companies have been essentially monopolies within their geographic locations. In particular areas, there is some overlap between companies, but seldom are several independent MLS companies competing in the same geographic area.

Monopolies create lethargy and complacency in many cases. For decades, the MLS system monopolies received no penalties for the tyrannical rules and laziness that harmed brokers’ ability to compete against technological innovators such as Trulia and Zillow. Many MLS systems will now be replaced or consolidated with their competitive skills never having developed or atrophying over time.

Then you have the strong, innovative MLS companies such as HAR, MRIS (Metropolitan Regional Information Systems) and MFRMLS (My Florida Regional MLS). These companies will absorb the weaker systems. Even here the real estate industry’s lack of innovation and divisiveness creates an additional self-imposed threat.

Will intelligent, innovative leaders such as Bob Hale, David Charron and Merri Jo Cowen put up with the broker industry’s infighting and lack of centralized strategic actions?

Do these leaders seem the type to accept being relegated to nothing more than the compliance officers of the industry? At some point, they might be so disillusioned with the industry’s factions that they become the latest hires at Zillow Group.

Politics

I am not an industry insider. I am sure there are all kinds of self-imposed, legacy-based barriers to the MLS companies centralizing their data and money and creating and dispersing technological innovation as I describe here. But I don’t care.

Either remove those barriers immediately or die in the viciously competitive, speed-of-light technology environment real estate has become.

Creed Smith is living the creation and implementation of innovation via REalMARKABLE.com, QValue.net, DemonOfMarketing.com and DenverInvestor.com (coming soon).

Email Creed Smith.

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