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Top 10 Dangers Facing MLS System

by James Bellandi

MLS faces 10 big problems with no easy answers

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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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