Multiple listing services that have been invited to participate in a national property database being constructed by the National Association of Realtors must now weigh similar offers from First American Corp. and Move Inc., which say they, too, would like to license historical listings data.
Unlike NAR subsidiary Realtors Property Resource LLC (RPR), First American is offering to share revenue with MLSs that enter into licensing agreements.
First American says it’s willing to pay MLSs regardless of whether they also decide to feed data to RPR, although the company is offering more generous revenue splits with MLSs that provide historic data to First American on an exclusive basis, according to those who have heard the company’s pitch.
Further complicating the situation, Realtor.com operator Move Inc. is also seeking sold and expired listings data from MLSs for display on its public-facing sites, in exchange for the use of a new search tool that the company says could also facilitate data sharing between MLSs.
Representatives of First American and Move pitched their separate proposals to MLS executives at an industry conference in Arizona last week, according to several who attended.
"I think it makes what was once a one horse race a two- or three-horse race," said David Charron, president and chief executive officer of Rockville, Md.-based Metropolitan Regional Information Systems Inc. (MRIS). "It looks to me like it’s going to warrant a big response from RPR. I can’t see people aligning themselves with RPR exclusively."
If the aggregation of active for-sale listings at third-party sites like Realtor.com, Zillow and Trulia has revolutionized the way consumers shop for homes, the collection and use of sold and expired listings data represents a new frontier.
NAR created its RPR subsidiary in November, purchasing technology and data aggregation services from LPS Real Estate Group in order to build a national property database that will include listings data from MLSs, public property records and other other contextual information.
Only Realtors and members of participating MLSs will have access to the database itself, NAR says, but RPR intends to generate revenue by selling analytical products such as market reports and property valuations to Wall Street investors, lenders and government agencies.
RPR says automated property valuations that incorporate listings data from MLSs will be more accurate than those relying primarily on public property records, which lack the most recent sales. If enough MLSs participate, RPR could generate $60 million to $80 million in annual revenue, company executives said in launching the venture last fall.
While RPR is offering to provide access to the database to participating MLSs, company executives don’t expect the company to become profitable until 2011, and say NAR must first recover roughly $21 million in startup costs before they will discuss a revenue split.
But First American, which also sells analytics products to investors and lenders through subsidiary First American CoreLogic, apparently sees some merit in the concept — and is willing to share revenue with MLSs right away.
Although the company would not comment for this story, Ben Graboske, chief executive officer of First American subsidiary MarketLinx Inc., gave a presentation in Arizona last week in which he said First American was prepared to share revenue with MLSs that provide listings data.
As a provider of property records and software to MLSs, MarketLinx already has ties to many major MLSs, and First American is already collecting listings data from some.
That makes First American a credible rival to RPR — and a threat to RPR’s future, said Brian Boero, a consultant who advises companies in the real estate industry on technology issues.
"LPS and RPR have a long, tough slog ahead of them," Boero said. "For the business model to work, they need to have significant nationwide coverage. LPS can’t go sell the derivative (analytic) products if they only have a dozen markets. They need near, or full national coverage. If First American comes out and says, ‘You don’t have to wait five years, we will cut you in on a slice of the licensing fees from day one,’ they amass coverage much faster than RPR."
At the the Real Estate Connect conference in New York City last month, RPR President Marty Frame said the startup company hoped to sign up half of the nation’s roughly 900 MLSs by the end of the year (see story).
Frame downplayed the impact of First American’s offer to MLSs, saying it validates RPR’s business model, and "draws a clear competitive distinction between who benefits" from the respective offers.
First American’s offer, Frame said, does not appear to offer tools to agents and brokers — it’s a straight revenue-sharing agreement with MLSs in exchange for their data.
RPR, on the other hand, is promising to provide participating MLSs with access to the public property records and other information in the database, and tools for agents and brokers to generate comparative market analyses (CMAs) and property reports for their clients. …CONTINUED
"I think it’s good news for us," Frame said. "They validated the business model … and competition is good — it keeps everybody sharp."
Move search tool
Move, for its part, doesn’t see its offer to provide a sophisticated search tool to MLSs that provide it with historic listings data as competing with RPR.
The "natural language" search interface would allow MLS members to search for listings using keywords, including not just the number of bedrooms and bathrooms, but even specific attributes like the brand of refrigerator.
"We can take whatever is typed in in English, tell what it is, and return the search results," said Errol Samuelson, Move’s chief revenue officer and president of Realtor.com. "It knows that a patio is similar to a deck or a veranda, or that when you say fireplace, did you mean a fireplace or the town Fireplace, N.Y.?"
The search interface can also cross reference listings with school district boundaries, environmental data and other contextual information, and facilitate the sharing of listings between cooperating MLSs, Samuelson said.
