VOW dog and pony show

(Warning: This post contains a sales pitch for services! Avert your eyes if you are allergic.)

We sent information to existing clients last week regarding our Virtual Brokerage Now program. Informally here we call it the "VOW dog and pony show." Virtual Brokerage Now provides MLS/association leaders and brokers with meaningful strategic background to make good business decisions about virtual brokerage. If you run an MLS, it will also help your brokers and leaders understand what to expect from VOWs, whether they intend to operate themselves or not. That may result in fewer questions from befuddled leaders and brokers down the road.

Information on the Virtual Brokerage Now program is available here. Contact me for pricing and scheduling information.

Good source for broker VOW ideas and strategies

Victor Lund at WAV Group has just finished writing a five-part series of articles encompassing ideas and strategies for brokers considering operating VOWs. I could quibble with some details of what he's said (and if I find the time, I'll comment on his posts where my uncontrollable ego demands it). But I have not seen anyone write as comprehensively on broker VOW strategies as Victor, so I definitely recommend the series.

It helps explain:

1. Why a broker/agent should want to have a VOW.
   
2. What a broker/agent can accomplish with a VOW.
   
3. Specific features and capabilities a broker/agent or consumer may want to see on a VOW.
   

If you pop over to look at the series, let me know what you think by posting a comment here.

-Brian

Progress toward 100,000 VOWs: Can I count ListingBook as 50,000?

I predicted last fall that there would be 100,000 web sites with VOW capabilities by the end of 2010. I rarely make predictions, because I hate to be wrong. Fortunately, I made this prediction with a high degree of confidence, and I'm prepared to claim that we are halfway there based on one company: ListingBook. Here's my argument.

ListingBook describes itself as an

MLS-wide online service that connects agents and their clients through an integrated platform of client management, sales productivity and direct marketing tools.... An Intelligent Virtual Assistant working 24/7 for agents.

I describe ListingBook as a portal to which an agent can give access for her clients/customers to view very rich listing data (often much more than is available in IDX); a portal that provides the agent a number of customer relationship management (CRM) tools to track what her customers/clients do on the site, including tracking what listings they have looked at, etc.

ListingBook is also a VOW: If you are a real estate broker displaying another broker's listings on your own web site, you're either breaking the law and violating MLS rules or you are doing one of the following three things:

1. Getting express permission from each listing broker (this is possible, but a little unlikely);
   
2. Displaying listings pursuant to MLS's IDX program (hundreds of thousands of brokers and agents are doing this now; OR
   
3. Displaying listings pursuant to MLS's VOW rules.
   

To my knowledge, ListingBook does not go around asking listing brokers to display their listings; and the ListingBook portal displays more data than IDX permits (at least in some markets); so I'm pretty sure it functions as a VOW.

ListingBook delivers a VOW/portal to each agent in the MLS free of charge through a contract with the MLS, and agents can pay to buy-up to ListingBook's premium or "B2C" services to have a custom-branded site (the link goes to an example).

I asked Ira Luntz, ListingBook's Executive VP/COO, how many VOWs/portals ListingBook currently operates. As of a week or so ago, Ira says the company has a "reach" of 420,000 agents (total of agents who have access to free portals/sites because their MLSs have signed with ListingBook), and 52,000 "active agents" (those who actually do use the free portals regularly). Right now, Ira estimates 25% of active agents have purchased B2C services. The company anticipates that 120,000 agents will be "active agents" and 40% will purchase B2C services by the end of 2009 – that would be 48,000 B2C sites!

Each free agent portal provides for brokerage relationships with consumers; and those agents can link into the free portal from their other web sites, so I'm going to claim each agent portal as a web site with VOW capabilities. And if Ira's right, ListingBook alone will be providing more than the 100,000 sites that I predicted by the end of this year, one year early!

But there is more: ListingBook is probably the market leader in providing VOW capabilities now. But some agents who use it are bound to look for alternatives – they'll want tools that do the portal thing in slightly different ways, meeting the highly idiosyncratic needs that agents exhibit. ListingBook's existence and success in propagating VOW portals will lead to more competitors in the space. Remember that the VOW policy permits agents to have VOWs (Section I.1.b) and permits agents and brokers to work with multiple AVPs (Section II.7). There is no reason for agents not to have multiple VOWs, especially as other AVPs may follow ListingBook's lead and make them free.

I set out in this post to assuage my insecurities by claiming much of my prediction has already come true. But I'm left asking whether my original prediction was such an underestimate as to be considered a miss anyway.

So how many portals/sites with VOW capabilities will there be?

(Disclosure: In case anyone wants to know, I don't have any relationship with ListingBook, but I have negotiated contracts with them for some MLS clients, and like most folks who have been in the industry for a few years, I know Ira Luntz. I've used the ListingBook portal in the Minneapolis market; I liked using it, but I have not compared it with other VOW/CRM portals. I don't endorse or recommend this product or any other product, for that matter.)

Who can be an AVP? Anyone (and his uncle)

In response to my request for readers to supply topics for MLSTesseract, I received this:

"[W]e have a real estate portal site currently providing IDX for a participant of our MLS. The portal site also happens to be a licensed brokerage in our state, but not a participant in our MLS. We have provided IDX data and there have been several issues with the display of data, etc. Now the question comes up about the legitimacy of providing a licensed brokerage without participatory rights full access to our MLS data if they were to request to be an AVP for a participant?"

NAR's VOW Policy provides: "A Participant may designate an Affiliated VOW Partner ("AVP") to operate a VOW on behalf of the Participant, subject to the Participant's supervision and accountability and the terms of this Policy." Policy I.1.a.

The key provisions of NAR's VOW Policy relating to affiliated VOW partners or AVPs appear in Section III.10 of the Policy. The policy provides that MLSs may not "prohibit Participants from designating particular entities as AVPs except that, if an AVP's access has been suspended or terminated by an MLS, that MLS may prevent an entity from being designated an AVP by another Participant during the period of the AVP's suspension or termination." Policy III.10.h.

So, to answer the question from the reader: I believe a participant in MLS can designate anyone to be an AVP for the participant, and the MLS generally has nothing to say about who the AVP is. Some examples of possible AVPs.

1. A licensed real estate firm that operates purely as a referral-only model. It could build VOWs for brokers "free of charge" but then charge the broker a referral fee upon the closing of a transaction.
   
2. A national portal. Imagine any national entity that would like real estate data behind it. In presentations, I use the example of the Home and Garden Network. HGTV has a real estate web site at www.frontdoor.com. FrontDoor could seek out a broker in every market, build a VOW for the broker, and then collect all those VOWs under a single, co-branded umbrella site (much the way www.REMAX.com so successfully gathers the IDX sites of RE/MAX affiliated together under one umbrella). This is what I refer to as a "roll-up" or "drill-down" site. (BTW, I have no knowledge of any plans by HGTV to do this - it's just an interesting possibility.)
   
3. Another MLS. A neighbor MLS could offer VOWs to your participants. The other MLS could then host a regional portal, connecting consumers to the VOWs (and listings) of brokers in your MLS – kind of an uber-public-facing web site.
   
4. The Chamber of Commerce. Your local Chamber could offer VOWs to your brokers and bundle them together under the Chamber's regional portal.
   

What's more, there is no limit on the number of AVPs with whom a broker can work. Section II.7 of the Policy provides: "A Participant may operate more than one VOW itself or through an AVP. A Participant who operates a VOW itself shall not be precluded from also operating VOWs in conjunction with AVPs."

But remember, in each case, the VOW – the part of the web site that shows your MLS's listings – belongs to your participating broker, and it has to be "branded" to indicate that. Otherwise it would be deceiving the consumer with regard to which broker she's entering a brokerage relationship with. Co-branding, is still permitted, though. Section III.7 of the Policy says: "An MLS may not prohibit or regulate display of advertising or the identification of entities on VOWs ('branding' or 'co-branding'), except to prohibit deceptive or misleading advertising or co-branding." It continues, "For purposes of this provision, cobranding will be presumed not to be deceptive or misleading if the Participant's logo and contact information (or that of at least one Participant, in the case of a VOW established and operated by or for more than one Participant) is displayed in immediate conjunction with that of every other party, and the logo and contact information of all Participants displayed on the VOW is as large as the logo of the AVP and larger than that of any third party."

