A better size?

Any wrap on the Connecticut Statewide MLS CEO's white paper must at least consider some other motivational factors that might act to encourage consolidating data into a statewide MLS system. The four TRUTHS of the white paper are either not logical, not true (or may not be true all the time, in all situations, with all types of property/buyers/agents). Put more simply, the four TRUTHS aren't likely to be driving the current urge to merge.

Drawing on my background as an ecologist, I want to consider a wide array of players in the MLS environment, then ask some questions about how they might benefit from consolidation of MLS data into a single container owned and operated by one entity.

Players Groups (stakeholders)Include (there are others, but these are central):
Buyers
Sellers
Agents
Brokers
Vendors
Local Associations
Local MLSs
Regional MLSs
State Associations
National Association


We'll examine how each group of players influences how real estate is bought and sold in terms of numbers, organization, power, control, profitability and influence over other players.

There is a complicating factor. Some individuals belong to more than one player group. Some used to belong to one group, now belong to another, but may return to the first group, or even become part of a third group, or a fourth group. Inevitably, the interests of the groups overlap to a considerable degree. They're all part of the process of buying and selling real estate. What happens when the interests of the groups don't overlap, but rather diverge along one or more planes of hyperspace? It's actually pretty simple. The group with the greatest stake in the outcome, the most power, the largest financial benefit or some combination of the above, attempts to make that divergence of interests disappear or, at the very least, seem immaterial to the greater scheme of things related to the real estate business. That creates the all important "if it's good for group A, then it must be good for group B" conclusion. An even better outcome is the "we belong to group A, so it's our group and therefore everything group A does must be good for us" conclusion. We watched the new Alice in Wonderland flick on bus during the trip to the marathon in San Diego. That movie displays the same kind of logic needed to draw the above conclusions about the real estate groups of players environment.

This slight of hand isn't as hard to achieve as you might believe, because success in real estate is measured by a very simple metric--money. That one, easy to measure, variable is influenced by 100's of other variables, many of which are difficult to measure. Recall how alluring the white paper became when the prospect of saving $100,000,000 was unleashed. The trade offs can't be so readily measured. Quality of service isn't easy to throw a number at. It's so tempting to just cut to the chase and go with what's sexy and measurable. Whata ya know? There are major players out there acting as alluring temptresses pimping out just that simple elegance. Show us the money and all is good!

The two groups with the greatest numbers among the stakeholders, the real estate agents (well over a million nationwide: 200,000 or so in CA, including MLOs) and the public (many millions paying over $50 billion in commissions in good sales years) represent the very core essence of the business of real estate. You'd think they'd be pivotal components in statewide MLS consideration, but they are NOT, because they have little or no organization, power or control.

If the public doesn't like the standards of practice in real estate, what alternative do they have? Find someone who does it the way they prefer? It's not that easy with standardization where it is. The public has nearly no organized voice. They have a need for real estate, but little control over how that need is met, aside from choosing from an increasingly homogeneous assortment of agents who use the same contract/disclosures, the same information, etc, etc. They may soon use the same MLS database too. Of course, there are different business models out there, but how different are they and are the alternatives available in every nook an cranny of the US?

What about the agents? They have have organizations at multiple levels and they pay dues/fees to all (directly or indirectly)--local, regional, state and national. Their interests must be well represented! Oh really? Those organizational entities are supposed to represent the agents, but flow of communication and power moves in a classic top down direction. There is very little moving from agents up. In fact, dissenting opinions are rare at the top. Those agents that rise in the organizations must hew to the accepted doctrine and culture. At which point, whom do they represent--other agents or the organization? As a result, even if most agents believed a change was needed--could they make it happen? Not likely, because very few agents actually participate in shaping the path of the trade organizations or even local associations. The few that do are trapped by Groupthink phenomena. Moreover, the people who fill key leadership positions at state and national levels were involved at local levels and may still be in one way or another. It's not an oversimplification to say that all of organized real estate is effectively controlled by a few hundred people at the volunteer level and even fewer at the key executive staff positions. In whose best interests is that control directed?

Meanwhile, most agents are engaged in the process of chasing commission checks, not engaged in organizational politics. Many don't see any clear relationship between the politics and individual profitability. Up until the last few years there wasn't much relationship. That is now changing.

The agents and the public may need to find a way to have more impact on their own best interests by working within existing organizations (not holding my breath there) or by creating new ways to exert better control over the real estate industry for the benefit of the groups that comprise its core essence.

Next installment moves on to Vendors, Local AORs, MLSs and Regional MLSs

Finally we'll look at the state and national organizations.