THE MLS PATH FORWARD By David Charron and Robert Hahn
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Section Name SECTION TITLE THE MLS PATH FORWARD By David Charron and Robert Hahn THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 1
TABLE OF CONTENTS
3 Introduction
6 The Challenge and the Opportunity
9 The Strategy: MLS as Real Estate Operating System
12 Short term (1-3 years)
Neutrality Principle + Primary Marketplace + Buyer Data
20 Midterm (3-5 years) Open Source Software
24 Long Term Goal (5+ years)
The Real Estate Operating System
28 Conclusion
“The opinions expressed herein solely represent those of the authors.”
Section Name SECTION TITLE
“The future of our industry
will be determined by
the consumer’s trust in
technology to drive the most
important financial decision
of their lives”
– HARVARD BUSINESS REVIEW
INTRODUCTION
Few of us would be in this business today if it weren’t for cooperation and com-
pensation. We have all benefited mightily.
Having managed one of the largest MLSs in the country gave me invaluable expe-
rience. Stepping away gave me perspective.
As I unpack all I have learned from many years in this business, I am reminded
repeatedly that the world around us has changed and is changing dramatically.
Technology has given consumers confidence, agents’ independence, and our
industry the shudders. People with ideas and checkbooks are changing the game.
They’re rewriting the rules. New companies are using a combination of money,
technology, and data to deliver consumers an experience that is efficient, cer-
tain, and convenient. And the clash between old and new is creating tribalism
amongst and between players vying for the top of the heap. Not surprisingly, the
MLS finds itself squarely in the middle.
THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 3INTRODUCTION
As these new models and platforms become viable, broker and agent reliance
and loyalty toward MLS will inevitably wane. As posited in the well written MLS
2022 Agenda, “If there is a choice (and there will be), will they choose us?”
What we are witnessing is much more than different weather patterns, more
than a few rogue waves. Don’t kid yourself. These changes aren’t just a stretch of
bumpy road; we are off the highway and headed for the ditch. Indeed, we are in
the midst of a seismic shift. And yet we continue to support systems that fail to
recognize the intersection of consumer preferences and innovation. As a result,
our once tidy industry faces challenges as never before. It’s called evolution.
It’s hard to imagine breaking up a system that has served the industry for so long and
so well. Indeed we are lulled into complacency because we cannot envision a viable al-
ternative to what we have in place today. Despite repeated calls for the MLS to evolve,
we all agree that advances have been too slow. So slow in fact that some argue it’s akin
to coming home and realizing you forgot to set your crockpot to actually cook a meal.
Traditional brands, legacy technology providers, people whose behaviors and
practices are all moored in the past are attempting to re-set their navigation. But
it isn’t easy! Tenure combined with market share is incredibly stubborn. And can-
nibalizing one’s base makes change even tougher.
Our MLS delivery systems remain moored in the early 2000’s. We rely too heavily on
dated technology, third-parties, strained coffers, and fossilized thinking -- resulting
in less relevance. Not surprisingly, our soft underbelly is exposed for all to see.
“MLS connects the most significant
amount of properties to the largest
number of competitors.
That is pro-consumer!”
4
– BRIAN BOERO, 1000WATT
THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert HahnINTRODUCTION Of course, it’s easy to get consumed by all of it and descend into a form of real estate delirium, where we suffer from disorientation and intermittent confusion. In turn, we console ourselves with well-intentioned but misguided beliefs that we can create something new by delivering more of the same. We must get beyond the perpetual fidget spinning that surrounds MLS. No more empty calories. No more modest, well-intentioned but half-baked efforts to move the needle. The time for trying to strike a balance between patience and urgency is long past. It’s our channel to lose. This is my motivation for weighing in on what MLS must do going forward. What if we could overcome these challenges by adopting a new mindset? What if the barrier to continued relevance is will-power, not money? What if the future we envision is possible? Could it be that simple? Imagine yourself in 2022. That’s just three years from now! Where will you be? Where will your MLS be? More importantly, where will your customer and the consumer be? And what is it you tell them you have been doing these last three years to ensure their success? Don’t let the pace of change distract you. Don’t rely solely on what has gotten you thus far from seizing this seminal moment! Adam Smith, Scottish philosopher and the father of economics was right. “Com- petition spurs growth and innovation.” So now the MLS must undoubtedly prepare to compete. As CMLS smartly advises, “MLSs must forge a new path forward.” The question for us: Will we? David Charron October 2019 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 5
THE CHALLENGE AND THE OPPORTUNITY The history of American real estate is the history of the MLS. The original name for the National Association of REALTORS (NAR), after all, was the National Asso- ciation of Real Estate Exchanges. The local MLS, the local exchange, where brokers gathered to tell each other about houses that were for sale and to promise to com- pensate anyone who brought them a ready, willing and able buyer, predates the REALTOR movement. At the heart of the MLS – and therefore the American real estate system – there has always been a social contract that is unique in business history: the unilater- al offer of cooperation and compensation. That contract is under attack today, both from within the real estate industry and from without. 6 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn
THE CHALLENGE AND THE OPPORTUNITY
We believe there are four major threats to the MLS today.
