Every real estate professional relies on the under appreciated infrastructure of regulation, policies, practices and technology that guides the invisible hand of the market and helps ensure trust between buyers and sellers and other transaction participants. At the center of the Real estate 1.0 infrastructure was the Multiple Listing Service (MLS) that published listing information and facilitated the exchange of compensation offers between members. These organizations served local markets well, but were difficult to integrate as brokers and markets began to operate on a regional or national scale.

Real Estate 2.0 layered the power of the Internet on top of this fragmented foundation. The liberation of listings information imposed new pressures on the MLS structure that was not designed to serve a wired industry or information hungry consumers. Third parties exploited the cracks in the “System” to capture a growing share of the consumer's attention and traditional broker profits.

Real Estate 3.0 will redraw industry boundaries and alter established rules and relationships by connecting business processes from end to end. The operations of real estate organizations will electronically converge, with each other, and with adjacent industries. The systems for finding, financing and facilitating real property transactions will work together to match buyers with sellers, shop the loan, manage the workflow and run the back office.

Tom Friedman's best seller, The World is Flat, describes how this digital blending has already transformed many services industries, and the signs that the real estate world is also flattening are clear.

• Consumers are expecting timely access to market information and greater visibility into the transaction process

• Brokers are integrating their services offerings with third parties from finance, media, information services and communications

• Lenders are converging their operations with brokers through Affiliated Business Arrangements, and with each other through electronic registries and repositories

• Associations are evaluating further consolidation of traditional MLSs

• Local governments are testing electronic transaction recording

• Service providers are adopting standards for information exchange and security

• Regulators are attempting to assert greater influence over an industry that has become part of the bedrock of the U.S. economy

The local MLS was once the sole electronic engine driving real estate sales. Today it is perceived as the gatekeeper and data supplier to the Internet marketing machine. Real estate is facing a question familiar to many industries and organizations -- can the existing infrastructure meet the demands of tomorrow, or will a new platform be necessary?

The forces of convergence, competition and compliance will continue to flatten the real estate industry. Eventually a new System, let's call it the Success Network, will emerge that supports the entire transaction process by:

• Safely exchanging sensitive information flowing across organization boundaries and with consumers

• Unifying business processes between industries

• Controlling the distribution of rich content in many forms to many audiences and types of devices

• Coordinating the activities of all the parties in the transaction

• Extracting business intelligence for companies and policy makers

• Servicing the homeownership needs of consumers after the sale

• Securing the Realtor® role as the first point of consumer contact

An interim and evolutionary step called Federation will allow MLSs to tie real estate organizations together safely on the Internet and with their customers and settlement partners. MLS, association and broker Federations will conveniently and securely connect Realtors® to an array of online resources and unlock the tremendous value that lies dormant in the current System … transforming every business model.

Federations will fuel a new era of real estate growth, following the path already blazed by the MLS, Realtor.com and NRDS. These innovations created enormous value for practitioners, organizations and consumers. They were possible because of the spirit of community and shared purpose that is unique to the real estate industry. RE 3.0 is happening before our eyes and the time has come to move the MLS System toward a nationally federated model. Success awaits.

Published: November 2, 2006

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