In Errol Samuelson’s view, the MLS industry is at a tragedy of the commons moment. “We have a cooperative where one person is acting in their own self interest and it could harm everybody else,” Samuelson, Zillow’s chief industry development officer told attendees of the Council of MLS’s (CMLS) Open House conference on Wednesday morning.
Samuelson cited economist Elinor Ostrom, who found that when situations like this arise, either everyone must come together and agree to cooperate or the government will step in to regulate. Samuelson said no one wants that outcome, but he fears the industry is nearing that point, citing the House Judiciary subcommittee pressing Compass International Holdings and Midwest Real Estate Data (MRED) to explain their nationwide private listing network partnership, along with the litigation surrounding the industry.
In Samuelson’s view the U.S.’s MLS system is the “envy of the world.”
“It is the reason we have transparency and amazing liquidity. It engenders competition because consumers don’t feel obligated to work with a big brokerage just to see what is on the market and, as a seller, I can easily get my listing in front of every possible buyer,” Samuelson said. “The challenge that we face right now is that there are some very loud voices in the room who are threatening and yelling and putting pressure on all of you to undermine that marketplace.”
According to Samuelson, every time an MLS makes a change like hiding listings from public view or hiding statistics like days on market or price changes, they are chipping away at the marketplace. This, Samuelson asserted, if it begins to negatively impact consumers, will lead to consumers going to their local legislators to complain, further increasing the likelihood that the government comes in to regulate the industry.
“The thing that I worry about [is that] if we continue to degrade the MLS by hiding information, those ultimate customers of yours [the consumers] are going to talk to their elected representatives,” he said.
Contributors vs. extractors
Samuelson also addressed growing criticism of Zillow and other real estate portals and technology vendors, which some have labeled “extractors” of MLS value that take without contributing. In response, Samuelson pointed to appraisers, who do not contribute listings to MLSs but provide a service without which the industry could not function.
“Last year, roughly three-quarters of sales required an in-person appraisal. Appraisers don’t contribute listings to the MLS, but they sure are part of the MLS system and they are your members. I would argue that they contribute even through they are not entering listings,” he said.
As for portals like Zillow, Samuelson noted that in the mid-1990s listing agents were paying the equivalent of $11 billion in today’s money to newspapers to advertise their listings.
“How much money do you think brokers are spending on newspapers today? Zero,” he said. “And the reason for this is because of sites like Zillow, [where] you can get free exposure for your listing. In essence, portals have given an $11 billion contribution back to listing brokers.”
AI and the MLS
While Samuelson is a strong supporter of much of what the MLSs are doing, an area he feels there could be some change is in how some have begun to regulate usage of their data in AI applications.
“Within the last few months we’ve started to see some MLS rule changes that fall into two categories. The first if that anything you create with AI with their data, the MLS owns. The second is that MLSs are blocking any usage of their data in AI. I don’t think any one of those will work,” he said.
This is because AI is enabling innovations that help agents better serve consumers, and Samuelson warned that agents will find workarounds if they see the MLS as standing in the way. Instead, he said MLSs should focus on AI governance, noting that Zillow has created walled gardens that prevent MLS data from flowing back to large language model providers.
“I think the key is not to say no AI, but to be thoughtful about what guardrails you are putting around AI,” Samuelson said.
At the end of the day, however, Samuelson said the MLS works very well.
“The majority of your members want the MLS to continue to function as a cooperative, but there’s a lot of noise right now,” he said. “This may sound hyperbolic, but in the next 12 months, you as CEOS and executives are going to be asked to make decisions that I think could have profound and lasting consequences for the industry. There are a lot of loud voices that are threatening and yelling at you, but those voices are actually the minority.”