There are many technological "shiny objects" MLSs are presented with for site-licensing or offering a la carte. How should these be evaluated by MLS leadership? Here are some thoughts from a presentation I previously made at the Clareity MLS Executive Workshop. First, I'll examine NAR's approach and suggest some potential updates and then I'll describe some additional principles that should be considered.

The NAR Approach


NAR has created three categories, basically:
  • CORE  = MLS MUST provide
  • BASIC = MLS MAY (include)
  • OPTIONAL = MLS MAY (offer, a la carte)

CORE

This includes information, services, and products are essential to the effective functioning of MLS, as defined, and include current listing information and information communicating compensation to potential cooperating brokers.

But how is MLS defined by NAR?
  • a facility for the orderly correlation and dissemination of listing information so participants may better serve their clients and customers and the public,
  • a means by which authorized participants make blanket unilateral offers of compensation to other participants (acting as subagents, buyer agents, or in other agency or non-agency capacities defined by law),
  • a means of enhancing cooperation among participants,
  • a means by which information is accumulated and disseminated to enable authorized, participants to prepare appraisals, analyses, and other valuations of real property for bona fide clients and customers, and
  • a means by which participants engaging in real estate appraisal contribute to common databases.

The phrase "listing information" seems too limited, given all the kinds of information resources MLS subscribers expect these days, the types of information being standardized at RESO, and all the types of data needed for a core MLS system or database to interoperate with all of the various tech tools in use by MLS subscribers. I would suggest that perhaps the definition of MLS could use a little updating by eliminating the word "listing" rather than trying to create some kind of all-inclusive list.

BASIC

This is determined locally and provided automatically or on a discretionary basis, and includes items such as: sold and comparable information, pending sales information, expired listings and “off market” information, tax records, zoning records/information, title/abstract information, mortgage information, amortization schedules, mapping capabilities, statistical information, public accommodation information, MLS computer training/orientation, and access to affinity programs.

Some brokers and broker groups have declared many things out of scope for MLS:  agent websites, CRM, property marketing tools, showing systems, transaction management systems, and MLS public-facing websites. One large group complained loudly a few years ago about MLSs pushing NAR to add as many items as possible to the list of ‘basic’ MLS functions to force participants to pay for them, whether they want them or intend to use them or not. Since that time it was determined that in-person training could not be mandated - clearly things are in flux.

But it seems obvious that showing systems could be considered critical infrastructure for efficient cooperation. The case for inclusion could be made for other items on the brokers' list as well. How do we know who’s right, and what belongs on that CORE and BASIC list and what doesn't? I do NOT think we should be evaluating the distinction between these lists to serve the interests of the "lowest common denominator" of MLSs OR go wild adding items to the list willy-nilly. I DO think we need to apply some additional principles and I'll come back to that.

OPTIONAL

An MLS may not require a participant to use, participate in, or pay for the following optional information, services, or products: lock box equipment including lock boxes (manual or electronic), combination lock boxes, mechanical keys, and electronic programmers or keycards; advertising or access to advertising (whether print or electronic), including classified advertising, homes-type publications, electronic compilations, including Internet home pages or web sites, etc.

Do Not Pass Go...

Those of you who attended the 2012 Clareity MLS Executive Workshop probably remember the cautionary note about anti-trust tying violations - how easy it is to get into trouble if one creates an illegal tie between one product (e.g. membership / subscription) and another when expanding a product offering. I won't dive into the details here, but I encourage readers to remember the four elements of such a tie:
  1. There must be two separate products;
  2. There must be a tie;
  3. The seller must have enough power in the market for the typing product so that it can impact trade in the market for the tied product; and
  4. A certain amount of sales for the tied product must actually be impacted by the tie.

I'm insistent that we must continue to re-evaluate the definition of MLS precisely because defining the product set that reflects the function of MLS (versus a separate product) is such a core part of the testing.

Another Approach: Principle


What are the principles by which MLS information, services, and products belong in the categories of core, basic, and optional? I not only believe we must more clearly define MLS but also clearly define the principles that are considered when evaluating the categorization of products.

Each bullet point in the definition of MLS services effectively spells out a core principle, which is a test for how appropriate it is for a product or service to be included in the basic MLS package. In short, at least given the current MLS definition:

A. Manage/Disseminate info so participants better serve clients, customers, and public.
B. Means for compensation offer
C. Enhance participant cooperation
D. Participants: appraisals, analysis, valuation for clients
E. Participant appraisals

But let's look at some other elements for consideration:

Principle 1. Network Power. Does the product or service require many or all MLS subscribers to use it to achieve benefits from it? Professional collaboration tools (i.e. transaction management and showing systems) would fall under this principle, unless they interoperate sufficiently that collaboration can occur without everyone using the same system.

Principle 2. Economic feasibility. Does the product or service help participants better serve their clients but is it economically or otherwise infeasible for any one participant to field the product or service on their own? 

Principle 3. Integration. Does the product or service require a level of integration into core systems that would not be feasible from an economic and/or interface perspective if every broker or agent selected their own? Note that ability to integrate continues to evolve.

Principle 4. Economic Interest. Is there an overarching subscriber economic interest?

Note that principles 1-4 help to refine consideration and categorization of items already considered relative to A-E (or an updated MLS definition that drives a different A-E). And, of course, all has to be considered against the potential for creating an illegal tie.

During my presentation at the Clareity MLS Executive Workshop we considered a number of product examples and evaluated them against 1-4 and A-E. That's the approach I'm suggesting MLS leadership take as they are approached with "shiny objects".

