MLS Tesseract

Offer spamming

noreply@blogger.com (Brian N. Larson) — Mon, 26 Oct 2009 15:24:00 +0000

Imagine you are a real estate broker, and you receive an email like this:

From: Mystery Investment Company, LLC.

To: YOU

Subject: Offer To Purchase

LETTER OF INTENT TO PURCHASE

123 Elm Street [the address of one of your listings]

Hello, Broker:

I am submitting this letter of intent to purchase the property you have listed below. I am making this CASH offer to you, the listing agent, with no other agent(s) involved. Please notify your client of my CASH offer. Should your client find my offer acceptable, please draft my offer on a standard contract form.

As you relay my offer, please emphasize the following:

ALL CASH OFFER
21 DAY20CLOSING
AS IS PURCHASE

PARTIES: Mystery Investment Company, LLC as (Buyer) and Owner of Record as (Seller).
MLS NUMBER: 1234567
PROPERTY ADDRESS: 123 Elm Street, YourTown, Any State
PURCHASE PRICE: $99950 CASH [less than ½ the listing price].
PERIOD: Closing on or before 21 Days.
PROVISIONS: Property purchased in "As Is" condition. Buyer and Seller agree to pay normal closing costs. Proof of Funds upon request. Earnest money to be deposited upon acceptance.

Buyer: ___________________________________________________ Date: _____________

[Signature line for buyer, but no signature]

Seller Acceptance: __________________________________________ Date: _____________

Imagine that you receive such an email for each of your active listings and that you learn from your peers that they too have received these emails. We understand this is becoming a more common practice all the time.

What do you do? Are you bound by the REALTOR® Code of Ethics or state law to present these 'offers' to your seller? Should the listing broker forward every one of these emails to her sellers? Can you get your seller's written instruction not to bother her with such 'offers' when they are below 50% or 60% of the listing price? The answer, not surprisingly, depends...

Is the email an offer?

Under the laws of most states, an offer to purchase is the buyer's proposal which, if accepted by the seller, would create a binding contract between them. It is unclear whether the 'letter of intent' would constitute an offer under the laws of all states. Issues that jump out immediately include the following:

• The email refers to itself as a "letter of intent" before characterizing itself in any other way. Though it later, and frequently, refers to "this offer," it is unclear whether the recipient would reasonably interpret this email as an offer to purchase (and that reasonableness is typically part of the standard for interpreting an offer in contract law).

• There is no way to accept the buyer's offer. The email directs the recipient to "please draft my offer on a standard form contract." It is likely that the effort by the seller's broker to do so would legally constitute a counter-offer, as it would necessarily include terms that are not in the email. Consequently, it appears impossible to accept the 'offer' – and that makes it not an offer at all, but an invitation to negotiate, which is binding on no one.

• The email says "Earnest money to be deposited upon acceptance." But of course, there is no earnest money in the email. This again suggests the email may be something other than an offer.

Nevertheless, as we shall see, just the fact that the email is a written communication may be sufficient to require the broker receiving it to forward it to the seller.

Broker's obligation to communicate offers

This section looks at brokers' obligations under the REALTOR® Code of Ethics (the "Code"), which is binding only on brokers and agents who are members of the National Association of REALTORS®; and under the laws of a single state, which govern only brokers and agents in that state. If you are a broker or agent, discuss this matter with local legal counsel before acting on it.

Standard of Practice 1-6 of the Code provides: "REALTORS® shall submit offers and counter-offers objectively and as quickly as possible." Standard of Practice 1-7 goes on: "When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing."

Taken together, these provisions seem to say two things:

Brokers must submit "offers and counter-offers" promptly, but no reference is made to communications that do not legally constitute offers.
The seller can waive this requirement in writing.

Thus, based solely on the Code, if the listing broker concluded that the email was not an offer, she could probably just delete it. If she gets a lot of these, she could ask sellers to give her written instruction (probably on a form that her lawyer creates for the purpose) not to present such offers.

All taken care of, right?

Not so fast. The listing broker may still have an obligation to present the email to the seller under state law. For example, the license law in one state provides the following:

"A seller's agent owes the seller, other principals and the principals' agents... the following affirmative duties: ... (b) To present all written offers, written notices and other written communications to and from the parties in a timely manner without regard to whether the property is subject to a contract for sale or the buyer is already a party to a contract to purchase.... [A]n affirmative duty may not be waived." [Emphasis added.]

The duty applies to all "written communications" and is not one the seller can waive, because the duty is to all the parties (including "other principals" – i.e., the putative buyer). At least in this state, the law appears to eliminate the wiggle room that the Code seemed to provide.

How to handle this situation?

If I were a broker, even if I were uncertain whether I had an obligation to present this 'offer' to my seller, I think I might take the following tack: I would draft a standard paragraph of text explaining what is going on, so that my agents and I could easily drop it into an email to my seller. Every time one of these 'spam offers' comes in, I would forward it to my seller with the explanatory paragraph and an email subject line of "Probable 'spam' offer." The explanatory paragraph would point out the following things:

The brokerage firm has received an unsolicited email from a company that has sent similar emails regarding other listings in MLS.
The email contains what purports to be a 'letter of intent' or offer to purchase the seller's property.
State law and the REALTOR® Code of Ethics may require the brokerage firm to forward the communication to the seller, and the broker is doing so.
The broker believes this not to be a serious offer, because the 'offering price' is a fraction of the listing price, and there is no earnest money.
The broker will take no further action with regard to the email or the 'offer' unless the seller instructs otherwise.

I would probably try to phrase all this in such a way as to make sure that the seller understands my firm is looking out for her. Taking this step and making a record of it in the file is good risk management for the broker.

What do you think? If you are a broker, I'd like to hear from you whether you are receiving emails like this and whether you have a strategy for dealing with them that you think is more effective.

-Brian

REALTORS® Property Resource: A possible business model?

noreply@blogger.com (Brian N. Larson) — Mon, 19 Oct 2009 17:56:00 +0000

I have had numerous conversations with folks regarding the REALTORS® Property Resource (RPR), NAR's multi-million dollar initiative shrouded in secrecy. Until now, my view has been that there is no business model for it.

NAR says that RPR, which will operate under NAR's REALTORS® Information Network (RIN) subsidiary, will give brokers better sources of data than consumers have and to make them the consumers' 'trusted advisor.' NAR is supposed to announce the RPR business plan in November in San Diego. I believe two big problems face RPR: (1) NAR has trouble executing real business plans and (2) RPR has no viable business model.

As for the trouble executing, NAR is famous for the fact that RIN itself crashed ignominiously in the late 90s after trying to build some kind of national technology service thing (I was never sure what it was going to be) – the only "good thing" that came out of it was Realtor.com. (Not everyone agrees that is a good thing, either.)

But I have to acknowledge this case might be different, as the "Two Dales" – Dale Stinton, NAR CEO, and Dale Ross, former CEO of MRIS – behind RPR have some pretty impressive accomplishments behind them.

Hard so see the business model

As for the business model, I could not think of a way that it could work. Here's why: Imagine you are a real estate broker in St. Louis. NAR promises that RPR will deliver to you much better parcel-based property data than consumers can get online. But chances are you are already getting access to property tax data from your local MLS, a service for which your MLS pays a third party, and the cost of which is included in your periodic MLS fees. Chances are, too, that if you want more data than you are getting, and if you were willing to pay for it, your MLS would already be providing it. So, RPR is offering something for which you have not been willing to pay until now along with stuff for which you are already paying your MLS. My guess is, you would decline to purchase those services if RPR offered them to you for a fee.

If you are a broker in Minneapolis, Minnesota, or Hilo, Hawaii, matters are worse. There, the MLSs have their own tax databases, in which they have built the best parcel-based data available for their areas. The only place RPR can get data as good as the MLSs provide to brokers is from the MLSs. Assuming RPR licenses from the MLSs, who will want to 'buy it back' from RPR? All the brokers in those MLSs already have access to it, and the cost is built into the MLS fees.

The upshot: NAR will spend big bucks offering these services and the money will have to come from somewhere: reduced costs from somewhere in the REALTOR® community; increased costs to the REALTOR® community; or money
from outside
the REALTOR® community.

I can't imagine any reduced costs, in fact, quite the opposite seems likely (subject for another post, if we have time). There will be quite the outcry if NAR raises dues to make this a 'core service.' And I couldn't think of who outside the REALTOR® 'family' NAR could get to 'sponsor' the RPR with enough money to make it fly – certainly no one out there would want to buy RPR's parcel-based property tax record (and related) data, as it's already widely available, much of it for free on the Web.

So, I had written off RPR. But now I wonder...

REBIG redux?

RPR might be able to get the money to pay for this using a business idea that caused quite a stir a few years back: Licensing MLS data to businesses outside of the REALTOR® membership base. Mortgage companies, credit agencies, insurance companies, and others pay a fortune in fees every year to information service providers to help them predict property values, portfolio losses, etc. Real-time MLS data is almost a Holy Grail when it comes to these types of predictions and valuations.

In the early part of the decade, REBIG LLC (a joint venture of several MLSs) attempted to aggregate MLS data and license it for exactly these purposes. REBIG did not fly. There were many problems with it; key was that many brokers hated the idea that someone would profit from their data. But the projected revenues were impressive: According to some early projections, by the third year of operations, REBIG was supposed to be making more than $150 million per year in licensing revenues from MLS data. But if those numbers were right (even if they were twice the right number), NAR could provide very sophisticated services to MLSs, get MLS data from them aggregated at the national level, and make a handy profit in the process.

Think about the strategic implications if NAR could pull this off. "If" is the key word, though.

Getting brokers and MLSs to permit RPR to license MLS data could be tough. If RPR is not an MLS (and NAR says it will not be, at least for now), providing MLS data to it will be a use of MLS data that is not part of the core purposes of MLS. Under NAR policy (which I assume RPR would honor), listing brokers have to be given an opportunity to opt out of any such use. Some brokers would choose to opt out or would work hard to keep their MLSs from signing licensing deals with RPR, even if there were clearly defined benefits flowing back from NAR. That's because listing brokers very naturally dislike the idea that others will profit from their listings.

So RPR as REBIG redux might not work. But I had not considered it previously because I was blinded by my own experiences with REBIG. I wonder what other business plan possibilities for RPR I've overlooked. With smart people and lots of money at their disposal, the Two Dales may yet have something very interesting to tell us in San Diego.

So now, all of a sudden, I'm kind of curious and excited to see what they announce. I'm trying to be more open to the possibilities of RPR, too. What do you think?

-Brian

(Disclosures: I was an employee of REBIG for nine months and did some legal work for its founders early in its formation. My firm has done legal or consulting work for some of the MLSs to which I referred above.)

Emancipating innovation from the ‘legacy customer’

noreply@blogger.com (Brian N. Larson) — Thu, 15 Oct 2009 16:27:00 +0000

MLSs are plagued by a seemingly intractable problem: their legacy customers. This is the existing broker 'member' or 'participant/subscriber' base. The problem finally crystallized for me during Brad Inman's keynote at the CMLS 2009 conference in Lake Tahoe at the end of last month. Brad was explaining why start-up companies innovate faster than 'legacy companies' – his premise is that innovating faster is essential. He gave four reasons why legacy companies do not innovate; to each one, I've attached a paraphrased common complaint by MLS executives:

Denial: "These new technologies and tools are cool, but the current needs of our existing customers are what matter."

Legacy technologies: "We have to maintain these systems because they are what our current customers are used to."

Funding challenges: "We can't raise/spend/invest the money of our current customers based on our ideas about what might happen in the future."

Resistance to partnering: "Company X provides an interesting opportunity for partnership, but our brokers would be very upset if we worked with it."

Can't just do whatever they want: "Our brokers would get very upset if we did that."

Start-up companies do not face these challenges, because they do not have legacy customers. In fact, they often don't have any customers. They often get money from investors who are sold on a vision and (maybe) a business plan. But real estate brokers and agents (and sometimes especially the ones on MLS boards of directors) don't want MLSs to 'level the playing field,' invest in research and development, build reserves to take advantage of development opportunities, raise dues (because that would be very unpopular, especially in a market like this), or try lots of new things out (because many of them are likely to fail). They want the MLS (and REALTOR® associations) to be "run like a business," but then they hog-tie their managers to prevent exactly that.

Of course, the MLS cannot ignore or greatly antagonize its existing, legacy customers, as they are paying the bills. But as someone at CMLS said:

If Apple had continued to view itself as a computer and operating-system developer competing with Microsoft and Intel, we would not have the iPod or the iPhone.

Apple redefined its market and its competition by innovating (and in the process, it picked up share in PC and operating system sales). It's also true that not all innovation is useful innovation (as Greg Robertson recently pointed out). So coming up with whacky and fun ideas is not in and of itself a way to deliver more value to MLS subscribers.

So, my question is, how do MLSs emancipate innovation from the legacy customers? Do they have to have subsidiaries to be innovation engines (like the national, California, and Florida associations have done)? Are there general strategies that MLS and association executives can use to build confidence in the volunteer leaders and members and gain support for investments in innovation? If you have a strategy that works, I'd like to hear about it. (I'm not really interested in one-off tales of a successful innovation – I want to know how you have created a culture of innovation.) If you are a broker and think MLSs should not 'waste their time' trying to 'level the playing field,' I'd like to hear from you, too.

-Brian

Great radio portrayal of how the real estate/mortgage bubble happened

noreply@blogger.com (Brian N. Larson) — Mon, 28 Sep 2009 15:48:00 +0000

It's always struck me that the news stories covering the real estate/sub-prime bubble and collapse have either been very superficial or too complicated for the average person to understand. When a friend or colleague casually chalks the problems up to "greedy Wall Street," "stupid consumers," "unprofessional real estate brokers/mortgage brokers/appraisers," I wanted something I can refer them to – a source that will give them a more nuanced understanding of what amounts to a very complicated problem. I didn't have one.