1. Brokerages Pursuing Systematic Exclusive Inventory Strategies
2. Rise of Institutional Real Estate (iBuyer/Market Maker)
3. The Commission Lawsuits
4. Government Regulation
The consequence of failing to deal with these threats is simple: residential real
estate will look like commercial real estate.
Commercial real estate famously does not rely on the MLS and there is no unilat-
eral offer of cooperation and compensation. The norm in commercial real estate
is for all prime properties and prime leases to be done as pocket listings and kept
within a small circle of brokerage firms. The only time a property or a lease va-
cancy hits the open market is when there’s some kind of a problem.
As the saying goes, “If it’s on Loopnet, it’s got hair on it.”
That modus vivendi might work in commercial real estate, where the clients are
businesses and corporations. However it runs into major problems in residential real
estate with its fair housing laws and regulations and consumer protection concerns.
No consumer anywhere has ever said, “I really wish I could search a dozen differ-
ent websites and talk to seven different agents from seven different brokerages
instead of needing to contact just one agent who has all of the inventory at her
fingertips.” (Just ask consumers in NYC.)
There are other problems of the MLS, of course, but those four are the major
threats of today. And these are existential threats that require a response.
BUILDING BLOCKS
The MLS still has (a) a captive audience within its market area, (b) most of the listings
for sale, and (c) tradition and inertia (not to be discounted, especially in real estate).
While cooperation and compensation is at the heart of the MLS, the value of the
MLS is deeply intertwined with data quality. Listings are ads of properties for
sale, but they convert into Sold data, off-market data, and other extremely useful
information that professionals and consumers need.
THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 7THE CHALLENGE AND THE OPPORTUNITY
There are three features of MLS data that makes it particularly valuable, even
compared to other sources of property data, such as public records:
• Completeness
• Accuracy
• Timeliness
Accordingly, whatever strategy the MLS deploys, it must be based on preserving
if not extending this data quality advantage.
The bad news is that the MLS is under attack. The good news, however, is that in
crisis, there is opportunity. There is today an opportunity for the MLS to embrace
reforms, implement new strategies, and create new value for its subscribers.
Perhaps the seriousness and the urgency of these threats unleash creativity and
political will from within the MLS system.
The result will be not only that the MLS survives, but will become even more valu-
able to brokers, agents and consumers by establishing a firm footing for the future.
MLS leaders of today have the opportunity to go beyond being caretakers of an
important institution. They have the opportunity to be revolutionaries who leave
a permanent legacy behind. This is not a time for despair and fear, not a time for
regrets over past missteps or lack of action. No, this is a time to rise up with re-
solve, action and optimism for the future.
The authors believe in the MLS as the marketplace for properties. It is the envy
of the world, and ought to be preserved. That preservation can only come from
improving the MLS, strengthening its value propositions, and providing a 21st
century framework for 21st century businesses.
In the rest of this paper, we lay out a strategy for how the MLS may be improved,
how it may be strengthened, and how it may be made even more relevant to bro-
kers, agents, and consumers.
8 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert HahnTHE STRATEGY MLS as Real Estate Operating System Past attempts by the MLS to create new and different value apart from the list- ings database have met with mixed results. Public facing websites, for example, is not a huge value proposition for MLS membership with the notable exception of HAR.com, and possibly a few other markets. Most non-dues revenue strategies also have the problem of coming into conflict with the business strategies of brokerages, who also want to provide tools and services to agents to differentiate themselves from their competitors. Data access fees charged to vendors anger brokerages who feel that the MLS is charging exor- bitant fees to access their own data -- after all, it is the brokerage Participant who contributed the information into the MLS in the first place. We believe that there is one path that the MLS can pursue. It is, in fact, the MLS’s original value proposition and the one it had maintained for decades prior to the advent of the internet: become the Operating System for the purchase and sale and leasing of real property. THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 9
THE STRATEGY
OPERATING SYSTEM VS. PLATFORM
It is important here to distinguish between the Operating System and the Plat-
form, which numerous companies are building.
Zillow, Compass, Realogy, Keller Williams, HomeServices of America, RE/Max,
NextHome and dozens of other companies large and small all have some kind of
a platform strategy at the core of their business plans. Most of these contenders
are far better financed, far better governed, and have far more capabilities than
even the largest MLS in the U.S. Most of them are Participants in the MLS and
would look upon the MLS competing against them to develop a Platform as a
declaration of hostilities.
So why does this strategy make sense? Two reasons.
