North California MLS Consolidation Raises Questions

January 11, 2006

Blanche Evans
Realty Times

It's natural for individuals to bond together to form a larger, more important union. That's why our government protects institutions from marriage to corporations.

But what does it mean when MLSs merge? Is there more to the story that providing improved efficiency to members and consumers?

In the January 6, 2006 edition of the Silicon Valley/San Jose Business Journal, journalist Sharon Simonson wrote "Regional MLS merger at hand" where she announced a merger at hand of six Bay Area multiple listing services, calling it "the first step toward a massive overhaul of the Northern California residential real estate industry."

The new MLS would rank among the largest in the nation, and "cover a territory stretching from the Central Valley across the East Bay to San Francisco and Silicon Valley all the way to Monterey and San Benito counties."

Jim Harrison, former CEO of NTREIS, a north Texas consolidation of 18 association MLSs, is leading the charge for ReinfoLink, the MLS that serves Santa Clara and adjoining counties.

Among the reasons mentioned for the consolidation:

• disjointed listing information
• market boundaries that don't serve the marketplace well

Other inefficiencies complained about by brokers and agents is paying multiple fees in order to access MLS information in nearby neighborhoods. After all -- brokers and agents are licensed by their states, why should they be limited to selling only those neighborhoods in which they pay fees to be members of multiple MLS organizations?

But "politics, personalities and paranoia" may slow the merger or slow other associations from joining a state-wide drive to consolidate, suggests one pundit. Too many jobs and too much power will be lost. Plus local brokers and agents may not want more agents competing in what is already a slowing market state-wide.

Others welcome a state-wide MLS. "This move will be necessary in order to fight off those out there who only see the MLS as a database and not as the amazing marketing tool that it is," says Russ Bergeron, CEO of SoCalMLS. "There are several companies out there -- some who haven't even announced what their "product" is -- who view the MLS as just a bunch of listings and who will try to use the existing MLSs to build their own competing models. As I have pontificated many times in many forums, the MLS is based upon cooperation and compensation. It is not the database that makes an MLS."

He continues, "On the surface, for the brokerages, it allegedly answers their demands for fewer MLSs (although it is only the large, multi-market brokers who are making the demands -- there are tens of thousands of one and two-man offices in California who could care less). What I would like to see come of it would be to get the big brokers into the governance of the MLSs:

• because they are obviously deeply affected by any decisions made at the MLS level;
• because they have better business sense than most of the people at the BOD table at most MLSs -- my MLS excepted of course; and
• it gives them a chance to put their money where their mouths are -- be careful what you wish for.

"Again for the large brokers it does make it easier for them to extract data in a common format to use in their back office operations. But on the other hand, they have already spent millions of dollars developing systems to collect data from various systems which has allowed them to differentiate themselves from others. Under a common database -- every broker, heck every agent would have the ability to have the same information downloaded to their desktop or back office."

Bergeron concludes, "I applaud the efforts of the Northern California group and would like to see a similar initiative here in Southern California. If done correctly both the real estate practitioners and the consumer will be better served because everyone will have wider access to the information needed for their part of the real estate transaction."

Pleasing the big brokers may be the MLS industry's only choice. In fact, Harrison told the Journal, "I think we should move as quickly as we can because the brokers have lost patience."

In related news, a company called Point2 says it is announcing their "Private MLS brokerage solution."

Says a spokesperson, "Point2 started what we believe is a shift in the role that the public MLSs play in real estate marketing. A change that no one saw coming."

In the next two weeks, Point2 plans to announce a number of agreements to feed listing data from Point2Homes.com to major search engines, says the company. "This reflects part of our vision and strategy for changing advertising in the industry -- turning it upside down. We expect that this will be the beginning of a turn of online listing advertising expenditures into revenue sources for brokerages, which we strongly believe are the rightful owners of the data assets in the first place, and should be able to capitalize on them instead of being penalized by them."

Spokespersons say that Point2 will be "the broker's own mini-MLS listing(s) that would include the kind of rich data that consumers are looking for. Up to 24 photos, neighborhood data, Google Earth, Seller Comments, etc. That's why search engines are interested in the content/data."

The broker's listings, which also post on their and their agent(s) websites, are created by Point2 Agent and automatically routed to the Point2Homes.com marketplace, which is fed to the search engines and other real estate online sites, says the company.

A spokesperson explains, "The general view is that brokerages own the data and right now pay to advertise it online while there are a number of entities that would actually love to get their hands on that content because it would help them to better differentiate themselves, provide a superior experience to their site visitors and attract more eyeballs to their sites. Needless to say, it would also attract more advertisers to their site. Leveraging this need for rich real estate data, both the broker who use Point2 Agent and our company can create a new revenue stream."

While companies have announced the "next great thing" many times before, technologies like this come at an extremely sensitive time in brokerage relationships, particularly considering the sword of Damocles still hanging over the head of National Association of Realtors members. The DOJ lawsuit that demands that brokers share their listings on other brokers Websites unconditionally has not been withdrawn, despite a petition by the NAR asking the court to dismiss the lawsuit.