Dear Monty: My neighbors are trying to sell their home. They have used two different agents and have yet to be successful. There have been three showings in six months. They reduced the price because they wanted to sell. The second agent told them three months ago that the price was right and nothing with the house or neighborhood would stop a sale. They are discouraged and frustrated. Their situation caused me to wonder if the MLS is working. Is the MLS theory of shared inventory obsolete?
Monty’s Answer: When the idea of a multiple listing service originated around 1908, it came about because agent customers spotted homes that a different company listed. The brokers and agents would meet regularly to share listings and agree on commission splits. The internet, cellphone, applications, and fax machines did not exist. The idea of consolidating information worked.
What Has Changed In 115 Years?
Consumers have mobile phones; fax machines have come and gone; we have the internet, applications, real estate data aggregators like CoreLogic and CoStar, and others that feed data to Zillow, Realtor.com, and many more. The U.S. Census Bureau states that over 100,000 real estate offices exist in the U.S. Seventy percent of them have a website, and the same percentage of the million-plus agents have websites. These raw numbers suggest there are about 140,000 real estate websites. Data abounds, and astute consumers have realized this and are willing to work to save money. According to an unbiased research study by Natalya Delcoure and Norm G. Miller in International Real Estate Review, “more than 1 million homes were sold by the owners themselves in the United States alone in 2000.”The Industry Must Adapt
The two primary models, MLS and the 6 percent commission, have mostly stayed the same. The National Association of Realtors (NAR) data needs transparency and public access. The consumer must be protected, not the agent. Raise the barriers to entry to purge “the masses of part-time, untrained, unethical, incompetent agents.” NAR must replace inefficient and costly business models. NAR must remove the agent filters that allow predatory behavior. The workforce requires new accountability. Eliminate the fragmentation with one standardized national platform. Instead, NAR, the trade association, spends tens of millions annually on lobbyists to influence protective legislation. Data indicates that the industry is losing its grip on data, and commissions are falling. Rather than recognizing these faults and investing those funds to modernize the sector, they cling to the idea that their models work well and spend millions more to convince the consumer. For example, technology can roll the 600 multiple listing systems into one.Is The MLS Obsolete?
For an individual real estate industry participant with a conflict of interest and consumer bias, technology can produce superior results compared to the existing workforce. With a new paradigm and resolve, NAR can derive outstanding results with web applications that create a standardized customer journey that is accurate, fast, efficient, simple, and inexpensive. Many industries have lost value to technology—examples like the taxi industry to Uber, retailing to Amazon, and advertising to Google. As more real estate consumers become aware that selling their homes is easy, the brokerage industry as we know it will be obsolete without the abovementioned changes.
