For years promoters and pundits have argued that real estate listings should appear everywhere on the Web and now the fruits of such thinking have begun to appear: As current contracts to purchase listing data run out, few if any MLS systems will be able to sell once-valued listing data. Why? Because it's tough to sell something that's readily available at little or no cost from an enormous number of sources, a commodity that no longer inspires a bidding frenzy.

The cash received by local MLS systems for data has amounted to millions of dollars in recent years. At one point, online sites wanted as many listings as possible so they could become portals through which real estate commerce flowed. The idea was that more listings meant more site traffic, more site traffic meant more revenue, and the result was that sites were willing and able to pay big dollars for listing data and even bigger-dollars for exclusive access to MLS listings. Those days are over and the coming decline in data revenue means that local MLS systems will soon be forced to either eliminate services or increase dues.

But higher dues payments are the smallest worry for most local brokers. Instead, a new and more substantial issue is emerging: If the Internet is a growing source of leads and consumer interaction, will brokers now have to pay aggregators and portals to carry listing data? In effect, will brokers be in the position of having their listings used to attract traffic for which they are then forced to buy back leads?

Real estate offers the illusion of vast earnings - - just multiply the number of homes sold by a commission factor and it's easy to calculate that the industry has tens of billions of dollars in gross revenues. Such calculations are both true and misleading: There are billions of commission dollars generated each year, but such money is divided by armies of brokers and salespeople. The 2001 member profile from the National Association of Realtors shows that median gross income for brokers was $73,400 while salespeople earned $34,100.

Typical real estate incomes are hardly associated with the rich and famous, and when gross figures are reduced by business expenses such as cars, licensure, training, organizational dues, insurance, and other costs such incomes dwindle even further.

Given such numbers, the question for many brokers is whether there is any room for another cost in the face of limited incomes and growing expenses. For many the answer is plainly "no" and that raises a question: How will real estate licensees respond to the changing world of Internet economics?

Some licensees, certainly, will pay for online leads. For others, several alternatives will likely emerge.

Distribution Agreements

To this point it has been assumed that if an ad for a home is published in a local medium that the publisher also has the right to re-sell such information and use it online. But in the same way that real estate ownership represents a "bundle of rights," so does intellectual property and there is no reason why brokers cannot seek to limit the use of their data -- or to be paid for the re-use of their content.

New Portals

One of the enduring lessons of the Internet is that there is always a way to do something easier and cheaper. With so many listings floating around, the ability to build a portal is far less expensive than in the past -- join a few regional MLS systems and you can have a huge inventory at little cost. Not the biggest inventory and not the most complete, but enough to have a credible site that requires few transactions to break even. In effect, even small brokerages will be able to claim local and regional "portal" status.

Competition

In the same way that the value of MLS listing data has plummeted, there is no immutable financial law which says online leads are worth a given dollar amount or commission percentage. If competition is good for real estate (think of discount real estate brokers), good for lawyers (think of legal clinics) and good for accountants (think of neighborhood tax preparation services), then why is competition not good for online lead services? It is -- which is why more would-be portals and aggregators will be spawned. For many prospective portals the shortest route to broker support will be lower fees and reduced charges, a trend existing sites will be unable to ignore.

Self-Promotion

The Internet is ideal for marketing, which means every broker and salesperson should have their own site. That's good news for companies like Best Image, Homestore and others that offer sites, traffic and no referral fees.

The trend toward self-promotion favors entrepreneurial brokers and salespeople, the folks most-likely to handle numerous transactions. Individual sites and online newsletters meld neatly with self-promotion off-line -- the cards, newsletters and local ads that leading producers use daily.

Re-Thinking Display Options

MLS systems now allow members to display listings through Internet Data Exchange or IDX. Brokers may elect to participate or not participate in such systems, and consumers see only some of the information available for each property. A second system, a Virtual Office Website or VOW, is now being considered for use nationwide by MLS systems affiliated with NAR.

Under VOW, all listings in an MLS system are displayed, there is no opt-out provision for brokers, and consumers must register to see properties. Given the loss of value because of the widespread availability of listing data, the VOW debate -- already heated -- is likely to get even hotter.

One school of thought suggests that VOWs may well be the best way to develop more online competition. The theory is that if MLS information is everywhere, then the influence of individual portals will decline.

The alternative view is that the old system, where brokers tightly controlled the use of their listings and data, will re-emerge. The logic in this case is that buyers are available from many sources so there is no reason to create a new cost center for brokers. Homes, goes this theory, were sold before the Internet and they will continue to be sold.

Taken to an extreme, the broker-centric view may create challenges not only for online sites but also for local MLS systems. Why belong to an MLS if the advantages of cooperation can be obtained just as easily, or perhaps more easily, with a good online site?

If you're a broker with a large local presence, do you really need MLS membership -- or does the local MLS need you? For brokers seeking to preserve the company dollar such questions are now on the table for the first time in decades.

For more articles by Peter G. Miller, please press here.

Published: March 4, 2003

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .