MLS® Sandbox
Posted November 4th, 2009 in Real Estate, Real Estate Stuff | 
Rags
There are times when you just have to address misconceptions spawned by the need for sensationalism splattered by local rags.
Don Cayo of the Vancouver Sun says that the “Real estate industry could face millions in fines if it won’t lower fees
Really Don, is that the whole story or did you need to make a deadline?
Then you have Karen Mazurkewich from Canwest News saying that “Feds tell Realtors® to open up industry.” With pat on head one responds with now Karen, open up suggests that it was under lock and key. Suggested is that CREA is protecting MLS® in the same vigorous manner any privately or corporately held security would. Ask Jimmy Pattison or the Liberal party to open their books. Karen, you may assume what their response will be. Sadly, there is more of the same drama in almost every paper in this country. What then is all this shouting about. Perhaps a little allegory will help.
Your Sand Box
In it’s most simple form it’s about a guy – a friend you might say, who came over to your house to play in your sand box and decided that he didn’t like the sand. He tells you that your sand doesn’t let him build things the way he wants. He asks you to change the sand because he thinks it would help him play better. Playing better means that he can offer the sand box to consumers to use at their will but, pay less. Therefore because he says so, you should change the sand. You of course, like your sand. It’s good sand and lots of consumers like your sand too. They trust your sand. They know it is clean sand that it is guarded and watched over by you and others like you to make sure their play experience is the safest and best it can be. They take comfort, they feel good when they play in your sand. Few have said change your sand or else. Knowing that and since it is your sand, you say no to your friend’s request.
Sand in His Shorts
Upset, he leaves. The friend then gets his lawyer buddy to sue you for not changing the sand as wished. You of course are a reasonable person who thinks well, maybe he’s on to something you might have missed and after due consideration, you decide that the sand could use a little refreshing with new rules that stand as Pillars of Conduct which govern play in your sand box and so you agree to some changes to enhance the consumer experience. To consumers the changes are reasoned, protect their interests and fulfill the mandates required when playing in the sand box. Again, they trust and feel good about coming over to play in your sand box.
I’m Telling
“Not good enough” says the friend! “I’m reporting this to a higher level, (the competition bureau), because you are not changing all the sand.” “I don’t like the way you let people play!” “I want to be competitive!” “I don’t care about your rules, fees or sand.” “You must allow me to bring consumer friends over and pay less for the play experience.” Scratching your head you say to the friend, “wait a minute, it’s my sand box!” “Have you thought about building your own sand box and inviting your consumer friends to play there?” While you would like him and his friends to come and play and you have made changes so that they get now get goggles and can play safely without getting sand in their eyes, he is still not happy. The friend, incensed with this response, says – “me and my consumers want sand the way we want it and for less money, your changed rules mean nothing to us.” “We want to able to do whatever we want in your sand box and we want to do it for less.” “It’s not fair and the bureau, that’s right, the bureau – they will make you change your sand.”
Not Going Away
What is this sand box story telling us? Is it the end of MLS®? No! Is it open season for anyone who wants to list their property on MLS® without using a Realtor®? No! Do individuals and government bodies have a right to tell owners of their sand boxes that they need to remove the safety provisions (Agency) from the play rules? Will changing the sand actually make the friend and his consumer buddies happier. Maybe!
As understood, the real story is about a former Toronto discount broker who wants to operate a bare bones business model while using the services of a tried and true service (your sand box) to offer consumers minimal service without the reasoned protection (goggles – agency) other consumers have enjoyed and seek.
If understood correctly, he business model is something akin to a middle man. In this world of blogging it might equate to Google’s ‘pay per click’ advertising. He proposes a sand box where all the work, protection and facilities are provided by you as the owner of the sand box, but seeks to provide none except getting a cheque from Google for each click from his consumer friends. His service appears as nothing more than adding a mark up on the fees Realtors® pay to record their sellers’ listing on MLS®.