An implied question in the reader's request is "Under what circumstances can the MLS terminate an AVP's access?" I need to think about that one for a bit.

-Brian

Making MLS data available to the government

Government entities frequently approach MLSs looking for listing data for various purposes. Perhaps the most common is the local property authority seeking property information in order to value properties more accurately for taxation. They like MLS data because (a) it's more up-to-date than their own; (b) it usually has more property characteristic details; and (c) it usually includes more recent pictures. But other types of government entity also seek access. For example, one of our MLS clients provides data to the real estate commission in its state; the commission uses the MLS data to investigate claims of broker and mortgage bank misconduct. I also posted on the Geek Estate blog about inquiries from Fannie Mae looking for access to MLS data in order to help it do a better job of predicting property values. (Fannie is not a government entity but a sort of quasi-governmental entity.) I'm interested if your MLS has been approached for other reasons; comment with your experiences.

This post provides some information about why MLSs do and do not cooperate by providing data to government entities; a discussion of a couple legal risks; some things MLS should consider before granting access; and provisions MLS may want to put into the written agreement with a government entity.

Reasons MLSs cooperate with government entities

Many MLSs cooperate with government entities because the MLSs or their REALTOR® associations hope to receive something in return. Sometimes the MLS will use the access as a relationship-building tool with taxing authorities and regulators. Sometimes the MLS will have to provide data anyway, so doing it on MLS's terms looks attractive.

In terms of the quid pro quo possibilities, perhaps the MLS can provide MLS data in return for free access for its members to a service for which a county normally charges. MLSs that use public records in their systems sometimes trade with government entities: MLS data in return for public records data. This may prove very valuable because of the cost of public records in some areas. Most states have "freedom of information acts" or FOIAs (see discussion below) but some government entities overcharge for the data they are required to provide under those acts. MLS can use the MLS data as leverage to get the public record prices down.

MLSs and the associations with which they are affiliated often provide data access to government entities as a means of building relationships. In those cases, you may want the association government affairs director to be the point of contact for the government entity – giving him/her a chance to enhance the relationship that is valuable for the organization.

Lastly, MLSs may have to provide certain data anyway. For example, the client I mentioned above that provided data to the real estate commission previously supplied data if the commission subpoenaed it. The commission would subpoena data relating to a few listings at a time; the MLS would have to run the request by MLS legal counsel, listing brokers, and others; and the MLS would then reproduce the records in paper form. The process was cumbersome and expensive for MLS and the commission. The MLS instead decided to license the data to the commission, but obtained the commission's promise not to use MLS data to initiate complaints or to go on "fishing expeditions."

Reasons MLSs do not cooperate with government entities

MLSs may avoid providing data to government entities because they fear the government entities will be able to take adverse actions against brokers or homeowners that would not be possible without the MLS data. At least some MLSs have withdrawn data access to punish uncooperative government entities.

The common fear is that something in the MLS property record will result in the property being reassessed with a higher value. Some brokers have complained that this is "the MLS doing the assessor's job for free" or handing the assessor "higher property taxes on a silver platter." I think it's reasonable for brokers to be concerned that MLS data may directly cause the higher assessment of a property.

Others argue that MLS data can help assessors get values right, and that's a good thing. Take the example of a home where the owner has completely upgraded all the interior finishes, adding value to the property. In fairness, the owner's taxes should be higher if the real value of her property is higher than previously assessed. In theory at least, all homeowners benefit if every home is assessed properly.

At least one of our MLS clients cut off data to a county when the county hiked its public record fees. This sort of retribution might not be the best idea in every circumstance, but it gave the MLS quite a lot of leverage in negotiating a bulk price in return for turning the data-tap back on.

