ORLANDO, FLORIDA — Money is pouring into the real estate industry and venture capital-backed brokerages and technology companies are hell-bent on upending the status quo. How will the companies that host the private databases that hold most of the country’s real estate listings react?
Leaders of the Council of Multiple Listing Services (CMLS) urged their members to be part of the change in the industry as CMLS kicked off its annual conference Thursday.
“When some people aren’t willing to break with the status quo, there will always be others in a hurry to do it better,” CMLS 2018 President David Charron told attendees.
The only real solution is to be part of the change, he said, and MLS executives who think their MLS is too big or too small to change, or that they are too old or too special to do things differently, are wrong.
“There’s risk in doing something, but there’s more risk in doing nothing,” Charron told Inman after his presentation.
What is he worried will happen if MLSs don’t remain relevant?
“That cooperation [between brokers] will ultimately fail, and that means brokers will likely fail as well, and we’ll be in a world of hurt,” Charron said.
‘A financial model that needs lots of members’
Part of changing means coming to grips with a business model that depends on having gobs of agents on board, regardless of their quality, according to Charron.
“All of us are wedded to a financial model that needs lots of members to feed the beast,” he told attendees.
“When are we going to come up with a strategic customer, consumer-minded model instead of one [that’s risk averse]?”
Later, he said, “When 40 percent of members don’t have a transaction side [in a given year], we often cater to the lowest common denominator. [Those members] never call or complain. It denigrates the industry.”
He pointed out the National Association of Realtors is the same way. “NAR counts on being a lobbying group for 1.3 million people. What are they all doing? Because they’re not [all] selling real estate.”
What’s the solution? “I think we’re seeing new models coming into this business that are insisting on production,” Charron said.
“There are still some brokerages that take anyone who will fog a mirror. We should celebrate how easy it is to enter the industry, but our downfall is allowing them to stay [when they’re not productive].”
He blames the rise of private listing clubs outside of the MLS.
“People don’t want to work with unprofessional people,” he said.
If brokerages change their business models, that will cause related entities in the industry to change their own models, according to Charron.
“Wall Street is investing in new models,” he said. Heavily-funded Compass, for instance, is focused on “buying top producers,” and its full coffers mean it can wait four years to recoup its investment in those agents — unlike traditional brokerages.
Still, any brokerage can insist on better performance from the agents under its banner.
“If brokers exercise even greater discipline regarding allowing non-performers to have a seat at the table, we’ll all be better off,” he said.
“Numbers are almost like a drug in this industry. We can’t wean ourselves off of them.”
MLSs should also band together to raise their value in the industry, according to Charron.
There are many MLSs “doing the same work,” he told attendees, and MLSs must find ways to work together.
“In my mind this means consolidation. Not just consolidation of markets. Call it collaboration or cooperation if you must,” Charron said.
Consolidation could mean mergers, but could also mean combining resources or making key partnerships with tech vendors, according to Charron.
Some MLSs — though by no means anywhere near the more than 600 nationwide — have been doing their part. They’re merging or forming joint ventures or committing to rebuild the industry’s tech infrastructure.
Will it be enough?
“Ladies and gentlemen, we have become an anxious nation and an anxious industry,” Charron said.
“We cannot let current views or long-held positions cast any shade on a new reality. Cooperation amongst and between participants [brokers] must be our north star and the only bridge to the future we should attempt to salvage. Everything — and I mean everything — else is noise.”