Peace Be Upon You: A Path Forward for RealScout

I started this post during my great Westward Ho! adventure, which was five days of driving across this great country in my car. That’s a lot of time in the car, which gives one plenty of time to talk to friends by phone and to think about stuff. Both happened on this trip, and at least one conversation led me to think that it might be helpful to pen a short followup to my last post, about whether RealScout wants civil war in the industry.

In light of Andrew’s comment on that post, it appears that he does not:

“RealScout’s private club of Superfriends” is an inaccurate description of the Buyer Graph initiatives, since it implies there’s an exclusionary, exclusive group. In truth, every time we go to a market, we reach out and speak to every brokerage that will lend us an ear, and welcome any company to join, and that includes Compass.

But that comment led to even more questions, which are on that post.

Thing is, I like Andrew. A lot. He’s a very smart guy, and there isn’t a mean or unkind bone in his body. And in talking with my friend James Dwiggins, CEO of NextHome, we both decided that maybe Andrew just got a bit carried away in trying to create some kind of intellectual sales pitch for Buyer Graph. We know he’s been getting traction with that product, and maybe that feedback from his customers led him to think that talking about competitive advantage is the way to promote his product. Maybe he didn’t think through the consequences of what he was writing and saying.

So somewhere in the great plains of Kansas (parts of which are breathtakingly beautiful), I thought about a way forward. There are two broad options: war (which I’ve already discussed) and peace.

TL;DR crowd: Buyer Graph needs to focus on consumer service delivery, rather than on competitive advantage. Or, it will be war.

Casus Belli

The case for war has already been made. If brokerages want to leverage RealScout (and other data-related projects like it) to gain competitive advantage over other brokerages, then those other brokerages are under no obligation to help them do that. Today, that means the MLS, and today, even the largest of large brokerages do not have enough market share to reach the tipping point where they get all of the buyers in-house, have exclusive off-market listings, and use both to recruit agents away from other brokerages.

There is no obligation for the MLS or the thousands of small brokerages that actually do have collectively the market share to help those companies put them out of business. The MLS is not a suicide pact.

I should mention that I spoke with an MLS executive about this during my drive, and he agreed. There are difficulties and execution problems, such as the fact that there is no specific rule provision (at least in his MLS) that RealScout and its brokerages are violating. But that doesn’t mean that the Board of his MLS couldn’t create that rule, like tomorrow. And they might need to. So broadly speaking, if RealScout and its brokerage partners persist in wanting to get superpower competitive advantage by leveraging their collective market share, there will be war.

But after speaking with Dwiggins, I think this is simply the wrong and counterproductive way to go. There is a far better way — the path of peace.

Blessed Be the Peacemakers

The better way is to focus not on competitive advantage but on consumer service delivery.

As James pointed out, the whole point of Buyer Graph is to get insights into buyers and buyer demand so that his agents can help their clients price their homes better, market them more effectively, and have an all-around better result. He didn’t care at all about “competitive advantage.” That’s not what it’s about for the enlightened real estate executive. James would happily join RealScout and want to bring Re/Max and Realogy and Keller Williams and thousands of independent brokerages into the program.

He’s right, and I do think that’s the way to think about it. Because I’ve always thought that some kind of a “buyer MLS” that goes beyond simple reverse prospecting makes all kinds of sense for the industry. I’ve tried to bring that about in the past, but the timing wasn’t right. The technology wasn’t really quite there. It is now.

The point is improved consumer experience. In this day and age, when the whole value of the real estate agent is under attack both from within and from without, the point has to be bolstering the value of a professional’s advice. As some of you have heard me say in my in-person presentations, the Realtor of the future has to have answers backed up by data. The days of telling a client that he needs to stage the home because of gut feelings and experience are over; now, it has to be, “Stage the house, and spend between $3,000 and $3,500, because the data shows that homes staged for that amount sell for 4% more and 8% faster, but over $3,500 there are diminishing returns, and here are the printouts to prove it.”

As the role of the real estate agent moves further and further away from facilitating the transaction and more and more towards being an expert advisor, the agent has to have access to data, to tools, to information, and to insights that consumers either (a) don’t have, or (b) don’t want to bother putting together, or (c) don’t want to spend the money to acquire.

Getting aggregated buyer demand data would help with that cause, and that cause is something everybody can get behind.

Coopetition: The Way of the MLS

Fact is, the MLS itself is one of the most successful models of coopetition, in which competitors cooperate in certain ways for the benefit of all. A buyer-demand data set in which brokers and agents would cooperate for the benefit of all is precisely in line with the mission and purpose of the MLS.