The MLS should seek to be the Real Estate Operating System, rather than the Plat-
form. We explain the difference in greater detail below, but the key idea here is
that the Platform is something like the Microsoft Office suite: the actual products
and services and apps that a franchise or a brokerage might develop in order to
drive productivity and competitive differentiation. The Operating System is like
Windows -- the invisible and rarely thought of background framework on which
Platforms and apps and software can be built.
Under this strategy, the MLS does not compete against franchises, brokerages and
tech companies. Rather, the MLS enables them to compete against one another on
a common operating system with a common set of resources available to all, and
the ability to build on them.
Add to this that all of the companies contending to become the Platform are com-
petitors in the real estate marketplace in one way or another. Brokerages all com-
pete against one another, as do franchises. Dozens of technology companies are
competing for pieces of the business in the MLS marketplace.
None of these companies have any reason whatsoever to get on a competitor’s
platform. Keller Williams did not choose to leverage the enormous platform that
Zillow built, because it regards Zillow as a competitor in many respects. We do
not see developers eagerly rushing to build on Realogy’s “open platform” because
they don’t want to be tied to a single company’s platform and be shut out of
competing platforms. NextHome is not building its software suite on top of RE/
Max’s infrastructure.
10 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert HahnTHE STRATEGY “If the MLS is seen as favoring one group over another, favoring one type of business model over others, one type of technology over others, then it will fail to become the Operating System. ” Practically speaking, that means that these companies can develop a Platform, but they cannot become the Operating System due to a lack of trust between and amongst competitors. NEUTRALITY The only entity in the real estate industry that could plausibly lay claim to not being an actual competitor in the marketplace is the MLS. This is the sole ad- vantage that the MLS has over everybody else. That means that the MLS and only the MLS can aspire to be the Operating System, which lays beneath Platforms and empowers them. The MLS can be the invisible foundation upon which everyone else builds their competing Platforms. Today, the MLS is a listings-only database that is defined by the unilateral offer of cooperation and compensation. Tomorrow, the MLS will be the Real Estate Oper- ating System that will be defined by the invisible enabling framework on which everything else in real estate is built. How do we get there from here? We begin with the short-term action items. These are things that must be done today, in order to set the groundwork for medium-term and long-term goals. We define short-term as the next 1-3 years, the mid-term as the next 3-5 years, and the long-term as 5+ years from today. THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 11
SHORT TERM (1-3 YEARS)
Neutrality Principle + Primary Marketplace + Buyer Data
In the short term, the MLS must implement three things: Neutrality Principle,
Primary Market Principle, and Buyer Data. These initiatives are not only critical,
they are urgent. The MLS must start working on these today, if it is to have any
hope of having them implemented and in place within the next three years.
NEUTRALITY PRINCIPLE
First, the MLS must declare and codify into its core documents (By-Laws, Terms
of Use, etc.) what we are calling the Neutrality Principle.
The Neutrality Principle is a policy decision and a public declaration of that deci-
sion. It states that the MLS is and will be neutral as to business model, technology
preferences, specific companies, or industry sectors. There will be no discrimina-
tion against any persons or groups or companies, nor against business models,
nor against technologies.
The MLS must declare its neutrality loudly to everyone who would listen. Then
the MLS must actually follow through and become neutral. We saw above that
12 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert HahnShort term (1-3 years) THE STRATEGY neutrality is the sole advantage that the MLS enjoys over every other company or entity in real estate. It must preserve and now expand on that advantage. If the MLS is seen as favoring one group over another, favoring one type of busi- ness model over others, one type of technology over others, then it will fail to become the Operating System. Neutrality = Non-Competition It is impossible to talk about how the MLS is neutral while it offers software and platforms and services that its own Participant brokerages or national franchises are offering to agents. No one can take the claim of neutrality seriously while the MLS offers one transaction management vendor as the default while excluding all others. Just this move alone would help with some of the simmering resentment on the part of brokerages and national franchises. PRIMARY MARKETPLACE PRINCIPLE Second, the MLS must insist that it be the Primary Marketplace in its market area. Primary Marketplace does not mean that the MLS be the only place where prop- erty information can be exchanged, where homes for sale can be marketed, and sellers and buyers are matched. Rather, Primary Marketplace means that the MLS is the first place where such things happen. The key concept is priority in time. If brokers or agents wish to use their own websites to market their clients’ prop- erties, because they believe their websites are better than any other, they should be able to, as long as that listing was put into the MLS first, thereby alerting the rest of the members that a property is for sale. If agents want to use private list- ing networks to market listings to agents they know and trust, they should be allowed to do so, as long as that listing information was put into the MLS first. If a listing appears anywhere other than the MLS first, then the MLS is not the primary marketplace, and that broker or agent has violated the Participant agree- ment. It’s a simple rule, and has the benefit of drawing a bright line that is easily understood, easily defined, and easily enforced. The importance to the MLS of being the Primary Marketplace cannot be underestimated. THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 13
THE STRATEGY Short term (1-3 years)
Recall that the three advantages of MLS data today are Completeness, Accuracy and
Timeliness. The MLS cannot have any of those three if it is not the Primary Market-
place. Even a short delay of 24-48 hours means that during that period, the MLS is
not the place to find the most complete, accurate and timely data about real estate.
