Hope you enjoy it!

Ostensibly it appears to be about creating an “online community” where users can actively participate and contribute.  What it is really about is “User Generated content” , which,  in my not so humble opinion,  is quickly becoming the next big thing.    Zillow, Trulia and Redfin are all trying to build a “community” where consumers can discuss real estate.  Will this work?   Hmmmn, I think it might be more challenging than it may appear.  Why? Because the average consumer only discusses real estate once every seven or eight years when they are thinking about moving.  At that particular time they are very interested in participating (or at least learning) from this type of “community”.   

In a past life I spent a lot of money on advertising in print, radio, TV and online. I know first  hand that most of your advertising dollars are only effective for people that are “In the market” for your product. Think about the last time you purchased something , for instance, like your last computer.  When you are in the market you suddenly notice all the advertising,  once you buy a system it is best if you stop looking immediately lest you suffer a severe bout of anxiety as better systems sell for cheaper.

What does that mean for a “real estate” centric community?  Simply put it means that your number one draw (real estate info) will only be effective on the subset of consumers that are interested in real estate and this is a much smaller subset of consumers. While Truila voices and Redfin’s forums might be satisfied with this audience, I think that Zillow has a much bigger designs than having a community that is only about, and for, people in the market.  I think they want to build a community that people use all the time in their daily lives, and are using people’s homes as starting point.

Again, in my opinion this is easier said than done.  They will be competing for attention with all types of communities – from the local community, news and city guide type websites to facebook, myspace and even wikipedia.   Trying to be “the place” is a really tall order.  Uploading neighbourhood photo’s, news and events will simply not be enough, in my opinion, to create a vibrant community that consumers visit and contribute to often. They will have to do more, and I am sure they understand that.

One group that we know for sure that has expert knowledge, is always “in the market” and can and will contribute to the neighbourhood information that consumers need (when they are in the market) is real estate professionals.  We have created a tremendous resource in our neighbourhood directory.  We intend to leverage this structure in many ways and in multiple platforms.  This will be done not only to provide great information for consumers but to always provide exposure for; showcase the knowledge of and bring back user generated content for use by the P2NLS real estate professional. 

What does this mean?  It means we are not as concerned with creating “the community” as we are about providing the underlying infrastructure and connecting it to real estate professionals. How are we going to accomplish this?  Just wait and see, in the words of Bryan Adams, “the best is yet to come”. 

From my point of view; traditional real estate agents are unfairly getting the short end of the publicity stick. Overtly or not, Redfin and models like them, are suggesting that traditional real estate agents are not providing a compelling value proposition to consumers. They are also suggesting, overtly or not, that the “traditional real estate industry” is trying to unfairly shut them down by discriminating against them. It also seems that everyone (from the DOJ, FTC through to the media and  60 minutes) is dying to jump all over “organized real estate” and blame it for any failures of alternative models. 

I have a couple of problems with this.  Firstly, it simply is not true that there is some form of organized systematic discrimination against discount and alternative models.  These models have been around, with varying degrees of success, for decades. Secondly, most professionals in this industry are proud of the value proposition they provide consumers and have no problem competing in the field against any of these alternative models.  As with most things in life, you get what you pay for.

So what are the real issues? Basically it comes down to this.  The DOJ is saying that it is effectively impossible to practice real estate without being a member of the local MLS.  They are also saying that NAR is using policy to allow “traditional” real estate brokers to effectively discriminate against “alternative” business models by not allowing them complete access to the MLS data to use in any manner they please.  To be sure, NAR has brought a lot of the problems on themselves.  ”Anti-referral”, selective opt out provisions and limited service rules seemingly make NAR and MLS’s appear to discriminate against alternative models or at least allow and encourage traditional brokers to do so.

In some ways I believe that NAR has been discriminatory against certain business models. I believe this has come about because the MLS data is being used for a purpose it was never intended.  Let me explain by first describing what I think the MLS was intended to do.

