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Convergence or Unintended Consequences: The Growing Legacy of Off MLS Marketing

It arrived in the spring 2012 to the collective relief of an entire industry. After five years of unstable and conflicted market conditions, the market seemed to finally have “returned.” With it came the promise of new opportunity and prosperity for all within the industry. A palatable sense of relief flooded across markets as hundreds of thousands of Boomer generation real estate agents realized that they would have one more opportunity to make the big time.

It quickly became obvious that the market that had returned was nothing like the market that had crashed in the late fall of 2005. Across the country, sales figures dramatically increased while inventories remained extremely low and prices began to precipitously increase. We now know that this activity was being driven by pent up consumer demand, the reticence of homeowners to enter the market, artificially low mortgage rates and ridiculously low prices.

Accompanying these symptoms, and appearing amazingly early on in the new market, were observations that suggested that real estate professionals at both the brokerage and agent levels were demonstrating behaviors inconsistent with their own and the industry’s long-term interests.

The most alarming of these behaviors were the “off-MLS” marketing activities that, by early 2013, had rapidly spread and in some markets were affecting more than 30% of transactions, a level that threatened the stability and function of the Multiple Listing Service (MLS). Major markets began to experience brokerage commercials that promoted the availability of “coming soon” properties not yet on the market. There was a growing sense that a rapidly increasing number of real estate professionals were so focused on making up for the lost time and income created by the events of 2005 through 2011, that they are willing to risk destabilizing critical institutions and relationships to meet their objectives.

Even after the presence of off-MLS marketing and its legal and marketplace dangers became known, few leaders spoke out against it. Brokers expressed fear that any interference would result in “breakage,” as agents threatened to play out their eternal “I don’t need no stinking boss” routines. Participating agents created an entire litany of excuses and rationalizations, including such soon-to-become classics as “my clients are requesting this,” “I am protecting my clients against the ravages of incompetent agents,” and “My clients are worried about their privacy.”

The real story behind the refusal to take action to stop off-MLS marketing practices was actually more personal than professional. The agents who were leading the way by telling real estate consumers across the country “You don’t need no stinking MLS” weren’t “those agents” (the ones everyone loves to accuse of being ill-trained part-timers without real passion for the job or love of their clients). The agents leading this new movement were the elite, the vaulted “top producers,” the agents that were seen as “role models” for the rest of the industry.

By mid-summer 2013, concern for the negative market, legal, regulatory and relationship ramifications of these behaviors (and the resulting lawsuits) had reached a point were some of the top entities in the real estate industry began to speak out about the dangers of these practices. The California Association of REALTORS® demonstrated great courage and caring with a fully funded multi-media program that warned California consumers against the evils of off-MLS marketing practices.

The brokerage response was taken up by no less a firm than Long & Foster, a national icon in the American real estate industry. Untold amounts of resources were invested in its program to caution consumers in the several states in which it operates that off-MLS marketing opportunities were not in their best interests.

Both of these organizations and their efforts deserve credit and recognition for demonstrating leadership, “doing the right thing” and creating leading-edge multi-media campaigns designed to reach the right people with the right message.
Now back to that convergence thing. While the real estate industry was working its way through the various traumas of the past several years, another movement was gaining speed, influence and power. Welcome to the world of the community website.

A social network community represents and connects people that share common interests in certain areas. These areas can be social, cultural, religious, geographic academic, lifestyle or special interests in nature. The members of a social network community select individuals from within their network to manage their profiles using the functionality provided by the social network website they use. The common area of interests enables users of the community website to meet new friends and like-minded people. Users connect with each other, rate peers and objects, buy and sell things, ask questions, get answers and discuss relevant topics.  These connections can be made on a publically accessible website or a subscriber based connection on a social media network like Facebook.

During the past several years, these “community websites” have gained both popularity and sophistication. The research leading up to this piece disclosed that:

  • Many if not most neighborhoods now have a website
  • Many neighborhoods use a public facing website for certain levels of interactivity and the subscriber based functionality (generally requiring subscribers to have at least two sponsors) to deal with more personal and intimate subjects
  • Participation in many of these sites has grown to include thousands of households
  • These websites tend to be managed and focused on issues from a woman’s perspective
  • These websites have become significant trading and merchandising centers

Here is the convergence. During the past year, the consumers who use these social networks have come to an interesting conclusion about their real estate marketing needs. After being told by numerous real estate agents through a whisper in the ear, “you don’t need the MLS, I have buyers,” consumers have come to the following conclusion: If I don’t need the MLS, then I really don’t need a real estate agent. I also know buyers and they are coming to our community website every day.

Agents who are caught with their hand in this cookie jar are fond of pointing out that this situation will only work in a hypermarket and it will not last forever. While the logic of this agreement may be correct, its metrics aren’t. This market will, in all likelihood, last for two more years.  During that time, hundreds of thousands of consumer families will have created a real estate marketing experience that many will find preferable to that offered by these same agents. There is plenty of time for the word to get around and the culture to change.

During this same period of time, industry, public and lender perceptions of the value of the MLS will also have changed. To protect their positions and businesses, these entities will have adjusted to new ways to perform old functions and they will not elect to return to vulnerability.

Finally, keep in mind that sophisticated off-MLS marketing practices (not the pocket listing) have only been around for about 16 months and they have already had an immense impact. This is without consideration for expanding broker liability, new lawsuits, fair housing assaults and additional regulation have their impact. Two years is forever.

Bottom line: Brokers must take charge of their firms and their marketing practices while there is still time to turn these trends around. Situations like these call for command and control. Increased regulation is just around the corner and it will use off-MLS marketing as its rational. It may be from government agencies, financial realities or just plain old customer demands. It matters not; the destination is all the same.

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