Virtual Realty Group’s Michael Lissack on NAR’s business model

Matthew Blake: Hello, and welcome to “Houses In Motion,” part of HousingWire Daily. I’m your host Matthew Blake, Senior Real Estate Reporter for HousingWire. For this episode, we were joined by Michael Lissack. Michael has had an extremely accomplished and varied career in several fields, including academics, finance, and publishing. To give one example, Michael is the former president of the American Society of Cybernetics. Michael is perhaps best known for serving as an FBI informant while working as an investment banker for Smith Barney in the 1990s. His work led to a year’s long investigation into dozens of Wall Street investment banks and how they were pricing bonds sold to state and local governments. The Wall Street firms ended up paying more than $120 million in federal investigation, but the probe also effectively marked Lissack’s end on Wall Street.

In the 20 years since, Lissack has maybe surprisingly dived headfirst into real estate among his many other pursuits. He’s operated as a real estate agent in Salem, Massachusetts in Naples, Florida, and served as a broker for the company Virtual Realty in several states. Lissack’s distinctive background has led to some distinctive opinions. He is unsparing in his criticisms of the National Association of Realtors, the trade group that represents agents and brokerages, but Lissack’s proposed solutions to the problems he sees might surprise you.

I learned a lot from our conversation, and I think some of it made me rethink the questions I ask people who work in real estate. If you have any thoughts on our conversation, please email me at [email protected]. Michael, welcome to the show.

Michael Lissack: Thank you for having me.

Matthew Blake: So you have an extremely varied resume. What led you into real estate?

Michael Lissack: Oh, this is the traditional story of probably more than half the people that are in the business. I moved to Florida. I bought a house. I was aghast at how much I paid my realtor. And I said, “I didn’t get anywhere near that level of service. I can do better than this.” So I went and took a class, got my license, and discovered that in Naples, Florida, 25 odd years ago, nobody knew anything about the internet. So I had an instant niche, which was I was the go-to person for out-of-state people looking for homes on the internet, and I did very well, and it sort of went on from there.

Matthew Blake: And so right now you are practicing in Naples, but then you’re also an agent in Massachusetts, right?

Michael Lissack: Well, actually I’m not in Naples. My father passed eight years ago, so I’m in Massachusetts. So when I sell homes in Massachusetts, I am our managing broker for Washington, Oregon, Connecticut, and Oklahoma.

Matthew Blake: How does that work?

Michael Lissack: I’m both licensed in Florida and California.

Matthew Blake: How are you able to be the broker of record in, say, Oklahoma and Washington? How does that work? And what are, sort of, your duties? Like, what kind of questions does a Tulsa, Oklahoma agent come to you about?

Michael Lissack: Well, the main way to do this is this other lovely thing called the internet again. So the biggest issue is just making sure everyone is aware that I’m on Eastern Time, and please don’t call me at 1 in the morning. And I can assure you I had an Oregon agent who called at 1 in the morning last night. So, yes, that is the biggest issue. I won’t mention what firm it was from. It wasn’t mine, but I did get a call at 1 a.m.

I supervise agents. I read paperwork. I answer questions. I talk to the MLS. I participate sometimes in realtor board activities, depending on what they are. Somebody else from the firm is in charge of recruiting. The Virtual Realty Group is in about 30 states, and we’re 100% commission shop of basically experienced people who know what they’re doing, and they have some managers that are like me that are there if you need a resource. And we have probably the strangest hiring rule in the business, which is anyone we think of hiring is allowed to cost senior management one hour of sleep a year. If we think you’re going to cost us more than that, we won’t hire you. If you do cost us more than that, we will figure out how to get through the problem and then we will politely suggest it’s time for you to go elsewhere. We’re not making very much as a 100% commission shop, so it isn’t really worth it to have sleepless nights. It’s a great rule. We’ve got about 800 agents across the country, and it works.

Matthew Blake: Wow. How long has Virtual Realty been around for?

Michael Lissack: Almost a dozen years now.

Matthew Blake: Interesting. And so it sounds a little similar to eXp that it’s virtual, but, I mean, describe a little bit more the business model. I guess you’re collecting fees from the agents but then giving them 100% split.

Michael Lissack: Correct. I mean, a brand new agent for a couple of deals might have to pay us 10% or 15%. In general, fees are a few $100 in transaction. The membership fee to be part of the organization is a couple $100 a year. And as I said, everyone has experienced some part-time but, no, we are nothing like eXp. We have no avatars. We have no virtual world. We have no stock. We have no, “Oh, I want to recruit you to the company,” because it doesn’t generate anything if you do that other than adding somebody to the family. We’re interested in being effective, helping you get your business done, and letting you continue to have a meaningfully real life.

Matthew Blake: So when you started in real estate 25 years ago, you know, I think 25 years ago was when my parents first got the internet. So the internet was just starting out. What has changed in real estate in those ensuing 25 years? Like, what is the most significant change that you’ve seen in terms of how customers do real estate and how agents do real estate?

Michael Lissack: Everybody’s got access to Zillow and realtor.com, etc. And there wasn’t really, shall we say, housing porn back then. Although as somebody who’s done several episodes of “House Hunters” myself, I am guilty of participating in the housing porn model. But the general availability of what’s on the market, what houses are worth, what people do inside of houses, how people do things in the real estate world, 25 years ago most of that was alien to the vast majority of people you dealt with, and now it’s very commonplace. My mother watches two or three hours of HGTV a day.

Matthew Blake: With housing generally as this entertainment product, when could you first spend hours flipping through pictures of homes you might never buy?

Michael Lissack: Well, if you’re in certain circles and have the money to do it, you can always look at “Architectural Digest.” So that was going on for the past 50 years. But in terms of it being popular, I would say it started in earnest maybe 15 or 16 years ago. And by 7 or 8 years ago, it was an enormously prevalent thing. It is very strange to encounter a prospective client who has no idea what houses are worth, has no idea what they look like on the inside. They may not know a whole lot about how real estate transactions are done, but they’ve seen a lot of information on the internet and on TV.

Matthew Blake: So how does that change your job then as an agent? And does that make your job maybe less important or maybe like a better way of putting it, does it take away a facet from your job that used to exist?

Michael Lissack: Ah, see, Matthew, you’re too young to remember the Sy Syms commercials. And if you were in the Boston area, Syms was a clothing store that sold off-price things, and Mr. Syms’ advertisement was, “An educated consumer is our best friend.” And I’m going to agree with that. It actually makes much of your job a lot easier. You’re not starting from scratch. On the other hand, if you’re not good at listening and you don’t understand where along the process your client is, you’re either going to be giving them information that they have to overcome, information they already know, or you’re challenging some fundamental set of beliefs. So you’ve got to spend a lot more time now listening, hearing what it is that they actually know about the market, and what they know or think they know about what they’re doing. Fill in the gaps, help to educate them, be able to be a good facilitator, and get them the kind of information, and access, and service that they can’t do on their own. This is a service business. If you can provide service, you’re adding value. If you’re just shuffling paper and clicking on things online, please find something else to do.

Matthew Blake: And so what do you think about the competition in the industry now? Are there more competitors in brokerage right now or…?

Michael Lissack: Well, competitor is an interesting word. I’m going to go back to something that you’ve quoted me on before. There are roughly 2 million people in the United States who label themselves as real estate agents. Fifteen percent of them or so know what they’re doing and can make a good living and provide service. So, yes, among that 15%, there’s competition and cooperation, etc. But that leaves 1.7 million people who quite bluntly are in the way. They don’t know what they’re doing, they don’t stay up with what’s going on, they are not providing value to their clients and customers, and the rest of us usually have to clean up after them. That’s not competition. That’s babysitting.

Matthew Blake: So let’s assume you’re right and that there are 1.7 million agents that get in the way. How have we got into this place?

Michael Lissack: Well, it’s very simple. The professional associations, NAR, the real estate boards, the MLSs, all collect membership fees. If your business model is membership fees, what you want is more members. And it’s a vicious cycle. The more people you hire to run the organizations and to staff the organizations, the more you need more members. And more members means you can raise money a little bit and still get a lot more money in, etc. So what is NAR’s real interest? Getting more members, not serving the industry, not making this a more professional environment. Getting more members will pay dues.

Matthew Blake: This dynamic that you’re describing, has this always been the case you feel like? Has it accelerated more recently?

Michael Lissack: I know when I started doing real estate in Naples, I was amazed at how many agents there were and the number has doubled. The population of Naples hasn’t doubled, but the number of realtors has doubled. It seems in markets like we have right now where things sell very quickly like it’s “easy money,” all I have to do is talk a neighbor into letting me list their house. And, yes, in the seller’s market, what appears to be easy is easier to get done than in a buyer’s market, but that’s also why the number of realtors can be very volatile. The last time we had buyer’s markets, that 2 million number was down to 1.1 million or 1.3 million. There was a huge shift. So it’s like anything else. When things seemed to be too good to be true, they probably are too good to be true. And we’re attracting a bunch of neophytes, people who might sell one house a year and are not professionals.