Extend this modest delay to what is increasingly the norm (listings being incubat-
ed as “Coming Soon” for weeks or longer) and the problem is further exacerbated.
To the extent that the value of the MLS is in its network effect, where all buyer agents
belong because all the listings are there and all listing agents belong because all of
the buyers are there, the MLS must be first-in-time so that the subscribers are in the
know about what is and is not in the marketplace or coming to the marketplace.
“The importance to the MLS of being
the Primary Marketplace cannot
be underestimated”
Modification of the Pocket Listings & Coming Soon Policies
It goes without saying that insisting that the MLS be the Primary Marketplace
means modifications must be implemented to existing MLS policies around off-
MLS marketing and Coming Soon -- all of the exclusive inventory strategies of
today and tomorrow.
Plainly put, the MLS must ban systematic and programmatic off-MLS market-
ing and Coming Soon by its members and Participant brokerages. And since the
world of MLS and organized real estate tends to be built around negotiations and
compromise, it must be pointed out that there are times when something is black
and white and no compromise is actually possible. This is one of those times.
The question to be answered is simple: Is the MLS the marketplace for real estate,
or is it not?
14 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert HahnShort term (1-3 years) THE STRATEGY This is the hill for the MLS to live or die on. If the MLS is to go away, then this is the issue over which it should go out fighting. If the answer to the question is, Yes, the MLS is still the marketplace, then there are multiple interlocking parts to how things need to change. Redefine Participant One of the most important terms in MLS rules and policies is “Participant.” Under current NAR-based policies, a Participant is defined as a brokerage who makes and accepts offers of cooperation and compensation. This mid-20th century con- cept is now outdated. We recommend defining the Participant simply as a brokerage that agrees to make the MLS its Primary Marketplace. All salespersons under that a Participant’s license must also make the MLS their Primary Marketplace. Violating this fundamental agreement, to make the MLS first in time, means a breach of the core contract of participating in the MLS and could result in expul- sion from the marketplace. In a very real way, we are recommending that MLS participation be held to the same standard as IDX participation: all or nothing. You are either in IDX or you’re not; there isn’t a halfway answer that is acceptable to anybody where you get to use everybody else’s listings on your website, but only 70% of your own listings can be used by others. That violates the letter and spirit of IDX. We believe the same approach to MLS Participation is appropriate. Enforcement A rule without enforcement is no rule at all. The MLS will need systems and pro- cedures in place to ensure that a property was not marketed anywhere else prior to its entry into the MLS. If it is, then the violator must be brought up for disci- pline, up to and including expulsion. This will take real commitment. No more winking at rule breakers. Thankfully, enforcement is relatively simple, compared to other possible rules. In most cases, all that the MLS must look at are timestamps. Automation is eas- THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 15
THE STRATEGY Short term (1-3 years) ier: crawl the web and determine when “123 Main Street” appeared on a broker- age website and compare the timestamp to when “123 Main Street” was input into the MLS. Define “Marketing” The MLS will need to define what is meant by “marketing” a property. Our rec- ommendation is to keep it general and allow people charged with enforcement to have some discretion. Somewhat like Justice Potter Stewart’s famous statement about obscenity, you will know it when you see it. Factors to be considered include, but are not limited to, the number of people in- formed, the relationship between the people informed and the agent, the degree of promotion, commercial purpose, and the method of communication. The goal is to try to understand the intent of the agent making the communica- tion when she made it: was it to market the property outside of the MLS, or was it not? It is a judgment call, but in the vast majority of situations, it isn’t a particu- larly difficult judgment call. Therefore, we believe that the policy should announce the philosophy and the gen- eral principle, and allow each MLS wide latitude on adjudication and enforcement. Waivers and Flexibility Finally, the MLS will need to put into place some level of flexibility to allow Par- ticipants and agents to deal with the exceptions where off-MLS and Coming Soon are both justifiable and necessary. The typical situations invoked are celebrity clients, divorces, or other sensitive situations where the client’s desire for privacy trumps considerations of wide exposure. We agree that there are situations where advertising on the MLS is against the client’s best interests. However, we must stress that such situations have historically been rare, and usually involved high-end luxury properties and unique consumers. There is no consumer privacy justification for systematic and programmatic off-MLS mar- keting strategies involving exclusive inventory. Therefore, the waiver process must be such that the exception does not swallow the rule. This is effectively what has happened to current Coming Soon processes. Be vigilant. 16 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn
Short term (1-3 years) THE STRATEGY
THE PROBLEM OF PRINCIPALS: IBUYERS
There is a much more difficult problem of preventing off-MLS marketing. It involves the
owners themselves. The MLS has never insisted that a FSBO (For Sale By Owner) prop-
erty be submitted to the MLS; indeed, one of the benefits denied to a FSBO is exposure
of the property to the wider audience of agents who belong to the MLS.
