16 minutes, Refin, What's the Point?
So as many now know, Point2 produced a little Spoof on the 60 minutes about the 6% commission. First off, I hope I’m not commissioned to don lipstick and a wig anymore, but it was a fun day putting it together. So how did it happen? Well, we’ve had a rough wet and cool spring up in Canada. Thursday morning we were having a daily standup meeting with sunny blue skies and warm air in the background. I think we were feeling a little giddy and perhaps feeling less motivation to do real work that morning. Next thing you know, a quick script was slapped together, a wig was purchased and the camera rolling.
Personally, I still have some reservations about it. I don’t know if it was the right thing to do. It was produced in fun and if you really look at it, there are holes in the logic because it is not meant to make sense. Similarly, it does not make sense to produce an editorial about a very large industry, focusing on an involved topic, push an opinion, try to appear objective, but ignore the fundamentals. I disagree with Brad Inman, that the industry had a shot on the CBS show. If I understand the facts correctly, the NAR offered to participate in the program but they did not receive fair representation on air. This common place in media where objectivity is not goal, just the air objectivity is.
I would like to note that neither Point2 nor I have anything against Refin or discount models. I believe in really existing free markets and in perfect competition. Where a discount brokerage can enter the market, compete fairly and win, I’ll be biggest supporter. To be truthful, I really like Glen Kelman and I think he's very smart marketer. The main issue at hand is that Refin is not competing fairly. They are taking advantage of MLS structures and data sharing agreements to undercut brokerages they also want to cooperate with. Let me back up:
MLSs were first formed to facilitate cooperating and compensation between competing brokerages that agreed to pool their resources and provide better exposure for their clients. There is no other industry I can think of where competitors agree to cooperate to such a degree. The offer of compensation makes the cooperation work because the brokerages have similar business models. It has allowed clients to gain maximum exposure by leveraging the collective marketing dollars spent by hundreds or thousands of these cooperating professionals. The Internet added a new dynamic…
At some point, the MLS data became the standard data source for online listing display and IDX (or ILD) agreements became the de facto policy behind data sharing. It’s become problematic to have these managed at the MLS level because it allows companies to take advantage of the spirit cooperation due to global opt in, opt out provisions. Cooperation is possible if companies have similar business models but it does not make sense for a brokerage to cooperate with another company that undermines its business model. Listings are marketing assets in real estate and they are the product of money and time spent on advertising, promotion and networking. It does not make business sense for a brokerage to allow a competing company, that is undercutting commission rates, to use my marketing assets to attract new business for itself.
Now as a member of the MLS, I don’t mind if ANY company brings a buyer for one of my listings. I also don’t mind if that any company contributes listings to the collective MLS cooperative effort and offers a co-broke that will cover my full service efforts. What I can’t accept, again, is allowing that company to undercut my rates but expect me to offer up my listing inventory publicly to help them attract clients.
Cooperation in real estate must continue. Real estate is a local business. As a regular homeowner, I can advertise my own home on Craigslist and Google. I might even feel I can show and stage my how better. What I can’t do is leverage the collective advertising dollars of hundreds or thousands of real estate professional and at the same time, gain access to their collective network of buyers.
If the spirit of cooperating is to continue for organized real estate in the Internet era, brokerages will need to be able to make their own peer to peer business decisions on who to cooperate with if discounters continue to unfairly take advantage of the MLS. A peer to peer system will help melt away anti competition rhetoric. It will allow discounters to continue to participate without harassment from traditional companies because those companies will not be forced to publicly share marketing assets and be undercut at the same time.
Brad Inman comments that “if a spoof is the best way to make a case for full service, the industry has a bigger problem”. I certainly hope this video is not perceived as the industry’s response to discount models. But I would add, if the only way to grow a discount business model is to unfairly take advantage of data sharing, they would be well advised to figure out how to both cooperate and compete in an era where brokerage can make peer to peer advertising agreements.
