Houston: we have convergence, man your battle stations and stand by for collision
It is hard to imagine that just last month this column asked a simple question about Off MLS marketing practices: "convergence or Unintended Consequences." Looking back, one wonders whether it was possible to be so naïve as to doubt whether or not respected participants in the American real estate industry would actually undertake to disrupt the most powerful real estate marketing tool and system of cooperation and compensation ever created, the Multiple Listing Service.
At the time it seemed inconceivable that in the midst of a wonderful market with unbelievable promise and potential that the very people who stood to benefit the most would feel the need to destabilize it. Every night we watch similar acts in communities and countries across the globe, always taking a moment to thank the lord that we don't live in those types of communities.
Over the past month news media have provided ample opportunities to witness passion, demonstrating both courage and creativity, delivered in the name of democracy, freedom and constitutional rights. As news of each act was delivered on the Internet or television screen all of us took a moment to wonder what matter of human travesty or horrible injustice would bring about the decision to disrupt what had taken so long to build.
Well, with respect to "off MLS" marketing practices we could not have been more wrong. We now understand and fully appreciate that some real estate professionals at both the brokerage and agent levels stand ready to disrupt lifelong professional relationships, critical consumer perceptions, the industry's reputation, functionality and institutions, not over issues of personal safety, religious freedoms, constitutional rights or self-determination but rather over issues of competitive advantage. Imagine trading personal security and family stability for market share points.
It is even more disturbing to think that these actions may be part of a national movement to consciously or unconsciously destabilize the Multiple Listing Service yet over the last month we have learned that this may be the case. We have recently learned that similar campaigns, many using similar strategies but different tactics, have appeared in markets across the country.
To be more specific it now appears as though brokers in different markets across the country are deploying tactics that are either intended or will have the unintended consequences of destabilizing the Multiple Listing Service and the invaluable services it provides to both its members and consumers. Moreover, as last month's article disclosed, there are agents affecting the same objective through their use of "off MLS" marketing practices. Now, based on information provided by Core Logic, a leading real estate information and system vendor, during a meeting last week in Phoenix called the Clareity Conference, we have been informed that slightly over 43% of transactions closed in 2013 didn't pass through a Multiple Listing Service. While it is true this number includes an undisclosed number of new home sales, distressed sales, for sale by owner and non-arms length transactions, the number still represents a serious matter, raises serious issues and reflects the fact that this market segment is growing year over year.
An interesting example of this movement can be found in the recently created website PocketListingInfo.com introduced into the Houston marketplace. The text on the site starts out with a seemingly proud announcement that pocket listings have been around forever (sort of like riptides and poisonous snakes). It then goes on to suggest that we all know the cool kids (top producers) are doing it, thus so should we. My sense is that using this rationale certainly impacted the document's credibility.
The creators of this program, like others creating off MLS sites around the country, are willing to trade decades of cooperation and compensation amongst millions of REALTORS® for $14.95 per month. Imagine that.
One can only puzzle about what the business model for this might be. Will a critical mass even consider participation, especially with an enterprise that is based on such an unproven concept? What do you suppose agents who participate in off MLS marketing practices will do if the MLS and HAR.com are destabilized as a result of these practices? If efforts like this have the effect of destabilizing the MLS and public websites, like HAR.com, yet lack the funding and technical sophistication to be a replacement for the MLS/public website, where will it leave the thousands of agents in the marketplace?
Since common sense tells us that this concept is unlikely to prevail, then who are the victims and who are the incidental beneficiaries of this undertaking.
The obvious victims here are the community, the consumer and the real estate professionals, all who stand to lose the benefits of a stable real estate marketplace and a system that provides structure, cooperation and compensation to those who participate. With respect to area agents just how many pocket listing networks will an agent have to join? Interesting since this is one of the reasons why the MLS is a market wide system open to all real estate professionals.
There are two obvious beneficiaries, however unintended. The first is some combination of the listing portals that, even now, are attempting to dominate the Houston real estate market and challenging the position of the Houston REALTOR®. Zillow and Trulia would like nothing better than to be the beneficiary of a struggle that sees REALTOR® pitted against REALTOR®. It is the ultimate application of the Blue Water Strategy made famous in the 2005 book of the same name.
The second potential beneficiary of this outrageous plan would be the Consumer Financial Protection Bureau, DOJ, and the Fair Housing enforcement system. While all of this has been happening, officials of the Consumer Financial Protection Bureau, one of the most powerful and savvy regulatory programs ever created in the United States, just happen to be working in broker offices across the country monitoring compliance with their several hundred new mortgage related regulations. While we certainly hope they don't have time to figure out what all the noise is about, it does seem doubtful. Perhaps they will all believe it was all a joke.
The REALTORS® of the greater Houston area have spent nearly a century creating a real estate marketing system that thrives on trust, ethics and mutual respect. It's not perfect, but just last year alone the MLS and HAR.com facilitated over 88,000 transactions worth nearly $21 billion. Both have contributed mightily to create stability, competitiveness and trust amongst both real estate professionals and consumers.
Perhaps the response to the off MLS marketing situation that is most telling is the fact that many of the largest and most respected brokerages (e.g. Long & Foster and John Daugherty, REALTORS®) and REALTOR® associations (e.g. California Association of REALTORS® and HAR) in the country are spending huge dollars to inform consumers regarding the undisputed advantages provided by the MLS and the disadvantages of off MLS listing practices.