Originally, or so most stories go, MLS’s were formed to facilitate cooperation and guarantee compensation between members which are typically real estate brokers and agents.  The MLS consisted of a database of listings of homes for sale.  Buyer’s Brokers could use this data to find the best home for their clients and sellers Brokers would make sure their sellers homes were exposed to more interested buyers than they had themselves. This arrangement benefited both consumers and real estate professionals.  The key to how this works is that the data was used by competing parties AFTER the Brokers had acquired their customers. It is worth noting that competing brokers could not advertise a listing that was not theirs, say in the paper, to attract new buyers and sellers. After all, the listing Broker generally has an exclusive right to sell granted, explicitly and contractually, by the listing agreement signed with the home seller.

Let me know also point out another fact that most in the real estate industry already know. 

• Real property has two components: The first is p

  ublic information such as address and facts that don’t change,  these are largely quantitative. The second component is the mar

  keting descriptions and photos, which are qualitative and copyrightable. 

• The listing agent/broker “creates” the listings by taking photos and using their marketing expertise and local knowledge to write compelling marketing copy.

• These “listings”become an asset that the listing broker owns.

• Agents and Brokers advertise listings to sell the home, but they advertise listings primarily to attract new buyers and sellers and to promote their brand.  They do this because they know consumers are interested in homes for sale far more often than they are interested in finding an agent or broker.

• Listing and marketing houses is expensive work and is only paid for on a contingency basis.

Along comes the Internet.  Brokers, realizing that consumers want the convenience and efficiency of the internet, agree to share their listings assets with each other online for the convenience of the consumer. They did not agree to allow other MLS members to use their expensive assets to attract new customers.  This is essentially what many of these “alternative” business models are doing.

I believe that Brokers should have the right to use their listing assets as they see fit, including choosing their advertising partners.  Note: this doesn’t meant that all members of the MLS should not have access to the property data – they should.  It simply means that the Broker should have the right to completely control how their copyrightable asset, the listing, is used.

Why is this important you ask?

In a cooperative, everyone has to pull their weight.  In my opinion; what some alternative models are doing can be characterized by a famous quote from Dave Liniger. They are, simply put, “bringing a fork to a potluck”.  This issue is simply being masked by a number of related, but orthogonal, issues.  MLS rules of IDX opt out, discrimination by MLS’s and brokers against alternative business models, MLS co-mingling rules; all these things are important, and may even deserve DOJ/FTC scrutiny, but they are beside the point!

What is really at stake here is the spirit of what the MLS is intended for and how it is being misused by some for unfair advantage; this is to say that listing brokers are being taken advantage of. The MLS was intended to help cooperating brokers.  The key to cooperating is that everyone has to pull their own weight.  If you don’t do your share you are not cooperating – you are freeloading.  What’s happening is that this is being masked and hidden in name of consumer choice.

In order to illustrate this point let me use an extreme but true story;

At a recent Brokers conference a specific Broker was telling me that they were no longer going to list.  This broker was in a slowing Florida market and was finding that listing homes was too expensive.  It was costing too much to market to prospective listing clients, and that was just the start.  Once they had listings, they needed to market it on behalf of the seller.  In a hot sellers market you don’t have to spend advertising dollars, but in a slowing market you need to spend dollars.  Sellers expect it. So this broker had given up listing, not a trivial decision given that until recently they had carried as many as 500 listings.  They were finding that, at least in this market where buyers are hard to come by, that it makes sense to expend their effort on attracting buyers. 

So how does this brokerage attract buyers? There are not many, if any, successful brokerages that can attract buyers without advertising listings for sale. There are other things they could advertise, to be sure.  They could advertise their “negotiating skills” or their “persistence and willingness to dig through every available listing”, or their “superior market knowledge”.  At the end of the day I submit to you that most buyers  are created out of interest in a listing. 

So I ask again,  how does this Florida broker expect to attract buyers without listings?  Simply put he doesn’t.  He is using listings (assets) that are created by other real estate professionals to attract and retain buyers.