That changed yesterday – I listened to a one-hour program on public radio's This American Life, called "Return To The Giant Pool of Money," that provided the best balance of nuance, completeness, and comprehensibility to this subject that I have heard so far. Normally, I find this program a little annoying (not sure why), and even this episode gets a little sentimental at the very end. But if you want friends to understand how we got into this mess, regardless of their level of education or familiarity with economics and the business, I recommend this program.

Looks like it's only available on iTunes as a podcast for a week after it plays on the radio. So if you want it, get it now!

-Brian

Bonuses and Conditions on MLS Offers of Compensation

noreply@blogger.com (Brian N. Larson) — Wed, 23 Sep 2009 17:41:00 +0000

Ok, so I posted earlier about why I think bonus offers are bad PR for the industry. But it is also unclear to me whether bonus offers can be allowed in MLS.

Policy background

If we take the example of MLSs affiliated with the National Association of REALTORS® (NAR), they should be complying with NAR policy. NAR's model MLS rules address inter-broker compensation in pretty strict terms: One section provides that "The amount of compensation offered by the listing broker must be indicated either by showing a percentage of the gross selling price or by showing a definite dollar amount." (At local option, MLSs can permit the compensation to be expressed as a percentage of the 'net sales price' instead of the gross.) Another section says "The listing broker shall specify, on each listing filed with the Multiple Listing Service, the compensation offered to other Multiple Listing Service Participants for their services in the sale (or lease) of such listing. Such offers are unconditional except that entitlement to compensation is determined by the cooperating broker's performance as the procuring cause of the sale (or lease)."

(Note that a listing broker can under NAR policy vary the compensation she offers to other brokers by correspondence outside of MLS - e.g., by sending a letter to a particular broker saying, "Despite what I offer on my listings in MLS, I'm paying you y%." This practice also deserves a couple posts, but that will have to wait. But even these superseding offers have to come in the form a dollar amount or a percentage of the gross or net selling price.)

The "unconditional" thing is important. It's not consistent with NAR policy for a listing broker to put a comment on the listing that says, "buyer broker receives compensation only if she shows up at all finish selection conferences with buyer and builder" (as some builders have tried to do). It cannot say "buyer broker must do X and Y to be compensated." The only condition for the buyer broker's compensation is whether she is the "procuring cause" of the sale.

The procuring cause standard of NAR is a test that takes into consideration many factors but with no factor being predominant. So, from the procuring cause standpoint, the absence or presence of any one condition is not determinative, and the demands of the listing broker are probably irrelevant.

But most MLSs, even those that aggressively enforce the "no conditions on offers of compensation" strictures, permit brokers to make bonus offers in MLS. Some MLSs have requirements about how bonus offers are expressed and indicated on listing records, but most accept them.

The bonus exception swallows the unconditional rule

The exception swallows the rule. Isn't a bonus offer just a conditional offer of compensation? And couldn't the bonus exception to the "no conditions" rule eventually swallow the rule? For example, as a listing broker, I could put a listing in MLS offering $1 of cooperating compensation, but then, in the remarks, say "Cooperating broker will receive compensation equaling y% of the net selling price if she meets the conditions on listing broker's web site at www.xyzrealty.com/compconditions.htm." Now, the listing broker can demand all sorts of things from the cooperating broker not contemplated in the MLS policies.

It's hard to imagine the variety of creative ways that listing brokers might describe cooperating brokers' obligations in the previous example. The probability is that there will be many poorly drafted statements of performance requirements. Arbitration panels will be confronted with the need to interpret those statements; and panels will not be able to rely on the (relatively) well-understood procuring cause standard.

I'm also worried about listing brokers using bonus offers to disadvantage new brokerage models. I've already seen one case where a listing broker has said in MLS: "Coop compensation is 1%; if cooperating broker does A & B, compensation is 2.5%." This would be prohibited in this form, but would it be permitted if the listing broker characterized the additional 1.5% as a "bonus"? What if other brokers pick up on the practice (because these offers are all published in MLS)? Will brokers who tend not to do A&B (despite the fact they are procuring cause of their transactions) end up effectively boycotted by listing brokers? I don't really want to think about it...

To the extent you think compensation through MLS is important, allowing it to be muddled in this way without some clear guidance as to how these provisions should be interpreted is a bad idea.

What do you think?

-Brian

Bonus offers in MLS are bad PR for the industry

noreply@blogger.com (Brian N. Larson) — Mon, 21 Sep 2009 19:29:00 +0000

This post and the next are revised versions of posts I did on my short-lived ActiveRain blog a couple years ago. They came to mind because of an Inman column by Teresa Boardman two weeks ago regarding the amount of cooperating compensation offered in MLS.

Some listing brokers in many markets are offering bonuses to buyer brokers in an effort to speed the sale of their listings. Bonus offers of this kind are bad for the industry.

What bonus offers look like

Here are examples very similar to bonus offers my MLS clients have asked me to evaluate.

"$5000 bonus to selling agent on sale closing before July 31"

Listing broker puts 1% in the MLS compensation then in agent remarks says, "1.5% of sale price as bonus if you negotiate for your buyer and arrange inspection and appraisal"

Example 1 is the typical bonus offer that has been around since before my time. Example 2 is of a type that is showing up more frequently as listing brokers want to try to specify exactly what a buyer broker must do to earn her commission. There are also very poorly worded bonus offers, ones so confusing that I can't imagine anyone being able to figure out whether she had satisfied the conditions or not; that's a discussion for another day.

Bonus offers send the wrong message to consumers

Why do listing brokers make bonus offers like example 1 above? How do they justify them to sellers? The only justification I can think of is that it will encourage a sale because cooperating brokers will be motivated by the opportunity for personal gain to show buyers the listings with bonuses, or to show such listings more favorably.

Many brokers have told me (1) that they would never put their own interests ahead of their buyers' to obtain a bonus, and (2) that they do not believe other professional brokers would do so. I hope they are being honest about (1), but if they are putting bonus offers on their own listings, I think they are being less than honest about (2). Why would they put bonus offers on their listings unless they believed they have an impact?

Brokers point out that it is nearly impossible for a buyer's broker to conceal listings from her buyer that pay less and show only ones that pay more, because consumers have access via IDX and sites like REALTOR.com to nearly complete listing compilations. They can thus "check up" on their brokers. This may be true, but the broker holds more subtle influences than just choosing which listings to show; she can also influence the buyer by the order in which she shows listings, how she shows the listings, what features of each listing she identifies as being important, etc. That's why consumers hire brokers - for their expertise.

Consumers know about the bonus offers: A listing broker generally needs consent from the seller to offer a bonus under the Code of Ethics and other regulations. I'm assuming every broker is aware that she must disclose bonus offers to her buyer in a transaction, at least in every state I can think of.

What messages do these disclosures send to sellers and buyers? Simple: "Listing brokers believe they can buy influence with buyer brokers by offering them extra compensation - despite the buyer brokers' duties to their clients." Does anyone think that's a good message for the industry?

There are other problems with bonus offers in MLS - I'll try to tackle them in the next post.

Your thoughts?

-Brian

‘Core’ vs. ‘optional’ Pt 4: Legal issues

noreply@blogger.com (Brian N. Larson) — Wed, 16 Sep 2009 15:34:00 +0000

(This is Part 4 in a four-part series. I started with some definitions to get us on the same page; we then looked at NAR policy on the issue (for those MLSs that are bound by it); I provided some of the arguments for and against making services 'core'; here, I'll touch on the legal dimension.

When an MLS makes a service a 'core' service, there is at least some risk it can face antitrust challenges claiming the MLS is engaged in an unlawful 'tying' arrangement. Under the Federal Sherman Antitrust Act and related statutes, unlawful tying occurs where:

A seller of a product or service has 'market power' in the provision of that service in a 'relevant market.' This is called the 'tying product.'
The seller requires purchasers of the tying product to buy another product or service as a condition of purchasing the tying product. This is the 'tied product.'
The result of removing the buyers' choice with regard to the purchase of the tied product 'harms competition' in the market for the tied product.
The harm to competition outweighs the pro-competitive effects of the tying arrangement.

The laws governing tying and related conduct are complicated. This post can really only scratch the surface. There are a few points I'd like to make immediately.

The use of apostrophes around terms like 'tying,' 'market power,' and 'relevant market' is meant to point up that these terms have special meanings in the law, meanings that may not be the same as the common meanings of the same words. I don't recommend running about making shoot-from-the-hip antitrust analyses based on the outline here unless you understand what these terms mean in the legal context.
We traditionally think of MLSs as monopolists within their markets, which by definition would mean they have 'market power.' But the analysis required to determine whether that is a legal fact is complicated. Don't assume that your MLS has market power, but recognize that others may make that assumption.
In the MLS context, the basic access to MLS – what NAR calls 'participation' – would probably be the tying product. If MLS conditions participation in MLS on the purchase of something more than the basic level of service, that 'something more' would be the tied product.
Bundling services and tying the purchase of one product to another is a very common practice in business. In the vast majority of circumstances, it is perfectly legal. Don't assume that an MLS tying the purchase of a core service to participation in the MLS is breaking the law.
The harm the antitrust law is designed to prevent is a harm to competition, not harm to a particular competitor. Companies engage in conduct all the time that harms their competitors – that's what competition is about. See the brief discussion below about themes of antitrust law to understand what a harm to competition looks like.
The law recognizes that tying arrangements can have pro-competitive effects. See the brief discussion below about themes of antitrust law to understand what a pro-competitive effect looks like.

The upshot of all this is that an MLS board considering whether to adopt a core service should consider both the pro-competitive and anti-competitive effects of making the service part of the core. Usually, legal counsel will advise you to consider the impact of your conduct based on the objectives of the antitrust laws. Stated very loosely and informally, the antitrust laws are organized around the following six themes:

Lowering prices
Increasing quality
Increasing output
Curbing power
Preserving freedom
Promoting efficiency

(My thanks to Prof. Brad Clary at the University of Minnesota Law School for this simple formulation of the themes of antitrust enforcement.) Note that many of these themes fit in with the arguments for and against core services I discussed last post. Making a service core might serve some of these themes and not others. The question will usually be one of magnitude in each case. There is no simple formula.

Conclusion

This series of posts provides a framework for thinking about the core vs. optional question, but every service in every MLS is different. In general, you should feel more comfortable with a service being core if it's integral to MLS than if it's only tangential: a help desk and training for the MLS system are better as a core service than a dry-cleaning pick-up and drop-off service. Smaller financial magnitude usually raises smaller concerns: an increase in core service fees of $3 per agent per year is less distressing than one of $3,000 per year. But the outcomes cannot be predicted based on any formula.

My sense is that NAR's policy on what is 'core,' 'basic,' and 'optional' was really intended to address potential antitrust issues. I don't think it's much help, unfortunately. MLS boards in the midst of these kinds of decisions will have to exercise their judgment, but I hope this series will help frame up the discussion.

As always, your comments are welcome. But please don't ask me in a comment whether a given instance of a service being core is an antitrust violation. For me to do that analysis takes a whole lot of information, some time, and plenty of attorney fees ;-)

My friend Matt Cohen has also suggested that I reiterate a point I made at the beginning of the first of these posts: "If after reasonable research the MLS believes that a service aligns with MLS's strategic objectives and will provide real value to MLS's subscribers, the MLS may decide that it should offer the service." All the analysis I've proposed in the last three posts should be necessary only after the MLS has concluded a service is near to the MLS's strategic objectives. If the service is not strategically related to your MLS's purpose, you shouldn't be offering it at all.

-Brian

Extent of MLS’s VOW rules enforcement duties

noreply@blogger.com (Brian N. Larson) — Mon, 14 Sep 2009 17:26:00 +0000

I'm taking break from the MLS core vs. optional services series to get out this post. An email has been circulating in the MLS community that has been misinterpreted as saying MLSs have some extraordinary obligations to police the VOW rules. The language that has folks confused reads this way:

"With the shadow of the DOJ hanging over real estate, MLSs are starting to come to two conclusions:

"1) Audits must be performed regularly on each VOW (at least yearly). If MLSs audit only a few brokers or audit on an irregular basis it will invite speculation regarding, or lawsuits alleging, preferential treatment of some brokers or AVPs (Affiliated VOW Partners) and/or discrimination against others.

"2) The audit should ideally be performed by an independent third party using standardized criteria. It is very important that MLSs establish consistent standards for VOW auditing, to a level of detail far beyond the NAR policy, ideally starting from the very first VOW audit."

This is not, nor do I think the email's author intended it to be, a statement of some kind of requirement of NAR policy or the settlement between NAR and the Department of Justice. Rather, it's an assertion that the email's sender is urging on the industry (thus the language "MLSs are starting to come to two conclusions").

Unfortunately, within a couple hours of this email going out last week, I had inquiries from clients about whether there is some enforcement requirement in the VOW policy or the NAR/DOJ settlement.

Here is a summary of my understanding about MLS enforcement of the VOW rules:

Your MLS should run its own plans for enforcing the VOW rules by its legal counsel. (This blog post is not intended as legal advice.)
As far as I know, MLSs are under no obligation to police the VOW rules proactively. MLSs are not required to 'audit' or review VOWs on any interval by the NAR VOW policy or by the NAR/DOJ settlement. Nothing I'm aware of in the law or VOW policy requires MLSs to go out looking for rule violations.
I have not seen any legal analysis that suggests MLSs have to be more proactive policing VOWs than they are with IDX sites. In fact, because the DOJ mistakenly views VOWs as tools of 'new-model' brokers and IDX as a tool of 'traditional brokers' – reviewing all VOWs proactively may look suspicious to DOJ if MLS does not also review all IDX sites proactively. (That would be very expensive in many markets.)
MLSs can probably use the 'tattle-tale' model to police VOWs. That is, MLS investigates a VOW if and when someone complains about it. That has been the model of rule enforcement with regard to IDX and many other parts of the rules in most MLSs as long as I can remember. I have seen no legal analysis to suggest that it is no longer appropriate.
If your MLS does want to review VOWs for rule compliance, it should do so on a non-discriminatory basis. That might mean reviewing all VOWs (which is easy when there are only two or three). Or it might mean reviewing a sample of VOWs selected at random (which would properly be called an 'audit').
MLS must apply the VOW rules in a non-discriminatory manner. Of course, most MLSs have plenty of experience doing that in the IDX context.
I don't know of any reason why an MLS would need an independent third party to conduct reviews of VOWs, at least with regard to compliance with display and registration rules. An independent third-party evaluator might provide valuable assistance with reviewing a VOW's compliance with some of the more technical provisions of the VOW rules or in cases where the MLS management does not believe it has staff that are well-trained enough to handle the task.