Strange it is then, that this story of sand in your shorts, has catapulted newspapers to new levels of sensational ‘sky is falling’ journalism that suggests the Multiple Listing Service owned and operated by Realtors® is somehow busted! It leaves you to ask the more important question that these journalists might have considered. The demand by the Bureau to change the sand calls into question legal precedents designed to protect the consumer. Consider the bureau’s demands that CREA remove these rules.
- A listing REALTOR® must act as agent for the seller to sell the property and to assist the seller through the entire time of the listing contract.
- The mere posting of property information in an MLS® system is contrary to CREA’s Rules. A “mere posting” occurs when the listing agreement relieves the listing member of any obligations under the Rules, including the obligation that the listing REALTOR® must remain the agent of the seller throughout the term of the listing contract.
- Only the listing REALTOR® name(s) and contact information may appear on REALTOR.ca. The seller’s name or contact information shall not appear on REALTOR.ca or in the public remarks section of the MLS® system.
What stands out is that the second and third rule flies in the face of long established provincial statutes (Laws of Agency and the Privacy Act), both designed to protect the consumer. Removal of these seem incongruent! Why aren’t these newspapers – the servers of public good, advising their readers that the Bureau is demanding that CREA strip this protection of long established legal statute, away from the consumer?
Where lies the greater benefit or harm to the consumer? Ensuring Pay per Click as per the mandate of the bureau or eliminating the assurance that consumers who play in the real estate sand box are protected by fiduciary responsibility from their Realtor®?
Beyond Sensationalism
Let’s correct the misconception. Contrary to what some have assumed or have hoped for from the implications of the headlines, it is not an opening of the MLS® system to the public. It is merely a push by your friend to have his way. The goal, a different business model to provide what is believed to be that panacea to which home selling consumers will flock. This model is not new nor is it different. A quick look to the US will tell you it’s been around for some time. Knowing a great number of Realtors® south of the 49th, their consensus in discussion is that the new sand being proposed is invariably the option of last resort for most sellers – particularly in tough markets. The greater majority of consumers want and to an extent, need the services and protection a REALTOR® provides.
To this author’s knowledge there is no jurisdiction in Canada that promotes fixed rates of compensation for real estate services. This sand box story is about the rules of engagement. They are the crux of the issue not the fees. Most important, it is these rules that provide under the laws of Agency, the best protection for the consumer. One is left to ask if the bureau is prepared in any ruling to usurp established rules and law designed to serve the consumer better than the business model? Hopefully the Bureau’s mandate is not myopic.
Observation
What strikes odd is that the Competition Bureau is insisting that CREA adjust its operations. As a good Realtor® friend eloquently stated in discussion – has “it never occurred to the Bureau, that in forcing Realtors® to lower fees they are insisting that they be “anti-competitive”.
Horizons
Prairie folk always have a clear view of a horizon. Read the view of flatland friend Norm Fisher of TeamFisher.com where he provides a more technical approach to this sand box dilemma.
That’s funny! Canwest media reportors complaining about the MLS monopoly.
Lets think about the North Shore newstands- Vancouver Sun = Canwest. Province + Canwest. National Post = Canwest. NothShore News = Canwest.
Yup looks like MLS is the only monopoly worth complaining about!
Fish,
Yup, things are slow at the presses across Canada. More important is whether they come to understand the impact the potential outcome may have on consumers. There will be lots to write about then.
From this perspective, it will be a slap on the face to all who championed laws of Agency – the idea of fiduciary responsibility and Privacy. There is a stink on the horizon.
The only stink is from the sandbox.
Instead of silly metaphors, lets use real world examples: AT&T (I’ll save Microsoft in my backpocket)
The forced AT&T breakup allowed competition into the long distance telecom market. Long distance providers paid fees to the originating/termination networks, and leased usage of land lines. Before that, AT&T had a monopoly cause they owned the originating/terminating networks and could decide not to do allow any other company access.