Legal risks

If the MLS structures its agreement with the government entity properly, it should be able to minimize legal risk to the MLS. As for brokers' legal risks, it is unclear what theory anyone could use to attack the broker. Consider the following facts in the context of an assessor using MLS data: First, the seller does not own the property after the sale and is unlikely to be 'harmed' by a later reassessment. Second, the buyer usually does not supply the information the listing broker has provided to MLS and is thus unlikely to be able to claim any invasion of privacy or breach of confidentiality.

Some MLSs deal with vestigial legal risks by putting legends/disclaimers on their listing input forms alerting the consumer that property in MLS may be shared with government entities and that the consumer should not disclose confidential information in the MLS. There are other steps the MLS and brokers can take as well.

Questions to address before licensing to the government

Before providing MLS data access to a government entity, be sure that you have checked your governing documents to see whether it is permitted. NAR policy does not prohibit sharing MLS data with government entities, but the NAR model documents may not expressly authorize it, so you might need a bylaws amendment or change to another governing document.

Things to address in agreements with government entities

As always, if you give access to MLS systems or data to anyone who is not an MLS participant (and thus subject to your rules), you should have a written agreement setting out rights and responsibilities. A written agreement is the only way to protect the confidentiality of factual information; even if you also register the copyrights in your database.

Many of our clients use a standard third-party access agreement based on our firm's model agreement when they license access to a government entity; it takes a "fill-in-the-blank" approach to licensing of this kind. (We're happy to customize that agreement for folks who need one.) If you will have your own counsel draft an agreement, we recommend you address the following matters in it.

1. Purpose of access. Define the purpose of the access very narrowly. Make sure the government entity acknowledges that it may not re-purpose any data you provide.
   
2. Identify users. If the government user will access your system, require that individuals accessing it be identified, and that each have a distinct user ID and password. Remind the government user that your system tracks all use and associates it with the user ID. (In other words, you will know if users abuse your system.)
   
3. Freedom of information laws. Most states have "freedom of information acts" or "FOIAs" that require that the government disclose records it uses in making government decisions to anyone who requests them. (These laws go by many names; e.g., "Freedom of Information Law," "Government Data Practices Act," etc.) If MLS provides data in certain ways to a government entity, and the government entity uses the data for certain purposes, the state law may require that the government entity provide a copy of the data to a requesting party under the FOIA. MLS will want to structure its relationship with the government entity to minimize this risk.
   
4. IP hygiene. Your agreement should include the "magic words" that clarify that MLS is offering only a non-exclusive license and that MLS retains all rights not expressly granted in the agreement. It should clarify MLS's (or MLS's and brokers') title to the data and obtain the government entity's promise not to challenge that title.
   
5. Short fuse. MLS may want to be able to cancel the agreement on short notice in case a big problem erupts around the issue of government access. Many of our agreements can terminate on 30 days' notice.
   
6. What MLS gets. If MLS expects something in return for the government entity's access, the agreement should express it very clearly.
   
7. Disclaimers. MLS should consider disclaiming warranties, including any warranty of accuracy or non-infringement.
   
8. Audit rights. Consider including audit rights in the agreement, so that MLS can demand to see how the government entity is using the data internally.
   

Just a reminder about legal advice. This isn't it. You should not rely on this general discussion in making decisions about your own organization. If you need legal advice, get a lawyer. We're happy to provide strategic and legal advice to clients on this issue.

-Brian

MLSTesseract: Post-hiatus posting topics

February ended up being an unintentional hiatus from blog posting for me. Between the NAR VOW policy implementation deadline in the middle of the month, and a much-needed vacation to a warmer climate (which I scheduled before we knew the VOW implementation deadline), I found myself a little pressed for time. I'm back, now that March is here and spring is supposed to be springing (still only 18 degrees in Minneapolis this morning).

I thought I'd post today some of the topics that folks have talked with me about recently and ask readers' feedback about which topics would be most interesting. I'm not promising that I'll write them in order of popularity, or that I'll write them at all, but it is nice to have a little feedback when making these decisions. Post your comments or questions below, or email me if you want to suggest something privately.