As to that last point, we have assisted a couple MLSs with their first reviews of VOWs to help them establish an approach and procedure; after that, they seem to manage on their own.

Note that on many of these points, I've said I'm not aware of any line of reasoning that contradicts the views I've expressed here. That doesn't mean I'm not open to arguments to the contrary. If you've got some, serve 'em up!

-Brian

‘Core’ vs. ‘optional’ Pt 3: Arguments both ways

noreply@blogger.com (Brian N. Larson) — Fri, 11 Sep 2009 20:06:00 +0000

(This is Part 3 in a four-part series. I started with some definitions to get us on the same page; we then looked at NAR policy on the issue (for those MLSs that are bound by it); here, I'll provide some of the arguments for and against making services 'core'; last, I'll touch on the legal dimension (but only briefly).

There are arguments for and against making services core. The weight your MLS gives to each argument is as important as the number of arguments; so there might be three arguments for making a service core and four arguments against it, but the three arguments for making the service core may be more weighty. The discussion that follows is thus necessarily just a framework for thinking about these issues; it is not a formula for resolving them.

Arguments for making services core

The key arguments for making a service a core service are that it provides economies of scale; it can promote individual broker investments based on the platform that MLS makes available and nudges brokers to be on the leading edge; it facilitates making the service as integrated with other MLS functions as possible; it makes MLS business planning much easier; it addresses the 'small incremental price' problem; or it addresses the unwillingness of a third-party provider to sell into the MLS subscriber base.

Economies. When the MLS purchases a site license for an application, it may get an incredible deal on a per-unit basis for the service. Volume discounts are frequently the foremost consideration in an MLS board's mind when it considers potential core services. Of course, this cannot be the only consideration. After all, an MLS with 2,000 subscribers could get a good deal on 2,000 Cadillac Escalades, too, but making a Cadillac Escalade part of the MLS's core services would not cross most folk's minds.

Encourage brokers to use advanced technology. The MLS may make a strategic decision that the industry as a whole needs to move in some direction technologically. Making some aspect of a new technology part of the MLS's core services removes one of the barriers that may prevent brokers adopting the technology – cost. If the MLS provides or arranges for training in and support of the service at the MLS level, it may remove other barriers.

Integration with MLS. Sometimes, for a service to be fully integrated into the MLS, it needs to be available to everyone. This is not true with all integrated services: The way that web-based MLSs are built, it should generally be possible to integrate a feature without it being available to or visible to all users. But on occasion, it's hard to make that work.

Easier MLS business planning. It's much easier for an MLS with a small staff, especially if it has no substantial marketing or sales staff, to take the cost of providing a service to all subscribers and just spread it across all the subscribers. The alternative is more complicated: the MLS must create a budget for the costs to deliver the service based in part on estimates of how many subscribers will buy it. Many MLSs do not have the business planning, marketing, and sales expertise on staff to do this kind of planning.

Addresses 'small incremental price' problem. There are services that are so trivially expensive that billing for them separately might cost more than the service itself does. For example, in one large MLS client of ours, a service to be integrated into the MLS worked out to cost less than $3 per subscriber per year. The MLS would have spent more than that to bill and collect fees for the service on an optional basis. Of course, the risk if MLS finds too many such services is core cost bloat (see below).

Third-party provider requirements. Sometimes a strategically important service is available only from third-party providers who insist that they will work with an MLS's subscribers only on an all-or-nothing basis.

Arguments against making services core

The key arguments against making a service a core service are that it 'bloats' the core cost; it make create an artificial adoption curve; it can overlook superior competitive offerings or stifle their development; and it may pre-empt offerings being developed by participating brokers internally.

Core cost 'bloat'. Every additional service offered as part of the core of MLS increases the cost to the subscribers, even if only slightly. Over time, such additions can lead to increase in the core cost. Many MLSs avoid this problem by adding new core services only when they have been able to press costs out of other services or eliminate services that are no longer useful. They avoid increasing fees and the problem of core cost bloat.

Artificial adoption curves. Sometimes the MLS may choose a service that ultimately does not have legs; or perhaps it chooses a service whose time has not yet come in the industry. The MLS may create a scaffold for brokers to engage in using this service at a time when the benefits for using the service do not match well with the costs.

Stifling superior offerings. This is an important issue. If the MLS makes a service core, one of two things commonly happens. One possibility: The core service is at least 'pretty good,' and because MLS subscribers are paying for it whether they use it not, they are not inclined to consider other products that they would use instead if they had the choice (assuming switching costs would not make it unreasonable to change). Another possibility: The core service is less than 'pretty good,' and many MLS subscribers buy a superior alternative on the market; but MLS's support of the inferior product prolongs its existence in the market and imposes costs of competition on the superior product it would not otherwise experience if the inferior service were allowed to die a natural death. Making the service a core service also increases the barrier for competitive service providers to enter the market.

Pre-empting brokers' own investments. Brokers are always seeking to distinguish themselves. One can debate at length whether they succeed at doing so – as others already have – but brokers nevertheless invest a lot of money in competitive marketing with each other. If a broker has deployed or is deploying a service within the firm, and the MLS adopts a competing service as a core service of the MLS, you can imagine the broker's displeasure. (I'd expect you would not have to imagine it – most brokers will be very vocal about it.)

Others?

I expect there are other arguments for and against making certain services core. Please comment to share your thoughts.

Next: Legal issues in the 'core' service debate

MLS services ‘core’ vs. ‘optional’ Pt 2: NAR policy view

noreply@blogger.com (Brian N. Larson) — Mon, 07 Sep 2009 20:32:00 +0000

(This is Part 2 in a four-part series. I started with some definitions to get us on the same page; in this post I'll look at NAR policy on the issue (for those MLSs that are bound by it); next, I'll provide some of the arguments for and against making services 'core'; last, I'll touch on the legal dimension (but only briefly).

Most MLSs are affiliated with NAR. If yours is not, you can skip this post. If your MLS is NAR-affiliated, it is bound by NAR's statement of multiple listing policy 7.57, which divides MLS services into three categories – core, basic, and optional – and provides guidelines about which services can be in which category. As a practical matter, though, this policy section appears to have little effect because in almost every case either (a) it is vague enough to permit almost any choices MLSs make or (b) MLSs really don't pay all that much attention to it.

Here are NAR's definitions. (All references here to NAR policy are to NAR's Handbook on Multiple Listing Policy, 2009 ed. Link requires password to access.)

"Core: Core MLS information, services, and products are essential to the effective functioning of MLS, as defined."

NAR says this boils down to current listing information and information communicating compensation to potential cooperating brokers.

"Basic: In addition to core services, an MLS may also provide additional information and services in a basic package of MLS information, services, and products, as determined locally and provided automatically or on a discretionary basis."

Among the 'basic' services NAR expressly says that MLS's may offer are sold and comparable information; pending sales information; expired listings and "off market" information; tax records; zoning records/information; title/abstract information; mortgage information; amortization schedules; mapping capabilities; statistical information; public accommodation information (e.g., schools, shopping, transportation, entertainment, recreational facilities, etc.); MLS computer training/orientation; and access to affinity programs.

"Optional: An MLS may not require a participant to use, participate in, or pay for the following optional information, services, or products: lock box equipment including lock boxes (manual or electronic), combination lock boxes, mechanical keys, and electronic programmers or keycards; advertising or access to advertising (whether print or electronic), including classified advertising, homes-type publications, electronic compilations, including Internet home pages or websites, etc."

There is a great chasm between the examples NAR offers for 'basic' and 'optional' services; one in which many MLS services exist. Consider online contract forms that populate with MLS data; online showing scheduling utilities integrated with the MLS system; open house databases; and automated transaction management applications. Each of these is arguably similar both to the example 'basic' services and to the example 'optional' services.

The following paragraph opens this chasm a little further:

None of the foregoing precludes an... MLS from utilizing... MLS reserves, dues, or fees or special assessments... to acquire assets (including hardware and software) necessary to make optional information, services, or products available, nor does it preclude an... MLS from making nominal administrative expenditures out of such funds to initiate or maintain such optional services.

NAR's definition of 'basic' services permits the basic package of services to be 'determined locally,' and the definition of 'optional services' just specifies two services that cannot be made 'basic' or 'core,' namely lock boxes and advertising; I interpret them together to mean that an MLS can make any service 'basic' except the two enumerated 'optional' ones. As for the two enumerated optional services, many MLSs heavily subsidize electronic lockbox systems and advertising (in the form of MLS public-facing web sites); I presume those efforts take the form of capital investment and 'nominal administrative expenditures.'

Consequently, though Statement 7.57 technically binds NAR-affiliated MLSs, it appears to have little impact on their practices.

Note: I think NAR could premise a denial of umbrella insurance coverage to an MLS on this argument:

Your MLS is offering a service as 'core' ('basic' in NAR's terminology) which it should not, and thus it is violating Statement 7.57.
Your MLS is being sued because of some alleged error or omission with regard to that service.
Thus, NAR is not required to extend coverage to you for that suit.

I've never heard of it happening, but my mom always says there's a first time for everything.

Next: Advantages and disadvantages of making services core and optional

-Brian

When should MLS services be ‘core’ and when ‘optional’? (Potential CMLS topic 4)

noreply@blogger.com (Brian N. Larson) — Thu, 03 Sep 2009 21:46:00 +0000

(Note: Shelley Specchio is CEO of the Northern Nevada Regional MLS, Inc., a host of the CMLS Conference in Lake Tahoe, September 30 – October 2. She and I have been discussing topics for the legal panel there. Shelley wants input and feedback from those likely to attend: Which legal topics are of greatest interest and what aspects of them are most important for MLSs? I agreed to do a series of blog posts on some of the candidate topics, cross-posting links to them in other forums and asking folks for their input. This is the fourth. If you have other topics to suggest, email me or comment on any of these posts.)

Almost every MLS is bombarded with proposals from service providers to cooperate with them in the delivery of their services to MLS subscribers. If after reasonable research the MLS believes that a service aligns with MLS's strategic objectives and will provide real value to MLS's subscribers, the MLS may decide that it should offer the service. The next question, and one that often challenges MLS executives and boards of directors alike, is whether to deploy the service as 'core' or 'optional.'

I've broken this topic into four posts to avoid one giganto-post. As usual, I'll start with some definitions to get us on the same page; then I'll look at NAR policy on the issue (for those MLSs that are bound by it); third, I'll provide some of the arguments for and against making services 'core'; last, I'll touch on the legal dimension (but only briefly).

What do 'core' and 'optional' mean?

In simple terms, a 'core' service is one that all MLS subscribers pay for, whether they use it or not. An optional service is one that has a fee associated with it; if the subscriber declines the service, she does not pay the fee.

In practice, things are a bit more complicated. Often MLSs offer optional services where the fee associated with the optional service does not exactly match its costs to offer the service. The MLS may collect less than 100% of its costs to operate the optional service; in this case, all MLS subscribers are subsidizing the service. In a way, that means all MLS subscribers are paying a portion of the service's costs, whether they are using the service or not. That makes the service look a little more like a core service. This may not result from any attempt of the MLS to subsidize the service. For example, if the new service takes two or three years to reach peak adoption levels, it is likely that the first year or two will be unprofitable and that later periods will make up for that.

The MLS may also collect more than 100% of its costs to operate the optional service. Many MLSs do so in order to make a reasonable profit and support establishment of appropriate reserves and research and development. An MLS may collect substantially more than its costs to operate the optional service; in that case, it is making the subscribers to the optional service subsidize the general operations of the MLS.

So, my vocabulary:

An 'optional service' is one that (a) subscribers must pay an extra fee to use and (b) the MLS makes reasonable efforts to break even or make a profit on the service over the service's lifetime.

A 'profitable service' is one that (a) subscribers must pay an extra fee to use and (b) the MLS makes efforts to make a profit on the service in excess of that profit necessary to fund R&D and a reasonable reserve. (Every profitable service is also an optional service; profitable services are a subset of optional services.)

A 'subsidized service' is one that (a) subscribers must pay an extra fee to use but (b) where the MLS does not plan to recover all the costs of the service from the fees it charges.

A 'core service' is one where all the costs for the service are included in the base periodic broker/agent/office fees; that is, all brokers and agents are required to pay for the service whether they use it or not.

Next: How NAR policy sees this discussion

NAR announces competition for game-changing ideas

noreply@blogger.com (Brian N. Larson) — Tue, 25 Aug 2009 19:03:00 +0000

Attendees at the NAR Leadership Summit in Chicago learned about a competition NAR is sponsoring for state and local REALTOR® associations to come up with game-changing ideas. NAR will fully fund the winning idea(s). The page for the program on NAR's site describes it this way:

REALTOR® associations are invited to submit big, bold ideas that will change the course of how REALTOR® associations work. Provide a brief description of your radical -- but implementable -- idea for evaluation by our panel of experts introduced at the Leadership Summit before the competition closes Oct. 1.

NAR invites ideas regarding a wide variety of association activities (including committees, education, and planning); but I'm interested in the fact that it includes "IT/MLS/Web." A panel of industry experts will select the winner(s). They include Gregg Larson of Clareity Consulting and John Tucillo of JTA LLC. NAR will announce winners at annual convention in San Diego in November.

If your association is working on a proposal related to "IT/MLS/Web", let us know if you want to bounce ideas off someone. We'd listen to your ideas, treat them confidentially, and give you feedback and suggestions. Our compensation will be sharing your ideas and enthusiasm (and if you win, you can thank us during your acceptance speech!).

Fun!

-Brian

StrategicMLS.com post on VOW policy clarifications

noreply@blogger.com (Brian N. Larson) — Wed, 19 Aug 2009 23:37:00 +0000

Tom Jacobson and John Rees have a new blog post explaining some of NAR's recent clarifications of the VOW policy. They're less wordy than I'm prone to being, so I figured I'd link to their good work rather writing my own post. Comments and discussion are still welcome here, of course.

-Brian

Neither fish nor fowl: Mobile technologies and IDX and VOW rules (Potential CMLS topic 3)

noreply@blogger.com (Brian N. Larson) — Tue, 18 Aug 2009 19:06:00 +0000

(Note: Shelley Specchio is CEO of the Northern Nevada Regional MLS, Inc., a host of the CMLS Conference in Lake Tahoe, September 30 – October 2. She and I have been discussing topics for the legal panel there. Shelley wants input and feedback from those likely to attend: Which legal topics are of greatest interest and what aspects of them are most important for MLSs? I agreed to do a series of blog posts on some of the candidate topics, cross-posting links to them in other forums and asking folks for their input. This is the third. If you have other topics to suggest, email me or comment on any of these posts.)

The question: To what extent can one broker distribute listing content relating to another broker's listings via mobile apps? Unfortunately, the answer is not clear, because these distributions generally do not fall under the IDX or VOW policies.

Some companies are offering texting-based or mobile-phone-app-based access to listing information. (I call all these tools 'mobile apps'.) This is old-hat on broker's own listings – the listing broker puts up a sign rider with a phone number (or phone number and code), the consumer sees the sign, calls the number, and gets info. Or the consumer texts to the number to get info. But the explosion of mobile apps has raised other questions.

Two example products are VoicePad's "MobileIDX" and SmarterAgent. VoicePad describes its "MobileIDX" product this way:

Now property buyers can access the entire local inventory from any telephone. VoicePad MobileIDX^TM delivers property information in high-quality sentence structure in both English and Spanish, by simply entering the street number, or MLS ID, of the home in which they have an interest. Unlike the wireless web or text messaging, MobileIDX works on every phone.

SmarterAgent describes its product this way:

Smarter Agent's Homes for Sale allows homebuyers to view all available MLS listing information on homes for sale around them anytime, anywhere, from the convenience of their cell phone. They can locate properties by GPS, address, zip code, or city; see details including price, square footage, beds/baths, and taxes; map properties closest to them; even see pictures!

I've never used VoicePad, having only heard descriptions of how the product works. There is an audio demo and a video on the company's site, but these demos emphasize the utility of the product to listing brokers. My understanding is (and the product's name and marketing materials suggest) that MobileIDX also works this way: Broker A signs up with VoicePad, which assigns Broker A a phone number; Broker A advertises the phone number to the public, inviting them to call that number whenever they want information about properties they see. The consumer sees Broker B's listing (driving by, on the web, it doesn't matter as long as the consumer sees the street number or MLS number). The consumer calls Broker A's VoicePad number; she enters the street number or MLS number, and VoicePad provides information about Broker B's listing.

I have used SmarterAgent in its Philadelphia incarnation, available from the Prudential Fox & Roach web site. (The button on the left that says "Search & Receive Local Listings From your Cell" takes you to a setup page for the product.) In the case of my iPhone, I entered my cell number, clicked through an agreement, got a text message, downloaded the app, and ran it. After all that, I could begin searching the Philly inventory, either by entering criteria or by using my phone's GPS location to find nearby properties. SmarterAgent's app displayed the results to me with PF&R branding on it and in what seems like compliance with the Philly MLS's IDX rules.

I think these tools, and many others like them, provide exciting possibilities for brokers to better serve consumers. (I really enjoyed using the SmarterAgent app.) But if they are not IDX and they are not VOWs, we probably have some work to ensure that innovation is permitted and supported while listing-broker and seller rights are not trampled.

What rules govern these uses?

What rules govern Broker A's use of Broker's B's listings in mobile apps like SmarterAgent and VoicePad? Well, that's not entirely clear. I think that probably neither of these applications qualifies as an IDX site or a VOW. (Note the "probably" – some MLSs have interpreted their IDX or VOW rules as specifically permitting these applications – given the arguments on both sides, I don't think that's unreasonable.) The NAR model rules define IDX in Section 18 as:

IDX affords MLS participants the option of authorizing display of their active listings on other participants' Internet websites.

(NAR, Handbook on Multiple Listing Policy, 2009 ed. Emphasis is mine. Link is to password-access site.) NAR's model rules define VOWs in Section 19.1(a) as:

A "Virtual Office Website" (VOW) is a participant's Internet website, or a feature of a participant's website...

(Ibid. Again my emphasis.) Neither of the example products is a "web site" and so I would argue neither is IDX or VOW. IDX is consent-based, meaning it is permitted because listing brokers consent to it. Any use of the listing data beyond what that consent permits is not IDX and is not permitted under the IDX rules. VOWs are permitted subject to the VOW policy and rules, and any use that goes beyond what those rules allow is not consistent with the rules. Both sets of rules expressly refer only to "web sites" and not to any other technology.

One could argue, and some have reasonably I think, that these applications are sufficiently analogous to web sites to be considered web sites for purposes of the IDX and VOW policies. Another fact surely strengthens the analogy argument: it is possible to view web sites through mobile phones, and in those cases, the sites are probably just IDX sites or VOWs. How does the "app-ness" of our example applications change the analysis? We could spend a whole series of posts debating that; the only consensus we would reach is that we can reach no consensus. (Thus my suggestion below that we address this issue head-on.)

Assuming that the example apps are neither IDX nor VOWs, what rules govern them? Again, we look to the NAR model rules, where Section 12 governs display and reproduction of MLS listing data generally. Section 12.1 provides:

Participants and those persons affiliated as licensees with such participants shall be permitted to display the MLS compilation to prospective purchasers only in conjunction with their ordinary business activities of attempting to locate ready, willing, and able buyers for the properties described in said MLS compilation.

(Ibid. Again my emphasis.) That does not permit willy-nilly display of other brokers' listings (which would just be advertising). Section 12.2 of the model rules provides:

Participants or their affiliated licensees may reproduce from the MLS compilation and distribute to prospective purchasers a reasonable* number of single copies of property listing data contained in the MLS compilation which relate to any properties in which the prospective purchasers are or may, in the judgment of the participants or their affiliated licensees, be interested.

*It is intended that the participant be permitted to provide prospective purchasers with listing data relating to properties which the prospective purchaser has a bona fide interest in purchasing or in which the participant is seeking to promote interest. The term reasonable, as used herein, should therefore be construed to permit only limited reproduction of property listing data intended to facilitate the prospective purchaser's decision-making process in the consideration of a purchase. Factors which shall be considered in deciding whether the reproductions made are consistent with this intent and thus reasonable in number, shall include, but are not limited to, the total number of listings in the MLS compilation, how closely the types of properties contained in such listings accord with the prospective purchaser's expressed desires and ability to purchase, whether the reproductions were made on a selective basis, and whether the type of properties contained in the property listing data is consistent with a normal itinerary of properties which would be shown to the prospective purchaser.

(Ibid. Again my emphasis. Actually, the model rules provide MLSs three options for Section 12.2, but most MLSs choose option 1 or option 2, and the language quoted here appears in both those options.)

In light of Section 12, why did we need a VOW policy? Well, the main reason is that some listing brokers believed that the medium other brokers used to display the listing brokers' listings was something over which they should have control: "Sure, you can fax my listing to your buyer, but you can't make it searchable to your clients on your web site." The VOW policy does two things: (1) it expressly permits virtual office web sites, laying to rest that question; and (2) it imposes rules on virtual office web sites intended to address the special risks associated with distributing listing data via automated means. In other words, Rule 12 was fine when we dealt with faxes and printouts from MLS, but automated listing distribution poses risks of 'scraping' etc. that were not present in traditional distributions. Consequently, automated distributions deserve specific rules to address those risks without discouraging the use of the technology.

The problem now is that there is now clarity about how MLSs should treat these products; a product embraced by one MLS might be shunned by another; brokers in one market might enjoy the use of it while brokers in another are not permitted to try it.

Solutions?

I think it makes sense to adopt a solution to this issue now, rather than waiting for confusion and maybe another lawsuit. And I'd suggest adapting the solution to the rules we already have. Here's one way of approaching it:

If a broker wants to display another broker's listings to a consumer by any "automated means," the displaying broker gets two choices:

If the displaying broker had no brokerage relationship with the consumer, the display would have to satisfy the IDX rule requirements. (For example, listings of brokers who opt out of IDX could not be displayed, displays would satisfy MLS disclosure requirements and requirements that listing brokers/agents be identified, if they occur in IDX.)
If the displaying broker had a brokerage relationship with the consumer, established either face-to-face or via the means identified in the VOW rules, then the display could take place under the VOW rule requirements. (For example, the app would have ID and password – or other means of confirming identity – respect for seller wishes regarding "internet" display, AVMs, and third-party commentary, etc.)

No other automated display of another broker's listing would permitted.

The change could be achieved by changing references in the existing VOW and IDX policies from "Internet Web site" to "automated means of distribution" (after carefully defining this term) and making a number of other tweaks. The problem for NAR and the MLSs affiliated with it is that they cannot change the VOW policy without DoJ approval, and I'm guessing that NAR would rather not reopen discussions with DoJ on this topic so soon. I suppose an MLS or group of MLSs could approach NAR and DoJ and propose language that would do the trick – not sure how that would work out. Another alternative would be for NAR to adopt a separate policy regarding distributions by "automated means" excluding VOWs, but have it closely parallel the VOW policy.

If your MLS is not affiliated with NAR (i.e., is broker-owned and operated), there is really no problem here. We have drafted rules for broker-owned MLSs that permit all "automated means" under largely the same terms as VOWs. This ensures that listing broker and MLS concerns are addressed but that new technologies are expressly permitted by MLS.

What do you think? Is this an important issue? Are there better options than the one I've described here? Are there other technologies that raise similar issues?

-Brian

State-of-the-art VOWs?

noreply@blogger.com (Brian N. Larson) — Thu, 06 Aug 2009 17:32:00 +0000

Frequently, I do presentations for groups of brokers explaining how VOWs work, why they might want to build them for their firms, and what to expect of other VOWs in their marketplaces. I usually include screen shots from one or two VOWs as examples.

Periodically, I like to go out and find new VOWs to use as examples, to freshen things up. This time, I figured I'd ask brokers and VOW technology providers to toot their own horns.

If your brokerage firm has a knockout VOW, or your company builds knock-out VOWs for brokers, drop me a line with some URLs (and your permission for me to view the VOW(s) and use screen shots for presentations). I'll let you know if I use your site as a model for other brokers.

Thanks!

-Brian

Does ‘search engine’ = benign use of listing data?

noreply@blogger.com (Brian N. Larson) — Tue, 04 Aug 2009 14:02:00 +0000

I pointed out in last week's capstone post on the "search engine indexing of IDX series" that any policy that permits indexing of IDX sites needs to define exactly what kinds of 'search engines' are permitted and what search engine uses are acceptable.

In case you were wondering why I'm so concerned about that, I recommend you take a look at the Google maps real estate interface. It was written up in Inman last month. Our friend Matt Cohen noted in a blog post, referring to the Australian incarnation of the Google interface, that this interface makes Google look more like a 'destination' site and less like a 'conduit' site. In other words, the site is trying capture consumer attention with its content, not just let them search and move off to the source web site. Victor Lund also pointed me to an article about how the interface has been controversial with some data content providers in its Australian incarnation.

(BTW, I wanted to show screen shots with some narrative here, but my web layout/authoring skills suxxors, so instead I created a PDF that you can download if you want to see what the Google site looks like without taking the time to figure it out for yourself.)

So, my concern: for right now, the Google interface in the U.S. is showing only the listings of listing brokers who have uploaded them to Google. But imagine this scenario on the hypothetical site www.Scoobynoogle.com:

Scoobynoogle.com 'spiders' the web looking for real estate listings on brokerage (and other) web sites.

Scoobynoogle.com caches all the information and presents it in an interface basically identical to the Google maps/real estate interface, aggregating data from multiple IDX sites based upon the address or other semi-unique identifiers, so there is one "push-pin" per listing.

The site is designed to keep consumers browsing on it as long as possible. It wraps the listing content and site functions with advertisements.

Scoobynoogle.com shows links back to the originating broker IDX sites (perhaps many of them) on the tab where Google currently has a link back to the "original webpage." The listing broker's site would not be favored among these links (though it might appear there).

Such a use would be a 'search engine.' But its purpose is materially different than the Google that you use to search the web. This hypothetical site is intended as a 'destination' – a site where the consumer lingers and executes multiple searches, rather than a 'conduit' – a site that gets the consumer to a broker's IDX site where she can continue her searching on the broker's interface.

When folks are thinking about how to define what sort of indexing of IDX sites is permissible, and by whom, they need to think about a use like the hypothetical Scubynoogle.com site and decide (1) if they are happy about it and (2) if not, how to define 'search engine' uses to include only those they consider benign.

BTW, I have no evidence that Google is even considering such an approach. But someone is. Even if Google is intent on just displaying listings of brokers who have uploaded them, the brokers should be thinking about what use Google is putting their listings to – is it web indexing (a 'conduit' use) or Google trying to build its own traffic numbers (a 'destination' use)?

-Brian

Cybersquatting on brokers’ names (Potential CMLS topic 2)

noreply@blogger.com (Brian N. Larson) — Mon, 03 Aug 2009 15:10:00 +0000

(Note: Shelley Specchio is CEO of the Northern Nevada Regional MLS, Inc., a host of the CMLS Conference in Lake Tahoe, September 30 – October 2. She and I have been discussing topics for the legal panel there. Shelley wants input and feedback from those likely to attend: Which legal topics are of greatest interest and what aspects of them are most important for MLSs? I agreed to do a series of blog posts on some of the candidate topics, cross-posting links to them in other forums and asking folks for their input. This is the second. If you have other topics to suggest, email me or comment on any of these posts.)

A common problem in the industry is that large brokerage firms are great targets for cybersquatters. According to the Anticyersquatting Consumer Protection Act (15 U.S.C. 1125(d)) or ACPA, cybersquatting or cyberpiracy is registering, trafficking in, or using a domain name identical to or confusingly similar to someone else's trade- or service mark in bad faith. The most common form in our industry results in folks registering a domain name that is a slight variation of a broker's firm name (also called "typosquatting"), putting up a page on the resulting domain, and selling real-estate-related links on the page. In most cases, this violates the trade- or service marks of the broker and may violate the ACPA.

What cybersquatting looks like

I've picked a victim at random. I opened the RealTrends 500 report and randomly picked a broker that our firm does not serve as a client. I selected Latter & Blum, Inc., a REALTOR® firm that serves New Orleans and the Gulf South. Latter & Blum's firm web site is at www.latter-blum.com. Check it out; I'll wait...

It turns out Latter & Blum affiliates have more than one site. If you type www.latterblum.com (one hyphen away from the first site) you end up at the site for NAI/Latter & Blum, a commercial real estate firm.

But try www.latterblumrealtors.com. The resulting homepage does not belong to the real estate firm. It shows links: "Home For Sale," "Real Estate Agent," "Foreclosed Home," "Real Estate," "Home Buying," and "Real Estate Commercial" – the links lead in turn to pages at the 'searchportal.information.com' domain, with links to other real estate brokers, home builders, foreclosure web sites, but not to Latter & Blum. If we look at Information.com and check the About page (http://information.com/help/about.html), we learn that it "is a privately-held, growing, profitable online advertising company that provides advertisers with results-driven access to online inventory and publishers with a way to monetize web, search and e-mail traffic."

Now try http://www.latterblumrealestate.com/. The homepage there shows links: "Real Estate," "First Time Home Buyer," "Home Value," in addition to links for local real estate markets, including Costa Rica, San Antonio, North Carolina, etc. It shows a copyright notice "© 2009 latterblumrealestate.com". Click on "Real Estate" and you get page with links to real estate broker web sites (not including Latter & Blum). This time, the pages appear on the www.latterblumrealestate.com domain. There is a link to "Inquire about this domain." (I interpret that as "inquire about purchasing this domain.")

You'll find similar results at http://www.latterblumrealty.com/, www.later-blum.com, and www.latter-blume.com, each a slight variation of the firm's name. Interestingly there is nothing at www.latter-blumrealty.com or www.latter-blumrealestate.com (and I hope my pointing that out does not result in a change). This can happen with smaller brokerage firms, too, if they have a well-known brand.

Trademark law is usually firmly on the side of the brokers here. Using a domain name that is confusingly similar to a broker's mark to market real-estate-related services infringes the broker's mark. The broker does not necessarily need to have the mark registered at the Patent & Trademark Office to claim its rights, though that certainly does not hurt. In the case of domains including "REALTOR" – NAR might have a thing or two to say about it, too, as that is NAR's registered mark, and it is subject to restrictions regarding its use.

Solving the problem

We've helped several brokers remedy these problems. The process usually starts with a cease and desist letter from our office. Sometimes the squatter will transfer the domain immediately as a result of our nasty-gram. More often, we get no response from the registrant (which is often hidden behind a registration privacy service or is located in Hong Kong or Panama). After waiting a bit for a response, we file a UDRP complaint against the registrant. UDRP stands for the "Uniform Domain-Name Dispute-Resolution Policy" adopted by ICANN (the international regulator of Internet domain names) and made a part of the registration agreement of every domain name registrar for names ending in .com, .net, .org, and some other (but not all) top-level domains. (For the sake of clarity, "registrant" is the person who registers, uses, and owns a domain name; "registrar" is the company, like Network Solutions or GoDaddy, that provides the registration services.)

The UDRP provides for an arbitration process. We file the arbitration complaint on behalf of the broker with one of the approved arbitration services. Usually, the registrant does not even respond to the complaint; in that case the arbitrator is most likely to rule in favor of our client. Unless the original registrant appeals by filing suit in court, the arbitration results in the registrar (not the registrant – this is important because the registrars are comparatively much easier to locate than the registrants) being ordered to turn the domain name over to our client.

We could go to court, of course, but that would be more expensive and the results might not be any more satisfactory. Under certain circumstances, though, it might make sense, especially if the defendant is an American company out of which we could extract money damages or attorney fees.

So, how can MLSs help brokers in these situations?

Educate them about the risks. (You can just forward a link to this post, if you like ;-) Encourage them to check likely typo-squats for their firm names.
If your MLS is owned by REALTOR® associations, they have an interest in protecting the "REALTOR" mark. So perhaps you can refer typo-squatted domains that include "REALTOR" to the local REALTOR® association or to NAR.
If you stumble on an example of a typo-squatter for a particular broker, give the broker a heads up.

So, I'm curious whether MLSs themselves are struggling with any domain name issues? If so, what kind? Would this be a good topic for CMLS? Post your comments.

(BTW, it's possible if you are viewing this post long after its original date that the examples will no longer illustrate the problem if Latter & Blum takes action to correct the cybersquatters identified here. You can illustrate it yourself using another well-known firm name, maybe even your own.)

-Brian

Search engines & IDX Part VIII: Options for moving ahead

noreply@blogger.com (Brian N. Larson) — Fri, 31 Jul 2009 19:34:00 +0000

We've considered this issue in seven posts:

Part I: What's the beef?
Part II: Search engine scope and data sources
Part III: Search engines indexing, audiences, and their objectives
Part IV: "IDX index fishing"
Part V: Is search engine indexing legal?
Part VI: Purpose of IDX and broker expectations
Part VII: Miscellaneous items

I promised that breaking this topic up would keep me from five-page blog posts, but I've lied. In this last marathon scheduled post on this topic, we'll look at some solutions folks have proposed and see whether they resolve the situation.

Interests to advance

A good solution to this problem should advance several interests, and I'll use these to evaluate the potential solutions below:

1. Listing Broker Expectations: Establishing reasonable expectations in listing brokers about how their listings may be used on the IDX sites of their competitors. This does not mean accepting brokers' current expectations, because in many cases, those expectations may result from lack of knowledge. Rather, it means telling the brokers, by rule, education, or a combination, what to expect. Any use beyond those expectations should be considered misuse.

2. Supporting Broker Web Efforts: Supporting efforts of brokers to be the 'go-to' sites on the Internet for consumers looking for real estate. This means giving brokers the tools to attract and retain consumers to and on broker sites. I think this is even more important than the first factor: after all, through education and clear rule-making, we can change listing broker expectations. But nothing MLSs do is going to alter the expectations of consumers on the web. We need to equip brokers to face the realities of the web.

3. Technology Tools: Exploiting technology that prevents obvious misuses of data at the source, if there are such tools. This means placing responsibility with the displaying broker (the one hosting the IDX site) to prevent obvious 'scraping' efforts, to the extent they can be distinguished from permissible uses.

4. Legal Tools: Giving listing brokers and MLSs legal tools necessary to go after those who misappropriate and misuse the MLS data. Once the data is out of the hands of the broker operating the IDX site, neither that broker nor MLS has physical means to prevent misuse of the data. So listing brokers and MLSs need other tools to go after 'the bad guys.'

Of course, the challenge will likely be balancing listing broker expectations and the efforts of site-hosting brokers to attract and retain consumers by all legal and ethical means. To balance those interests, I wish we had a little more info on these two points:

First, what are the types and frequencies of these searches on search engines? How often, for example, does a consumer go to Google and type: "Nancy Smith" if she's looking for a listing of Nancy's? How often does a consumer go to Google and type "123 Elm Street" when she has driven by a listing? If consumers only infrequently use these "long-tail" searches, permitting them may not be critical to the success of broker SEO efforts.

Second, if we were to talk through how IDX index fishing works with a group of listing brokers, would they be distressed? I've argued that listing brokers would be justified if they felt IDX index fishing frustrates their expectations about how IDX works. But no one has demonstrated that listing brokers as a group actually care. Am I wrong about that?

I don't list clarity as an interest, because clarity is essential - being clear about what is required, what is permitted, and what is forbidden. Rules that are not clear do not provide a good basis for conduct. As far as clarity is concerned, I don't think anyone as satisfactorily defined the distinction between legitimate indexing by web search engines, entities not in the real estate business that are indexing the whole web and that promptly pass consumers off to matching sites, from "indexing" that is really scraping by a real estate player. If we permit 'search engines' without clarifying what we mean by 'search engine,' anyone can scrape data from IDX sites all over the country, put it up on a national 'real estate search engine,' and attempt to monetize the resulting traffic by selling leads back, etc.

Options

So, what are our options? Well, NAR's current rule reads this way:

Participants must protect IDX information from misappropriation by employing reasonable efforts to monitor and prevent "scraping" or other unauthorized accessing, reproduction, or use of the MLS database. (Section 18.2.2 of NAR's model rules, NAR Handbook on Multiple Listing Policy, 2009 ed.)

Option A. No change – Allow each MLS to interpret the rules

If NAR does not change the text of Section 18.2.2 of its model rules, I expect MLSs will continue to interpret the section as they do now, with some holding that web search engines are 'scrapers' and other that they are not.

The current rule has a clarity problem: The first sentence imposes on the broker a duty to prevent misconduct that is beyond the sphere of the broker's control ("monitor and prevent ... unauthorized ... reproduction, or use"). A broker can be asked to prevent scraping of her site, using commercially available tools to monitor access to the web site to detect scraping and terminate access from IP addresses that engage in it. (This may not ultimately prove successful, but it may at least make scraping more difficult.) But she can hardly be expected to police uses by a third party unless the way the third party 'scrapes' the site gives the broker notice of some kind of problem.

It's also unclear in that we don't know whether web search engines are making authorized use or unauthorized use of the MLS data.

It's unlikely NAR will allow local MLSs to make these decisions. A key reason is that brokers who function in multiple markets will not like it if two adjacent MLSs take opposite views. The arguments those brokers make about the difficulties this would pose for them might be overstated, but NAR will hear the arguments nevertheless. NAR has attempted over the last several years to make IDX rules more uniform, and I expect they will respond on this issue in kind.

Option B. All MLSs adopt the MIBOR approach

NAR could require all MLSs to adopt the MIBOR approach, prohibiting indexing by search engines. Then I'd recommend changing section 18.2.2 of the model rules to read:

Participants must make commercially reasonable efforts to prevent the gathering of MLS data from their IDX sites by automated means, including techniques commonly described as "scraping," "spidering," or "web-crawling." For purposes of this Section, indexing by search engines constitutes "web-crawling."

By the way, I don't think this approach would prevent listing brokers from doing IDX index fishing with their own listings. Generally, NAR and MLS policies do not restrict how a listing broker displays her own listings. So, in this case, even if MLS says "you can't allow search engines to index IDX listings," a broker could permit her own listings to indexed on her own web site.

Thus, there are many who would claim the big listing brokerages were driving this approach. I think that it's reasonable for a listing broker to say, however, "If someone searches for my listing agent or the address of one of my listings on Google, the result should be a link to my site or to a neutral site that I have authorized to display my listings, not to my competitor." The listing broker who agreed to take part in IDX to allow other brokers to advertise her listings may never have contemplated that her listings would be used as search engine bait.

As for our interests, this approach does a good job of setting listing broker expectations because it's clear what is permitted and what is not. As this approach does not require making a distinction between good scraping and bad scraping, it does not require nuances in interpretation. There are also technology tools that permit web sites to prevent almost all spidering, web-crawling, etc. (rather than requiring the server to attempt to distinguish between good bots and bad bots), so it supports our third interest. As for legal tools, this approach provides none, but adopting Option E in conjunction with it could change that.

This approach fails to support broker web efforts, because non-broker sites will be able to take advantage of web search engines, but most broker sites will not. This is only one of five interests weighing against this approach, but frankly, I think it's critically important. Do we really want to say that brokers with IDX sites cannot use site development techniques that are common across many industries and that are otherwise legal and ethical? Do we want to permit aggregators to use tools that we do not allow to brokers?

Option C. NAR policy committee approach from May 2009 (or modified form)

NAR could adopt the policy proposal it considered in May, which essentially permits all indexing by search engines. This is how that change would have left Section 18.2.2 of the model rules:

Participants must protect IDX information from unauthorized uses. This requirement does not prohibit indexing of IDX sites by search engines.

This also suffers from clarity problems similar to the ones in the current policy (Option A). Here's language I'd propose instead:

Participants must make commercially reasonable efforts to prevent the gathering of MLS data from their IDX sites by automated means, including techniques commonly described as "scraping," "spidering," or "web-crawling," except when those techniques are used by web search engines. A "web search engine" is [define here].

(Note that I have not defined what a "web search engine" is or what data uses typify a "web search engine." This is not a trivial problem. If you have a sense of how to define it, post a comment.)

It is essential that the policy language define "search engine." As we concluded previously, any database that a consumer can search that displays the results online is a "search engine." Trulia, Google, and Realtor.com are search engines. In fact, almost any site likely to misappropriate IDX data is likely to do so by presenting it in the form of a "search engine." When evaluating this approach, I'll assume it comes with a good definition of "web search engine."