The parallels to the MLS site are obvious to anyone old enough not to be playing in a sandbox.
Continuing this great example: many years later along comes cell phones and VOIP, making the breakup kinda pointless since these other technologies created the competition that was lacking.
A look south of the border shows the kinds of websites that develop when MLS is opened to competition. They offer all kinds of neighbourhood data, data that once was only available from your Realtor. One day a site might replace MLS completely.
Consumers need choice, and Realtors need competition. Win-win.
- consumers have been lacking choice and being ripped off cause of it.
- there are many bad Realtors who offer little extra value for their high commissions. Competition will remove them from the market, or force them to be better.
As for privacy and protection:
Privacy: If I want my contact info posted on the MLS site, then what are Realtors protecting me from? How is using Craigslist any different? I am available for contact without my info being posted publicly.
Protection: A good agent will help in the buying/selling process with advice. This same advice is available from a lawyer, for about $1000 compared to the 6% commission both agents will share. On a $500K home that’s $30K. I’ll take the $1K lawyer, and the lawyer will have better advice. I’ll use the $29K savings to hire a home inspector (buying) or staging company (selling).
Sorry Larry, your whole argument stinks this time.
Instead of arguing against breaking up the monopoly, how about justifying the monopoly and commissions. Your 3 justifications don’t hold water when compared to similar online services, and sandbox example torn apart when compared to real world examples (and I didn’t even use Microsoft as the example!).
Cheers,
Chris
Chris,
I think you may have missed the metaphorical point.
It is simply not the case that discount brokers who offer alternative real estate services via MLS do not co-exist, – they do! There are and have over the years been any number of discount brokers. One of the latest most technically progressive local casualties was E-Realty. IMO, a damn fine concept which reality would not support. There are many more who survive today within the system who offer various levels of RE service. Their ‘business model’ of services and fees varies as much as do marbles in a bag.
Based in the fact that varied business models currently operate within CREA’s rules of engagement implies that competition exists. What is accepted, is that CREA’s rules of engagement may not be suitable to all models and thereby may preclude certain variations from operating. IMO this is not any different than the operation of a franchise. Within that franchise are contractual rules that govern the use of the tools, brand and infrastructure the franchise developed and provides for an initial and on-going fee.
South of the border –
If you are talking about Zillow, Trulia, Redfin et al then you must also talk about Zoocasa and Point2. ZooCasa is I believe modeled on the first two. The three rely on the agent to input the data which unlike Point2 combines both agent input and is also (I think), fed by the Saskatchewan Real estate Association. I can’t say if Point2′s system is open to the public for Sask listings but, I presume it must be. The depth of this fed data is unknown, the QUALITY of the data input to Zillow et al is suspect. Zillow, Trulia have their benefits. From reactions I hear at Inman sessions the value to the consumer while Ok is still questionable. Why? Strange it may seem but, consumers like to go to one source they can trust.
Are they popular alternatives to MLS? NAR – CREA’s big brother, is still a powerhouse. Why – Mostly the reliability of the data.
As to some of your statements:
Will MLS be replaced completely. Nothing is forever. I accept that MLS may just be a stepping stone for the next great thing.
“Bad/Good” Realtors.
A never ending discussion in and outside of this industry and a constant problem in any industry. I believe we would all like to think we are special and that includes you, problem – there are alternate opinions.
Privacy:
Privacy- you may not care about your personal privacy but, I guarantee you that you stand alone. Privacy is a huge concern to many consumers. Aside from your personal choice, we must abide by the terms set within Federal statute.
As an adjunct: there are at any time a number of listings on MLS where you will not find a matching For Sale sign on the property. Why – “we don’t want the neighbours to know our business.”
Protection:
You may want to ask those lawyers you are referring to if they are happy about paying their insurance premiums these days. And yes many had to increase their fees to offset this cost. While the RE and legal industry is self regulated with some pretty tough regulations, you can’t stop people from doing stupid things that do harm to consumers. Our insurance is there to offset that harm.
Justification:
At the risk of being repetitive I’m going to send you over to Norm Fisher’s blog. You may find that discussion enlightening. You can also get a different perspective from John Pasalis in Toronto.
I’m also certain in the days ahead you will find many more people chiming in on this topic.
I’ll leave you to reflect on this comment from the self proclaimed Real Estate Intelligence blog:
the comment: from Bill Lafferty
There’s a major Car dealership in my area that sells thousands of new and used vehicles each year due to it’s prime exposure due to location.
Even though for many years it has cost the owners of this dealership a ton of money in expenses as well as business licences to stay in business and THEY OWN this successful dealership.
My question is: Are the owners of this successful dealership being anti-competitive in not allowing everyone to park their vehicle at this successful dealership for a small fee and directly sell their own car or truck to the buyers that come to this dealership?
The Competition Bureau obviously would think so, since there’s NO DIFFERENCE on what they are trying to pull on the Canadian Real estate association who owns the MLS system that all licensed Realtors have had to pay for, for years.
well said larry! i think our MLS system is efficient for the consumer, as all listings are on one site. in the US there are numerous MLS sites and in my opinion it is a less efficienc method of searching. by the way, what about the oil companies? how competitive is their method of selling gas?
Larry,
The fact that you quoted the car dealership shows how you hold onto the metaphorical point and miss the real world implications.
Anyone in business knows the best spot for your business is next to your best competitor. If this dealership has a great location, then buy the land across the street and open another dealership.
That was almost too easy. Shall we try another?
I held the Microsoft card in my backpocket, time to play it: 92.5% of computers run Windows, Microsoft essentially has a monopoly. In the spirit of your metaphorical point Microsoft could define any number of rules for others to use Windows to sell their product. Sound familiar?
“What is accepted, is that CREA’s rules of engagement may not be suitable to all models and thereby may preclude certain variations from operating.”
Case in point: Internet Explorer. Microsoft shipped IE with Windows, forcing each Windows buyer to pay for the IE browser. There were competitors, namely Netscape, yet they were at a disadvantage cause Microsoft could manipulate Windows to make Netscape uncompetitive. The Justice Department seemed to think so, since there’s NO DIFFERENCE on the ruling against Microsoft, since Microsoft paid for years to develop Windows and laid the groundwork for internet browsers (all the underlying network interfaces and protocols). Sound familiar?
“The Competition Bureau obviously would think so, since there’s NO DIFFERENCE on what they are trying to pull on the Canadian Real estate association who owns the MLS system that all licensed Realtors have had to pay for, for years.”
In Ottawa there is a company Grapevine that is catching on. Like Netscape, they are held at a disadvantage cause they cannot play by the same rules as other Realtors. In Ottawa there are about ~2000 properties on MLS, and ~250 on Grapevine. Without the power of MLS Grapevine has gotten > 10% of the market. Now imagine is CREA let Grapevine compete without a disadvantage? If I was a Realtor I’d be fighting tooth-and-nail against losing my monopoly too.
So please, stop using the silly metaphors and stick to real world examples. There’s been enough court cases of monopolies, surely CREA can find one that wasn’t broken up that operated a similar business model. If not, too bad, so sad.
As for your other comments:
Privacy:
Responding to how Craigslist protects privacy by mentioning people who don’t want a sign posted? Come on dude, I don’t post a sign on my yard when I sell on Craigslist, yet my post is publicly available like the house would be too. Difference? Craigslist manages to allow people to contact me without revealing my personal information. Why is CREA/MLS so afraid of allowing the same?
Protection:
My lawyer could charge $29K more, for the record that is 29x or 2900% more, before equaling the commission a Realtor gets on a $500K condo.
Lets take your argument for what it is: finger pointing crap.
Justification:
AT&T, Microsoft > silly metaphors that don’t hold water when a truck is driven through the holes in them.
