What do real estate industry people talk about?

My 10-12 weeks of “blogging” have been quite interesting for me, in that for 15 years I mostly have talked about the real estate industry with other industry people, and talked about local real estate with my own clients and local agents. Blogging opens up talking to consumers generally about the industry, which is in and of itself, quite a revelation.

Given I will be attending the MIT dinner event tomorrow, I am contrasting the speakers of that event with the participant theories of my normal industry discussions. Tomorrow’s event will be “the newbies” Zillow and Redfin plus HouseValues, whom I wouldn’t call a “newbie”.

I am “lifting” this discussion of the past few days from the forum that has been around since 1995 or so, and I have participated in since 1998. I thought this particular discussion was a huge complement to whatever I may hear tomorrow night. For the benefit of those attending tomorrow night, you might want to read this beforehand for “balance”. I have removed the names, except mine, since I am “lifting” it out. I think at least Robbie’s interest will be peaked by that part of the discussion that suggests that the MLS may cease to exist as an end result to all of this.

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Agent A says:

I would guess that there is not a large brokerage in the country that doesn’t have plans to withdraw from MLS depending on the outcome of the DOJ suit. I believe that many large brokers are considering withdrawing from MLS REGARDLESS of the outcome of the DOJ suit…

All across America, in every major city there are 3 or 4 large brokers who control around 80% of the inventory. If COURT mandated MLS rules don’t make competitive sense to those brokers MLS will END.

Even if you and Attorney Barry and the rest of the majority of the NAEBA are victorious your victory will be pyrrhic– MLS will be run YOUR way but it won’t contain enough listings to be a market force.

“Ardell” wrote:

What I am asking everyone one to focus in on is what “should be” as opposed to what “has been” since before buyer agency existed.

and

My major beef with the industry is that buyer agency was set into a system, parts of which should have been revised accordingly, and still need to be revised.

Agent B says…

Could it be that buyer agency will be given as the justification for the large brokers pulling out of the MLS? As Ardell notes, the whole system is a carry-over from a time before buyer agency. Does it really make sense to “cooperate” with other brokers in an adversarial relationship in the same way as when it was a subagency relationship?

One could argue that a listing agent is not truly acting in their seller’s best interest by making the property available to buyers working with their own agents until they have made every effort to find a buyer themselves. If a buyer agent is really going to save their buyer money, help them get more concessions, etc, isn’t it in the seller’s best interests for their agent to find an unrepresented buyer?

Consider this hypothetical situation:

Large brokerage with a state-of-the-art website and large advertising budget decides that they will take all of their listings as exclusive, non-MLS, non-cooperating listings for 45 days. No lockbox, the listing agency will conduct every showing, and there will be no showings to buyers who have not gotten a mortgage pre-approval. During this period, they will not do dual agency, and will attempt to find buyer customers for their listings. If they do not sell in 45 days, the listing will then be entered into the MLS. Their justification for this is that they believe that this maximizes the chances that the seller will get an offer that is in their best interests. Is there anything that would be illegal or unethical about this?

I think it is very easy to come up with scenarios in which the MLS becomes the dumping ground for the bottom of the barrel properties and over-priced dogs. It’s also easy to see scenarios in which MLS entries are very bare bones affairs with just enough info to generate a lead from Realtor.com, but not enough to be useful for other agents anymore. I find it very hard, though, to picture a scenario in which the large brokerages will just happily keep providing data-rich, picture-laden MLS entries for all of their listings, if they lose control over how and where these listings will be used and displayed.

I thought this might be food for thought for those who have not considered how the industry might change in order to counteract the events currently taking place with regard to mls access.

About ARDELL

ARDELL is the Managing Broker of Sound Realty in Seattle/Kirkland. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has over 22 years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. Follow Ardell on Google+

Comments

  1. You can rearrange the deck chairs on the Titanic all you want, but the future is inevitable. Going forward there will be fewer realtors, lower comissions for home sellers, and better selection and data for buyers. You can’t stop the march of technology.

  2. Steve, I think you actually CAN fight the future, or at least you can put it off through legal maneuvers. If the industry really does dissolve the MLS or withhold listings en masse, they would effectively declare themselves dead, but they might be able to milk higher revenues from a fragmented market until technology and consumer preference force them to improve service and lower commissions.

    In fact, I would argue that they’ve been fighting successfully for a few years now – the NAR and Realtor.com have effectively prevented competition, innovation, and held the line on discount brokers five years now.

    I think these are idle threats, though. The real estate industry clearly feels threatened by the DOJ suit and they’re pulling out all the PR stops to keep the status quo. They have publicly talked about the nuclear option in the past, but I think it’s BS. If you were selling your home, would you really use an agent that withheld your listing from 20% of the buying public for 45 days (or even 14 days)? I wouldn’t even consider it unless they guaranteed extremely low commissions, which isn’t really the point, right?

    If the MLS systems go through with the fragmentation threat, I look forward to the ensuing train wreck.

  3. I agree Galen. The article in the link you provided is a summary of a line that the real estate community has been spinning for quite a while. That being technologies, etc….”would increase efficiencies and cut the costs of selling homes.” Hasn’t happened.

    Moreover, the spin of “streamlining the process” through a nifty invention called “affiliated business relationships” (ABR’s) has also done nothing of the like. Fees to consumers have not dropped as those participating in these arrangements previously argued. ABR’s sole existence is competition and profit driven. There is nothing inherently wrong with that, but let’s not confuse consumers into thinking that ABR’s will benefit them by “streamlining” the process and “cutting the costs” of selling or buying a home.