This approach should establish clear listing broker expectations (though I think we'd have to educate listing brokers about how this works, what they might see, and what their own options are for using the same techniques). It also supports broker web efforts, essentially allowing IDX to compete with the likes of Realtor.com, etc. It does not really provide any legal tools for stopping bad actors, but adopting Option E in conjunction with it would help.

This approach is a mixed bag on the technology front. The broker hosting an IDX site might be able to detect that someone is scraping the site, and as long as the scraper is not posing as a web search engine, we could probably expect the broker operating the site to take steps to prevent the scraping. But it would be difficult for the broker know if a malicious scraper is posing as a legitimate web search engine; in other words, the displaying broker's "commercially reasonable" efforts are unlikely to prevent a determined scraper.

This approach will not be without its detractors: I think listing brokers do not expect that searching "Nancy Smith," a listing agent with ABC Realty, on Google, will result in a match to one of Nancy's listings being displayed on XYZ Realty's IDX site. I know there are those who discount this listing broker concern as symptom of a failure to compete on the web. But IDX after all, is a grant of permission by listing brokers for other brokers to display their listings. They are entitled to have a say about how the listings will be displayed. If you want to do funky stuff with other brokers' listings, you can do it behind a password on your VOW (though web search engines should not be able to index VOWs). Might big listing brokers pull out of IDX if NAR adopts this option? I'll save that question for a post on the strategic interplay between IDX and VOWs.

On the other hand, if the information I've shared in previous posts (and comments of others associated with them) is correct, listing brokers can readily adopt the techniques of "IDX index fishing"; and widespread adoption of these techniques will make them less effective, and presumably, less distressing to listing brokers. Perhaps the way to address listing brokers' legitimate concerns is to educate them about how IDX index fishing works, and about how they can make use of it themselves.

Option D. Permit indexing, but limit fields that can be indexed

NAR could adopt an approach that permits indexing generally, but prohibits it on a few key fields to address the listing broker concerns about the example I gave in Section C. The rule might look like this:

Participants must take commercially reasonable steps to prevent the gathering of MLS data from their IDX sites by automated means, including techniques commonly described as "scraping," "spidering," or "web-crawling," except when those techniques are used by web search engines. A "web search engine" is [define here]. If a Participant permits or encourages web search engines to index the Participant's IDX site, the Participant must not expose the following fields in the listing display provided to web search engines: name of listing broker, name of listing agent (or non-principal broker), street address of listing [Others?].

Generally, this approach has the same virtues and vices as Option C, except this one does address a narrow concern of listing brokers seen in the example I gave in Section C (search for listing agent's name shows link to agent's listing on a different broker's web site).

This approach does create a sort of paradox, though. Most MLSs have rules requiring that an IDX display include the listing broker's name. It seems odd to require an IDX site to withhold the listing broker's name when displaying that broker's listing to a search engine. Essentially, I think this rule would require the broker to provide a different display to search engines than it provides to consumers. That makes me uneasy, though I can't say exactly why.

Option D.5? One possibility arises from the fact that many MLSs do not require that listing agent name be displayed on IDX (only listing broker name). By prohibiting display of listing agent name in IDX, MLSs would prevent the problem in the "Nancy Smith" example above, but without having separate display rules for search engines and consumers. This option probably does not work in states that require the listing agent to be identified on advertising.

Option E. Control downstream uses with terms of use

Mike Wurzer described his notion that we should impose a "terms of use" requirement on users of IDX sites. The NAR model rules (see model rules Section 18, pp. 118-21 of the NAR Handbook on Multiple Listing Policy, 2009 ed.) for IDX do not require that IDX sites display terms of use. We have urged MLSs for years to adopt such requirements (for reasons unrelated to the current dispute).

The law about online contracts has evolved. Most courts are likely to find an enforceable contract where the visitor to a web site clicks on a "SEARCH" button that has a link to terms of use next to it with text that says "By clicking 'SEARCH' I am agreeing to this site's terms of use."

Our MLS clients that have adopted requirements for TOUs to appear on IDX sites provide the actual text of the terms of use, or at least key portions of it, to their brokers. One common TOU provision says that the MLS is a third-party beneficiary of the agreement the TOU creates. That means that the MLS can sue the consumer/web site user if he/she/it breaches the TOU and misuses the data. Other provisions embody some language from the NAR rules about "personal, noncommercial" use.

No matter which option NAR adopts for model rule 18.2.2, I'd recommend that it also adopt an optional IDX rule that allows MLSs to impose terms of use on visitors to IDX sites. The advantage of this approach is that it allows the MLS to police the downstream uses of the data of which it becomes aware. This complements any efforts the displaying broker may make server-side to prevent scraping.

(BTW, though this suggestion comes from a post by Mike, I don't support a suggestion he made in the same post that it would be better to limit the fields available in IDX to alter the impact of search engine indexing. I'll take that up in a post on strategic interplay of IDX and VOWs in coming weeks.)

What I would probably do...

So, if NAR said to me, "We're going to take action on this, what do you recommend?", I'd probably say this:

Define what we mean by 'web search engine,' identify the benign uses they make of listing data, and incorporate those descriptions into the rules.
Say that broker IDX sites may allow and even encourage indexing by web search engines.
If brokers are particularly miffed by the "Nancy Smith" example, MLSs can prohibit display of listing agent in IDX (as long as state law does not require it).
Educate all brokers about how site indexing works and about technology options to allow them to take advantage of it.
Allow MLSs to adopt a rule requiring IDX sites to display terms of use prominently on the site (but giving brokers a few months' grace period to implement them).
Develop a good model TOU and invite the MLSs to promulgate it to brokers; two key terms would make MLS a third-party beneficiary and would allow 'web search engine' use but not any other commercial use of the listing data.

I'd chose permitting indexing over prohibiting it, because I think we have to let brokers have the tools they need to compete on the real web. Listing brokers who don't like the results can employ the same tools. I don't like Option D, but as I say, I can't quite put my finger on what there is about it that makes me uneasy.

I would stress the need to define exactly what constitutes benign "search engine indexing."

I would also stress the need to put together some education to help MLSs and brokers. NAR has CRT, which is a great resource, but it still tends to make knee-jerk decisions and then allow local MLSs to have to deal with the implications. It's down-right idiotic if NAR does not produce material that explains how this works in layman's terms.

As for the model terms of use, I'd suggest that NAR consult with attorneys of some of the MLSs about this, rather than basing the model on NAR's purely theoretical understanding of the issues.

Your ideas?

-Brian

Current legal issues with VOWs? (Potential CMLS topic 1)

noreply@blogger.com (Brian N. Larson) — Wed, 29 Jul 2009 20:12:00 +0000

(Note: Shelley Specchio is CEO of the Northern Nevada Regional MLS, Inc., a host of the CMLS Conference in Lake Tahoe, September 30 – October 2. She and I have been discussing topics for the legal panel there. Shelley wants input and feedback from those likely to attend: Which legal topics are of greatest interest and what aspects of them are most important for MLSs? I agreed to do a series of blog posts on some of the candidate topics, cross-posting links to them in other forums and asking folks for their input. This is the first. If you have other topics to suggest, email me or comment on any of these posts.)

NAR has received its first written complaint from a broker regarding an MLS's implementation of the VOW policy. My law firm represents the MLS about which the complaint was made; and we believe the matter is under control and that the MLS has complied with the policy at all times.

Nevertheless, we expect a few more problems may crop up with MLSs and the VOW policy before the CMLS meetings, so we will be prepared to discuss them then.

My suspicion is that problems will develop for a number of reasons.

"Confidential" fields and statuses

There still seems to be quite a bit of confusion about what it means for an MLS to designate a field or status as confidential under the VOW policy. I've posted on the issue here and here. Some MLSs are assuming that anything that does not appear on a "customer handout" format in the MLS is confidential. Others have adopted NAR's model rule Section 19.15 (or one of the other 'parity options'), but have not adopted parallel language elsewhere in their rules restricting the disclosure of those fields/statuses in all other media, including orally, which is what the VOW policy requires.

Technical implementation

To implement the VOW policy, MLSs really probably need to have four fields on the listing database to capture the seller's options under the VOW policy (relating to listing and address display on the Internet and relating to automated valuation and third-party commentary). Unfortunately, some MLSs have given confusing names to these fields, and listing input staff and agents doing input at brokerage firms may not understand their implications or even know about the new VOW rules. MLS staff also need to be sure that the seller selection for "no-display-on-Internet" prevents applicable listings from being displayed on Realtor.com, aggregators sites, and in IDX if the MLS will be excluding such listings from their VOW data feeds, which is what the VOW policy requires.

Listing brokers not understanding the new policies

In the near term, most brokers likely will not operate VOWs. Their agents nevertheless need to be aware of the policy so they can advise sellers about their options and provide a heads-up about how the seller's listing will be treated on other brokers' web sites. We've given "Virtual Brokerage Now" presentations for a number of MLSs to help with this education. Though the programs are well-attended and well-received, we really are just scratching the surface of the pool of folks who need to be educated.

Forms problems

I did not anticipate this, but forms have been a problem. Many state associations and some local associations and MLSs develop their own listing contract forms. Unfortunately, a number have not properly understood the policy and have created forms that do not accurately represent the seller's options.

The seller has four options:

withhold her listing entirely from the Internet (including VOWs, IDX, Realtor.com, and aggregator sites);
withhold her listing's address entirely from the Internet;
prohibit displays of automated valuations of her property adjacent to it on VOWs (this option only affects VOWs, though I expect the IDX policy will be changed to cover this at NAR's meetings in November);
prohibit displays of third-party commentary about her property adjacent to it on VOWs (again, I expect this will apply to IDX soon).

(One issue is whether these options should appear in the listing agreement, where the seller normally authorizes marketing in broad terms, or if they should be in a separate form. We think that both can work, but we have recommended the separate form for reasons I can explain in another post if anyone expresses interest.)

Among the problems with forms that we have seen, for example:

One association's form gives the seller options (i), (ii), and (iv), above, but inexplicably omits option (iii).
One association's form informs the seller with regard to options (iii) and (iv) that she can opt out of displays of automated valuations and third-party commentary "on the Internet." But those seller's options currently only extend to VOWs, not to IDX and certainly not to the many other web sites her listing will likely end up.
One association's form tells the seller she can opt out of "blogging." I presume this is meant to refer to third-party commentary. But the term "blogging" is both under-inclusive (because third-party commentary can take forms other than blogging) and over-inclusive (because blogging by the broker displaying the listing is permitted despite the seller's request, if the blog post expresses the displaying broker's professional judgment).

There are many others. Unfortunately, many listing agents do not understand the policy well enough to explain the options even when the forms are correct; the result is that sellers' expectations are likely to be frustrated – never a good outcome for the listing broker.

What other parts of the VOW policy do you think are likely to create problems? Have you had any issues with it you would like to see discussed?

(Tomorrow, I expect to do the final planned post regarding IDX sites being indexed by web search engines.)

-Brian

Search engines & IDX Part VII: Miscellaneous items

noreply@blogger.com (Brian N. Larson) — Fri, 24 Jul 2009 13:58:00 +0000

This posts covers a couple miscellaneous items I wanted to get out before doing the final post in this series.

"Static pages" and "RESTful development"

Mike Wurzer pointed out that my post on how IDX index fishing works is technically inaccurate. I asserted there that IDX index fishing requires the creation on the IDX site of static pages showing all the listing information. He explained that current web development methods are focused on creating sites that are easily indexed, and that they tend to include links (or what I have previously called 'sitemaps') that link to dynamic content. In this way, they get the benefits of having static, indexed pages, as I described them in Part IV. He described this as "REST" (which stands for "representational state transfer"). I did a little (admittedly, a very little) reading about "RESTful" development on Wikipedia. I also visited a number of web sites that deliver database-driven content; RESTful techniques appear to be in wide use throughout the web.

Based on these facts, I'm prepared to revise the implications of my earlier comments. There I said that "IDX sites are not naturally prone to be indexed by web search engines" and that "some brokers with IDX sites are intentionally using the listings of other brokers in IDX to fish for indexing." The implication is that brokers using these techniques are somehow departing from the norm. In fact, after Mike's helpful comments and a little research of my own, this appears to be the norm in the design of sites driven by database content. I'd be curious if anyone can offer evidence to the contrary.

Users posing as Google robots

Victor Lund made a comment on an earlier post noting a blog post that purports to show how anyone can pose as Google and thus index a site, even if it's behind a registration (which could have impacts on VOWs, if true). I reviewed the post, and it appears that the site has to allow this conduct. In other words, an IDX site that required registration before making certain content available, or a VOW, which is required to make visitors register and login before showing them VOW content, would prevent the technique described there. (The comments to that blog post clarify it.)

In any event, with IDX index fishing, we're talking about broker sites that want to be indexed, not ones that are avoiding it. Under the VOW policies, a VOW-operator may not allow the VOW to be indexed by web search engines.

More IDX index fishing may make it ineffective

Mike Wurzer pointed out on an earlier post that permitting IDX index fishing may actually lead to the method becoming less effective. This, as it turns out, may be a very important point.

Web search engines like Google apparently have "duplicate content filters" – these are designed to screen out web pages that contain content very similar or identical to pages on other web sites. The web search engines are trying to prevent what some call 'search engine spam' – dressing up the same content on multiple sites in order to increase search engine rankings or traffic.

I found several easy-to-understand summaries of duplicate content filters. (Here's one, though I don't claim it's accurate.)

The upshot: If IDX index fishing techniques appear on every broker IDX site, or even most of them, they may find that all their pages are being filtered as duplicate content by the likes of Google. Consequently, if IDX index fishing becomes widespread, it may also become largely ineffective. (Of course, I expect clever web designers and SEO contractors will look for ways around this 'problem.')

