Editor’s note: Long a crucial center of a healthy, functioning housing market, the MLS now finds itself having to adjust and reinvent to keep up with changing times. This three-part series examines new initiatives in data-sharing and consolidation, as well as debates over public-facing property search sites and the MLS’s role in broker cooperation and offers of compensation. (Read Part 2, "MLS public listing sites gain support," and Part 3, "Debate rises over MLS role in offer of compensation.")
Multiple listing service walls are coming down. Not all walls, and not everywhere, but consolidation and data-sharing efforts are chipping away brick by brick — and sometimes swinging in like a wrecking ball.
There are already many examples of regional and statewide MLS data-sharing and consolidation across the nation, with several studies in progress on the potential for more large-scale initiatives. It’s not happening everywhere — and MLSs in large markets are more prone to change than smaller, more isolated markets — but it is definitely happening. While there are still over 800 MLSs across the country, that number is dropping.
The National Association of Realtors is investigating the creation of an immense national property data repository that could serve as an information gateway for MLSs and real estate professionals. California and New York state Realtor associations are among the groups pondering options for MLS consolidation or collaboration, and brokers in many markets are pushing the conversation to build a better system.
Why so many changes? The most common arguments in favor of MLS collaborations and consolidations are that subscribers can save money and realize greater efficiencies in data entry and data searches. Agents and brokers are members of multiple MLSs in some market areas — which can mean multiple membership fees, rules, vendors, administrators, staffs and databases. Large brokers are in some cases driving for consolidation, but smaller brokers can also feel the burden of this so-called "Overlapping Market Disorder" that requires them and their agents to join multiple MLSs.
Cooperation grows
National-scale brokerage companies are already operating huge data-sharing networks across MLS boundaries and state lines, and can view local MLS boundaries and politics as more of a hindrance than an enabler. Web 2.0-era Web sites are also fanning the flames of MLS change, as even small brokerage companies can share data with a national audience.
Gregg Larson, CEO and founder of Clareity Consulting, a real estate consulting company, said he believes there will be "dramatically fewer" MLSs in less than a decade. "I was hoping in the next five years we could go from maybe 800 MLSs to 500. I think it would be nice to say there is a goal to have half as many MLSs in five years. I don’t think that’s possible," he said.
"I’m seeing a higher level of cooperation among MLSs I’ve never seen before. Before, they wouldn’t even talk to each other. The momentum behind consolidation is coming from a push from the large brokers, national association and some of the states in the last 12 to 24 months. It’s making a lot of MLS operators nervous, and causing those boards of directors and staff people to think about what their options are," Larson said.
Real estate is still mostly a local business when it comes to MLSs — most MLSs cover a local or metro-area market and are operated by or affiliated with local or state Realtor associations. There are far fewer statewide and regional interstate MLSs.
"If they are not willing to regionalize or consolidate — which is a really big, laborious process — they are going to data-share and (use) common rules and enforcement as a means of satisfying some of the broker requests," Larson said. Common rules and regulations can also go a long way toward placating the demands of brokers, he added. Brokers’ saber-rattling does get results — large brokers with heavy market share could conceivably form their own listing services and bypass the traditional association-owned MLSs, Larson noted.
"The good thing about these data-sharing initiatives — while it’s a step short of consolidating, it’s a lot easier to do and a lot easier to do in our lifetime."
Even in some rural market areas, small MLSs are collaborating on a larger scale, he said. While broker pressure can be a motivator, another possible accelerant is third-party Web sites like Google and Trulia and Cyberhomes, Larson said. Such sites represent the power to share property information with few or no costs and no geographic boundaries. "Even the smaller brokers realize they need more access to information. That puts more fear into the industry," he said.
Pete Flint, chief executive officer and co-founder of real estate search site Trulia.com, said he expects more MLSs to assist subscribers in providing more exposure for their property listings on other Web sites. MLS data-sharing and consolidation efforts "should reduce some of the technical burdens on real estate brokers and third-party real estate marketing sites," Flint said.
Consumers in some cases have better tools to search and find properties than the internal MLS tools used by real estate professionals, said Ed Krafchow, president of Prudential California Realty and a longtime advocate of MLS consolidation.
"If the industry has no better information, then how is the agent supposed to serve the consumer?" he asked.
While some Realtor associations that operate MLSs have demonstrated a willingness to change the structure of the MLS system, "other MLSs — all they are about is the longtime employment contract, and that’s been terribly destructive for the business itself." Technology vendors that have developed solid relationships with local MLSs may also feel threatened by consolidation, he said, and some associations may also take a stance that MLS collaboration or consolidation could bring too many agents from other markets into their market.
