The data about home listings that you see on most real estate websites comes from organizations called Multiple Listing Services (MLS). Each geographic area is served by one or more MLS, and all of the local real estate agents become members of the MLS so that they can share data about the homes that they have for sale with other members of the MLS. Through this sharing agreement, when you list your home with one real estate agent, it is automatically shared with all of the other members of the MLS. They use this data to populate the websites that you use to search for homes. Agents update their listings to show when houses have changed prices, are under contract, or have sold. MLS organizations serve other purposes as well, mostly to standardize rules and procedures for how real estate is bought and sold amongst the agent community.
There are some popular real estate sites out there that are do not receive their listing data from the MLS, most notably sites like Zillow, Trulia, and Yahoo. Although there are a handful of cities where this does happen, such as Houston. Where do these sites get their information about homes for sale? There are a number of sources.
- Home owners enter listings directly
- Real estate agents enter their own listings
- Real estate brokers send a feed of their listings to each site
As a technology guy, it would certainly be interesting if all of this MLS data about home listings was unlocked and freely available to software developers and the general public. There would be a wave of new websites and applications that could use it, and it would certainly help satisfy the consumer’s thirst for more and more real estate data. But will this happen? It is a complicated question with complicated and far-reaching answers. Let’s take a look at both sides of the debate and what may or may not happen in the coming years.
Who owns MLS data?
The MLS is first and foremost a “cooperative marketing agreement” between real estate brokers. No single agent has a broad enough reach to satisfy the selection of homes required by buyers, and no single agent has broad enough marketing to advertise your listing to all potential buyers. By combining all the listings, it makes for a compelling home shopping experience for everyone. The MLS agreement basically says that I agree to show your listings if you agree to show mine, plus a bunch of stuff about how agents get compensated in the process.
Because the MLS is designed to drive transactions through real estate brokers, these brokers maintain “ownership” of their listing data. The logic here is that by maintaining the best source of homes for sale, real estate agents become the best place to go when it is time to buy a house. Because their entire business is built upon this, real estate brokerages are wildly protective of this data, and in most cases do not allow it to be published on other non-MLS sites. This protectionism is not only for individual listings, but is also for a number of property details even on their own websites. Often things like price history, sales history, or even the address are hidden from public view with the hope that you will call a real estate agent who has the magical keys to this data. We don’t agree with this protectionism, and feel that consumer demand for information should take precedence over driving customers to a particular real estate brokerage. Many MLS systems in the US take these policies to a downright silly extent hiding details like listing address until you register with the website, hiding the entire listing until you register, or hiding the listing for only agents to see. A real estate agent’s primary duty is to act in the best interests of their buyer or seller, and quite frankly we think that by restricting data access, real estate companies are putting their own best interests ahead of the consumers they are supposed to represent.
It is important to note, there are a few data fields that should remain “agent confidential”. Information about how to access the home, whether it is vacant, or times that the homeowner will be away are clearly not meant for public consumption. However, we fail to see how restrictions on other details such as price history, past sales, selling commission, etc. are in the best interests of the real estate consumer.
It is also important to note that most MLS are run by private entities, not state or local government. Some are run by real estate companies, others are run by a local association of Realtors, and yet others are owned and operated by their broker membership. (Our Northwest MLS is broker-owned and operated, and is not affiliated with the NAR.) Many of these MLS are for-profit ventures, so not only do their members have a vested interest in protecting the data, the MLS itself doesn’t want to lose their grip on the data, lest they lose their revenue source.
The MLS will go away
What will it take for the MLS stranglehold on real estate listings to go away? There needs to be a viable alternative for home buyers and sellers that does not rely on MLS data. There are two components of this. First, the replacement sites must drive huge numbers of visitors. Without a huge base of home buyers, no seller in their right mind would rely on such a public listing service to sell their home. There are some interesting viable sites that may grow into this role, such as Zillow, Trulia, or potentially even Google. While their visitor traffic is substantial today, it still doesn’t exceed the pull of the thousands of real estate broker sites that rely on MLS data. Second, a listing site must be seen as a reliable data source. Consumers want assurance that a house they see for sale online is actually for sale, and a house that they see as sold is actually sold. There are issues of data quality with MLS websites today, with agents who try to game the system, fudge on property details, or are just lazy about updating their listings. However, there are fairly stringent rules in place for MLS members to gain some level of reliability and accuracy to listing data. Non-MLS listing sites suffer from much larger data quality issues today. A quick perusal of “public” listing sites will show you a listing that sold a year ago still being shown as “for sale”, or the most prevalent problem, which is that a large chunk of homes that are for sale are not even listed on the site at all.
The MLS is here to stay
The other side of this debate says that the MLS system of distributing listing data will remain intact. Real estate brokerages will not willingly give up their control of this data, and there are strong political forces in the industry that will resist changes to how MLS data is distributed. Data quality issues remain if the listing database is controlled by the general public, and these issues are not easily overcome. Lastly, in the face of online data, there remains a clear role for real estate agents to facilitate what is a messy and complicated transaction process. As shepherds of a real estate transaction, these agents are in the best position publish listing data, and their current compensation model relies on MLS participation to guarantee their income. That will be a difficult dynamic to change.
Where are we headed?
All of these local MLS systems are at risk of losing relevancy as more and more real estate data is placed online in. The thousands of local real estate agent websites are also losing relevancy as certain big websites gain huge market share for real estate search. There is clearly consolidation taking place where home buyers use only the biggest, most impressive websites to search for homes, even if their agent is not affiliated with that website. There is also consolidation occurring at the local MLS level, with various MLS organizations combining to cover larger and larger geographic areas. We’ve seen that happening in Washington, and I know that California MLS systems are doing the same. In the case of one of the most progressive MLS organizations, the Houston Association of Realtors (HAR) has actually created a public website highlighting all of their listings, doing away with the need for each individual brokerage to maintain a search website.
The debate over the future of MLS data will ultimately decided by consumers. Consumers will vote with their mouse clicks on how they prefer to search for homes, and the real estate industry will eventually follow. The changes will evolve slowly, as there are many factors in place that resist these changes, but brokerages of the future will not be able to ignore non-MLS websites that attract huge numbers of home shoppers. I personally believe that real estate agents will retain their role as the primary source of listing data, and they will ultimately publish their listings through a variety of MLS and non-MLS channels. However, many real estate agents will abandon efforts to drive home shoppers to search for homes on their websites, and will instead be servicing consumers who prefer a small number of popular, data-rich real estate websites.
Where do you think MLS data is headed in the future?