Looking forward to reading more on this as it develops and seeing how more Realtors poorly justify their commissions and monopoly. The excuses to this point have been laughable, and will only get more entertaining.
Cheers,
Chris
Chris,
Here’s some alternate real world implications.
When there is a system better than MLS that offers
-as much or more relevant real estate information that helps me help my clients,
-is as well managed,
-is as cost effect
-offers equal or better benefits, protection and service to me as a REALTOR
-offers equal or better benefits, protection and service for my clients
-meets or exceeds market exposure value to the real estate buying and selling public
Then and only then, will I consider another sand box.
Until that day arrives, I suggest real world implication extends to that next great system. They should not expect to be freely handed the resource called the MLS because they feel ‘entitled’.
As opposed to hiding behind the skirt of the Bureau perhaps they should take a page from your suggested formula for success and buy the lot next to that car dealership.
Ultimately Chris, you and or others need to convince me that there is a better truck to carry the load. When you do, I’m all over it but, I remain skeptical.
So far none have achieved the level of MLS – be it the Zillows, the Trulias, the Zoocasa’s and even the Googles of the world. And just to be clear, all these contenders need the REALTOR collective to input the data. Without the REALTOR acquiring, collating and inputting all collected data, none would exist.
As to the commission discussion – Chris it is a tiresome dialogue. Suffice to say, there are many, many MLS capable discount brokers and REALTORS out there who may provide the level of service you seek. Commission rates are not fixed and you are welcome to enjoin them in negotiation to arrive at a fee you think is reasonable.
In parting, I note that, to my knowledge, none of the discounters take the time nor do they bear the expense of maintaining a blog. Such luxuries – call it a real estate service if you wish, (is that too silly a methaphor to describe what appears to offer you benefit?), is only afforded because I am paid well for the value added services delivered.
Larry,
“They should not expect to be freely handed the resource called the MLS because they feel ‘entitled’. ”
That’s just BS. No-one wants it freely handed to them, they want equal access to the monopoly CREA created. AT&T didn’t hand its networks over for free, instead it changed its business model to leasing.
I noticed you were once again unable to quote a real world example of a monopoly not being broken up, so I’ll take that for what it is: admission that a monopoly exists and no justification for it.
Then there’s this: “And just to be clear, all these contenders need the REALTOR collective to input the data.”
And what data is that? Room sizes? pictures? estimated house price? number of biffies? (which you noted, the Realtor didn’t even get right on a $22M house). Its laughable that’s your last stand to justify Realtor commissions.
Please refrain from the sob stories over maintaining a blog at your expense. The only reason I read this blog is cause there is a monopoly on access to the data that you happen to have access to. Open that data to Google, and I’ll probably never come back. You’ll notice I’ve also repeatedly complained that brokers have data I cannot access either.
I will agree with you that they should buy the lot next to the dealership, which is why I included the Grapevine example. They have, and have taken > 10% market share on a system that allows the seller to enter all that precious data Realtors wish to keep a monopoly on entering.
Ultimately though this creates another problem – many real estate websites that consumers have to traverse to buy, and multiples to choose from to sell. This is in no-one interests as it lessens the market for sellers, increases the overhead for buyers, and makes using an agent difficult as they only represent a subset of properties to collect commissions. It’ll become your metaphorical car dealership, in that Realtor A will only sell houses from dealership B.
It’s already like that in Ottawa, Realtors won’t even consider suggesting houses advertised on Grapevine, regardless if they might be in the best interest of their client.
That’s sad, and that’s the monopoly that needs to be broken up.
Chris,
Submit a proposal to CREA and or the Competition Bureau – I gotta go sell a house.
“many real estate websites that consumers have to traverse”
Try 15 differenct boards in LA. plus Trulia, Zillow, Redfin and others. One source may be as you suggest, be a monopoly but, ultimately it is the most effective venue for the consumer.
As for the only reason you read this blog…. I’m crushed.