Realtor associations, just as MLSs, may need to reconfigure their business models to best serve members, he said.
There are simply too many MLSs, Krafchow said, and the system is badly fractured and in need of repair. In California, Krafchow said he favors a Northern California consolidated MLS "and last but not least a state option." It isn’t just a large-broker issue, he said, noting that there are examples of successful multi-MLS ventures that include participation by smaller brokers.
MLS cooperation initiatives around the country
The California Association of Realtors is considering the creation of a statewide consolidated MLS or a statewide data aggregation service, which would pool property information from the state’s 70 MLSs. A study conducted for CAR estimates cost savings of about $52 million per year to MLS subscribers in the state for the consolidation, and savings of about $4 million to $8 million per year for brokers and other users of a data aggregation system. CAR officials are expected to take a vote on these options at an October meeting.
A CAR-formed group is taking a look at data-sharing and consolidation efforts already in progress in California, such as the planned merger of four San Francisco Bay Area MLSs into a single MLS known as the Northern California Real Estate Exchange and a large intrastate data-sharing agreement called the California MLSAlliance that enables data-sharing among 10 MLSs spanning from Southern to Northern California. The MLSs serve about 45 local real estate associations across the state.
The New York State Association of Realtors has formed an advisory group to study possible reform to the state’s MLS system, and the association is surveying its members about their appetite for change.
The cost of MLS services and overlapping boundaries has led some members to question whether data-sharing and regionalization efforts could improve the function of MLSs, said Patrick Reilly, vice president of member and board services for the New York State Association of Realtors.
"I don’t think we’re looking at a statewide MLS," he said. There are about 34 MLSs in the state and 40 Realtor boards. A report on the survey results will be presented at the association’s September business meetings.
In Florida, the state association of Realtors launched a data-sharing venture called MLS Advantage that allows participating local boards and their members to search properties shared by other participants. Over 20 Realtor boards and associations now participate in MLS advantage, with a handful of others slated to join soon. The system is open to all local Realtor boards in the state.
"Logic says, ‘If I’m licensed in the state how come I can’t have all the data that belongs to this state?’" Krafchow said, and he noted that technology isn’t a barrier to establish a national MLS.
"It’s going to take a lot of dialogue to get some people over the barrier. This industry is run by fear. Talk about a national MLS raises all sorts of fears with all sorts of people," he said, and the industry will have to crawl before it can walk or run "to get us beyond the parochial lifestyle of real estate and into an understanding that we need those datasets to be fairly universalized so we’re looking at the same thing the consumers are."
An advisory group formed by the National Association of Realtors is studying the feasibility of a national data repository that would serve as a vast storehouse for current and historic data for all types of properties. While this proposed data "gateway" is not envisioned as a replacement for MLSs, it could serve as a stepping stone to MLS reform.
The East Coast has been a hotbed for large regional and statewide MLS ventures. One of the latest examples is the statewide Connecticut Multiple Listing Service, which was approved by a vote in August 2006 by directors for the Connecticut Association of Realtors and launched Feb. 1. That MLS has about 13,000 participants out of a total of about 19,000 Realtors in the state, said Cameron Paine, CEO for the statewide MLS.
Paine said there are holdouts to the statewide MLS — a group of competing MLSs still operate in the Fairfield County area of the state.
The structure of the Connecticut MLS is somewhat unique in that the MLS is under the umbrella of the state’s Realtor association but its board of directors is composed entirely of brokers, including representatives for five large brokerage companies, five mid-sized companies and five small companies. The board also includes one MLS subscriber as a member and a nonvoting association executive.
"The brokers feel comfortable in the fact that brokers have control of their data. They own it to start with. That’s been a real sore spot for a lot of brokers around the country," Paine said.
The MLS charges $26.26 per member per month, which may be higher than some MLSs and lower than others, he said. "What we are providing that (subscribers) didn’t have before is 100 percent listing coverage that they may not have had before in three quarters of the state."
Connecticut MLS is already exploring other opportunities to collaborate with MLSs in other states, including other statewide MLSs, and has signed a reciprocal access agreement with the State-Wide MLS of Rhode Island that allows system users to view information from both systems.
"We think that’s a good first step and we may go further in the future. For all those Realtors working in border areas and for all their clients … it just makes sense," he said.