I’m going to contrast that with our neighbors to the north. To be a real estate agent in Canada, you’re a professional. You have more training. You go through more things that you have to do to stay qualified, and you all provide a higher level of service, but that’s not the American model.

Matthew Blake: It sounds like you’re saying that you want to see your fellow real estate agents have more training. Is that true and what would that look like if that is true?

Matthew Blake: I would like them to have more training. I would like them to be more professional. I’d like them to better understand how their clients actually work in the world. They should not have to go talk to a mortgage banker who tells them whatever the flavor of the month is. They should have a good understanding of how financing options work. They should not have to call their friend, the contractor, to figure out what it means when they see mold. They should understand. They should be able to walk into a house and tell somebody, without having to do a whole lot of research, “You know, these colors were from 10 years ago,” and it is amazing how many people who call themselves real estate agents have no idea how to do any of those things.

Matthew Blake: What would that look like? Would you like to see a year of education required?

Michael Lissack: I think it would be great if it was an apprenticeship model, something like appraisers do, and that there was some training classroom-style test that allowed you to become the apprentice, and that you had worked with somebody for a year or maybe a year and a half before you were allowed to just do this on your own. And working with does not mean being dispatched to put signs out on the street when there’s an open house. Working with means actually being there, listening, observing, interacting, and at least by some form of osmosis, gaining wisdom.

Matthew Blake: Well, how does your brokerage work? How does Virtual Realty work? Do you require that kind of apprenticeship?

Michael Lissack: We don’t hire inexperienced agents. I mean, by definition, an inexperienced agent is going to cost us more than that magical one hour of sleep. And if all I’m getting paid as the managing broker is a couple $100 a transaction, I don’t have the time or the financial wherewithal to spend the time training you. We’re not that kind of a shop. I also want to point out that 95% of our agents are all part-time. And while they’re very experienced, this is not the main way they make a living.

Matthew Blake: Let’s talk about the National Association of Realtors. Is collecting dues really their main priority? How do they represent you well and how don’t they?

Michael Lissack: I don’t think they represent me well at all. I can’t give them a single thing where I would say, “Yay, NAR, I’m glad you exist.” I’m not glad they exist. As far as I’m concerned, they’re a parasite.

Matthew Blake: What do you think they’re interested in? I mean, they do lobby Washington more than any other group in terms of expenditures. I mean, I would maybe argue that they do well for agents in the sense that the commissions that agents make have, you know, remained unchanged. So maybe they must be doing something right and preserving that, but you don’t see them doing anything helpful.

Michael Lissack: Matthew, I don’t regard that as a good thing. Overpaying agents for bad service is not a good thing. And to the extent that the only way that happens is collusive, probably illegal activity is shameful. We all pretend that we’re not going to deal with people with an expectation of “normal commission is x,” but who are we kidding? Every community has some expectation of “the normal commission is x,” whatever that might be. Now, where I am in Massachusetts, most people think the normal commission is 4, 4.5. In Naples, people think the normal commission is 6 or 7, but they think there’s a normal commission and that’s a problem.

Matthew Blake: So how do you educate? In your job, how do you let consumers know? I mean, do consumers negotiate with you, and what’s…?

Michael Lissack: Absolutely. And when I started in this business, the niche that I started in was by offering rebates when nobody else did. And I basically said, “Look, it’s a buyer’s market. People are not getting list price. If I am not capable of saving you off of what they’re asking at least what I’m making, I will make that true.” So no matter what I was being offered as a commission, if I couldn’t get the sales price down, I would cut my commission. Now that’s a service. It doesn’t work in the seller’s market. By definition, everything is going over list. So if you do that, you’d never make a commission. So that one’s not a good approach in a seller’s market.

But commissions are, should be and, if we’re actually going to be a value-added industry, must be actually negotiable. And despite what it is that NAR and most people in the industry say, it actually should probably be negotiated twice. Here’s what I would like to make assuming everything goes well and, at the end of the transaction, did I perform? Are you happy? Have I earned what we said I should earn? And be willing to have the conversation about no or yes. I do that with my clients and I have been surprised by people who actually handed me more money.

Matthew Blake: Mm-hmm, that sounds good but I wonder how confident a consumer feels in negotiating a commission. This is not bartering over a kitchen stool at a garage sale. Buying or selling a home is a big and sometimes scary process. How do you assure there’s a good face negotiation?

