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Consolidation: The Ideal MLS?

March 1, 2006

By Saul Klein

Many brokers today want a sense of “oneness” with their MLS. They want one MLS that covers their entire market and they want to pay one fee to oneorganization. They want to be able to serve on one MLS board, deal with one MLS vendor, receive their data in one format, and play by one set of MLS rules. Too often, though, multiplicity is the name of the game.

Brokers with large market areas are required to pay for membership in several MLSs—each perhaps with vendors who use different technology and interfaces. Varied technology not only requires extra training but also leads to difficulties offering consistent listing information online. Then multiple IDX rules add their own financial and educational strains to the mix.

Additionally, brokers must belong to different boards of directors and committees to ensure that their needs are being met. Each, of course, with its own distinctive governance structures and schedule of meetings—major time commitment for the broker who wants to be involved.
All this has led to a lot of broker unrest.

In Chicago, Bakersfield, Connecticut, Massachusetts, New Jersey, and other markets, dissatisfied brokers are proposing possible solutions, including disolving association-owned MLSs and forming “privately owned” MLSs.

The broker discontent was so prevalent in California that last year Jim Hamilton, California Association of Realtors®’ president, appointed a Realtors® MLS Work Group to begin to evaluate potential threats to the 20 MLSs serving 200,000 Realtors®.

Composed of large and small broker companies, with Jim Link, association executive of the Southland Regional Association of Realtors®, and Walt McDonald, past president of NAR, the Work Group was formed. It’s function, in part, was to address complaints about the inefficiencies of several MLSs, primarily in the Northern California market.

The CAR Work Group interviewed consultants, users, MLS executives, and brokers to develop an aspirational “Statement of Principles” defining how the ideal MLS should operate (see sidebar).

Throughout the process, CAR assured the board of directors that the intent was not to pave the way for a statewide MLS, but rather to make way for the future of the MLS.

Refined over the summer and adopted by the CAR board of directors in September 2005, the document will help MLSs achieve this vision.

What Is Happening in Northern California Today?

Recently, in the spirit of the CAR Statement of Principles, six northern California MLSs consolidated into a single 46,000-member MLS, called the Northern California Real Estate Exchange (NCREX).

According to Gregg Larson, CEO of Clareity Consulting and the hired MLS consultant for this attempted consolidation, “We are trying to create a brand-new real estate information exchange for the next 20 years, and we wanted to start with a blank sheet of paper to design it properly.”
The organizations founding NCREX are REInfolink, Contra Costa MLS, Bay East MLS, East Bay Regional Data, Central Valley MLS, and the San Francisco Association of Realtors® MLS. Other Northern California MLSs are also set to come on board.

Similar to the CAR Statement of Principles, NCREX will have one set of business rules and regulations and a common database structure.
A somewhat similar data-sharing “alliance” between a number of MLSs in Los Angeles and surrounding areas has existed for a few years but is not without its opponents. The Conejo Valley Association and MLS separated from this alliance when they determined it wasn’t working for their members. Clearly, not all Realtors® regard the principles the CAR Work Group proposed as the only path to the future.

So is CAR on the right track as it drives toward consistency and consolidation? Time will tell. Some areas and markets always will feel that consolidation is not in their best interest, or that the task of standardizing fields, showings, and most other aspects is beyond their power and collective efforts.

Perhaps consolidation is merely an interim step to the next big development—thousands of databases on thousands of computers, searchable with something like Really Simple Syndication (RSS) feeds, or resembling the format of a blog or Craigslist.com.

CAR has considered this possibility and is planning for the multiple-database scenarios, in addition to pursuing its principles, with the development of a middleware product known as Intelligent Agent. Intelligent Agent will facilitate the transfer of MLS data from one broker to another without needing an MLS. It will allow for single-party access to MLS data housed in separate databases. Just as music can be shared on a “peer to peer” basis, so would listing information.
This new software product may be a major component in the future of broker data sharing. Since a central system of aggregated data would no longer be required, MLSs as we know them would cease to exist. MLS rules would be replaced with broker business rules and contractual data-sharing arrangements. Is this the future CAR envisions?

Although regionalization and one MLS for a state, or one MLS for the country, may not be in everyone’s best interest, it is clearly in the best interest of enough people to motivate CAR to lay the groundwork for “boundaryless access” to listing data as we move deeper into the 21st century.
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CAR Statement of Principles

* MLS data needs to be fully standardized with local options for data field variation.
A lack of uniformity has created artificial boundaries that impede the efficient operation of the market and the ability of Realtors® to service their clients. CAR supports universal data fields that are standard across all MLSs while also recognizing the need for adding local descriptors.

* California Realtors® should have universal access to all MLS data. CAR members are licensed by the state Department of Real Estate and as such are able to sell property throughout California. Consumers have access to statewide and even nationwide listings through a variety of data aggregation sites on the Internet. In order for Realtors® to provide their clients with the information they want, California Realtors® should have access to all listing data in the state. Shared databases and reciprocal agreements should be strongly encouraged.

* MLS entities should exist for the benefit of participants and subscribers. CAR believes that MLS fees should be set at a rate that gives the MLS and/or the local association a fair return for delivery of MLS services. We believe that local associations of Realtors® provide valuable services to their members. These include services and activities that advocate for homeownership, ethics, and professionalism in the industry. CAR believes that local associations of Realtors® should be adequately and fairly compensated.

* MLS rules should be uniform and enforced consistently. Over the years, the relevant market area for many brokers and agents has expanded beyond the artificial boundaries of now-outdated MLS regions. As a result, brokers are increasingly operating in multiple MLS environments and facing complex issues related to the disparities in rules, regulations and enforcement governing different MLSs. CAR believes rules should be established that simplify and enhance the experience of MLS users across systems. To that end, we believe that the CAR model MLS rules should form the basis to develop statewide rules and standards of enforcement.

* The MLS board of directors should include broker owners with appropriate regional representation. CAR believes that broker involvement in MLS governance is critical. The MLS is the single most important business tool in the real estate industry, and as such, the provision of MLS services should be accountable to all participants. We believe it’s imperative that brokers from both large and small firms be given representation on MLS boards.

* Use of MLS data and its distribution to third parties should be controlled by the brokers who provide the data. CAR believes that a listing represents intellectual capital and that the process of creating a listing is a value-enhancing activity. Brokers entering into an exclusive agreement with sellers accept the responsibility for marketing the property and should have control over distribution of the listing data. The rampant and uncontrolled dissemination of valuable listing information on the Internet has increased the cost of doing business and devalued the role of the agent and broker in this process.

Saul Klein, e-PRO, GRI, CFP, is a member of the CAR MLS Committee, 2006 vice chair of the NAR Business Information and Technology Forum, and a nationally known speaker, trainer, and technology expert. He is president of the technology company InternetCrusade. Contact him at saul@internetcrusade.com