Top 10 Dangers Facing MLS System

by Mike Pugh

MLS faces 10 big problems with no easy answers


Commissioned to the Swanepoel | T3 Group, The National Assocation of Realtors’ recent “Danger Report” analyzes the industry from multiple vantage points, including agents, brokers and associations. The intent behind this extensive report is to highlight the many challenges that threaten the real estate industries’ foundations.

Previously, we looked at threats to agents, threats to brokers and threats to NAR itself. Last week, we discussed the dangers facing state and local associations. This week, we look at the dangers facing the MLS.

1. Entry by a New Player – Many fear that an external, non-real estate technical powerhouse, such as Google, could enter the market by buying a large real estate portal. Such a sudden entry could shake the real estate data market and threaten the MLS system.

2. Unclear End Result – With the advent of the Internet and the digital age, the MLS has lost its exclusive positioning as the principal source of real estate listings. The multitudes of different national portals, ways and methods to feature listings have left brokers feeling out of control. With the MLS failing to innovate with the times, it’s possible that the MLS may be rendered obsolete before it has time to catch up.

3. Decentralized Infrastructure Becomes Obsolete – One of the reasons why some MLSs have failed to innovate, the report argued, is because of the scattered nature of local MLSs. With no central organization to fall back on, and with a stubborn attitude against consolidation or merging due to dues-bound membership, revolving leadership or just protectionist boundaries, many small MLSs get left behind as people turn to portal websites, which can streamline MLS functions while offering a lower cost.

4. Control of a National MLS – A centralized, national MLS solves some problems while creating new ones, such as: Who would run it? Whom would it benefit? Would it be a full program and organization, or just a database smaller MLSs could reference?

5. Large Patent Troll Attack – Another problem the report spotlighted is the ever-present threat of patent trolls. In the past few years, patent trolls have moved towards less tech savvy companies in areas like real estate. Their targets would be search methods and data pulling, the very thing that the MLS specializes.

6. Security Breach – Although MLSs would seem to hold less valuable information than what cyber criminals look for, there is an ever-increasing push to integrate financial institutions and other transactional systems in MLS software. The report argued that the MLS’s weak encryption and low security quality leads to a very real danger of a cyber attack.

7. Off-MLS Listings Escalate – Pre-MLS, pocket listings and off-MLS listings have always existed, but the question is not one of legality, the report stated, but whether or not they are in the best interest for the seller. If off-MLS listings are not in the best interest of the seller, that could turn into a massive legal problem for the real estate community due to violating the Realtor Code of Ethics.

8. Increased hostility in the real estate community – Reinventing the MLS is hard enough, but with constant infighting between large and small brokers, franchises and independents, it becomes even harder to come to an industry-wide decision about how to do it.

9. Consumer-Facing Websites at the Crossroad – With the rise of consumer-facing portals, MLSs have felt threatened. With none of the top 10 real estate websites being MLS sites (realtor.com, though, is MLS backed, and Zillow Group has established direct MLS feeds), some brokers criticized the decision to add Business-to-Consumer components to the MLS, such as IDX feeds. Brokers argue that it only serves to further dilute the market, while portals (such as Zillow) continue to gain strength.

10. A Better Mouse Trap – Portals worldwide are making it easier for agents to operate without being associated with a brand, or having to use the MLS system. The next problem becomes what happens when those portals use their technology to create a one-stop-shopping experience, both for consumers and agents alike, by adding more services and conveniences to their product, offering at a lower price than current brokers offer. When they’re completely undercut, what can brokers offer that portals cannot?

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  • Toni Nicholas says:

    I’ve often said that the demise of our local MLS is just a matter of time – because they were cannibalizing their own proprietary information system. The deals they have made with IDX, etc. and allowing some brokers to offer “sold” data direct to consumers was paramount for me. Not only do these types of deals dilute a broker’s offerings and services, it allows for further demeaning and undermining of the entire broker or agent relationship leaving many consumers to question “why do we even need a real estate agent, and why should we pay one?” For me, this should be a state level policy. If the state only permits those who have gone through training and obtains a “LICENSE” in order to “sell,” then the state needs to step in and provide some sort of “edge” for those of us who have followed the laws of the state – and provide ethical and legal services to our clients. Otherwise, this free for all complete with incorrect data provided by Zillow and others will totally invalidate any need for a License, and ethics will be totally thrown out the proverbial window – as is already being realized. And, to make matters worse, agents and brokers are now questioning why even pay for MLS, License renewals, Errors and Omissions, etc. when your clients have devalued your services? It seems to me that we are headed in the direction of buying homes online and without any type of negotiator with fiduciary duty working on behalf of the seller never mind buyer’s agents. The sellers have no clue the can of worms they can get into, but hey, they are saving the commission – right? ..It’s probably a good time to become an attorney specializing in real estate….

