The internet has dramatically changed the business of real estate brokerage, and ushered in a host of new business models around the country. Some of those business models have pushed the envelope and, not surprisingly, resulted in major clashes between "old" and "new" approaches. This is particularly true in the sphere of the Multiple Listing Services, where new technologies and business models are challenging long held beliefs about who owns the data, what information can be displayed to consumers, and where and how it can be displayed. For those of you reading this who aren’t Realtors, a little intro will help you better understand this arguably esoteric post.
MLSs are typically owned and run by local Boards of Realtors, or regional associations of those boards. Only Realtors can post listings to the MLSs and have full access to the data. (Although appraisers and other professionals involved in real estate who have a business need for the data can be affiliate members.) You must be a Realtor (which means a member of the National Association of Realtors, and not just a licensed real estate broker or salesperson) to participate. Local MLSs set their own policies regarding data ownership and display within broad guidelines of the National Association of Realtors, but there are wide variations among boards. That’s why, when you’re searching for a house on a website of a member of the Atlanta Board of Realtors, listings may be displayed with property addresses (which that Board permits), while when you search on my website for properties in Sullivan County, addresses are not displayed (our board does not permit the consumer display of property addresses.)
One of the biggest battlegrounds I see over the next few years is control of the flow of information. Traditionally, Realtors have controlled the flow of information. The listing agent decides how the property is described, with an information flow from one,the listing agent, to the many – other cooperating brokers and consumers. There is no feedback loop, for other brokers and consumers to comment on the listing. For example, a listing broker may put in the remarks field of a listing, "Charming, cozy farmhouse in the country, needs some updating" Sounds great, right? But it may have 6 1/2 foot ceilings, be located just off Route 17 with lots of road noise, and have evidence of foundation damage and wood rot. But most MLSs prohibit any adjustment in listing data on a website by another agent, for example by adding another comment line.
That’s the preamble to help you understand the Seattle dispute, which has wide reaching implications. Redfin Real Estate is a Seattle-based online brokerage that’s technologically very savvy (and also has a business model that rebates part of the sales commission to buyers). Redfin is an active member of the Northwest Multiple Listing Service, and displays the MLS data on its website, similar to how I offer the Sullivan MLS on mine. Redfin knew it couldn’t adjust the listing data on its site per the MLS rules. So Redfin set up a blog-type site, Sweet Digs, and hired reviewers to go out, visit properties for sale, and write reviews. I thought the idea was brilliant. The Northwest MLS did not. The NWMLS ruled that Redfin’s "reviews violated its regulations against advertising other brokers’ listings" and a policy against commingling listing information with other non-MLS information on a Web site.
The NWMLS fined Redfin $50,000 and threatened to terminate its access to MLS data. Redfin capitulated and pulled the reviews from its Sweet Digs sites. Redfin is appealing.
The ruling is chilling in its impact, and I believe very shortsighted. In every other major purchase area, consumers have become used to access to unbiased information to help them make a purchase decision. When you buy a car, you don’t just go to a manufacturer’s website and read their hype, but you go to Cars.com, Edmunds and Consumer Reports to read their reviews from both experts and consumers. When planning a trip, consumers go to Tripadvisor.com and other similar sites to read what other travelers have to say about a hotel, resort or cruise line before plunking down their money. But for a single family home purchase, which is likely the largest and most significant purchase of all, we only have the equivilient of "manufacturers’" information.
Buyer representation offsets listing agent bias somewhat, but on a one on one, property by property case, working with individual clients.
I don’t want to imply here that listing agents are deceptive or underhanded. The vast majority are not. Conscious deception is surprisingly rare. But the job of the listing agent is to position a property in the most attractive light possible, to generate calls and showings. While they are obligated to provide accurate objective data on a property, e.g. acreage, property taxes, square footage, etc., they aren’t obligated to provide a comprehensive subjective picture.
One of the huge inefficiencies of this business is how much time agents spend showing property relative to each actual sale. One reason is all the time wasted showing frogs that are positioned on the internet as princes. Property reviews, by reviewers independent of the listing agent, would be a huge step to helping buyers narrow in on the properties that really fit what they’re looking for, and reduce all this wasted time and energy showing frogs.
I think listing agents are concerned that if the process is "opened up", their clients — sellers — will freak out about any negative comments about their houses, pull the listing and go the FSBO (For Sale By Owner) route, posting their property on websites where they can better control the information. Personally, I think that would be fabulous — that if your property is in the MLS, it is open to comment and review. That could position the MLSs as the gold standard of accurate, unbiased information for consumers, and marginalize FSBO sites little more than biased, seller-paid hype. Let’s start rating houses, for quality, value, design and condition. Sellers will hate it (at least those who don’t get 4 or 5 stars), but consumers will love it!