When the Local MLS Model No Longer Works

by Ron
October 26, 2015

When the MLS loses focus on members and consumers, its demise is acceleratedTechnology Disrupts Inefficient Markets

Just think about how Expedia disrupted the inefficiencies of the travel industry, peer-to-peer lenders (such as the publicly traded Lending Club) have disrupted the high unsecured rates associated with consumer lending, and several years ago Zillow changed the landscape for consumer real estate portals because of the complacency of the then dominant Realtor.com.  The current MLS model does not represent the best interests of data-hungry consumers,and is becoming increasingly irrelevant and out-of-touch with the needs of the very real estate agents that financially support it.

Highly Fragmented MLS Organizations Cannot Drive Innovation

With all of the consumer-centric advances that have occurred over the last 5 years in real estate, the industry is still characterized by highly fragmented MLS organizations — approximately 800 or so independently run across the country.  These organizations supposedly represent the interests of the local Realtors, although many would argue that they have become internally focused and have lost site on their members and the consumer.   They can never be expected to drive innovation, since that will come from entrepreneurs and the tech industry.

Consumer and Market-Insensitive MLS Policy

The more out of touch they become with the members who pay substantial dues to support them, the less likely they will be able to sustain their reign over the local real estate markets.  And, as they take actions that are insensitive and illogical to consumers — the clients of the Realtors, the faster their demise will be.

About a year ago, the Contra Costa Association of Realtors (CCAR) that runs the area’s East Bay MLS organization decided that they were going to aggressively enforce a “rule” stating that all listings MUST be submitted to the MLS database within 2 days of being signed.  If that does NOT happen, then the seller of the property must sign a document “excluding” the property from the MLS.

This policy, unto itself, reflects how out of touch the MLS is with their own members and clients.  Few real estate agents would ever take a listing and have the property online within 2 days — certainly not if they care about the quality of work done for the client. Generally, listings are signed weeks or months in advance of a home going on-market due to our involvement in the home’s preparation work, as well as the myriad of home staging and marketing activities required in advance of going on the MLS.  In fact, the real estate laws administered by the California Bureau of Real Estate require that an agent must have a signed listing in order to engage in any sale-related activity.

Impact of Poorly Conceived Policy on Consumers

Given this MLS “rule”, every listing agent must now have clients sign a confusing document that states that they want their home “excluded” from the MLS.  It doesn’t take much intellectual enlightenment to figure out that the document requires a detailed, nonsensical explanation.  Clients invariably sign it, since they naturally don’t want their home going on the MLS before it is ready for market.  And, in the esteemed wisdom of the CCAR policy makers, the document must have an exact date when the property will eventually be placed on the MLS.  In fact, CCAR funded the creation of a database to track the “exclusion” documents, as well as funding a Director of Compliance to monitor and enforce this policy.  Since real estate agents rarely know the exact date when a client’s home will be ready to go on-market, we usually need to have our clients sign multiple versions of this “Exclusion” document.  Makes no sense, right?

MLS Policy Gets Worse…

Stay tuned for my next post regarding a very recent MLS policy announcement that has Lafayette Realtors and other members of the local MLS “up in arms.” If not mitigated, it will severely impact the market attraction of our clients’ homes for sale in Lafayette, as well as in other local east bay markets.