However, the case of institutions raises a difficult challenge to that longstanding un-
derstanding. When an iBuyer is the actual owner of and is actively trading hundreds if
not thousands of properties in the marketplace, that isn’t a typical FSBO. It’s something
new altogether.
The difficulty is that all of the arguments for consumer protection are inapplicable when
the “consumer” is a giant multibillion dollar corporation who knows exactly what it is
doing and wants to be able to direct its listing broker to effect its commercial strategies.
All of the current institutions engaged in iBuyer (or more precisely, market making) activi-
ties use an agent, who is a member of the local MLS, to represent them in all transactions.1
We believe that the only pragmatic solution when it comes to institutional owners is
one based on civility and mutual benefit, rather than one based on rules and enforce-
ment. That is, the MLS should allow for programmatic waivers by institutional owners
without penalizing their MLS Participant.
In exchange, the MLS should secure a relationship with such institutions to maintain its
status as the Primary Marketplace as much as possible. For example, perhaps the MLS
can exchange data with an iBuyer: make Sold or off-market data available in exchange
for iBuyers submitting their owned properties to the MLS.
We believe that the Neutrality Principle would go a long way towards a negotiated
partnership between institutional principals and the MLS. iBuyers have had reasons
to suspect that the local MLS controlled by the local REALTOR Associations and bro-
kerages may be actively trying to hinder them. An explicit guarantee of neutrality and
non-discrimination would help usher in a new era of partnership.
1. In some cases, that agent is an employee of the institution, which itself is a Participant in the local MLS (e.g., Opendoor). In other cas- 17
es, the agent is under a Participant brokerage and the institution is a client like any other institutional client (e.g., Zillow).THE STRATEGY Short term (1-3 years)
BUYER DATA
One of the most important develop-
ments in recent years has been the
emergence of buyer data networks such
as RealScout and Buyside, as well as
others. Brokerages are leveraging an-
onymized buyer data for competitive
differentiation, and they are coming
together to create networks to aggregate
buyer data. Success stories from New
York to San Francisco to Miami to Den-
ver are popping up in media coverage.
The benefits and advantages of lever-
aging buyer data numerous. A leading
company in the space, Buyside,
promotes its buyer data network with
language like this:
Buyside helps your agents dominate every listing appointment by arming them with the
ultimate differentiator: BUYERS. Your agents will stand out by showcasing to homeown-
ers a list of buyers actively working with your brokerage, who are a perfect match for their
home. With Buyside, you’ll arm your agents with the power of real-time buyer data – and
help them crush the competition every time.
Just like the MLS allows every subscriber to know what the inventory is, and to
use that data (including Sold data and Withdrawn, Expired, Suspended and Ter-
minated data) to help consumers make proper decisions, buyer data networks
allow their members to know what buyer demand is, and to use that data to help
consumers make proper decisions.
More problematic for the MLS is the fact that buyer data networks create an alter-
native marketplace outside the MLS. Once again, Buyside:
Buyside matches more buyers to your listings, helping you close more transactions in
house. Listings get promoted intelligently to agents with a matching buyer, selling faster.
Buyers get the inside track on hot new properties, including Coming Soon Listings and
Quiet Exclusives that they can’t find anywhere else. Buyside puts your brokerage’s net-
working effects on steroids, helping you close more sides in house for greater profits!
18 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert HahnShort term (1-3 years) THE STRATEGY Matching buyers to sellers is the very definition of a marketplace. Promoting listings intelligently to agents with a matching buyer usurps the core function of the MLS as a marketplace. At the same time, the MLS cannot in good conscience require that it be the Prima- ry Marketplace for its Participants, and then turn around and prohibit them from leveraging buyer data to better serve their clients. In 21st century real estate practice, the fact that the MLS is missing buyer data is a major gap in its capabili- ties and its offerings. This gap must be filled. The MLS cannot claim to be a marketplace, nevermind the Primary Marketplace, if it does not fill this gap. Rather than see the buyer networks as a threat, we encourage you to regard them as opportunities for improvement and enhancement of the value proposition of the MLS. Embrace buyer data fully for the benefit of all Participants and subscrib- ers, not merely the ones who have signed up with a third-party vendor. Therefore, we strongly recommend that your short-term action include acquir- ing buyer data for the entire MLS and deploying it to every broker and agent within the MLS as a whole. The MLS simply cannot allow third party companies to take the lead in buyer data. A note on brokerage conflicts: if you already have some brokerages participat- ing in third-party buyer data networks, they may regard the MLS’s entry into this area as yet another example of competing against them. We believe that there is a difference between offering a CRM program or a transaction manage- ment system, which is rightly in the brokerage’s playing field, and offering a marketplace that matches buyers and sellers together, which is the core func- tion of the MLS. Furthermore, the value of a network increases exponentially with each additional new member of the network. Your brokerages who are using buyer data networks to provide valuable insights to their clients will be able to offer even more value if the network encompasses the entire MLS, instead of just their small circle of firms. Adding buyer data to the MLS is absolutely critical and urgent. This work must be done, and it must be done now. THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 19
MIDTERM (3-5 YEARS)
Open Source Software
If the MLS has accomplished those three short-term tasks, of implementing full
neutrality, of becoming the Primary Marketplace, and of expanding its universe
of data to include buyer data, then it can tackle a necessary structural issue in the
midterm, which we consider to be 3-5 years out.