If RealScout were to turn away from its current “competitive advantage” focused sales pitch, and towards a “cooperate for the good of all”, that’s a program that I could and would heartily endorse for all MLSs to adopt. This is not the place where brokers should compete; better service, better advice, lower prices are where brokers and agents should compete. Frankly, that’s exactly what James Dwiggins wants to do. He relishes the thought of competing on the basis of agent training, design excellence, superior marketing, and lower fees (to his franchisees); he doesn’t need some competitive superpower derived from buy-side data.

By moving towards the path of peace, RealScout could be an incredibly important and valuable piece of the overall MLS landscape. Aggregate all of the buyer demand data, and make it available to all. That’s something small and large brokerages can get behind, and there is a lot more power to the accuracy and completeness of the data when the entire network participates rather than just the few.

Does that hurt RealScout’s economic prospects? I can’t see how, especially since Andrew has made it clear that Buyer Graph is non-exclusive and all are invited. Well, then invite everyone through the MLS, rather than telling brokers that they can get competitive superpowers by leveraging network effect, which destroys the MLS and many of the smaller brokerages that make up the MLS. I’m sure financial terms can be reached that would make everyone happy.

Avoid the Attention of the Powerful

In case those are not enough reasons to change the way to position and market Buyer Graph, let me suggest that now is a particularly good time to avoid the attention of the powerful, aka, the government. It is clear that the authorities are looking hard at the real estate industry around issues of competition and data access. Now is just about the worst time to start up some venture that purports to provide superpower competitive advantages by using off-market proprietary data.

Leverage buyer demand data to improve service delivery that all brokerages can use? That is literally pro-competitive, so provides zero hooks for .GOV to latch onto.

Take the Path of Peace, Andrew

So in closing, let me urge Andrew Flachner, whom I admire more than most real estate technology executives, to take the path of peace. Back away from the marketing centered on competitive advantage, and move towards one based on cooperative service delivery.

I know that selling to MLSs is a pain in the ass, because they move so slowly and often take years to make decisions that could and should be made in weeks. That’s something I’d like to see change, and governance reform is a practice area I’m most passionate about. I’d happily collaborate with anybody on that.

If RealScout’s Buyer Graph can be made to be about collaborative service delivery for everyone, that’s a program I can recommend to the MLS without reservation.

If it isn’t… if it remains a program for superpower competitive advantage… well….

Coda: Big Picture on Off-MLS Marketing

This is not the place to really dig into this big issue, which is at the heart of the kerfuffle with RealScout and buy-side data, and I’m likely going to need to write one or more posts about it. But we really do need to have a wider conversation and debate about the now common and oft-systematized use of off-MLS marketing by brokerages.

I was reminded of the importance of this discussion because of a Facebook update from my friend Jack Miller, who is also the President of T3 Sixty, one of the premier consulting firms in the industry. He talked about some transactions he was involved in personally in the Austin area, and wrote:

Property search experience

We used mostly used Redfin and Zillow. Both have a terrific mobile experience. Redfin has coming soon inventory of their own listings, so if Compass was stronger here in Austin I might have used that as well. [Emphasis added]

This is a problem for the MLS and for the industry. One can’t blame consumers for going to where the inventory is. But if this is the future of real estate, then the MLS needs to think long and hard about why it continues to exist.

Now, open partisans like Ken Jenny would be happy to forthrightly declare that the MLS needs to die. That’s fine, and such partisans are entitled to their own opinions and do what they need to do to bring about such an outcome.

But like I’ve said all along, the MLS is not a suicide pact and there is no reason why the MLS needs to meekly go along with such partisans who want to bring about its destruction.

As the MLS executive I mentioned above said, there are a number of difficulties in trying to do something about the Coming Soon, the off-MLS, the pre-marketing, and so on and so forth. That’s for the MLS to figure out, and leadership of various MLSs had best get talking about what if anything they want to do.

At this point, let me limit myself to this observation: The MLS and systematic Coming Soon are incompatible. Only one or the other can survive, ultimately.

If we as an industry are going to have the MLS structure, then Coming Soon and off-MLS marketing must be relegated to what it once was: rare occurrences for the truly unique client situation. MLS leaders need to stop wringing their hands as if they are powerless to stop the destruction of the system from within and start taking action.

If, instead, we’re going to move towards systematic and programmatic off-market marketing of properties, and only putting properties “onto the open market” after it has been proven to be a non-prime property, then the MLS needs to atrophy and die. This is what we have always had in commercial real estate, where the really great properties never “hit the market” and have always been handled as pocket listings kept within a small network of firms and brokers. The only properties that hit Loopnet are ones that “have hair on them” in the words of my mentor in commercial real estate.

In that case, we no longer need the MLS as an industry and should forthrightly move to private inventory for everybody, and putting those properties that have hair on them on Zillow and call it a day.

The choice is yours.

-rsh