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Changing Colors

Tuesday, December 18, 2018   (0 Comments)
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(Remarks initially made at the CMLS Conference in Orlando and MLS Policy Forum in Boston and have since been updated)

Good morning! My name is David Charron and I am so pleased to be with you today.

What was originally intended to be moderately crafted remarks are even less so now.

That’s because so many events are shaping the landscape. Yes it’s possible to capture a moment in time. But it’s impossible to set anything in stone as nothing is standing still. That’s where I am today.

But back in 1968 I was a fly boy on a web press at a small printing company in Louisville, Kentucky. We specialized in Homes Magazines and MLS books. In printer/publishing parlance, “on line” meant the type was set, the plates burned, and production had started. And that fit perfectly with the real estate industry at the time. It was all very, very tactile. We put everything on sheets and books. After all, we lived in a world where newspapers meant “news” on “paper.” We knew where we were but none of us really knew where our industry was headed.

Yet we all knew things were far, far from perfect. We all knew we could improve!

In our world for instance, the Federal Housing Administration, established 3 decades earlier, had greatly expanded home ownership in America by creating the Home Owners Loan Coalition underwriting handbook. This handbook came complete with neighborhood classifications that divided housing by occupation, income, and ethnicity.
(The above are examples are taken from the HOLC Handbook. Every major city had a map just like those above.)

Green was good for business and professional men. Blue was still desirable, expected to remain stable. Yellow was in decline or bordering black communities. And Red? Black and low income people lived in these areas and were not ideal for lending. By 1968, this system, this status quo, was decried in the streets and thankfully in the halls of government.

We were at a moment where everything known about home financing for three decades, had to be shaken to its core. And in 1968, it was. Congress passed a new federal law to ensure something that most of us now take for granted: equal housing opportunities for all, regardless of race, color, religion, sex, or national origin.

The National Association of REALTORS was a vocal supporter of the Fair Housing Act. And NAR was also in support of an amendment in 1988 that extended this protection to families with children and persons with disabilities. So then, as today, NAR was fighting the good fight on our collective behalf.

Things needed to change. And smart people in our industry helped bring about that change.

Granted comparing the challenges of today to something as archaic and corrupt as neighborhood classifications is dramatic particularly given we still have miles to go. Nonetheless I use it to make a point as we once again must write the new rules that move us forward.

Through the 80’s, 90’s and 2000’s we moved away from basic information that was published in a tactile form. We adapted to and adopted online systems. We integrated images and public records. We formed regional MLSs. We eventually engaged with portals that quickly responded to consumer preferences that in turn decimated newspaper revenue streams. We contracted with cool companies like Boris, Moore and PRC and TaraSoft, FBS and Black Knight … and more recently with companies like W&R Studios and HomeSnap, RealScout and Remine … the list goes on.

The big lesson, through all of this, was learning to let go of much of what got us to that point.

We did all this hard work and finally landed at the place we wanted to be. We ALL adapted as we needed to adapt. Some of us led. Some of us followed. And it was all okay because the one thing that remained the same was that the MLS was the de-facto local market exchange for more than 100 years. It was still intact. 

You show me yours, I will show you mine. Let’s cooperate.

But… the work, the challenges, the moments of urgent change, were not done.

By ten or so years into this new century, each of us were required to manage more and more complex issues — political, technological, financial, personnel. For most of us, reading the tea leaves and then acting quickly on our impressions became a business imperative. Our margins for error shrank. Time spans for measurable achievement of objectives were shortened.

Some of us tried to play it safe rather than risk our positions or our place at the table.

Critics emerged. Some constructive, some not so much. Yet all critical of our progress or lack thereof.

Like in 2013 when brokers, angry at themselves and those who they believed contributed to their profitability challenges, pointed at the MLS world and in their own network moment cried “I’m mad as hell and I won’t take it anymore.

The noble, costly and as of yet unfulfilled distraction called UpStream was conceived.

Some of us responded to this seminal moment, focused our energies and recommitted to delivering continuous improvement. We became inspired by innovation. And in true real estate industry form, we were also threatened by it.
For me personally, it took longer than I’d like to admit to act upon a call for change. I’m guilty. I wasn’t immediately willing to let go. I had no experience in blowing up a very successful company in order to accomplish something on behalf of brokers; major consolidation. But eventually I believed in it so strongly, I was willing, no I was eager to move in a different direction. I had to play the long game. And I found others to play it with me.

Politics in many ways parallels our industry.

Several observations:

Congress is losing all courage as it relates to real estate except for taxation.
Flood insurance, MID, second homes and several others are in the cross hairs. And don’t mistake providing short-term extensions and reduced incentives as a victory. Kicking the can down the road is a hollow and temporary victory. All we have achieved is a delay in the day of reckoning.

In politics, the parties operate at the fringes. Just as in real estate, they shout down the disruptors and label them as outsiders who will do all of us great harm. (Reminds me of Remax 40 years ago. Or Zillow 10 years ago. Or maybe Redfin and Compass today.)

Ladies and gentlemen, we live in an increasingly polarized age. We have become an anxious nation and an anxious industry. Words are flying and many of us find ourselves in the cross fire. And what was once a dog whistle is now a scream! And the rules of engagement are changing.

Companies with big ideas are changing the game. Google knows if we are walking or riding in a car. Alexa listens. Data about each of us is being weaponized with military precision. It seems everyone now has a plan for greater control and use of data, disrupting the tradition of trust that worked for so long.

In a very real sense we are all contributing to the balkanization of our once tidy, cooperative industry. And in the process we are pushing an envelope that is not widely understood and most importantly from which there is no return.