That structural issue is software. The MLS must fully embrace open source soft-
ware. There are numerous reasons why open source is important going forward,
but let us address a few of the most important.
COST EFFECTIVE
We need to be honest about the fact that the largest MLS is a small enterprise.
The largest MLSs in North America have annual budgets in the 8-figure range:
everything from salaries to office space to software. It is a far cry from the
roughly half-a-billion dollars that Zillow spends annually just on technology and
development. And we haven’t even touched the real technology giants like Google,
Microsoft and even Dropbox with thousands of software programmers and engineers.
With open source software, it is not a single company who develops it, but the com-
munity of developers who come together to develop it together. The analogy that
20 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert HahnMidterm (3-5 years) THE STRATEGY
the open source movement uses is a pot-
luck: each person, each company, brings
something to the table, and the whole is
greater than the sum of its parts.
By pooling together the limited devel-
opment resources of a large numbers of
MLSs, the various technology vendors
OPEN SOURCE
in our space, and inviting participation
by developers and coders from out- Open source software is software with
source code that anyone can inspect,
side the industry, an open source MLS
modify, and enhance. The typical user
project can be the equal of (or even be never sees the source code for software;
superior to) the proprietary systems we just see the finished product. Pro-
produced by the largest engineering grammers, however, can see and use the
teams at the largest companies. See, for source code to create their own applica-
example, Apple’s iOS (proprietary) vs. tions or improve the existing software.
Android (open source).
There are numerous advantages to open
source software, according to the Open
If we aim to build the MLS into the Real
Source Foundation, and many are directly
Estate Operating System, open source relevant to the MLS and its future:
software is the only economically via-
ble path to that kind of development. 1. Community
2. The power of the crowd
TRANSPARENT 3.
4.
Transparency
Reliability
Open source is also the only way to 5. Better security
get companies, particularly technolo- 6. Merit-based
gy companies who are never going to 7. Faster time to market
8. Cost effective
build their products on a competitor’s
9. Freedom from lock-in
platform, to build on the MLS. 10. Becoming the norm
With open source software, the source Much of the internet is built on open
code is plainly visible. Engineers can source software, and it is becoming
inspect the MLS platform code line by the dominant approach for software in
line if necessary to assure themselves industries from mobile phones to AI to
Big Data to automotive technology.
that there is no funny business going
on. They can compile that code them- Please contact the authors if you need
selves to make sure there aren’t any more details on open source software
security flaws or theft of intellectual and its applicability to real estate.
property going on.
THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 21THE STRATEGY Midterm (3-5 years)
Furthermore, open source software is a guarantor of the MLS’s neutrality,
which is crucial to the strategy. Remember: everyone else building a platform
is competing in the marketplace in one way or another. Only the MLS can
stand above the fray; it absolutely must stand above the fray, and be seen as
standing above the fray. Open source software expresses and guarantees
that neutrality.
COMMON DATA STANDARDS (RESO)
The platform must be built on a common, open set of standards so that any tech-
nology partner could build tools that integrate within it. The obvious answer is
RESO (Real Estate Standards Organization) standard that much of the industry
already employs to varying degrees.
A platform built on RESO standards would not only allow faster development
of software and greater interoperability of tools. It would provide portability of
data that stretches beyond the MLSs traditional listing data: lead data and saved
customer searches that work seamlessly across platforms and tools. It allows for
standardized data reporting on usage of tools by brokers, agents, and consumers,
providing valuable insights to all parties as to which technologies are serving
their customers best.
One of the perennial problems that RESO faces is deployment and adoption.
RESO spends enormous time and effort convincing companies to adopt the latest
RESO standards into their proprietary systems. With an open source platform, it
becomes a one-and-done process: once the core codebase adopts the latest RESO
standards, it propagates throughout the ecosystem quickly and without the one-
by-one cajoling and pleading.
Real estate open source software is possible only because RESO exists. But open
source software will also supercharge RESO standards to make MLS technology
as up to date as possible.
RESOLVING THE NEUTRALITY PRINCIPLE CONFLICTS
Open source software is also the longer-term solution to the inevitable short-
term conflict between the Neutrality Principle and the need for the MLS to offer
products and services and value to its subscribers.