"To the extent that you have neighboring MLSs who decide they wish to allow reciprocal access (for members), you could do that very quickly," Samuelson said.
What Move would like in return "is not money, but better, richer data we can display on our public Web sites," including Realtor.com, Samuelson said.
"In particular, we’ve found that consumers are interested not just in homes for sale, but homes that are no longer for sale — homes that sold, when it was sold, and who was the agent representing both the listing and the buyer," Samuelson said. "Or if it didn’t sell, they would like to know whether it was withdrawn, for example."
Providing that information to consumers would benefit MLS members — real estate agents and brokers — Samuelson said, because it could help them generate leads.
"If I’m an agent who primarily works with buyers, on most consumer sites I don’t get a lot of coverage," Samuelson said. "If I do 25 transactions a year, and 20 are on the buy side, it’s like I don’t exist."
Although Move was initially involved in developing the RPR platform for NAR, NAR ended up changing course and buying much of the technology behind the property valuation site Cyberhomes.com from LPS to power RPR.
Although Samuelson said "there is some overlap of the technology" Move supplied to NAR during the initial development phase of RPR, "I see this as being quite different from what RPR is doing," as Move is not seeking to create analytic products from MLS data for sale to nonmembers.
In any event, Samuelson said Move retained the rights to the platform it developed for RPR, much of which predated the project.
Although the natural language search-engine capabilities Move is offering to MLSs are fully built, no licensing agreements have been drawn up.
In demonstrating the search engine, "We just said here’s the technology, let’s talk about it (how an agreement might be structured)," Samuelson said.
Boero, who saw a demo of Move’s new search-engine platform in November, said the business model is the biggest question.
"I would say the Move technology is very impressive — I’m just not quite sure what the business model is that they would propose to MLSs — where does the revenue come to share?" Boero said. "Move doesn’t make (money) selling data to Wall Street and the government."
MRIS’s Charron said Move offers "an incredibly capable alternative for markets that want to have more control over their destiny … and First American (offers an option for) monetization."
RPR licensing agreements
RPR has said it hoped to launch Beta tests next month at about a dozen MLSs, with 25 to 50 users at each MLS. Depending on the results of Beta testing, all members of those MLSs would get access in May, with additional MLSs coming on board in the second quarter, the company has said. …CONTINUED
RPR has begun sending proposed licensing agreements out to MLSs that are interested in participating. Frame said that as of last week, RPR had received requests for licensing agreements from about 100 MLSs, although only a "few" have signed on.
Many MLSs appear to have questions about partnering with RPR that aren’t addressed in the licensing agreements. Those questions go beyond the issue of revenue sharing. Some MLSs want more details about how their data would be used.
Bob Bemis, chief executive officer of Arizona Regional MLS Inc. (ARMLS), said that conceptually, RPR is "long overdue and much needed."
The interface the company has demonstrated at NAR’s annual convention and other forums "looks equally awesome, if it works as the demo works and is scalable to millions of users per day," Bemis said.
But after receiving a proposed license agreement from RPR, Bemis said he still has questions about what RPR will do with the data, and what ability MLS will have to to approve or disapprove products or services that go beyond the "Realtor valuation model" (RVM) valuations RPR says will generate revenue for the company.
"If reports that identify an individual listed property are contemplated, as apparently they are, how will we get permission of the seller to convey that information and transfer that permission (or lack thereof) to RPR?" Bemis said. "There are serious privacy concerns that must be addressed if such detailed information is to be sold to mortgage holders."
Cameron Paine, chief executive officer of Connecticut Multiple Listing Service Inc., said the MLS’s board of directors "does not feel they have enough knowledge of how our data will be used by RPR to make an informed decision."
Steve Sullivan, chief executive officer of the Metropolitan Indianapolis Board of Realtors (MIBOR), said the MLS’s board has had a meeting about RPR "and still (has) a number of questions, most of which would be left to negotiations with RPR" and not "negotiated in a public forum."
Charron sees "the notion of a property-centric repository of information is just an extraordinarily good idea, and I think the way Marty designed (RPR) is nothing short of elegant."
"The business model that surrounds it, though, is not at all attractive to me," Charron said.
"The agreement, according to people wiser than I am, says ‘You give us all the data, we’ll let you know what we want to do with it,’ " Charron said. "That’s good work if you can find it — we are not interested" in signing the agreement in its present form, he said.
Brian Larson, an attorney who advises real estate companies on contractual issues, recently blogged that he was "flummoxed" that the contract offered to one MLS "allows RPR to create almost any kind of product with the listing data" but "basically does not promise to do anything for the MLS or its subscribers" in return.
"If this is all there will be, I can’t imagine any MLS signing it," Larson wrote.
