Are MLS organizations serving their own ends or those of their members? A close examination of current MLS choices in systems vendors, information aggregation, and lack of inter-MLS cooperation shows that they serve neither effectively. Agents are upset with poor performance of outdated systems, and the organizations are in trouble. Here's the problem.

There is no end to agents' complaints about MLS legacy systems and their limitations, much less their difficult conversions. The outgoing system providers who lost their contracts have little incentive to cooperate with the incumbents. Fields of information often don't populate properly, causing inaccuracies in every task from CMAs to home searches. Inadequate connections cause "traffic jams" and interrupted connections to the server. System adjustments are costly, training is expensive and often inadequate. And one of the few things they have going for them (that keeps the MLS organizations defending them,) is about to be taken away by the Internet - the ability to keep the old proprietary MLS business model going.

MLS business models slow to change, expensive to members

According to some experts the problem lays with the MLS organizations themselves. Their business models are based on retaining proprietary hold of listing information, which means a reluctance to change or adopt new revenue models, even for their own members' benefit. They are also reluctant to cooperate and share information with other MLS companies, a deterrent in an increasingly global market. This fact alone has allowed third party service providers to usurp local MLSs in the collective gathering and presentation listing data to the public. And it is no secret that Realtors use these third party providers to search homes and run CMA reports in areas other than their local MLS.

Another result is that the system vendors such as Moore and Interrealty are hard pressed to make a profit and therefore to provide many innovations, according to John Giamo, president of HomeSeekers. Most systems are old DOS-based systems with a Windows upgrade. Each system is customized for the particular MLS client.

"These system vendors don't make money," says Giamo. "They are customizing for every client. That means you have to have in-house staff to serve these various clients."

The proprietary approach leads to highly individual methods of system design and expensive customization of information fields for searches and other applications. This method is also expensive to association members because it requires proprietary software which must be purchased for hundreds of dollars. The software, as well as the training programs to use the software, are important revenue generators for the boards.

The results of this approach is a lot of unnecessary expense, learning curve problems and frustration for the agents, brokers and others who access the system including appraisers and lenders.

It begins with a complicated decision making process in which the board appoints a committee to decide which information needs to be included in the database, how it will be accessed and how it will be manipulated by the end users. The requirements then have to be returned to the board for approval. If a field of information is overlooked, the committee has to recommend that it be added to the software, and the board has to approve an expensive change, usually in the neighborhood of $25,000 and up. The legacy system provider then must make the change to the system. All the software used by brokers and agents must then be upgraded.

Lack of common language is a barrier

One of the reasons this has been the default way of doing things is the lack of a universal language for MLSs everywhere to use. If there were a common language, MLS members all over the country could access each other's databases for the benefit of their customers. As it stands now, a Realtor from one community can't even access the data from an adjoining community less than a mile away without becoming a member of that association.

Each of these communities catalog and code information differently. From one community to another, bedrooms may be input as BR, B, or BD, among other choices. That means that every time a system changes, the Realtor must go through a learning curve to memorize the new codes so that s/he can perform necessary functions on the system. And if s/he is a member of several associations, s/he must memorize the codes on each system plus purchase the proprietary software to run each system.

One of the defenses put up by many organizations is that their search data must be customized to include certain fields of information. Many communities have specific search criteria that are not relevant in other regions. For examples, waterfront properties along the Eastern seaboard require a variety of fields - is the property on the intercoastal or is it an ocean view? Lake view? Riverside? These choices aren't needed by landlocked communities such as in the Midwest.

But that argument doesn't hold water, according to Giamo.

"Homesekeers has been around four years, and in that time a lot of agents we were servicing told us that our system works better than their MLS system," says Giamo.

"As a third party vendor, I have to learn 200 types of systems, and all the codes they call bedrooms, or beach fronts or pink fireplaces in all the MLSs," says Giamo. "There is no reason why they shouldn't be standard."

Giamo is a supporter of XML, or RELML as the open architecture for the real estate industry would be called. RELML, believes Giamo, would standardize real estate language codes.

"We count on the information we get," he says, "and if we can't get into an MLS system, the agent is upset with us. If the information were Internet-based, the MLS could take control at the administrative level instead of at the programming level which would save everyone time and money."

Apparently Giamo isn't alone. This last week NAR president Sharon Millett, also pro-XML, took an active role in the Atlanta conference concerning the exploration and development of XML for the benefit of the organization's members and clients.

A leap of faith - backwards

Another reason MLSs cling to legacy systems is fear of the Internet. One of the reasons Dallas chose a legacy system over an Internet system is that "the Internet is still unproven and might not possibly be able to handle a MLS as large as NTREIS (10,000 members.)" says one of the committee delegates, Dabney Tompkins.

Bill Mitchell, president of Infinite Access, an Internet MLS solutions provider, shakes his head in amazement. He says, "We have a hard time understanding why everyone is so befuddled by making an Internet-based system work."

Size is clearly not a problem as evidenced by the volumes of information handled by home search aggregators as HomeSeekers, Realtor.com and HomeAdvisor, or the development of large Internet based systems for franchise organizations such as Coldwell Banker and ERA.

"The assumption has been that the brokers and the agents don't have the equipment to handle these new technologies, but almost everybody has a browser and can get a connection," Mitchell says.

According to Mitchell, Cendant agents have a higher "connectivity rate" than the average consumer.

His company, Infinite Access, is the system vendor for the whole ERA franchise and most of Coldwell Banker's franchises. ERA has 6,000 members, and the Coldwell affiliates have over 11,000 offices.

"The phones aren't ringing off the hook, so it must be running fine," laughs Mitchell.

Those are the problems. Now what are the solutions? In a global market will the MLSs continue to survive as private fiefdoms, or will they adjust to the new order of the Internet?

Part II - Solutions to MLS Conversion Problems will be posted tomorrow.

Also See: