Zillow is probably breathing a huge sigh of relief that NAR's "Logogate," the dues increase, and DocuSign IPO shifted Realtor ire away from their Instant Offers product. As I discussed in a prior article, I don't think Instant Offers is worthy of fear and, as I see it, the success or failure of products aimed at iBuyers point to a future where we'll have better insight on how much (like, what percentage of the sales price) consumers will actually pay for convenience. Instant Offers is only one platform, of course, and it's got some catching up to do, but it got me thinking about what the net effect might be if even a few percent of listings go the iBuyer route.
Before I dig in on how iBuyers could affect MLS data, I have learned from working with MLSs around the country that unless you begin by defining what the MLS is supposed to be, all too often you wind up with differences in belief of what the purpose of the MLS is. Not having a common understanding leads to different expectations, different goals, and different measurements of success.
The MLS is Nothing Without Quality Data
The express purpose of the MLS is to facilitate a unilateral offer of cooperation and compensation between real estate brokers. But this definition is meaningless without listing information that the offer can be attached to. And since poor quality listing information makes a blanket offer of compensation and cooperation nearly useless because it's being leveraged on garbage data, "listing information" requires the word quality as a conditional modifier. For the purposes of this article, when applied to MLS listing information, "quality" means comprehensive, accurate, and timely. These are the three legs of the stool that support the offer of cooperation and compensation, because without them the offer itself is meaningless.
iBuying Is a Simple Trade-off; Money for Convenience
iBuyers are a new, niche market that in my opinion will grow into a significant, though not dominant, maketshare. Boiled down to its essential element, the iBuyer value proposition is simply trading dollars for convenience. As I discussed above, the unknown is how many dollars consumers will pay for the convenience of a secure offer, not having to prepare the property for showings, being able to move quickly, etc. Also unknown: Can the model survive a downturn in the economy? How many iBuyer products will consumers support?
How Much Will iBuyer Sales Push Prices Down?
How I think iBuying will affect MLS data is that the MLS currently has no means of tracking or measuring the tradeoff in dollars for convenience in the transaction. If a seller accepts an offer from an iBuyer they are making a judgement that whatever they are paying in commission, fees, etc., is worth it for the convenience, speed, security, or whatever motivated them to sell. That calculation of the difference between true market price and what the seller accepts for their home in the name of convenience can be estimated, but is not a data point currently captured by the MLS. As a result, sales of iBuyer properties will show up in MLS comparative data with sale prices skewed lower than market value - and with no explanation or understanding of why "X" property sold for "X" amount less than market value. Initially, this issue will likely only affect local comps in the same area as the iBuyer sale, but significant numbers of iBuyer sales will cause a net effect of decreased home sale prices on a local, and possibly regional basis.
An Opportunity for CMLS to Lead
Without accurate measurement of the effect of iBuying on sales price the MLS will not have a real idea of how much data is being affected. I see this as an opportunity for the Council of MLSs to display leadership by making concrete recommendations on how MLSs can create new fields to permit tracking of information related to iBuyer properties without stigmatizing the property. In my mind, the only way to capture legitimate analytics and have a true picture of how iBuyer properties affect MLS data is to require the fields when reporting the sale of the listing.
Remember that iBuyers are serving a need expressed by consumers so the MLS should be facilitating the ability of agents to meet the consumer's need - and also ensuring the continuity of their mission to provide comprehensive, accurate, and timely listing data.