At one point, Multiple Listing Services was innovative technology designed to help buyers find homes. Today, though, its only getting in the way. With more users finding homes on national search sites, arcane rules and local focus have made MLSes as relevant as the binders they replaced.
For more than 100 years, real estate brokers have worked together to help sell listings. In the pre-digital days, brokers kept "listing books" full of their local board's available properties, which allowed each broker to promote a wider range of homes than he or she represented individually. The result was faster-moving inventory for the entire board, and everyone won. The service was (and still is) opt-in: brokers choose which listings to cross-promote. But results down't lie, and the vast majority of properties wound up in the book.
Eventually, the listing book gave way to a brokers-only digital database, which improved performance and accuracy. When the Web came along, real estate boards acknowledged the necessity of a consumer interface, providing plug-in solutions that let users search its inventory, or licensing third-party software vendors to provide similar services. Brokers who want to develop something fancier can request direct data feeds (often at substantial cost), subject to the board's restrictions.
Technology disruption in real estate is a very volatile topic, so let's be clear about what this article is not saying. We're not saying the Internet will eliminate the need for agents. It's already changed the way they do their jobs, but houses aren't cars, so an expert voice will always be important.
For a very long time, even after the MLS went digital, brokers were gatekeepers to an area's listing data. Seeing available inventory meant taking a trip to the local real estate office, which guided the buyer through every phase of the search and purchase. The Internet has changed that. According to the National Association of Realtors (NAR), 88% of home buyers (and 94% of buyers age 25 to 44) used the Internet during their home search, typically long before contacting an agent.
That same NAR survey revealed that more than a third of Realtors received no business whatsoever from their personal websites. The reason for the discrepancy? Homebuyers are bypassing MLS-sanctioned broker sites for online marketplaces with more inventory and a broader customer experience.
1. Searches Are Bigger Than Boards
The real estate industry is local. Real estate searches, however, are not. MLS coverage areas often overlap. It's not unusual for a broker to participate in three or more boards, each with its own MLS, its own custom data fields, its own naming conventions and its own restrictions on how data can be searched and displayed. In many cases, the boards may even restrict "commingling" of their listings with listings from other boards, creating a logistical nightmare for brokers trying to list as much inventory as possible on a website.
A broker whose territory bridges the Pennsylvania/New Jersey border explained his frustration with board-specific data restrictions. "I have customers who come to me and say it's impossible to search through all of the area properties on my website, and I can't blame them. They don't care about which [real estate] boards are where. They just want to see everything within 20 miles of work, so they bounce from my site, do a search on Trulia, and if I'm lucky, they come back to me with questions. If I'm not, I lose the lead."
2. The Industry Has Moved On
National and regional search portals like Trulia, Zillow, and even Craigslist offer a wider range of inventory than brokers' MLS-specific search widgets. Typically, they can get away with this because their listings aren't part of the MLS system. Trulia, for example, actively recruits direct listings from agents, building its own national database of searchable properties that cuts through local boards' red tape. Syndication services like ListHub and Point2 allow brokers to push their listings to dozens of portals with a single click. More progressive MLSes are partnering with these and other, similar services to help brokers promote their listings and maintain data integrity. Other have blocked syndication deals, but determined brokers are pushing listings on their own.
Does listing aggregation introduce the potential for errors and fraud? Absolutely.
In January, a prominent San Diego real estate firm (video above) rather famously pulled its listings from sites like Trulia for exactly that reason. Trulia itself found evidence that 21.3% of direct submissions had an error in listing status or price.
Clearly, there's an advantage to MLS oversight, but the cat is out of the bag, and the numbers are striking. In the US, Trulia, Zillow, and Realtor.com account for 8 times as many visitors as all of the major real estate franchisors combined. Consumers seem willing to put up with inconsistency if it helps them find a house on their terms. Brokers seem to agree. For all the rumbling about unfair treatment by listing aggregators, actual defections like the one in San Diego are extremely rare. The public wants broad, easy searches. Despite their best intentions, most MLSes are getting in the way.
Third-party aggregators aren't going anywhere, and the trend toward listing decentralization will continue. In January, four national franchisors entered a partnership with ListHub to try to deliver a national real estate search to end users in the face of a NAR ban on direct data feeds from MLSes. Expect to see more of this sort of maneuvering as everyone tries to create national portals.
At the same time, we'll likely see more consolidation into mega-MLSes like California's CARETS, which encompasses more than 50 boards. By migrating boards to a common technology platform and (hopefully) encouraging them to adopt similar rules, larger MLSes should make independent sites more useful, help secure deals with aggregators that actually protect data integrity, and make homes easier to buy and sell.
Can This Technology Be Saved?
The local real estate board will no doubt continue to exist, but the MLS as we've known it is already on its way out, just like the three-ring binders that came before it. The best shot MLSes have at remaining relevant is acknowledging that change is inevitable, and doing what they can to keep that change safe for their clients. If they embrace the world of syndication, consolidate where it makes sense, and position themselves as guardians of data accuracy in a distributed world, they can remain an important part of the industry and even improve it. If not, well, it's not clear anyone will miss them.
Previous ReadWrite Technology Deathwatches
Feature Phones: No change
One Laptop Per Child (OLPC): No change
In-House Data Centers: No change
Point-and-Shoot Cameras: No change
Video Game Consoles: The utility of bundles apps like Netflix and Vudu seems to be slipping. An NPD Study showed that one in five consumers who view streaming video on their TVs do so without a peripheral device.
Blu-Ray: The same NPD study reveals that "online video is maturing” as users migrate to watching streaming media on their TVs.
QR Codes: It's been a mixed bag. While Bank of America is testing QR codes for mobile payments (good news for the technology), a security researcher demonstrated how a malicious QR code could be used to wipe a Samsung smartphone.
For an update on ReadWrite's baker's dozen of company Deathwatches, check out our updated ReadWriteWeb DeathWatch Update: The Unlucky 13.
Building implosion image courtesy of Shutterstock.