Real estate is experiencing its version of cord-cutting, as more consumers go directly to the listing agent to buy a home.
In the 1980s, cable companies signed up exclusive deals with cities to provide a vast array of channels. The local lobbying push paid off with a handful of cable giants getting big and powerful. And it gave consumers access to hundreds of TV channels — not just the big three networks.
Nevertheless, these cable giants exercised monopoly powers over what we watched and how much we paid for it. For almost 35 years, this cable cabal was impenetrable. But the Internet began to erode that lock as we tired of paying so much for their bundles.
Cutting the agent cord
In total, 33 million households have dropped their paid-TV plan, essentially “cutting the cord.”
Real estate is experiencing its version of cord-cutting, as more consumers go directly to the listing agent to buy a home. Let’s call it “cutting the agent.” Meanwhile, an increasing number of sellers are going to iBuyers, which can result in agents being cut out of the equation entirely.
The real estate broker-cooperation compact has many similarities to the cable history, except it has been around much longer — more than 110 years. The consumer benefits are undeniable: a comprehensive MLS, giving consumers access to all of the homes that are on the market.
The compact is fraying at the edges
Just like with TV shows, innovators are getting their hands on the real estate listings and changing how the compact works.
But a more powerful trend that kills the pact are agents and brokers who want to get paid twice by representing both sides of the transaction while keeping listings to themselves and off the MLS. These listings disrupt the MLS system that exists because of the broker compact. The industry has become its own worst enemy.
The consequences of this strategy cannot be understated.
More and more established brands and agents are offering pre-market listings to consumers, often cutting out the buyer’s agent.
At stake is the MLS. But no one seems to have a plan for how to protect the old system. In part, because many of the smartest people in the industry are looking the other way or do not get the connection.
A prominent real estate team leader recently asked me, “why is everyone attacking the MLS?” In the same conversation, he and his partner explained how they promote pocket listings with every seller they work with. In other words, a lot of people aren’t connecting the dots.
NAR stumbles into the mess
Troubled by the trend, the National Association of Realtors is considering a controversial proposal to shore up the MLS, against “coming soon” listings.
Here’s a summary.
Within 24 hours of advertising a listing to the public, the listing broker must submit the listing to the MLS for cooperation with fellow MLS participants. Advertising a listing to the public includes, but is not limited to, flyers displayed in windows, yard signs, digital marketing on consumer facing portals, brokerage website displays, including IDX and VOW, and consumer-accessible applications.
Bold, but it won’t pass, say insiders. The genie is out of the bottle.
It’s evident by how divided the industry is on the issue.
One big East Coast broker has already threatened to sue NAR if the proposal gets passed. Suing your own trade group? This shows how important the practice is to some brokers, but it also points to the disarray inside the industry. They have disagreed on many issues before, but nothing so fundamental.
MLSs share the blame
Am I defending the 600+ local MLS fiefdoms? No way, that system is as flawed as double-sided transactions. The MLS leadership is equally culpable in the collapsing broker compact. Many have spent way too much time feathering their own nest and not doing what is right for the consumer and the industry.
It’s also true that the broker compact was carelessly used as an ironclad system to keep outsiders outside. That brought on the scrutiny of the FTC and the DOJ, which has launched a new round of investigations.
Plus, the opaque nature of how buyers’ agents get paid — the Achilles heel of the broker compact — has brought on a slew of tsunami-like lawsuits. And reform has again been too little too late.
Innovators are often blamed for disrupting real estate, but this is a case of the industry setting its own house on fire.