Additional MLS Considerations

An MLS is unlikely to go through a process of product evaluation unless the product appeals to subscribers, that is, it fills a subscriber need. But choices must also be made based on whether the product is strategic for the MLS and its subscribers in some manner, how important and urgent it might be for the MLS to field the product at that time and, of course, cost. Also, MLSs typically have limited capacity to roll out new products and continually encourage adoption of those products - again, choices must be made.

Deciding what to do when a product or service is not as well adopted as desired, or if there is dissatisfaction with it, is a topic for another blog, another day.

Next Steps for the Industry

I would suggest that industry leaders collaborate on the following:
  • Consider how we might modernize the definition of MLS (perhaps beyond just fixing reference to “listings”). Think about what we aspirationally want the MLS industry to become - again, a subject for another post.
  • Refine core (and basic) MLS  services as a standard to reflect that new definition. Phase-in over time to allow MLSs to determine strategy for coming up to snuff (on their own or together).
  • Add four additional principles to the section of MLS policy relating to service characterization (core, basic, optional)
  • Remove lists from policy and put them in a “best practices” document explaining how each product/service (and new ones) relate to definition and principles.
  • Run it all by anti-trust attorneys!
Some time ago, in preparation for an industry publication, another industry consultant asked me, "What are the most significant issues facing the MLS by 2020, what actions do you propose be taken to address these issues and what are the desired outcomes?" Following are my answers:

Expand what cooperation via MLS means.  If the perception of MLS is just about a place to advertise the homes with some private fields, MLS is very vulnerable. If we make it more explicit that cooperation is about a lot more than that, the MLS can grow stronger.

To accomplish that, we can:
  • Develop standards for compliance and enforcement: data standards and business rules, data distribution, maintaining "fair" online advertising using the compilation (IDX / VOW) and other uses.
  • Develop core standards for MLS data integrity business rules.
  • Consider the kind of government regulation the industry could be facing with regard to wire fraud and get ahead of it - MLS can be a part of that, if organized. Information security practices will be a part of that - much of the steps needed to deal with wire fraud take place during the "cooperation" phase where the MLS is, or could be, involved.
  • Develop and implement standards for brokers and agents ("With teeth") re: responsiveness to showing requests, participation in secure electronic communications and transaction management. Develop these as MLS monitored areas with supported core functions as needed. As elements of cooperation, these would seem to fall within the jurisdiction of MLS. What other areas, technological and otherwise, could be considered "cooperation" and be an MLS function?

There are many challenges ahead for MLS - I think it would be ideal to firm up its value and capabilities in this area.

Consolidation: A unified industry would be more capable of managing risk.

To encourage consolidation, we could:
  • Develop and mandate core standards for MLS, based on CMLS best practices.
  • Drive recognition of strategic issues driving consolidation BEYOND the local service needs and Overlapping Market Disorder (OMD) - for example, managing risks described in the DANGER report, information security, and legal challenges (without depending on subsidy from the national level). Positioning based on OMD alone was unfortunate because that is only one of the drivers for consolidation.
  • Determine the MLS consolidation end-game (per my earlier blog on the subject). When I speak on the subject or consolidation or am helping MLSs achieve it, I create a map based on consumer-oriented data that allows us to productively discuss the end-game. This market-driven endgame map should drive tactics to achieve consolidation, driving them based on consumer needs and the professional access needed to serve the consumer rather than existing industry structures. Add the other broker and core standards factors and we should have a better picture of the end-game we are aiming for.
  • NAR itself could get the right people from each organization sit down together to work consolidation out. Peer to peer asks have had some effectiveness, but progress is slow. Not everyone comes to MLS conferences like the Council of MLS or the Clareity MLS Executive Workshop to understand why consolidation is so important.
  • Some of the states have, in the past, worked against consolidation - this must be discussed at the national level. Shared services at the state level solve some problems, but are stopping others from being solved.

Front End of Choice

Most MLSs are not ready to unbundle for FEoC: providing a core "pipe" of information and allowing for product choice, including products provided through the MLS organization, through brokerages, and purchased by agents themselves. Though I don't think this is an especially important trend to move forward - other others described above are much more urgent - I don't think this trend is going to go away. If the industry is going to support this trend, potentially incompatible licensing processes and the per-user cost bundles MLSs have created will need to be addressed. A few large MLSs (MRIS, CRMLS, Northstar MLS)  developed the technical infrastructure to support this - and it is not easy! Others have focused on providing FEoC for alternate means of MLS data access while providing a single core MLS system.  Once further data standards are created that are needed to support this type of business, there may be increasing competition for this core infrastructure.

Now, brokers are dealing with a similar issue today, with some deploying suites but many more deploying best of breed products, integrated as best they can without data standards. While many brokers are happier when they create this best of breed solution, but it's expensive and difficult because of that lack of data standards. There's more inertia in the MLS space to stick with the single-vendor suite plus a few integrated products approach due to licensing models, but data standards in the MLS space are more advanced than in the broker space and alternate front ends are starting to emerge - so I expect this is going to happen. Again, "How urgent and important is this?" is a question that needs to be asked when considering this initiative - and the answer is not going to be the same for every MLS.

Other Issues

Every MLS has different issues to address in strategic planning. For example, in the last few plans I have facilitated in 2018, "Front End of Choice" didn't come up at all from subscribers or the leadership, while the other two issues did in one form or another - along with other local issues. Some of those local issues are ones I've seen recently in several organizations and could well be covered in another blog post.

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