Does it necessarily make sense that this brokerage should be able leverage the assets (listings), that other brokers have attained by expending marketing effort, time and dollars, to lure buyers so they can remain profitable?  I would say that this is a decision that should be left entirely up to the owner of the asset.  The listing broker (asset owner) ought to decide whether or not it is in their best interest to allow other brokers to use their assets to attract and retain buyers.  In a perfect world, both brokers would list homes and pool their marketing assets (listings) for use to attract and retain buyers.  This doesn’t always happen. Too many brokers are willing to bring their fork to the potluck of MLS data and other broker’s marketing assets.

Please note carefully; I am not suggesting that all buyers’ brokers are freeloaders. Every market is different (real estate is local) and in many markets buyers agents more than pull their weight. I am simply suggesting that listings are assets and the asset owners have a right to leverage their assets and control how, where and when they are used. This is why we devised the P2 NLS, a system that gives asset owners (brokers and agents) complete control and choice as to where they advertise their listings and whom their marketing partners will be.  Agents and brokers that created these assets ought to be able to determine who their marketing partners are on a case by case basis.

The DOJ thinks that brokers and agents are restricting the consumer’s access to listing data to the detriment of the seller and consumer. This is simply not true. Brokers and agents want to advertise and market their listings as broadly as possible, as long as that’s what the seller wants. What they don’t necessarily want is for others to market their listings on their behalf and sell leads, generated with their own asset, back to them. Progressive MLS’s like Bob Hale’s Houston Association of Realtors know this and have begun to syndicate data to places like Google.  Not every MLS has the resources to carry out the development required for syndication. This is where we intend the P2 NLS to become a marketing partner, especially for any MLS that lacks the resources to allow selective syndication, analytics and predictive marketing.

What am I talking about you ask? I am talking about a presentation given by Blanche Evans of the Realty Times to the NAR Realtor Association Executives Institute held in
San Diego this February 19^th, 2007.  Here is a link to the intro and here is a link to the power point presentation.  (All on realtor.org) 

The entire presentation is about a conspiracy by Banks, Federal Government, third party service providers, consumer groups and the financial press to “Demonize” Realtors, NAR and Associations, interesting times Indeed.  Normally I read things like this with interest, often finding truth and validity in the arguments.  Imagine my surprise to learn that the P2NLS, even more specifically this blog,  are part of this widespread organized conspiracy.  Hmmn, normally I would shrug something like this off as water drops off a ducks back, but this presentation was made by Blanche Evans.  

Blanche, if you read this (and you must be reading my blog if you used it in your presentation)  I want you to know that I am a little hurt and confused.  Why?  I have always read your “stuff” and found it to be well researched and written and I am disappointed that you didn’t take the time to understand the P2 National Listing Service.   I am disappointed that the NLS was portrayed as a party enjoined in the conspiracy against organized real estate.  Nothing could be further from the truth.  

In fact, only licensed real estate professionals can participate in the NLS and THERE IS NO PUBLIC FACING MARKETING COMPONENT of the NLS.  Brokers have COMPLETE CONTROL and CHOICE as to where, if at all, their listings are displayed and who their marketing partners are.  Further, these listings are displayed with their brand and their contact information and link directly back to their website.  With respect to the NLS and consumers; consumers can only take advantage of the power of organized real estate by enlisting and working with a licensed real estate professional. 

In short, If you look at the P2NLS in its entirety one can only come to the conclusion that it is the penultimate proponent of organized real estate.   

If you listen to Blanche’s presentation, and I encourage you to do so, you will see it implies that we are trying to capitalize on the weakness of the regional MLS system.  Not true.  We are simply filling the gaps in marketing, advertising and analytics that these organizations were never intended to provide. I prefer to give Blanche the benefit of the doubt. I am sure she has simply misunderstood our purpose and commitment to organized real estate.  To this end I am extending an olive branch and this promise to Blanche and the AE Institute;  In every way we will  continue to take the  high road in our attempt to promote and promulgate the altruistic agenda of organized real estate.  The end result will be better for Realtors, better for Associations and better for consumers, because remember, “first class is always full”.

