The Canadian Real Estate Association (CREA) is often quoted in these pages, whether we’re offering housing market information, forecasts, benchmark prices or even, sometimes, an opinion on how to create better housing policy. Just about everything we do in terms of information and analysis is possible because realtors provide property listings to their local real estate boards’ Multiple Listing Service (MLS), where it is aggregated and categorized. Listing information is then uploaded almost instantly to Realtor.ca for consumers to view.
MLS listings are the raw material for the MLS Home Price Index (HPI), which is used by the OECD, World Bank, IMF, and others abroad, as well as by our own financial institutions and organizations, like the Bank of Canada and Statistics Canada, who use it in their calculation of the Consumer Price Index.
Recently, we commissioned a paper entitled “Multiple Listing Services in Canada: How to preserve and expand value.” Authored by Paul Johnson of Rideau Economics and Anthony Niblett of the University of Toronto, it is publicly available on crea.ca. We wanted to explore how the MLS provides value to consumers, what sorts of things may threaten that value and what could be done to maintain and enhance the MLS’ integrity and credibility.
Johnson and Niblett conclude that having more property listings on the MLS increases value for both buyers and sellers through “network effects.” As you might expect, a real estate marketplace with more homes for sale will attract more buyers and, in a virtuous circle, a marketplace with more buyers will attract more sellers.
One obvious way to destroy these valuable network effects is to remove listings from an MLS. Over the past few years and especially during the recent peak in housing markets, we have seen an increase in some practices that result in listings being lost to the MLS — a challenge that affects the comprehensiveness of the data.
These practices included abuse of “coming soon” marketing, where pre-listing advertising went beyond promotion of a property prior to it being available for sale on the MLS to a deliberate effort to sell a property before it ever reached the MLS or Realtor.ca. Another was an exploitation of “exclusive” listings, i.e., listings quietly marketed by the selling agent to an exclusive list of clients and not placed on the MLS at all.
When used improperly, these practices may not be in the best interest of the client, even if there may be valid exceptions where a home seller wishes to be excluded from the MLS: when Drake decides to sell his home, for instance, he likely won’t agree to public showings or open houses.
Another way the value of the MLS could be destroyed is through a deliberate attempt to take listing information to create an alternate system that ultimately would reduce total listings over time. There’s obviously nothing wrong with a competing service. But Multiple Listing Services are real estate marketplaces for professionals who trade in real estate and a competing service built on MLS listing data would be like Airbnb asking the hotel industry for their reservation software. Multiple Listing Services were created at significant cost and with sustained effort by realtors to enhance the efficiency and effectiveness of real estate transactions. And they only succeed if actual realtors who trade in real estate contribute value to the system by either adding home listings or bringing buyers to the table.
The same goes for the relatively new phenomenon of companies joining an MLS System as “brokers” to access property listing data but then not contributing listings to the co-operative and maybe not even trading in real estate. As brokers in name only, they could reduce the network effects that create value for consumers.
Finally, a host of hackers, data-scrapers and similar actors either break existing sharing rules or attempt to steal copyrighted material for their own use. CREA and local real estate boards and associations devote significant resources and effort to protecting the integrity of the information they are entrusted with by realtors and their clients.
The problems we’re facing are not uncommon these days. New technologies have made it more difficult to protect investments that consist mainly of information. How do we intend to address these threats to the value of the asset we’ve built up? We will continue innovating to enhance value for consumers by making it easier to find the information they need to support their real estate decisions. We’ll also introduce new rules that will limit misuse of “coming soon” marketing and require homeowners to sign off on exclusive listings — once they’ve been given an explanation of their options. And we will educate stakeholders, including actual and prospective homeowners, about the need to maintain the integrity of a world-class system that drives value to Canadians in what is often an emotional, expensive and complex transaction.
Michael Bourque is CEO of the Canadian Real Estate Association.