22 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert HahnSection Name SECTION TITLE
“With an open source
platform, it becomes a
one-and-done process.”
With a fully open software platform, the MLS no longer needs to offer enterprise
solutions to all subscribers. Instead, companies can offer their own solutions on
top of the open source MLS platform, and as long as all of the rules are followed,
compete for business from that MLS’s subscribers.
Front-end-of-choice is a given, but so is any other part of the MLS from listing
entry to buyer data editing to CMA to public records: in an open source environ-
ment, each vendor can offer its own unique product that is fully integrated into
the MLS, operates on top of the common MLS database using common MLS rule-
sets and using common RESO data standards.
That allows the MLS to be even more neutral as to software and focus on its core
value of stitching together the user experience and providing a common Primary
Marketplace for all.
THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 23LONG TERM GOAL (5+ YEARS) The Real Estate Operating System Once the MLS has achieved both short-term and mid-term goals, it can then consid- er pivoting its value proposition from what it is today to becoming the Real Estate Operating System: the invisible framework that makes everything else possible. The definition of an operating system in the world of computers is “software that manages computer hardware and software resources and provides common ser- vices for computer programs.” The operating system in and of itself does noth- ing useful for the actual user; it is absolutely critical to the software that does do something useful for the user. By example, this paper is being written on a Microsoft Word program that resides on a Mac laptop. The writer is not thinking at all, or even aware of, everything going on between Word and the laptop: something is telling the laptop to put data into memory, perhaps save it to the hard drive. Something is telling the graphics card to send signals to the monitor so the writer can read what is being typed. That software behind the scenes which makes everything possible is the operating sys- tem. Without it, a computer is nothing more than wires and silicon and plastic. 24 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn
Long Term Goal (5+ years) THE STRATEGY Importantly, the operating system is invisible to the end-user. As far as the author is concerned, he is us- USER ing Microsoft Word, and seeing words on a screen. The inspiration for the MLS to be the operating system APPLICATION for real estate comes from the world of Cloud comput- ing. Specifically, it comes from Dropbox and its pivot to becoming more than just online storage. Dropbox is competing against several major technology com- OPERATING SYSTEM panies to become the operating system for the Cloud, where there is no single computer, and the role of the operating system is not to manage hardware and soft- HARDWARE ware resources, but to organize the user experience. In an interview with Bloomberg, Dropbox CEO Drew Houston talked about the pivot: It evolves the Dropbox experience from a folder full of files to a living team workspace where you can have not just files, but any kind of cloud content. So things like Google Docs, Sheets, Slides, really anything that you’re using, and integrations with tools like Slack and Zoom, from within Dropbox you can send people messages, you can start meetings, you can send things out for signatures, you can see your calendar, it’s a much more integrated workspace. We saw so many of our customers, and frankly ourselves, struggling with the fact that there are all of these new apps, and they are great, but how do you stitch them all together? We see a big opportunity to make that a much more seamless experience. Houston talked about the opportunity he saw to organize all of the various apps that people actually use, work across all these different ecosystems, share files, communicate from one place, without forcing the user to get locked into a single environment. Ben Thompson of Stratechery laid out why this is so important, writing in a piece called Box, Microsoft, and the Next Enterprise Platform, “Something needs to tie together all those computing devices, and data, which needs to be everywhere, is the logical place to start.” This is a role that the MLS, and within the real estate industry only the MLS, can fill. Today, users think of the MLS as a piece of software, and executives and subscrib- ers both call their MLS by the product name: “I’m on Matrix” or “Tempo is down THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 25
THE STRATEGY Long Term Goal (5+ years)
right now.” We think that in the future, users won’t even think about the MLS, in
much the same way that we do not think about Windows or OSX or Linux.
The vision for the MLS is to be the solution that stitches together all of the tools
that pertain to the business of real estate. The user will be using whatever appli-
cation she wants for whatever task.
For example, the user of the future might have:
• Boomtown for CRM
• Transaction Desk for transaction management
• Google Apps for email and calendar
• Slack for communicating with her team members
• Dropbox for files
• Google Drive for listing photos
• Matrix for listing search, FlexMLS for listing entry,
and Cloud CMA for CMA reports
Perhaps she has a dozen apps that she uses across her laptop, her phone, and her
iPad, and she wishes that they would all sync so she doesn’t have to keep export-
ing things or converting things.
Why can’t she take photos with her cell phone, automatically have them sent to
BoxBrownie for editing and virtual staging, have the finished images show up
automatically where she stores her files, and have those images automatically
syndicated to her personal website, her franchise website, to Zillow, Realtor.com,
Homes.com and to her drip email campaign program?
The goal of the MLS as real estate operating system is to make those images show up
automatically, and to stitch things together so that she can use a variety of programs
and apps without friction.
We know that large brokerages and national franchises are all building their pro-
prietary Platforms for lead-generation, marketing, productivity, and customer
management to differentiate themselves from one another. The goal of the Real
Estate Operating System is to enable those companies to create their proprietary
Platforms without having to redo all the work that stitches things together.