  Some people who have been following my blog guessed that we might release a National Listing Service long before we released it.  The posts “National MLS?”  And “National MLS Part Deux” give insight into what I feel a National MLS ought to be and the P2 NLS for the most part is just that.  At the Inman conference much of what we have been postulating with respect to state of the union and the region MLS system was verified.  There was a specific break out session called “The MLS Under Siege”  With the ink not yet dry on the P2 NLS press release I was a bit concerned that either a) nobody would know about our NLS or b) if they did know they would see us as an enemy of organized real estate.  I was pleasantly surprised to find that a) almost everyone knew of the P2 NLS and b) most of them must have read my blog (just kidding) as they understood that the P2 NLS is a friend of organized real estate. 

  Jessica Sweeny was the Inman moderator for the breakout. It proved to be quite a job.  The room was broken into four corners and it was intended that four breakouts of equal size would take place simultaneously.  What in fact happened was very interesting.  The “MLS Under Siege” session took over the room.  Chairs were taken from the other sessions, people stood and crowded around.  All in all there were likely less then two dozen people attending the other three sessions.  

 From the get go it was obvious that the Broker participants in the “MLS Under Siege” session were passionate and outspoken. I had assumed that the theme would be that MLSs were under siege by technology companies and outsiders.  In fact, at least here in this venue, the MLS system was under siege but by its very life blood – Brokers themselves.  Brokers were asking tough questions: “Why do I need to join more then one MLS and pay dues to them all to cover my market area?”  “Why can’t I control where my listings go?” “ Why is the data so poor and different in each MLS?” “What, exactly am I getting for my dues?”  “Why are the administration costs of my MLS so high?”.  These were just some of the questions.  It seems to me that most of the questions come back to four main issues, these being:

  Regionalization

• The MLS is regional by nature, their boundaries can overlap and they don’t always align with a Brokers marketing area. 

 Data Structure

• The MLS was never meant to be a public facing marketing vehicle.  The data structure just doesn’t cut it for marketing.  It’s why brokers are being out marked by 11 year old kids selling baseball cards on eBay.

 Data Control

• The current MLS system gives Brokers little or no control over the marketing of their greatest asset: listings.

 Analytics

• Current MLSs have no (or very little) analytics

 Governance

• 900+ MLSs translates to thousands of executives and tens of millions in salaries all which need to be supported by dues paid by Brokers.

These issues embodied exactly what the P2 NLS has set out to rectify.  Specifically:

  Regionalization: The P2 NLS is national, in fact international with members in 85 countries.  There are no artificial borders for Brokers marketing areas.

 Data Structure: The P2 NLS has a rich data structure that allows 36 photos, has free virtual tours, sound, lengthy descriptions, seller participation and empowerment and structured homogenous data. 

 Data Control:  The P2 NLS gives Brokers Complete Control and Choice.  Data distribution and syndication is completely controlled by the Broker.  Brokers are able to leverage the power of organized real estate by advertising on each other sites.  The are also able to capture consumer upstream and brand themselves by syndicating their listing assets to all the places consumers are looking: Google, Yahoo, New York Times, Trulia, P2homes, Propsmart and many others. 

  Analytics:  At this latest Inman conference it was said that anything worth doing should be measured.  We agree and the NLS is chock full of Analytics of every type including important ROI calculations. 

 Governance: The P2 NLS is developing what I consider to be the most efficient and effective form of governance. The current MLS systems elect officials to represent its membership (agents and brokers).  This is effectively a “Representative Democracy”    That is, those you elect to represent you make decisions that reflect their constituents will. (Saul Klein would say that in reality they are oligarchies but that is a different story).  Ostensibly these representative democracies are necessary for purposes of efficiency – it would cost to much to have every member cast a vote on each issue.  Unfortunately there are simply too many of them and cost of the elected officials simply drive up the cost of MLS membership. 

  Technology can help.    Simply put, technology allows for Brokers to participate in a “Direct Democracy”.  The P2 NLS is in the early stages of developing a direct democratic social governance system.  Brokers get to call the shots on their advertising partners and the usage of their greatest asset (listings). Ultimately a Direct Democracy ( the type Plato and Aristotle espoused) is the best and most efficient. 