On the other hand, according to an article on the topic on Google's Webmasters/Site owner help, it looks as though Google may try to 'pick a winner' among the many sites that have duplicate content. In that event, I'd be worried that one broker with clever SEO might effectively monopolize the top spot. Such an advantage is still likely to be temporary, though, as other brokers, SEO experts, and aggregators like Realtor.com will be spending time and money to overcome it.

One more copyright issue

In response to my post about the legality of web search engines indexing web sites, Rob Hahn posted a comment to which I want to respond. Here is an excerpt:

Something I'm curious about... is the difference between the Kelly case... and the case of listings. A listing, after all, is more or less a compilation of facts about a property. It isn't a creative work, like an artistic photograph. Furthermore, what of the relationship between the seller and the listing agent? Supposedly, the listing agent is a fiduciary of the seller, whose home is the ultimate property at issue. Wouldn't the seller hold the ultimate IP to descriptions, likeness, facts of the house, and any grant of license to the listing broker is dependent on the seller? It's a tricky area, but how would you go about unravelling the original and base IP at issue -- that of the seller? How does that impact the whole IDX/Search issue? I rather think there's an impact here but maybe I'm overthinking it.

It's important to distinguish the rights of the seller under the listing contract, as the owner of the property and perhaps principal in an agency relationship with the listing broker, from the rights of the listing broker/agent in the listing record
under copyright law as author of creative content. Copyrights in the listing photographs and textual descriptions of the property belong to the human being who created them – usually, but certainly not always, the listing agent. (There are some exceptions – probably not important here.) And photos and descriptive text of the kind common in MLSs are both creative works from the perspective of copyright law. (So too is the "compilation" of the facts in the MLS database, but that's a topic for another post.)

Generally, then, the seller would have intellectual property rights in the listing record only if the listing contract (or some other writing) transfers them to the seller from the listing broker/agent – or, of course, if the seller had created the content in the first place.

We could spend a long series of posts on copyright issues in the industry, but I think readership would drop dramatically in that event... Maybe I'll see if I can summarize in a single post somewhere down the road.

-Brian

Search engines & IDX Part VI: Purpose of IDX and broker expectations

noreply@blogger.com (Brian N. Larson) — Thu, 23 Jul 2009 16:25:00 +0000

We're almost to the end of this line, I think. I took a break for a couple weeks to think more about this and to talk to some thought leaders (and also to do a little of the work for which I get paid ;-). In this post, I'll spend a little time on the history of IDX and what I think most brokers think its purpose is. I'll argue that IDX index fishing, though not illegal or immoral, 'breaks' the expectations of most listing brokers regarding IDX, but that we probably should find a way to permit it. In the next post, I'll talk about a couple technical and legal details. And in my final planned post (number VIII!) I'll discuss the specific proposals of which I'm aware and wrap it up.

A little history

I sometimes get described as "the father of IDX." I think that's an unfair characterization. Of course, anyone who's known me long knows that I am head-over-heels-in-love with the idea that I believe underlies IDX: "The best source for listing information on the web should be the web site of a broker participating in MLS." IDX facilitates this by ensuring that a broker with an IDX site can display nearly all the active listings in the MLS to visiting consumers. In almost all MLS markets (with some quirky and distressing exceptions), that means the broker's site can be unsurpassed as a source for listing information.

Back in 1999, when I managed the RMLS in Minneapolis/St. Paul, we looked at the model adopted at the broker-owned MLS in Seattle, Northwest MLS. They called their program "Broker Control." RMLS considered whether it should adopt the same approach. While I was on a three-month sabbatical, two key members of my staff, Rachel Wiest and Rebecca Younger, worked tirelessly with a small group of RMLS's leaders, most notably Phil Olson (a Coldwell Banker broker who sadly died just a couple years later at a tragically young age) and Henry Brandis (a leader at Edina Realty). Late that year, after I returned from sabbatical, we tweaked the rules to address the concerns of a big listing broker in our market.

As soon as RMLS launched IDX (we called it "Broker Reciprocity"), I started crowing about it on listservs (like those maintained by Internet Crusade) and via other means. I spent the balance of 2000 and 2001 traveling all over the country explaining IDX to large groups of brokers and MLS execs. In 2001, on behalf of RMLS, I wrote the IDX Implementation Guide for NAR, which NAR published in August of that year, just a few months before the implementation deadline of January 1, 2002. I also moderated a listserv at for the Internet Crusade on IDX or broker reciprocity issues. Over the years, I may have talked with more brokers and MLSs about the 'why' and 'how' of IDX than anyone else – I've heard a lot about their expectations.

The purpose of IDX

There is no definitive statement of the purpose of IDX. NAR did not adopt one with the IDX policy in 2000. The NAR IDX Implementation Guide did not articulate one in 2001. Even RMLS did not adopt an explanation for why it had done IDX. But the message of the leaders at Northwest MLS and at RMLS was very consistent:

The purpose of IDX is to ensure that brokers are unsurpassed as a source for real estate listing information on the web.

I looked back at my communications and presentations from the 2000-2001 era. Back then, we focused on IDX as a tool for brokers to make their sites 'sticky,' to keep the consumers on their sites once they arrived. We expected brokers would get the consumers to their sites using traditional marketing; brokers were already spending heftily on it, and adding a web address to display advertising would not increase their costs. That angle also helped to persuade large brokers, who held most of the listings, that it was cool sharing their listings in IDX with smaller competitors. Yes, the large broker and small broker sites would have all the listings, but the large broker's greater marketing budget assured more traffic per capita (with the capitae here being those of agents). (It turns out we were wrong about that, too. Some small and medium brokers get much more traffic per agent to their sites than even very successful large-broker sites.)

Until a consultant showed me IDX index fishing a couple years ago, I had never considered the question of listings serving as 'bait' to get consumers to broker sites from search engines. Of course, they were always bait for the big listing aggregators in principle; I just had blinders on regarding their utility for SEO on broker sites.

Expectations thwarted, but maybe they need to change

I'm spending this time on history and the way things were to make a point: I expect many brokers in IDX share my antiquated views about how IDX ought to work, and that those expectations shaped the brokers' strategies to participate in IDX. Now that brokers have built web strategies around IDX, they cannot respond to expectation-breaking uses of the IDX data just by pulling out of IDX, as some have suggested. Preventing other brokers using your listings in IDX means giving up your own IDX. I can't imagine a broker doing that.

Thus, while I don't think IDX index fishing is illegal or immoral, I do think it departs from the expectations of brokers contributing their listings to IDX, particularly in that a consumer using a web search engine to search for the address or listing agent name of one broker's listing may get a search result showing another broker's site at the top. Listing brokers are right to be distressed about this. Brokers who get inquiries on their web sites about other brokers' listing are terrible at replying, resulting in a disservice to seller, buyer, and listing broker. (WAVGroup published research to this effect in "The Consumer Online Real Estate Search Experience" in March; Victor, I could not find a link....)

Practically, though, it may not be reasonable to ask brokers to hamstring their web-sites when it comes to competing with the likes of Realtor.com and other aggregators, many of whom are engaged in index fishing themselves. Thus, I think we need to find a way to make it possible for brokers' IDX sites to be indexed by legitimate web search engines. That also means educating all brokers in IDX about what their new expectations should be.

We'll talk specifics in post VIII on this topic, but we have a few little items to address in post VII first.

-Brian

Search engines & IDX (note regarding renaming)

noreply@blogger.com (Brian N. Larson) — Fri, 03 Jul 2009 12:31:00 +0000

For the four or five of you actually following the lengthy discussion on search engine idexing of IDX sites, I wanted to give you a heads up that I have renamed the posts on that topic to shorten the names (removing the academic colons, collapsing the two levels of title into one, etc.), with the goal of making the posts easier to find in the post history for MLSTesseract.

Sorry if this causes any confusion.
-Brian

Search engines & IDX Part V: Is search engine indexing legal?

noreply@blogger.com (Brian N. Larson) — Tue, 30 Jun 2009 03:38:00 +0000

(Warning: possibly mind-numbingly boring and long legal content to follow. And I'm not even giving legal advice here.)

When I posted regarding indexing and search engine audiences and objectives, I mentioned that I could provide a short exposition of how copyright law sees search engines. Only Paula Henry had the courage to ask a lawyer to discuss a legal topic in her comment on that post. With only one taker, I thought maybe I'd pass on the chance to explain, but then I got thinking how this might fit in with later posts.

My knee-jerk instinct when folks asked, "Is it fair use if Google indexes listings on an IDX site?" was to say, "Of course. We love web search engine indexing." As it happens, when I began to think over how the prevailing case law treats web search engines in the copyright context, I started thinking I may have been a little hasty.

So, here it is. Kelly v. Arriba Soft Corp. (2003), from the Ninth Circuit Court of Appeals (the federal court that hears appeals from California and a couple other western states), is the leading case in analyzing copyright fair use in the search engine context.

Facts from Kelly

(For you lawyers, you can find the Kelly opinion at 336 F.3d 811 (9th Cir. 2003).)

Plaintiff Leslie Kelly was a professional photographer. Some of his images appeared on his web site and other sites to which he had licensed them. Arriba Soft Corp. operated an Internet image search engine. (It's name has changed and it's now available at http://www.ditto.com/.) Arriba's web crawler cached full-sized copies of the images onto Arriba's server. (See discussion of indexing and caching in previous post.) It then created 'thumbnails' (smaller, low-res versions) of them. It allowed visitors to search for images. Arriba Soft then displayed thumbnail versions of matching images. According to the court:

by clicking on the 'Source' link or the thumbnail from the results page, the site produced two new windows on top of the Arriba page. The window in the forefront contained solely the full-sized image. This window partially obscured another window, which displayed a reduced-size version of the image's originating web page. Part of the Arriba web page was visible underneath both of these new windows.

All of this detail, it turns out, was not necessary to the court's decision, as the court addressed only the question of Arriba's display of the thumbnail images. A technicality in legal procedure prevented the court from considering the question of displaying the larger-scale images.

Kelly never gave Arriba permission to copy his images and objected when he discovered the copying. Based on his complaint, Arriba took the images down and blocked indexing of the sites where his photos appeared, but he sued anyway. Kelly claimed violations of his exclusive rights to display, reproduce, and distribute his copyrighted works. The trial court granted Arriba Soft's motion for summary judgment (basically dismissing the case), both with regard to display of the thumbnails and the full-sized images, based on the fair use doctrine. Kelly appealed to the Ninth Circuit.

The Kelly court's basic rules of copyright law

Here are the basic rules of copyright law, as the Kelly court laid them out in its opinion.

The owner of a copyright in a work has the exclusive right to reproduce, distribute, and publicly display the work.
For Kelly to establish that Arriba Soft infringed his copyrights by reproducing his work, he had to show that he owned the copyrights and that Arriba copied the works. (As to the thumbnails, Arriba conceded that it had copied the images and that Kelly owned the copyrights in them.)
If the plaintiff establishes that the defendant has copied the plaintiff's copyright-protected work, the defendant may escape liability if it can show that the copying is "fair use."
Fair use is an exception to the general rule of copyright law, designed to permit creativity and productive output that rigid application of the copyright law might otherwise impede.
Whether a use is a "fair use" depends on the weight given to and interaction between four factors. The court can consider other factors, but it must consider the four identified in the Copyright Act.
The four "fair use factors" are 1) the purpose and character of the use, including whether the use is of a commercial nature or is for nonprofit educational purposes; 2) the nature of the copyrighted work; 3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and 4) the effect of the use on the potential market for or value of the copyrighted work.

Factor one: Purpose and character of the defendant's copying

First, just because Arriba's use was commercial, it did not necessarily lose on this factor. Quoting an earlier case by the U.S. Supreme Court, the Ninth Circuit said the central purpose of this factor is to determine

whether the new work merely supersede[s] the objects of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is transformative. (BNL's emphasis)

The Ninth Circuit said that the "more transformative the new work, the less important the other factors... become." As we shall see, this is an important observation. The court compared Kelly's purpose in the works ("intended to inform and to engage the viewer in an aesthetic experience") with Arriba's (intended "as a tool to help index and improve access to images on the internet and their related web sites"), and found Arriba's copying to be highly transformative. The court found that this factor weighed "slightly" in favor of Arriba, with the transformative use outweighing its commercial nature.

Factor two: Nature of copyrighted work

Some works warrant greater protection under copyright laws than others. For example, works of art generally get higher degrees of protection than compilations of facts. Because photographs of the kind that Kelly created are close to the "core of intended copyright protection," the court found this factor was slightly in Kelly's favor.

Factor three: Amount and substantiality of the portions used

Generally, the more that one copies of the original work, the more likely this factor will weigh for the plaintiff. But where, as here, copying the whole image is necessary for the transformative use, the court found this factor did not weigh in favor of either party.

Factor four: Effect of the use on potential market or value of the copyrighted work

This factor considers the extent of market harm caused by the defendant's use and the likely impact on the market for the original work that defendant's conduct would have if engaged in by many others.

The key here is that the thumbnail images on Arriba's site (the only ones considered in this opinion) were not in any way a substitute for any use that Kelly was making of his own images. They were too low-quality to be of use in any size larger than a thumbnail. The court noted, though, that this might not always be the case with photos. (In fact, in a later opinion, the Ninth Circuit would acknowledge that this factor might weigh against the defendant if it indexed images from a source that made a business of marketing images in thumbnail form.) It also noted that low-quality copies of other types of media (e.g., text, audio, etc.) might not always result in a win for defendants on this factor, either.

The court determined that this factor went for Arriba.

The tally of factors favors Arriba

The court noted that one factor went slightly for Kelly (factor two), one was neutral (factor three), and two went for Arriba (factors one and four) – the tally thus favored Arriba. It's interesting that the court took this approach for two reasons: First, the court seemed to use the transformative nature of the use (factor one) to make amount and substantiality (factor three) a 'push'; second, the court's analysis of the effect of the use (factor four) found Arriba's transformative use did not compete with Kelly's uses.