Again, think of the brokerage/franchise Platforms as Microsoft Office suite and
the MLS as Microsoft Windows, which enables Office to work together seamlessly.
26 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert HahnSection Name SECTION TITLE
“The vision for the MLS
is to be the solution that
stitches together all of the
tools that pertain to the
business of real estate.”
THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 27CONCLUSION The challenges confronting the MLS are unprecedented in scale, scope and in im- portance. Failing to meet these challenges means the end of the MLS as we know it. Instead of its central place in the structure of American real estate, the MLS will become like hundreds of smaller Loopnets: a secondary dumping ground for properties to be distributed to the hoi polloi. The MLS industry cannot keep papering over what is under attack. Collaboration is the bedrock of an orderly market system. People with checkbooks and ideas are using technology to change this most fundamental tenet. There is high anxiety and increasing panic in the broker community as they are challenged to respond to substantial change and competition in a time of de- clining revenue and profitability including commission pressure, growing lead generation costs and new competitive business models. Add to this, the dramatic growth in technology cost and agent demand for it, are resulting in a landscape for them that is forever changed. The authors believe this proposal will help brokerages save precious capital by having the MLS invest in the creation and advancement of a common operating system that supports rapid platform development and continuous improvement while encouraging substantial, competitive differentiation. Most importantly, by committing to this new paradigm, the MLS can enable brokers to survive and thrive while ensuring the consumer interests are well-served. If the age of the MLS has passed, and Participant brokerages want to move on into a Brave New World of “dark pools” of information, then that is a decision that should be made collectively, openly, as a community. It should not be a decision that is made in a vacuum. Let that decision be explicit, be open and public, and be the result of serious discussion and debate. That debate doesn’t occur until there are pro and con arguments. And right now, the MLS doesn’t have a compelling po- sition to argue. The future we envision is currently out of reach, but not out of the realm of possibility. It is imperative that the MLS has a fresh and reasoned alternative to the plethora of challenges confronting it. More of the same simply won’t cut it. 28 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn
CONCLUSION
The issue is particularly important because the consequences for consumers are
dire. What is tolerated in commercial real estate, where clients are corporations
and businesses, will not be indulged in residential real estate given its numerous
laws and regulations.
The future we envision is currently out of reach,
but not out of the realm of possibility.
We the authors have laid out a vision and a strategic roadmap. And of course hy-
brids of this envisioned future can and should be explored. We would be pleased
to provide more detailed advice to your organization, based on an understanding
of your local marketplace, your local situation with your local brokerages. We
invite you to contact us to see if we can help.
However, we also owe a debt of gratitude to the MLS industry, having made our
living in it for so long and having been blessed with friendships and relation-
ships with some of the finest people we have had the pleasure to meet. We genu-
inely care about the future of the MLS, the future of brokerages and agents, and
the future of this dynamic industry we have come to love. If this paper aids you
and your advisors in any way, if it helps you think through the problems and pos-
sible solutions, then we will have been amply repaid for our efforts.
Thank you,
David Charron Robert Hahn
dccharron@att.net rhahn@7dsassociates.com
301-838-7120 917.921.7612
/david-charron-22a6359 /robhahn
@dccharron1 @robhahn
THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 29SECTION NAME Section Name 30 THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn
ABOUT THE AUTHORS
David Charron David continues to con-
tribute to the industry
For most of his career, via speaking, writing and
David Charron has whispering to people and
served the real estate companies that are intent
industry in a variety on ensuring its continued
of senior positions. Da- vitality. Since stepping
vid was CEO of MRIS, away from the industry
Inc. for 18 years, one of full time he aspires to be
the largest MLSs in the an excellent stone wall
country. Most recently builder, an average golfer
he served as the Chief and promoter of smart,
Strategy Officer for the engaged people. With the
successor organization, exception of the latter,
Bright MLS, Inc. this list changes regularly.
Robert Hahn airplane hangars (true
story!). He moved on to
Rob is the founder of 7DS Realogy, where he head-
Associates, a management ed interactive marketing
consulting firm in real es- and product for Coldwell
tate, but most of you know Banker Commercial before
him from his well-known striking out on his own.
blog, The Notorious R.O.B., He is a graduate of Yale
and from his many speak- University with a BA in
ing engagements through- Philosophy. As the Wall
out the industry. Street Philosophy Banks
Rob has what you might were not hiring, he add-
call a varied background ed a JD from NYU along
with stints in high fi- with student loans the
nance, law, technology, size of a good mortgage.
startups, fashion sales, He is a refugee from New
and even professional Jersey currently residing
gaming. He started in in fabulous Las Vegas
real estate investing in with his wife Sunny.
THE MLS PATH FORWARD © Copyright 2019, David Charron and Robert Hahn 31mlspathforward.com
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