VOWs still pose many questions

I expect to continue posting on VOWs and adding content to our resource at www.VOWClearingHouse.com. Here are just some of the questions that need answering:

1. Is it a myth that VOWs are the tools only of new-model, referral-only, no-skin-in-the-game brokers? (Short answer: yes, it is a myth)
   
2. Is it a myth that MLSs can regulate the way VOWs use MLS data more strictly than the ways traditional brokers use the data? (Short answer: generally, yes, it is a myth, but with exceptions)
   
3. Can one MLS become an AVP to deliver VOWs to the brokers participating in neighboring MLSs? (Short answer: Yes.) What else could the MLS do with the data under this scenario? (Short answer: Good question.)
   
4. What does it take to form a consumer/broker relationship online? (Short answer: In many states, not much, but it varies quite a bit from state to state.)
   
5. Who will form national VOW "roll-up"/"drill-down" sites? (Short answer: Could be anyone. Candidates I think are interesting include Realtor.com, national franchisors (Prudential is already there with a VOW and RE/MAX has a successful IDX roll-up), consortium of large MLSs, ListingBook, other media channels – maybe someone like Home and Garden Network?)
   
6. How will MLSs enforce VOW policies? With rumors of the DOJ making threatening calls to MLSs over rather minor issues, what happens if an MLS has to cut of a broker or AVP from receiving VOW data?
   
7. Should we use NAR's sample/model VOW license agreement? (Short answer: Not without some modifications.)
   

Possible MLSTesseract topics for March

1. Strategic training vs. strategic planning. Is there a way to avoid the biennial process where a consultant comes in and tells you what to do for the next two years and provides you a written report (sometimes failing to replace every instance of the name of the last client they provided it) that you dust off just before you begin the next strat planning session? Yes, train your leadership so that they think strategically at every board meeting.
   
2. Broker value propositions. I've been thinking about how brokers as professionals are like and unlike lawyers as professionals. It's a comparison probably neither profession wants me to make.
   
3. MLS public web sites. We did a whitepaper on this topic last year with Kevin McQueen at Focus Forward Consulting. My focus this year: Telling brokers in markets that have or are considering MLS public web sites what they can do to measure the impact of the MLS sites on the brokers' business.
   
4. Including open house listings in IDX. Every open house on every broker's IDX site – why this is easy to do and could deliver big value to brokers.
   
5. MLS Bill of Rights. The Connecticut (almost) statewide MLS has offered up a document that outlines broker rights, what they should expect from MLSs. I think the document is a little too specific on some points and not specific enough on others, but it's an interesting start to a discussion.
   
6. How can the MLS use my listings? Related to the last topic, this one focuses on the limits of MLS power to use broker listings.
   
7. MLS collaboration efforts. Mergers, MLS data shares, etc. – why does it take so long for these discussions to deliver value? Why are the discussions so painful?
   
8. IDX collaborations. Related to the last topic, we've suggested that MLSs may deliver more value to brokers by embarking on more limited collaboration efforts. The effort of North Carolina MLSs to create a shared IDX program is a great example.
   
9. Identifying foreclosures in MLS. This little thing is posing a big problem for some organizations.
   
10. Public policy debates about public records. Most MLSs acquire public records data (tax and recorder records) from third-party suppliers. But all of them should be motivated to ensure that public records are readily available.
    
11. MLS vendor selection. How cognitive biases result in bad decisions and how good decisions sometimes turn out badly.
    
12. Agreements to provide MLS data to newspapers. Is the local newspaper really any different than other syndication channels?
    
13. Agreements to provide access to MLS data for government officials/assessors/etc. There are special risks associated with making this available – but there are also opportunities. See March 12, 2009, post.
    
14. MLSs providing AVM tools that brokers can embed in their IDX and VOW sites. Can "Bestimates" (broker estimates) can compete with Zestimates (Zillow estimates)?
    

Your feedback is welcome!

-Brian