Attorney John Rees has also posted a long list of issues he says MLSs need to consider before entering into a licensing agreement with RPR or other companies, including whether the agreement "expressly provide(s) what the licensee may not do with the listing content."
RPR’s position has been that it will sell only "derivative" analytics products, such as Realtor valuation model (RVM) property valuations, to third parties.
Frame said the licensing agreements that have been provided to MLSs so far can serve as the basis for further discussions.
Instead of providing a narrow, detailed description of how RPR is conceived today, Frame said the licensing agreements were drafted with the intention of providing enough flexibility to provide additional services to participants, without having to go back and get approval every time a new issue comes up.
Rather than spelling out exactly what RPR will be, the licensing agreements specify what RPR will not do with the data it receives, Frame said.
RPR is trying to avoid a "logistical process where every time a member promotes an idea they’d like to see get done by RPR, we have to cycle it through 900 MLS agreements, which is odious from a logistical standpoint," Frame told Inman News.
RPR’s relationship to MLSs is "not typical vendor situation — it’s a difficult concept, so I understand why folks blogging about it may not be able to see it in any other context," Frame said. "Probably 99 percent of the agreements they review are for vendors, so that’s the template." …CONTINUED
But consultant Michael Audet of the WAV Group Inc. wonders whether RPR will be able to keep its promise to provide free services — like public property records and tools allowing MLSs members to produce their own analytics — if the company’s business model doesn’t pan out.
In a white paper, "Realtors Property Resource: To Join Or Not to Join — That is Not the Only Question!" Audet says that while the addition of MLS data does make automated valuation models (AVMs) more accurate (but doesn’t create a new market), it simply adds another input into the existing AVM model.
If RPR can’t generate the revenue it’s anticipating from producing "RVMs" and other analytical products, MLSs should ask themselves whether the company will be able to continue to deliver the promised services free of charge, Audet wrote.
Frame said that offering a one-year licensing agreement is one way to address such uncertainties about the future — including the possibility that RPR will be a runaway success, and participating MLSs will want to share in that success.
"We’ve said really clearly that we are here to provide services to the members, without charging fees of any kind," Frame said. "We will have one-year agreements, and everyone will have access to our financials. If (RPR is) a phenomenal success, the members (NAR) will be repaid first, and everything will be transparent. A time will come to deal with that (revenue sharing), and that’s when we’ll do it."
But Audet thinks RPR could address the issue in its licensing agreements by promising in writing to share revenue after NAR has earned back its investment and achieved "some reasonable amount of profit."
Diane Ruggiero, chief executive officer at Heartland MLS, which serves the Kansas City area, said the MLS is scheduled to participate in the RPR Beta test but has issues that would need to be resolved before signing a content licensing agreement.
Heartland MLS would like to participate in RPR, Ruggiero said, citing "cool tools for members, better and enhanced information for MLS subscribers, (and a) potential revenue stream for NAR that could lead to lower dues or better services for members," as pros.
But Heartland remains uncertain about the long-term impact on the MLS and its members, and the licensing agreement "as presented needs lots of work before it can be acceptable to our MLS," Ruggiero said.
One issue for Ruggiero is potential liability to Realtors "from sellers who may not realize that their information is being used in ways they did not intend."
Annie Ives, chief executive officer of the Combined L.A.-Westside MLS (CLAW), said the MLS has not seen a proposed licensing agreement from RPR and has no plans to participate in the initiative.
CLAW currently provides its members with access to public property records and valuation tools through ValueMap, a service of First American CoreLogic.
"I looked at LPS product and it is still in its infancy stage," Ives said.
Ives said CLAWS currently provides First American with access to its data for First American to utilize in the products that they provide to its members — only 40 percent of whom are Realtors. But CLAWS has "no plan to license our data" to First American for other purposes, she said.
Jim Harrison, president and chief executive officer of Sunnyvale, Calif.-based MLSListings Inc., said the MLS is not only planning to participate in the Beta test, but is looking to negotiate a three-year licensing agreement with RPR.
Harrison serves on RPR’s advisory group, and MLSListing’s chairman, Jeff Barnett, serves on RPR’s board of directors.
While one year is the default in the agreement RPR is offering to MLSs, it "was not intended to represent that RPR was only interested in one-year agreements," Harrison said.
"One year is barely enough time to roll out and promote a new platform, and although I do typically only offer data licensing agreements for one year, this arrangement is for a product we would connect to through our MLS and the effort involved deserves a longer term for a business relationship like this."
MLSListings is already a First American client, Harrison said, "and we have an excellent relationship with them."
But in evaluating licensing agreement with First American, "the use case for the data would be more important than the money," he said, adding that the MLS’s members have placed limitations on the use of their data.
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