Yet one thing is certain; the status quo is broken. Nothing stands still forever. And man o’ man is it messy.

So right or wrong, we must change. Again.

The MLS must further define and defend its value proposition. And I mean … define and defend it every day. And why not? Our customers have to. Shouldn’t we?

Competition for us may well come from a contiguous neighbor. They certainly provide a convenient foil for our collective intransigence. But I could easily and successfully argue there are threats arriving in the form of listing clubs … from brokers fighting for differentiation … from off-MLS sales … from portals that are going well beyond being media partners to becoming a marketplace … from consumers who don’t care about boundaries … and from MONEY … unprecedented amounts of MONEY.

Money will continue to chase money into these models until the market proves them world beaters or sinkholes. And the media will continue to amplify their proclamations and publicity pitches because they sell.

And do you know why money is so attracted to this space?

When people aren’t willing to break from the status quo there will always be others who are hungry to create a new world order. People and companies with money and vision will rewrite the rules. They will capitalize on new models. They will steal away market share and mind share. They will drive today’s well-intentioned people and companies out of business.

Suddenly it might not be so clear what the MLS means to real estate.

People, politics and money inhibit cooperation.

The root cause of our challenge? It certainly isn’t technology. We are wedded to numbers. All 600 of us are addicted to a financial model that needs lots of members to satisfy the beast. As I said at CMLS in September “…when are we going to come up with a consumer-minded model instead of one that is risk adverse? How can we responsibly supplant our current model before things get even further out of hand?”

For sure, it’s not easy. The lines are blurring. We are anxious and impatient. Yet how many of us are really ready to do anything different than we were 12-24-36 months ago? And if not, then where will we be 36 months from now? And more importantly, where will our brokers and agents be?

If we are looking for comfort, I have some news to share. Anyone who thinks they are too big or too small or too unique is wrong. Anyone who thinks they are too old or too steeped in their ways to make meaningful changes is wrong. Anyone who is unwilling to accept the risk of being railed at by your leadership or brokers or shareholders for being committed to exploring alternatives is wrong.

That’s because there is an undeniable imperative to set our sights on something new and tangible NOW.

Still many of us hang on. But make no mistake. A reckoning is coming.

The transfer of power is seldom voluntary.

Change is loyal to no one. And change doesn’t occur because everyone wants it. Change invariably finds its genesis in a much smaller group of people. It occurs because a need has been identified and that need will be met. And once it gets legs, change destabilizes the status quo.

If we are too wedded to the status quo, if we choose to be institutionally blind, if our past success is too alluring, then innovation suffers, protectionism intensifies, growth stagnates, and we hunker down. We cocoon. We wait for the storm to pass. We end up bemoaning how others are disrupting us as opposed to seeing opportunity, seeing innovation.

The moment of truth for all of us in this industry must be in understanding that much of what has gotten us this far will not carry us further. Or better said in the tribal wisdom of the Dakota Indians and passed on from generation to generation, “when you discover you are riding a dead horse, the best strategy is to dismount.”

So continuing on the present course or worse, building walls of protectionism in the face of such enormous change does not properly depict who we are or what we aim to be. And “doing nothing” while very Zen is wrong as well.

Over the years I have learned that the primary job of every CEO is to establish the vision, secure the funding, execute, communicate, evaluate, course correct, rinse and repeat. Additionally every successful CEO and Director believes the job invariably comes with a sense of urgency.

My question to you: Do you have this vision? Do you have this sense of urgency?

Filling the space that gets us from here to there is our challenge. (Denee Evans)

We cannot let current views or long-held positions cast any shade on a new reality. Cooperation amongst and between all participants must be our North Star. It is the only bridge to the future we should attempt to salvage. Everything, and I mean everything else, is noise.

If we are not actively working, collaborating, and debating with the amazing people in this industry then we are auditing. And if too many are auditing, I don’t see how that’s any different from hanging onto the housing classifications that were both discriminatory and wrongheaded or the sheets and books that were usurped by technology and consumerism.

Whatever is next, it requires leadership. Sure it involves risk. But I would argue that the risk of doing nothing or worse building walls of protectionism is a recipe for disaster.

Now more than ever, each of us is required to place a greater reliance on others in order to help us, all of us, move this great industry forward. That my most capable peers is the only way we will be able to “fill the space that gets us from here to there.”

Let me close with this.

The future of this industry will be determined by the consumer’s trust in technology and their acceptance of risk as it relates to the largest transaction of their lives. (Harvard Business Review)
· If we think that consumer demand for transparency will diminish, then we should do nothing.
· If we believe that broker profitability and agent relevance will magically improve, then we should do nothing.
· If we believe incursions from outsiders will be repelled by becoming more insular, by all means lets build a wall.
· If we believe current and nascent technology will somehow bypass our industry, kick back. Chill.
· If we believe that broker efforts to create their respective, in-brand solutions will have little impact on cooperation and compensation, don’t worry. Be happy.
· If we believe that national initiatives, many with hugely smart people, solid technology and Wall Street money are simply a few rogue waves, then we really should let the band play on.

But if indeed we do decide to stand down, if we decide to not take advantage of and build on the many, many things that unite this industry, what does brokerage look like in 3 years?

I am reminded our respective Boards of Directors are comprised of brokers and agents that are fiercely competitive and independent thinkers. Yet each month or quarter, they all sit down at the Board table, put aside their competitive instincts and determine the best path forward for the entire MLS.

My question to you: In this critical moment of change, can you do this as well?