  • Linda Vintro says:

    I always begin my technology discussions with this statement: “When I first started in real estate, we didn’t even have fax machines.”
    That said, I love what technology has done for our industry and for the consumer and for us as individual agents. I begin my journey with buyers with a much more educated buyer, for the most part, and spend way less time getting to the right house (though sometimes it’s the house they didn’t find on the internet, but I did bring them to that is the one they buy). And sellers, for the most part, are more educated as well to value.
    What we in the industry need to do is to promote our value in the transaction — our local knowledge, for listing agents, our level of service (something many newcomers to the industry are not being taught), our product and process knowledge that can make for a smoother transaction. For buyer agents, again our product and process knowledge — experience with septic systems and well tests and mold and termites and heating systems, our ties to ethical, efficient mortgage originators and products.
    We have a value, if we are doing the job correctly. Maybe it’s not access to information anymore, but it’s still a value well worth promoting.

  • Ryan Cook says:

    With a multitude of agencies each taking their “fair share” of an agent’s commission check and a not unreasonable forethought that commissions will be driven down (see CFPB changes… it would be foolish to consider that brokerage commissions will stay unchallenged ad nauseum) forcing many agents to reconsider paying regular dues at a loss. If there is also any teeth for toughening of real estate licensing standards (see previous article “Top 10 Dangers Facing the National Association of Realtors”, Item 6 “Quality vs. Quantity”), membership numbers will dwindle. As both NAR, local associations, and the various MLS systems are dues based, it’s not a far stretch to see the impending demise of the MLS system as it exists today.

    • Toni Nicholas says:

      I agree Ryan, and if each state does nothing to protect the integrity of the profession or an updated MLS system, they will see unethical and fraudulent practices rise as there is nothing to protect the consumer if and when they have circumvented and avoided any help from Licensed professionals. So, what are we to do? In Massachusetts, we have a five member real estate board with no teeth, and to my knowledge, has not addressed this impending demise. Perhaps, we (collectively) need to do something to bring this to the attention of the Governor? But, unfortunately, every time I have reached out to other agents or brokers, the back-stabbing competitive and negative attitude kicks in. If we don’t come together on this issue, we will definitely see the demise of the state-wide, or even regional, updated, and accurate MLS system. As it is now, many agents don’t even fill out certain fields. The current MLS records, as they are now, are not totally accurate, but it’s all we have to compile accurate market valuations and trends along with the public records. This HAS TO BE addressed, and addressed NOW!

  • charles ginsberg says:

    I do not know why my MLSPIN gives its data (listings) to real estate portals like trulia, Zillow and homes.com. They aren’t even real estate companies and all they do is use this data to get buyers to come to their sites and then sell those leads back to us agents. Let them fend for themselves. The more inaccurate those portals are the less people will use them. MLS’s should only have data feeds to real estate company web sites who are members of their local MLS’s and realtor.com and that is it.

    • Toni says:

      Unfortunately, the Zillow and Trulia sites were well funded, and many agents bought into the technology aspect and exposure. So, these companies only got stronger, financially speaking. The clients/customers didn’t know, and didn’t care, that the data was inaccurate. They wanted more and more free information – at the demise of the industry. Do you think that Zillow cares what they are doing? Hell no, it is apparent to me they are doing this on purpose. More importantly, did the people running the proprietary MLS databases understand that what they were doing would cannibalize their own existence? Apparently not, and if they do not change course immediately, the R E industry, as we know it, will implode. The sharing of proprietary and accurate data was not the way to go. It will prove to be unsustainable. In fact, I’m more than sure they have already begun to realize the decline in agent and brokerage memberships, yet they are too ignorant and incompetent to understand why.

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