  We are committed to putting this framework together. We have a great start.  Check it out at http://nls.point2.com/ .  Send me comments and ideas.  I assure you we will listen.   2007 is going to be an exciting and prosperous year. 

I submit to real estate professionals that if they consider the value of their MLS to simply be consumer facing advertising, then they are correct, Zillow will be the next National MLS. At this point I would also suggest that these same Realtors get their resumes in order. Side Note: I always refer interchangeably Realtor and Real Estate Professionals – When I say Realtor I really mean anyone licensed to sell real estate (I hope I don’t get a nasty note from Laurie Janek J ). Seriously, the members of the Realtor community that feel their value add is tied to their control of the public display of listings are living on life support. That genie escaped the bottle long ago, and consumer oriented web 2.0 companies like Zillow are going to continue to make the display of listings easy and freely available. This is what consumers want – see my post here.

Further, it is my contention that the more information a consumer has, the more likely he or she will be to use a Realtor. Let me explain by way of analogy: You might go online to diagnose a disease or illness; you will find a lot of information there and may even come to truly believe you know exactly what is wrong with you. Will you prescribe medicine or operate on yourself? I think not. If you think that is too extreme consider this: would you represent yourself in court? You can get ALL the information you need online. Some people do but most, particularly educated Internet users, do not. There will always be some subset of people, however, who try – in real estate we call those FSBOs. So why, as a group, do many Realtors believe their value is simply in hiding homes from consumers and “forcing” them to deal with a member of their profession to “see what is available”?

As you might have discerned by now, I DO NOT BELIEVE the value of realtor is attributable to their access to information. Most Realtors provide real value, whether buying or selling a home. Many of these successful Realtors understand that Zillow and others like them will not destroy their value. Real estate professionals bring tremendous value to the table including: Marketing prowess, negotiation skills, market knowledge, local knowledge, education, legal and contractual obligations and just plain common understanding of the local business environment and pitfalls to avoid. However, these reasons alone might not be enough to ensure that the profession, as we know it, will prosper and flourish. As Saul Klein commented here it certainly is “time for brokers and agents to take back their future”.

So how does an entire industry go about “taking back their future”? In order to take back the future you have to understand the past. The past, in this case being the entire Regional MLS system. The main goal of these regional or legacy MLS’s has been to facilitate the cooperative sharing of information and the cooperative marketing of listings between real estate brokers. Up until this point in history these MLS’s have served the industry well. The MLS’s were never designed or meant as public facing advertising vehicle, but it could be argued that is in fact the largest portion of value that it provides to it’s membership.

I would argue that, in conjunction with advertising, the biggest value of an MLS comes from the idea of organized cooperation amongst real estate professionals. This is an important concept that might not be clear at first. Think about it. Real estate is a complex business involving the sale of complex capital goods. Having local professionals collaborate together in the best interests of consumers, buyers and sellers alike, is very important. The MLS is the system that has allowed these professionals to cooperate. The MLS allows for the sum to be greater then the parts. It is it fact that these cooperating parties are all truly “real estate professionals” that creates the value.

So, I am saying that the power in the MLS is advertising and organized cooperation amongst professionals. The allure of this has attracted the attention of many parties that would attempt to capitalize on this power without contributing to its creation and continuation. These parties include:

• Part time or pretend real estate professionals
• Certain types of discount “Brokers” that are little more then a way for FSBO’s to get into the MLS
• Non-Realtor Internet firms looking to use the data to generate traffic they can monetize; in many cases by capturing leads and sell them to realtors.

In an attempt to protect themselves from the above, some MLS’s have implemented policies that have attracted the attention of the DOJ/FTC. DOJ aside, there are many problems with the structure of the current regional MLS’s.In my opinion much needs to change to help the Industry “take back the future”. Actually, it is more then just my opinion. It is no secret that NAR President Tom Stevens appointed a presidential advisory group, or “PAG,” to study the future of MLS.

So how can the industry “take back the future” ? In my opinion it is to capitalize on the power of what makes the MLS, namely: the power in the MLS is advertising and organized cooperation amongst professionals. So let’s look at each component.