There are also statewide MLSs in Maine and Massachusetts.
Last month, Metropolitan Regional Information Systems MLS, which has about 60,000 subscribers in the Greater Washington, D.C., area, and Greater Philadelphia-area TREND MLS, which has about 32,000 subscribers, announced an agreement to create a single database serving members of both MLS systems. The area served by both MLSs covers 61 counties, 30,000 square miles and includes parts of five states.
The new system will allow each MLS to retain all distribution control for its own content while jointly licensing the shared data content to brokers and vendors.
David Charron, president and CEO for MRIS, said he expects "enormous strides in data-sharing agreements and market consolidation" nationwide in the next 18 months. "It is inevitable that MLS service areas will get larger across the country. Entities are going to collaborate in different ways. Working with contiguous markets I think is just a real smart thing to do."
There may always be areas where for protectionist or political reasons those markets may remain separate from other markets, though Charron said he generally expects to see more collaboration.
In addition to the TREND agreement, MRIS has discussed forging similar data agreements with other MLSs, though Charron said he could not yet discuss the details. "We are in significant discussions with several other markets, some of which are contiguous to ours and some which are not."
Brokers’ expanding footprint and widespread industry adoption of the Real Estate Transaction Standard, a data standard that can facilitate the sharing of real estate data among MLSs and other entities, are among factors driving MLS changes, Charron said.
"It is increasingly difficult for anyone to blame technology for the inability to share information," he said.
So far, the industry has not come far enough, he said. "As MLS operators we really have failed to deliver on the promise of regionalization and consolidation. Everybody’s looking for more efficiencies."
No ‘one-size-fits-all’ solution
MLS consolidation and collaboration is not always the best-case scenario, said Brian Larson, a lawyer who has represented Realtor associations and MLSs.
"It’s sort of like one-size-fits-all clothing. That’s OK with certain kinds of clothing items, and others it’s not," he said. Simple data-sharing agreements, such as an expansion of online data exchange agreements among brokers to other market areas, can be quickly achieved compared to more complicated MLS mergers, Larson said.
A group of 14 Realtor associations in Minnesota, representing 10 regional MLS providers in the state, announced a data-sharing MLS co-op system early this year, as an example. And a database in Michigan, called the Michigan Property Data Query for Realtors, allows MLSs to pool property information for members to search via a single database.
Jim Branscombe, as a participant in a Northern California MLS data-sharing group called Quattro and the north-south MLS Alliance data-sharing effort in the state, said he hopes that consolidation efforts follow natural marketplace territories.
"Dissolving MLSs may not be the best way" to move the industry forward, he said. "We grew naturally into a marketplace. We didn’t want to get too big." There is a risk that large MLSs may get too big to properly manage their members’ data, he said. His MLS, based in Santa Rosa, Calif., serves about 10,000 members in five counties.
Larson said, "The biggest mistake is (thinking) you’ve got to consolidate because everybody says consolidation is the thing to do. You could be focusing those resources on solving other problems."
Geographically isolated markets may not have a need to consolidate or form data-sharing agreements, he said, as they may not feel the same pressures as densely populated coastal areas where real estate agents are more likely to participate in a broader regional real estate marketplace.
A bigger MLS does not necessarily mean cheaper services or better quality data for subscribers, Larson said, and the solution should match the problem. "If all you’re trying to do is make sure you find listings, why not just expand (the Internet Data Exchange system) statewide?" he said.
"Some of the largest MLSs in the country charge more per agent than average. I really don’t believe size makes it better at all. I’ve seen some large MLSs that really don’t seem to pay any attention to data quality at all."
That said, Larson acknowledged that the MLS system in some areas is "a real mess," and MLS cooperation and consolidation efforts may be a good thing in some instances.
"There will continue to be contraction," said Luke Glass, chief financial officer and chief operating officer for Threewide Corp., a vendor that provides MLS tools and services and has dozens of contacts representing about 400,000 real estate agents. "I do think in some markets it does make sense for consolidation."
Threewide, in its strategic planning, projects a decline in the overall number of MLSs operating nationwide, he said. "I think at the base of it — either people are paying too many fees to too many people or having to re-enter information too many times."
As an MLS vendor company, Threewide has to be adaptable to serve the changing market, Glass said, and to make sure that technology is not a barrier for whichever direction the industry moves. The call for consolidation or other MLS cooperation appears to be most prevalent among large MLSs responding to large brokers’ demands, he said, and less common in smaller, more isolated markets.
