I have been trying to wrap my head around the advertising of listings for sale on the Internet. What companies are doing it? What are the source of the listings? Who pays for the listings? What business models are being used? And most importantly how does it affect us as realtors and agents?
They only way I can sort this out for you without getting completely confused is to follow a listing through cyberspace. Follow along...
A home seller has called and asked you to sell their house. They could have come from a number of sources including but not limited to a sign in someone else's yard, a referral from a past or current client, a call from a print media advertisement, your personal sphere. My point here is that few listing leads currently come from the internet. They are mostly buyer leads. So you have spent time, money, effort and expertise to generate a listing. And anyone who has been in the business knows that listings are golden. They generate leads for more listings as well as buyer calls.
Now we take this precious listing, this generator of leads and we give it to the MLS. What does the MLS do with our listing? Well, it bundles it with all the other listings and does three things:
- It puts your listing on its own website. The website that my reagional MLS runs is called homesdatabase.com. How this website makes money, I am not sure. But it does not send email inquiries directly to the listing agent. (I am still trying to track where a lead goes.)
- The MLS then sells the listings to other sources, the main one being realtor.com. Recently the MLS serving the Northwest has decided to stop sending the listings directly to realtor.com as of April.
- It sells a listing feed called IDX back to agents so that they can put the feeds on their own websites. I will discuss this crazy relationship shortly.
The websites that get the feeds from the MLS services then use that data to generate revenues based on several different business models. One model generates revenue by selling banner ads and text ads on the website. The more visitors to the website the more click-throughs and the more money for the website owners. Yahoo has sold its entire real estate section to Prudential. Every listing has a Prudential banner ad at the top, another ad that directs a buyer to call a Prudential 800 number for more information and another mention of Prudential at the bottom. If the listing wasn't mine, I would have thought it was Prudential's. (I do not work for Prudential, but it seems like Yahoo does).
Another business model used by websites is to get buyers to sign up online to get more information or get notified of other listings that meet the buyer's criteria. These websites then sell the leads back to the agents whose listings are generating the leads. And I use the term "lead" loosely because 4 times out of 5 these "leads" have no intentions of buying a home now or in the near future and a lot of times, they are completely unreachable. But it's a good business model as long as agents are willing to pay for their own leads. And in fact, if you follow the lead back, we actually pay the MLS, to sell the listing to the companies who generate the leads that we pay for. Are you getting ill yet just thinking about that?
Now, the IDX feed is the ability for an agent with their own website to allow home buyers the ability to search the entire database of listings on the MLS. It is sold to agents and I think we pay $30 per month to have the feed. What is interesting about this setup is the chain of ownership of the listings and where the $30 goes.
Agents must join one of the associations that is an owner of the MLS. For instance, I am forced to join the Northern Virginia Association of Realtors or the Dulles Area Association of Realtors if I want access to the MRIS-MLS. That is because NVAR and DAAR are two of the ownership associations. The MLS is owned by the associations. Since I am a member of the association does that make me an owner of the MLS? I can't really tell, but I think it does.
So I pay my dues to join the association so that I can pay MRIS to put my listings into the MLS database and search the database. Then the MRIS sells the listings to other websites or sells an IDX feed back to me. If they sell it to other websites then these other sites sell the leads back to me. So what happens to the money that the MRIS makes from selling the feeds? Shouldn't it go to the shareholders?
I have personally contributed over 300 listings to the MRIS in the last 3 years and our team has contributed over 500. But I just keep getting a bill and haven't seen any profit sharing. This doesn't seem right. And in the end, we as realtors just pass the costs on to the consumers in the form of commissions and fees.
But the consumer is getting weary and I recommend that we get a little weary as to where all the money and all the leads go.