ADVERTISING Consumers rely on Real Estate professionals to be professional marketers. As such, the industry cannot afford to be out marketed by 11 year olds on eBay selling baseball cards.

A National MLS needs the following:

• Rich Homogeneous Data Structure. In order to build something strong you need to have a good foundation. Current MLS’s were never meant to perform a public facing advertising function and were therefore never designed for this task. The data structure needs to be completely redefined to provide a robust marketing and advertising medium.
• Exposure/Syndication.The listings (marketing assets) need to flow transparently wherever the owner of these assets (real estate professional) chooses. This could be their own site, other professional’s sites, Google base, Yahoo, Craigslist or even Zillow. Real estate professionals need to realize that by actually setting the data free and placing it in these places, under their own terms, they are actually maintaining control. Sometimes to really have something you have to set it free – believe me on this one – I know.
• No Regional Boundaries. Regional MLS’s have regional boundaries that simply don’t make sense to consumers. There are some areas (the Tri State in
  Michigan for instance) where a consumer on a broker or agent site might have to look in three separate IDX pages for three separate MLS systems to see the available listings.
• Searching not bound by geography. Regional MLS’s by definition can only show listings in their region. Many consumers are looking for second homes and lifestyles, market conditions and home features may be more important then geographic location.
• Analytics. Traditional advertising is very inefficient, typically results cannot be measured. An effective National MLS would need to not only provide advertising but would need to provided and track results and calculate concise ROI’s.
• Predictive Marketing. A National MLS, or any MLS, ought to build a profile of potential consumers based on their online behavior and predicatively and automatically provide that consumer with what they are looking for. For instance if a consumer were looking in a certain neighborhood they ought to be sent that neighborhoods demographics. If they had spent a lot of time looking at all the photos of a certain home, they ought to get information about open homes, price changes or sale status if any of these events transpired. If they were primarily looking at kitchen photos (or any other rooms) they should get sent homes that are similar and have interesting kitchen photos – automatically.
• Consumer participation – web 2.0. A National MLS will need to be open to empowering consumers to participate, in what for most, is the biggest financial transaction of their lives. Seller logins, seller comments on listings, etc.

ORGANIZED COOPERATION

This is really the crux of why Zillow will never be a National MLS. Zillow and others like them may be able to achieve the advertising vision above, but will never be able facilitate the organized cooperation amongst true real estate professionals that has been the magic behind the success of the current MLS system. That said, changes are afoot that could destroy the profession if the industry does not “take back the future”. Here is what is needed to ensure the continued “magic” of the MLS.

A National MLS needs the following:

• Co-operation. There is simply more power in organized real estate. Simply put the power of real estate professionals working together is simply great news for consumers. This is a case where the sum is more then the parts. Together we are stronger.
• Asset Protection. Real estate agents and brokers are professional marketers that turn the data associated with a home in to a “listing” that is really and truly a marketing asset. The real estate professional uses this asset to market the home and attract new buyers and sellers. Every prudent business persons protects their assets – why should realtors be any different?
• Data Control. The real estate professional that created the listing (took the photos and provided the marketing descriptions), needs to completely control where and how it is displayed. The real estate professional needs to be able to provide the seller with the assurance that he or she will not lose control of the sellers data. A National MLS needs to provide this.
• Choice in Marketing Partners. A National MLS should provide a real estate professional complete control over who they share their marketing assets with. A member of a National Listing Service should not be forced to allow non-professionals to market their assets, nor should they be forced to market other listings in the National Listings Service. After all, does anyone tell a retailer what products he must carry market and sell? These marketing choices can effect a Realtor’s reputation and should therefore be individual business decisions.

COMMUNITY

The last and possibly most important thing a National MLS needs is community. This nebulous term is really at the crux of a National MLS. Participation in the community ought to be free for any licensed real estate professional. The community should be self regulating and policing based on, and tied into, the “social capital” of each member. The community should embrace transparency and openness.

In closing, I do think time is running short for the real estate profession to “take back the future”. That said, I think it can and should be done!

Best

Brendan