Chicken Little and the Extinction Event Horizon

Chicken Little in Black by dbgg1979

I really like Rob Hahn and think that he’s a really smart guy- then he goes off and shows me that even being smart doesn’t help if you push off on the wrong foot.  Rob wrote a post called “Extinction Event Horizon: Real Estate” in which he takes a flying leap into space, and with his feet planted firmly in a vacuum begins to leap frog from one preposterous premise to another. I really felt that I needed to chime back with some facts and some opinions of my own. Let’s start by looking at his premises;

  • Premise 1. There is an organized group of brokers that are large enough to create a meaningful national MLS. Rob quotes an article at Agent Genius revolving around the members of the Realty Alliance and their discussions at their meeting last spring. The conversation as Agent Genius reported it was less about leaving the MLS than it was about withdrawing their listings from third party aggregators like Zillow, Trulia and REALTOR.com. Edina Realty actually took the step to remove their listings from XXX just this week. Whatever you think about the third party aggregator issue, it does not signal the end of the MLS.  When even the largest and  most dominant companies in a given market  area don’t control more than 24-26% of their market (a huge share), they will not leave a vehicle to access the remaining 74%.
  • Premise 2. That the lack of contention between the Realty Alliance, other Large independent Brokers and  National Franchisors is significant. The fight is over, its a non-issue for now, and the parties will move on to other strategies to achieve their business goals.
  • Premise 3. “a “rebel alliance” will not simply pull out of the MLS or the Association; they will pull out of both, because they must pull out of both in order to achieve their aims of independence from existing policies and governing bodies.” Its just not needed, nor does one follow the other. Most of the large brokerages in the country are run by people who are members of NAR’s volunteer leadership. They value the organization highly and would not detach themselves from the largest PAC in the country (or debilitate it) just because they want to start their own MLS (which they don’t). Additionally they value the Code of Ethics, and the pride that active REALTORS feel in their organization. Though many of the MLS systems in the country are owned or operated (or both) by REALTOR Associations, another important reason for MLS systems to follow the model bylaws created by NAR is for the E&O insurance, and for the protection of the Legal Affairs committee when they have huge industry wide litigation, as well as having access to the world class legal minds at NAR (did you see how Laurie Janick negotiated an incredible settlement on the Civix law suit at the Mid-Year meetings?)
  • Premise 4. “The existing paradigm of the MLS today is that its core mission includes helping its members market properties” That is truly not the primary purpose of the MLS. The purpose of the MLS, is, was, and will continue to be to facilitate cooperation between real estate brokers and agents. In most companies, more than 70% of their business required the cooperation of another firm. The creation of the MLS is born of our need to foster cooperation, not from our need to market properties. The MLS is a B2B system, not the most important marketing system for the real estate industry. The MLS does not bring us clients, it helps us service our clients, both buyers and sellers. In fact, it works so well that we take that function for granted and ignore it. The fact that we use versions of the MLS data to feed our marketing channels doesn’t make marketing the primary function of the MLS
  • Premise 5. “The most important change, then, has to be that within the Rebel MLS, there can be no such thing as Internet Data eXchange, or IDX. The whole purpose of IDX is to allow participants to use MLS data to earn a customer.” In fact, the conversation reported by AG that started this whole flight of fantasy was more about a rebellion against syndication than it was about sharing inventory with other brokers. When 90% of consumers buy their home from agents, getting your inventory out to other agents is imperative-

So while Rob’s post is timely, articulate and interesting as always (I love reading Rob’s posts) it just doesn’t have any roots in reality. That being said, he then lists some consequences that are, by themselves sort of interesting to me.

  • Zillow Takes Over – I hate to say this, but we already lost this fight-property information has become so ubiquitous that it is no longer the key to contact with consumers. According to NAR’s 2008 Profile of Home Buyers & Sellers , when asked what actions they took as a result of internet home search only 27% of consumers found and chose an agent. That means that 3 out of 4 consumers chose their agents for reasons not connected to the home search. Frankly, if it were possible to remove the syndicators from the equation, it might benefit the real estate professional, but it would take a massive paradigm shift in our industry to make that happen (though I am watching the Edina situation cwith interest) and I just don’t see that happening.
  • The end of Buyer Brokerage – Buyer brokerage originated because consumers were confused about who represented whom in a real estate transaction. Issues like vicarious liability, litigation resulting from dual agency (which was generally undisclosed in those days), and growing consumer demand (in many instances from consumer advocacy groups) created buyer brokerage which became codified with the advent of the ABR designation. Today most states have legislation regarding buyer and seller agency, so this part of the business is just not going away regardless of MLS issues. On a practical level, more young agents count potential buyers in their spheres of influence than any other type of real estate consumer, and buyers seek agents to help them in their complicated transaction, so working with buyers that aren’t the listing agent is again a part of the bedrock of the real estate business.
  • Mass Extinction of Vendors – Real Estate is a business that generates a lot of money and has tons of practitioners. There have always been, and will continue to be people who sell stuff to that large market. We wouldn’t have fewer vendors, we would have different vendors. I would expound on that, but it seems to obvious to me to need explanation.
  • The End of Associations as We Know Them – This is so wrong, and indicates so little understanding of the history and function of our trade associations on all levels, that its difficult to know where to begin. Do we start with the Code of Ethics, and the benefits it provides to members? The REALTOR movement, by its creation and adoption of the COE has established the standard of practice and professional care for real estate professionals for the past 98 years. Arbitration proceedings alone have saved members millions upon millions of dollars of legal fees, and resolved business issues more rapidly than any courts. Our local state and national political advocates have helped create a usable space for real estate professionals to practice their trade. The National Association has provided legal and financial support to local and state associations when landmark litigation has been fought. All levels of Associations provide good low or no cost education for their members, where no one is selling them anything. And NAR, through its designations and certifications programs, offer specialized training of the highest quality with no product to sell or ax to grind, aiming solely to improve member’s businesses through specialization and professional development (Disclosure– if you didn’t know- I was the lead author in the 2010 re-write of NAR’s e-PRO certification,teach that course internationally, have been approved to teach GRI in the past,  and am currently a Certified CRB instructor as well) . And perhaps, most importantly , the REALTOR Associations are a place where professionals can gather and learn from each other in a non-threatening less competitive environment.  People that don’t get any benefit from their Association membership typically haven’t put anything into it. I can only speak from experience. The courses that I have taken, the seminars that I attended, the people that I have met, the volunteer positions I have held, and the events that I have participated in have profoundly and positively impacted my real estate career and are in part responsible for the successes I have achieved as a real estate professional. It is not an accident that people from all over the world come to NAR meetings to learn and network and bring knowledge back to their countries. NAR, the state and local associations may have their flaws, but they are an amazing resource to the industry and a major force for positive change and improvement in our industry.

Rob ended his post saying “Is all this mere Chicken Little’ing? God, I hope so.” – I think, without question , that this time Rob was running a little too quickly without all the information needed to make his predictions – which, as I remember the story is almost exactly what Chicken Little did – Luckily Rob’s a lot brighter than Chicken Little, not to mention more creative – making him an interesting guy to listen to – just don’t run for cover just yet.

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