The real estate marketplace—continually modernized through business and technological innovation—delivers consistently strong financial and transactional benefits to real estate professionals and their clients. Through multiple listing services, the marketplace gives listings exposure to a broad swath of serious buyers, while allowing buyers to see the full range of for-sale inventory.
Like any heavily traveled pipeline, the real estate marketplace can have plumbing problems. Portions of the industry still use a kludge of antiquated data feeds underneath their technology. The MLS industry lacks its own comprehensive data network. These are areas where the industry must improve, and they’re the mission of the Real Estate Standards Organization (RESO): to create standards and processes that bring efficiencies to the market.
However, one plumbing problem that’s getting a lot of attention today isn’t the result of infrastructure weaknesses; instead, it stems from a system that might be working too well.
Often, the experience in a single MLS environment feels seamless and efficient—the features just work. If the sinks, the showers and the toilets are doing their jobs, no one gives a second thought to the plumbing that makes this a reality. Unfortunately, these outcomes can sometimes become viewed over time as inevitabilities, rather than achievements.
It’s a good thing when participants don’t need to question why the market works. But what happens when they begin looking for ways to break away from established practices and engage in practices that are detrimental to the marketplace’s foundational functionality? Such activity can erode the marketplace’s broad benefits.
A Victim of Invisible Success
It’s easy to take the incredible productivity of the modernized real estate marketplace for granted. High standards of practice, innovative technologies, broad distribution channels and strong rules frameworks create a transparent, comprehensive set of inventory.
Consumers open an app on a phone and instantly find timely information on nearly every home for sale in the market. They click a button and contact a person who can offer a legal duty of loyalty to them through buyer agency. That agent gives them access to investigate, collaborate, offer, sign and close with mere taps on a screen (and a lot of personal support in between).
For sellers, the efficiencies of the market may be even more distinct. They hire an agent, turn over the complexity of the process to their trusted adviser and watch the digital representation of their home go into a marketplace with global visibility in just days or even hours. The most attractive offers come from the maximum number of qualified buyers, as they compete for this unique, fleeting opportunity that might just vanish before their eyes. It’s the essence of the maximized benefits of free market competition.
But this environment doesn’t exist without a consistent strategy to maintain it. MLS marketplaces have become modernized through intentional action to create these efficiencies.
The Affluenza Effect
When the status quo of a service is of such high quality and ubiquity, it’s important to be aware of how negative human behavior evolves. People experience what is known as “the complacency of plenty.”
Ironically, the more reliably a system produces extraordinary outcomes, the more invisible it can be, and the more attractive it can become for participants to try to differentiate outside of it. Real estate professionals are, after all, unique marketers at heart. So, it’s no surprise they might consider ways to do business that diverge from the familiar MLS process.
These instincts are not inherently negative. But they can sometimes create negative outcomes. Academics describe the lure of counterproductive behavior, influenced by the positive results of using a system, as perverse incentives.
In pop culture reference there’s a term, “affluenza,” that describes the actions of people who live in such an exceptionally good environment that it causes them to seek activities to deviate from that environment. A somewhat parallel term that fits the industry’s situation is “negative differentiation.” Participants engage in efforts to pursue a more differentiated set of services, resulting in lesser outcomes for customers.
Information restriction, artificial scarcity, process opacity—these practices can generate captive attention. But they can also degrade the efficiencies that a comprehensive market brings to real estate professional and consumer participants.
The sign is in the yard, but it can’t be found on the app. The buyer has to call offices, research apps and search multiple sites for current inventory. It moves the marketplace experience backward when the industry already provided a path to a singular search experience decades ago. Most professionals recognize this negative outcome for their industry and instead focus their differentiation tactics on exceptional personal service, systems and style.
Results That Matter
These behavioral dynamics matter most when they begin to affect real financial outcomes. The improvements that come from listing on the modernized MLS have been measured in many studies. Some include Bright MLS, the San Francisco Association of REALTORS® MLS and Doorify MLS, all of which have published analyses showing measurable improvements in home sale prices through broad distribution and visibility.
The Bright, San Franciscopdf and Doorify studies reported a likely $50,000–$75,000 increase in proceeds for a home seller at the median U.S. home price (a 13%–19% gain). This is unsurprising in basic economic terms. The connection between exposure, demand and upward pressure on pricing is a given. There’s little to debate on the concept.
Even a significant reduction in these expectations would still result in a material financial improvement for sellers that could contribute to a down payment, the kids’ college tuition, a new car or retirement savings. The outcomes are not academic. They’re often life-changing.
Consumer Choices in the Marketplace
These positive financial outcomes exist within a marketplace designed to support a wide range of seller preferences. Homeowners have many choices when they sell. As a baseline, they can choose to list a property For Sale By Owner and get broad internet exposure if they believe they don’t need representation.
If they’re like the 90% of consumers who choose to use a broker, they can list on the MLS and, if needed, add privacy features. Nearly every MLS has single-office and/or MLS-wide broker-only exposure features that can exclude the listing from public display. And many have “coming soon,” delayed marketing exempt listing, delayed publication and other “pre-marketing” capabilities to build buyer anticipation and still get exposure to all brokers and their clients.
Sellers can even choose public display of their listing while removing the property address from the advertisement. As long as all buyers receive equal treatment, potential buyers can be pre-screened for financial capability, and showings can be curated. There are many ways to create an experience with the least possible hassle for the sellers.
Keeping a Free-flowing Pipeline
As the industry evolves, it will continue to have new scenarios to debate and changes to consider for the marketplace. After all, some of today’s rules and practices are decades old. Their value might be timeless, or they might be ripe for reevaluation.
At the same time, the foundation of real estate marketplaces—high-capacity supply inputs that keep the pipeline flowing and high-quality infrastructure that keeps out toxins and leaks—can’t be neglected. The critical task for the industry is to ensure that its standard operating procedures, and the modus operandi of its professional service providers, direct the market’s best capabilities toward the dominant consumer needs: sellers seeking maximum financial returns and buyers seeking maximum housing choices.
If the rest of the world’s reaction to the marketplace is any gauge of its value, one only needs to look at the many countries striving to replicate the North American MLS system. In dozens of nations, there are brokerage alliances, trade organizations and even government agencies putting their efforts and finances behind creating a similar model.
The industry’s plumbing can support all kinds of new, innovative system choices. A central priority for the industry, though, must be ensuring that the comprehensiveness of the modernized MLS marketplace and widespread access to its inventory remain strong. To continue bringing maximum value to consumers and benefits to communities, there’s nothing more important for the real estate industry to point to as its North Star.
