The owners of real estate sales data in Canada have gone to great lengths to restrict unauthorized access to and use of that data, but the Competition Bureau and many within the industry have long argued for freer access to data to enhance competition.
The matter seems far from settled despite years of litigation and rulings. As a result, some real estate boards continue to file legal notices against property technology companies that try to gain access to their data and remind them of the integrity of their digital infrastructure.
Real estate transaction and listing data in Canada is disseminated via the Multiple Listing Service (MLS) systems, which are owned and maintained by the real estate boards. A collaborative agreement facilitates the sharing of data between and amongst boards. Realtors usually register with one or more boards and then become eligible to list properties on the MLS system, which can then be reviewed by prospective buyers and their agents online for free.
The boards, of course, are motivated to protect the integrity of data they collect, maintain and disseminate, either by themselves or with help from others. The improper use of that data or access by unauthorized entities is a valid industry concern, but so is the commitment to promote competition and prevent monopolies.
A recent industry-sponsored paper by Paul Johnson and Anthony Niblett pointed out the success of the MLS system lies in its “network effects.” As more homes are listed on the system, more buyers are attracted to it, which motivates more sellers to list their properties. This reinforcing loop of more listings leading to more buyers leading to even more sellers creates the so-called network effect.
The authors offer three recommendations to preserve and expand this system’s value. First, it recommends realtors be required to list all properties on MLS. Currently, the system operates as a voluntary listing service, so realtors can decide to handle the transaction alone or within their brokerage.
Before the real estate industry embraced the internet, the practice of keeping listings off the MLS system was prevalent among large brokerages that would double end the sale by having agents from the same brokerage represent the buyer and the seller. However, such practices are unlikely to be in the best interests of consumers, so requiring all properties to be listed (with some exceptions) is a worthwhile consideration.
Their second recommendation is that MLS “must continue to leverage highly effective portals” through which real estate data is disseminated. The most recognizable real estate portal in Canada is Realtor.ca, which is operated by the Canadian Real Estate Association, the sponsor of the study.
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At the same time, proptech companies and digital–first brokerages also provide listing data with additional information about neighbourhoods and previous transaction prices through virtual office websites. Portals generate competition, inform buyers and draw even more attention to listings. The industry, therefore, benefits from such portals.
The third recommendation is about limiting access to MLS data. The authors said unfettered access to listing data might discourage sellers from listing their property on MLS, but we believe such privacy concerns are a red herring.
Sellers willingly consent to have photographs of their bedrooms and washrooms made freely available online to anyone in the world when they list their properties on MLS. If privacy was a concern, sellers would be more cautious. Yet the millions of homes listed on MLS containing photographs, 3-D renderings of floor plans and videos suggest privacy concerns are not a deterrent.
The authors said “any entity whose access to MLS Systems is used for the transaction of real estate would presumptively create value and should (continue to) have access.” But realtors are not the only ones who create value. Most real estate transactions do not take place without home inspectors, lawyers, financial institutions and others getting involved.
With advances in artificial intelligence and communication technologies, the real estate sector is ripe for constructive disruption that will benefit consumers while safeguarding the intellectual property rights of those who collect and store real estate data. Restricting the definition of value-adding entities to those who market real estate is not in the best interest of consumers.
Murtaza Haider is a professor of real estate management and director of the Urban Analytics Institute at Toronto Metropolitan University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website, www.hmbulletin.com.