In fact, I think the very transformative nature of Arriba's use was the deciding "factor" in three out of four factors in the fair use test.

Is the current dust-up like Kelly?

Remember, my knee-jerk instinct when folks asked, "Is it fair use if Google indexes listings on an IDX site?" was to say, "Of course. We love web search engine indexing." But think about the Kelly court's focus on the transformative nature of Arriba's use and compare it to the IDX search engine situation. If a web search engine indexes the contents of an IDX search engine, is it transforming the content? Isn't it just copying the whole thing, possibly slightly transforming it, and then replicating the utility of the original? Don't three of the four factors now go against the defendant/web search engine?

I'm curious what you think. (You don't need to be a lawyer to weigh in on this.)

Copyright licenses and ROBOTS.TXT

But even if a web search engine indexing an IDX search engine is not fair use, I think the web search engine has one more defense – permission. In copyright law, as in real estate, giving someone permission to use your property is called "granting a license." (The term is less common in real estate law than in intellectual property – but it has a long history in 'dirt law.')

Having a license is a defense to a copyright infringement claim. If you say I copied your work, and I can prove you gave me permission, you lose your copyright infringement claim against me.

Licenses can be implied: that is, the copyright-holder can behave in such a way as to suggest that she is granting a license (even if she never actually says, "You may copy this"). Generally, she can revoke an implied license at any time.

I expect if an MLS sued Google over indexing an IDX site, Google would claim that that the IDX sites it indexed had given it an implied license to copy for at least two reasons:

By creating static pages of listings and detailed sitemaps, the IDX site was "index-fishing," the only point of which is to be indexed. Thus, the site owner cannot complain when the indexing actually happens.
Any web designer worth his/her salt knows that you can put a "ROBOTS.TXT" file on a web site or portion of a site to keep search engines away. If the owners of these IDX sites did not want them indexed, they could easily put the file in place, expressly revoking any implied license.

There's only one problem: Just like in real property, one cannot grant any more rights in intellectual property than one actually has. The broker who displays listings on an IDX site has a license from other listing brokers and the MLS to display their listings on the displaying broker's IDX site. But the broker does not have the right to license that content to other sites, including web search engines.

But listing brokers can do what they want, right?

Here's the key (and I think this is responsive in roundabout way to a comment Victor Lund posted a few days back): The broker operating an IDX site could certainly give a license to copy its own listings to web search engines. In fact, I don't think that NAR's IDX policy (or the MLS rules promulgated under it) prevent a listing brokerage doing whatever it likes
with its own listings.

Consequently, if a listing broker wants to put up an IDX site and index fish using its own listings as bait, I don't think any MLS is likely to complain. I don't think that would require an NAR policy or rule change at all. Just don't create static pages and sitemaps for the listings of your competitors.

-Brian

Search engines & IDX Part IV: "IDX index fishing"

noreply@blogger.com (Brian N. Larson) — Thu, 25 Jun 2009 15:08:00 +0000

IDX sites are not naturally prone to be indexed by web search engines like Google. Here's why:

Typical IDX search engines 'draw' pages of listing data dynamically or 'on the fly.' When the consumer enters her criteria on the search page, the IDX search engine goes into the database and pulls the data for matching listings. The IDX search engine then formats the listing data for display on the IDX web page. Before the consumer's search, there was no web page displaying the listing at 123 Elm Street. It was only when the consumer executed her search based on criteria that included 123 Elm Street that a page with information about the listing was drawn.

When Google's web crawlers encounter a web page for a typical IDX search engine, they index the contents of the IDX search engine's search page. But the Google web crawler does not execute searches on the IDX search engine, and consequently, the listings on the IDX site are not indexed at Google.

Clever brokers and technologists have found a way around this problem. They have their IDX sites draw a static page for each of the listings in the IDX database, and they may include links to all those pages from a 'site map' page on the IDX site. So every day, the IDX site creates a slough of pages, one for every listing in the IDX database. The pages are drawn in such a way as to be easy for Google to index. The display in question may be nothing like what is drawn for the consumer when she executes her search, and in fact, most of those pages will never be seen by any visiting consumer. That's not important to the site, though – what's important is web search engine optimization.

The first time I saw this practice, I was impressed by its cleverness. I was shown it by an industry consultant. The consultant had me visit the web site of ABC Realty and look at one of the listings of its agent Nancy Smith at 123 Elm St. (All names and addresses are changed in this example.) The consultant then directed me to Google. He said, "Imagine you saw the 'for sale' sign, remembered it was on Elm Street, and that the listing agent was Nancy Smith." So, I typed "nancy smith elm street" into the Google search engine. The top-matching entry (of the relevancy matches – there were no sponsored links) was for a page on Clever Realty, Inc.'s website. I clicked on the link, and up popped Nancy's listing, but on Clever Realty's site, not Nancy's site or her broker's. ABC Realty was credited as the listing broker (as required by the IDX rules) but all the contact information on the site was for Clever Realty and its agents.

This is what I call "IDX index fishing." And it is this practice that makes Google indexing of IDX valuable to the brokers who operate the sites (and the vendors who sell them their technology). To see how it works, try it with one of your own listings: Go to Google; for search criteria, use your name and the street name of one of your listings.

I cannot think of any reason for an IDX site to offer a static page for each IDX listing and a site map for those pages except to fish for web search engine indexing. Consumers do not browse listings by listing number or even street name (usually).

Note that IDX index fishing is not illegal or improper under the IDX rules of most MLSs, as long as the resulting static pages comply with the MLS rules. Note also that IDX sites are not the only sites that do index fishing – Realtor.com and most national aggregators also do it.

Let's look at another example:

I was looking for a cabin/lake home up north in Minnesota. I knew that I was interested in lakes around the town of Moose Lake. I found the name of Majestic Pine Realty, a Moose Lake broker, via a banner ad on a non-real estate site. So I went to Majestic Pine's site at http://www.majesticpine.com/ and viewed listings.
I found a listing I liked - http://www.majesticpine.com/viewListing.aspx?LID=237. I noted that it was on Soper Lake. I don't know Soper Lake, so I wanted to find out more about the body of water.
I googled "Soper Lake mn".
Here's where things get interesting. The first three matches of my Google search were these:
1. Soper Lake Fishing in Carlton County, Minnesota Fishing Works
  
  Soper Lake is a lake in Carlton County in the state of Minnesota. The latitude and longitude coordinates for this lake are 46.4272, -92.4916.
  www.fishingworks.com/lakes/minnesota/carlton/holyoke/soper-lake/ - Cached - Similar pages -
2. 1939 Soper Lake Ln, Holyoke, MN, 55749 - MLS ID#145561 - Single ...
  
  1939 Soper Lake Ln, Holyoke, MN, 55749 - Single Family Home - MLS ID #145561. 2 Bed, 1 Bath. Real estate listings and homes for sale on REALTOR.com®
  www.realtor.com/realestateandhomes-detail/1939-Soper-Lake-Ln_Holyoke_MN_55749_1108124784 - Cached - Similar pages -
  Holyoke, MN, Real Estate Listings and Holyoke Single Family Home ...
  Photo of 1939 Soper Lake Ln, Holyoke, MN 55749. $149900. 2 Bed, 1 Bath, 984 Sq Ft on 5.67 Acres. Property Type: Single Family Home. Save Listing ...
  www.realtor.com/realestateandhomes-search/Holyoke_MN/type-single-family-home - Cached - Similar pages -
  More results from www.realtor.com »
3. 1939 Soper Lake Ln, Holyoke MN 55749, MLS #145561, Weichert.com
  
  Features of this property include 1 level living, tongue and groove pine throughout, open kitchen, vinyl energy windows and attached garage.
  www.weichert.com/24732296/ - Cached - Similar pages -
I was gratified to find the first link, which told me a little about the lake I was interested in. But I was intrigued by the next two matches – one for Realtor.com, and one for the IDX site of a Weichert office in Minnesota, but both referring to my listing (actually, to Majestic Pine's listing)...
I then went to Google Images and did the same search (looking for pictures of my lake). Here are the first results:


1939 Soper Lake Ln, Holyoke, MN, ... 310 x 233 - 25k - jpg www.realtor.com [ More from p.rdcpix.com ]		1939 Soper Lake Ln 320 x 240 - 16k - jpg www.weichert.com [ More from images3.weichert.com ]		1939 Soper Lake Ln 320 x 240 - 24k - jpg www.weichert.com

7. Again I got Realtor.com and the Weichert site. This time I decided to check out the links. I clicked on the Realtor.com link and ended up with a view of the listing with the listing broker's name and phone number, but no link to back to the listing broker's page (I guess you have to pay extra for the site the Realtor family owns to link back to the listing broker's site). In fairness, there was no link to anyone else's site, either. On the Weichert page, I saw the name of the listing broker (pursuant to IDX rules), but all contact info and links go to Weichert.

8. I searched "soper lake mn" on bing and got similar (though by no means identical) results.

9. I decided to try one further check. What if I remembered just the town and number of bedrooms of my original listing? So I Googled "Holyoke mn 3br" – the listing I'm interested in comes up, displayed on Realtor.com (first matching result) and the Weichert site (third matching result.)

I think we've established that some brokers with IDX sites are intentionally using the listings of other brokers in IDX to fish for indexing by Google and other web search engines. In fact, I think that's the only reasonable explanation for the static pages and site maps on some of these brokers' sites.

The next question, then, is "So what?" If Realtor.com and third party sites like Trulia and Zillow can fish for web indexing, why can't broker IDX sites? I guess the answer depends on what you think listing brokers' rights are and what their expectations are about how other brokers will use their listings in IDX.

-Brian

Search engines & IDX Part III: Search engines indexing, audiences, and their objectives

noreply@blogger.com (Brian N. Larson) — Fri, 19 Jun 2009 20:22:00 +0000

Indexing

Search engines can return results quickly because they 'index' the content in the database. When a consumer searches on a broker's IDX site for a listing number that she saw in a print ad, the displaying broker's search engine finds the matching listing immediately. If the database were not indexed, it would have to do the equivalent of checking every listing record, asking, "Is this record #1234567?" Even at computer speeds, that would take a long time. The index speeds this process.

IDX and MLS consumer-facing search engines are usually indexed based on fields of data: Listing number, bedrooms, bathrooms, etc. This kind of indexing is common in relational databases. This works well, because the visitor to an IDX or MLS site can usually answer questions about particular data fields. E.g., how many bedrooms, bathrooms, what listing price range, etc.?

Web search engines like Google work differently, indexing whole web pages. They note things like the frequency of a word on the page, its propinquity to other words, and much more, using complicated indexing algorithms. That's why you get much better results when you provide multiple words in your search. "Hepburn movie leopard" is more likely to get the answer you are looking for than "leopard," or "leopard movie." (The answer I wanted was "Bringing Up Baby.") The web search engine finds pages that have more of your words on them. Proximity of the search terms matters, too. That's why when you search "marcy holmes," a page about the Marcy-Holmes Neighborhood Association comes up more readily than a page that refers to Marcy Smith's affection for Sherlock Holmes.

It's important to understand that for Google to perform the sophisticated types of indexing it does, it must 'cache' (or retain a copy of) pretty much every web-page that it indexes. This copying of copyright-protected content from web sites might raise copyright law issues, but the Federal courts have generally held that search engine indexing of the kind that Google does qualifies for treatment as 'fair use' under the copyright laws. (It's not clear whether ALL search indexing would meet the 'fair use' test, which is a multi-factor balancing test. Some cases have found that Google's indexing of images, for example, might not be fair use if it impairs the copyright-holder's ability to commercialize its work. (Comment if you want more of a copyright law exposition on the search engine issue.)

But how you index your search engine may depend a great deal on your target audiences and their objectives.

Search engine audiences and their objectives

Search engines can be targeted at broad audiences or narrow ones; and they can be 'destination' sites or 'conduit' sites. A search engine can be designed to redirect visitors to other sites that are the source of the indexed information – a conduit site – or it can be designed to present the information directly to the visitor without resort to other sites – a destination site. Search engines vary in their audiences and objectives:

Google is a conduit site with a broad audience. Web users of all kinds visit looking for information on topics of all kinds, and Google redirects them to the sites that are the sources of its information. (This is a generalization – Google does offer services that don't work quite this way.)
IDX search engines are destination sites with a moderately targeted audience. They attempt to attract and retain the interest of consumers interested in real estate in the geographic area(s) where the broker practices (still a pretty broad group); they do not 'refer' visitors to listing brokers' web sites, but instead attempt to build relationships with them through rich content. (More on this in another post.)
Real estate aggregator search engines generally have the same audience as IDX search engines (though perhaps with expanded geography). The extent to which they are destination or conduit sites varies greatly. For example, visit Realtor.com and try to get to the listing broker's web site from the average listing. Compare that to Trulia or Googlebase. (I presume it gets easier to get to the listing broker's site if she has paid Realtor.com for some kind of 'enhanced' service.)
MLS consumer-facing search engines have roughly the same audience (and scope as we noted before) as IDX search engines, but they vary in the extent to which they are destination sites. The Houston Association of REALTORS site, HAR.com, for example, has very high traffic numbers, probably because it is designed to keep consumers on the site. (Again, try to get to the listing broker's page for the listing you are viewing on HAR.com.) Other sites may function more as conduits.
The online legal research service Westlaw is a destination site with a relatively narrow audience. It indexes court opinions (among other things), principally for use by lawyers who are performing legal research. Westlaw's goal is to sell the password-only index itself (and certain ancillary services). It does not redirect its customers to the web sites of the courts whose opinions it indexes; it has cached, indexed, and annotated copies of all the opinions and delivers the whole kit and caboodle.

Next, we'll look at some SEO efforts of brokers operating IDX sites to enhance their appearance on web search engines like Google, including the practice I call "IDX index fishing."

-Brian