    What has occurred is an increase in consumer costs–many suggest due to kickback issues via the enormous proliferation of ABR’s created by title companies followed closely behind by lenders and real estate brokers. And this is the blip(s) on the radar by the DOJ & RESPA officials (besides the MLS problem).

    What technology can do,and very well,is provide information to consumers who use it to their advantage: be an informed buyer or seller. For example, when my wife and I purchased our last two homes, we found the property ourselves. And we utilized a good Realtor. But, the Realtor’s services for us as a buyer was significantly marginalized, yet our agent received the full 3% commission. Again, nothing wrong with the way this played out, but this is the crux of another large issue–value perceived for commission paid. In some respects, having consumers access to internet listings (both FSBO & traditional listings) has certainly made it easier for real estate professionals.

  4. To use my favorite comparison again, the problem is that the MLS is trying to be both the NASD & NYSE. I think the MLS (or some variant of it) should have a role as the private-sector regulator of real estate services (or the real estate version of the NASD, which is it’s primary mission, is it not?). However, it should NOT be sole the guardian of marketplace data.

    On Wall St, stock brokers make money selling financial services products. If you want market data, you can get all you want for free. If you want market insight and advice, well you should consult a professional and be ready to pay for it.

    On Main St, real estate brokers make their money selling houses. Their livelihood depends on owning the sale, not the data. (which apparently is contrary to the belief of many of those in the industry). The customer doesn’t not want to consult a real estate professional and suffer through a sales pitch just to get market information. If they want your service, they’ll contact you (or one of your competitors).

    The consumer should be able to get at all market data they want at little or no cost. It is in the buyers best interest to be able to select from the largest home inventory possible. Conversely, sellers should have their market data (a/k/a their listing) distributed as widely as they wish and as inexpensively as possible (in order to attract as many buyers as possible). Doing anything else prevents the seller from getting the best possible price, due to a lack of competing buyers. And it prevents buyers from finding the best home available.

    After all, the rise of computing power and continuing fall of bandwidth & storage space, has made markets more efficient everywhere except real estate.

    If the industry wants to withhold listings, they will only the hastening their own demise. Not only that, but anybody outside of oligopoly or cartel of large brokers, will get the DOJ involved so hard & so fast, that they’ll be wishing they were Microsoft or a tobacco company.

    Funny how the lawyers always win, no matter what technology does.

  5. The mls is is simply “trying to be” what it always has been. It is the contention of some, mostly NAEBA members, that it should become a “public utility”. The bottom feeders are trying to change what it “is” to a public information source. In most of the country, one needs to be a REALTOR to access the mls, in addition to being a licensee.

    That is why you see the references in the agent discussions to NAEBA and Attorney Barry.

    Seattle is not reflective of the issue on a national scale, it being one of the few mls services in the country not tied to NAR. In fact, I remember seeing in the Trulia thread that Manhattan is not part of an mls system at all.

  6. Galen and Ardell,

    I agree… The Major Brokers do have plans for this. Gary Keller of Keller Williams mentioned at a big conference that as soon as they are the 4th biggest (not sure which number exactly he said) that they were going to pull out of the MLS’s in every city.

    Also as someone who is working hard on a RE search… I see it every day… talented agents who know exactly how to correctly map and tag properties but fail to do so to be vague and prevent a full data rich MLS. This way they control the sale of the property and will have more of a fighting chance for their commission.

    Giles

  7. Here is an idea, let’s let the market set the service level and price, not only for sales commissions but other services related to the process. True competition!

    Levelfield, LLC announces the launch of their Reverse Auction Real Estate Service

    http://www.leveldeal.com

    Seattle, March 20, 2006: Levelfield LLC announced today that it will be launching a Reverse Auction Real Estate Service for homeowners to offer the listing of their home to licensed real estate agents in a reverse auction format. Agents will compete in private auctions by increasing services and or lowering commissions for the opportunity to list an owner’s home.

    Despite the introduction of new technologies, a large number of agents (2+ million) and skyrocketing housing prices, agent commissions have remained around 6% and transaction costs have increased. This market remains unaffected by market forces and competition. These converging trends have created an opportunity to streamline the typical residential real estate transaction, and make the process more efficient and cost-effective for all parties involved. Levelfield’s technology gives the buyer and/or seller a venue to acquire the professional services desired from local agents for the best value.

    Online reverse auctions are a proven way for buyers to reduce the cost of acquiring capital equipment, services and materials from suppliers in the commercial sector. Levelfield, LLC will be deploying an enhanced reverse auction web site to bring home sellers/buyers and licensed real estate agents together. The site will not auction any real property. Rather, a home seller would offer the listing of his or her property, up for bid in private reverse auction format to licensed real estate agents. Levelfield, LLC’s patent pending methods and business model offers agents the ability to bid their service levels up and/or commission rates down for the opportunity to list an owner’s home. The service will be offered to agents and service providers (e.g., title & escrow, inspection services, etc.) for an annual fee, the homebuyer or seller will pay a small transaction fee to list service needs.

    The market is ready for a major change in how real estate is bought and sold. Levelfield’s technology allows the procurement of services in an open and transparent market place resulting in fair and real competition by licensed agents and service providers. The site will also include reverse auctions for homebuyers to obtain buyers agents, office leasing, title and escrow services, home inspection services, insurance and home warranties.

    “We believe that agents add real value to both sides of a real estate transaction but the fees and commissions have not adjusted to market conditions and competition. With the ease of information flow provided by the Internet and the large number of agents and service providers, prices will adjust in favor of the consumer in this model.

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