Michael Lissack: If we were only a community of professionals who actually delivered high-level service to clients, that concern would not be there. But when you’ve got this extra huge group of people, the concern is real. You don’t know unless you do a lot of research whether you’re hiring the right person or Joe Schmo or Jane Schmo. And hiring the wrong realtor can be a disaster.

Matthew Blake: So what do you see… There are a few lawsuits right now filed against the National Association of Realtors, and including regarding the buyer-broker commission agreement, the National Association of Realtors has been subject to justice department investigations subject to lawsuits before. Since you regard the NAR as a parasite, do you see any of these legal actions or any of the pressure from the U.S. Justice Department right now may be forcing the NAR to change its role for the better?

Michael Lissack: What’s going to change NAR for the better will be if the political forces based on all of the manipulations that go on in Washington end up passing some version of the PRO Act.

Matthew Blake: And what’s that?

Michael Lissack: That is an act that says that independent contractors have the right to unionize. And if the 100,000 people that work for Keller Williams or Coldwell Banker or eXp have the right to form a union, do the senior people and the people that are making a lot of money want a union? Absolutely not. But the junior people would be better off having a union that represented them as opposed to NAR that represents itself and the executives at the large firms. And the pressure of having a competing group that was mainly looking out for the junior folks would make a huge difference.

Matthew Blake: Yeah, that’s very interesting. Could you argue that NAR in sort of a roundabout way is looking out for the junior folks now because they have this buyer-broker rule and because they have this clear cooperation policy? It seems to me like they have these rules—all the homes must be on an MLS, agents are expected to get some type of minimal commission that seems already kind of prop up what some might prerogatively call the weaker agents.

Michael Lissack: Okay. But how many hours should you spend on floor duty? How are you treated when you’re running around managing signs and open houses? Are you the person who has to do the mailings and the phone calls, etc.? That’s the kind of thing that a union will look out for these people for. So, sure, the agencies are propped up by NAR’s ability to keep the collusion going about commissions. That doesn’t help the junior people who work there. And to argue that it does is sort of like arguing that, sure, and the fact that universities have great professors helps all the adjuncts who are not getting paid. I don’t think so.

Matthew Blake: So, let’s…just to argue with you on this, let’s say, a federal law passes that allows independent contractors to unionize. And let’s use the example of Keller Williams. They have…I’m not quite sure off the top of my head how many agents, but I think over…you know, almost 200,000 agents in the U.S.

Michael Lissack: I’m going to use 200,000 as a number, but yeah.

Matthew Blake: So, let’s say that 10,000 of those agents, maybe less, do so well, maybe make into, like, the high six, low seven figures that they don’t want to have any part of this union. They don’t want to deal with a union just because of their own economic self-interest. And so, then you have 90% of Keller Williams agents to unionize. What do you think would be the response of Keller Williams headquarters? Let’s say the responses of Keller Williams headquarters just says, “You no longer work for Keller Williams. You are no longer affiliated with Keller Williams in the independent contractor role.” What do you think the response might be from one of those bigger brokerage shops if the more junior agents were to unionize?

Michael Lissack: Well, you are aware what you just described is blatantly illegal. If they’re allowed to unionize, the employer does not get the option to say, “I don’t feel like dealing with you.”

Matthew Blake: Right.

Michael Lissack: That would put Keller Williams out of business. It is not a choice. If the law says you have the right to unionize, and the junior people wish to organize a union and they successfully do the things the law requires to organize a union, the law says there will be a union. And the alternative is to just close your shop completely.

Matthew Blake: So, Keller Williams cannot end its contractual relationship with these agents because it would be against the law. So, then you have 180,000 or so unionized agents at Keller Williams who are still independent contractors, but now can collectively bargain their workplace rights. How would that collective bargaining process work would you envision? Like, what…if I’m an independent contractor…

Michael Lissack: I suspect the junior people will negotiate that while they’re in “apprenticeship mode,” that they’re getting paid a reasonable sum per hour, that they’re not being asked to do things with no notice that disturb their family lives, that they have the opportunity for… I mean Keller Williams provides lots of good trading opportunities, but there are other firms that don’t. But I would assume that in a union contract, things like training and supervision would be a major concern. Again, Keller Williams will do fine on that score. But, hello, we’re going to go back to 50 or 100 years ago. The junior people are going to be like Redfin. They’re getting beat on salary.

Matthew Blake: Mm-hmm.

Michael Lissack: Because that’s the only way to make it work and have appropriate working conditions. I used to work for a firm called Owners.com which, thank God, no longer exists, where every agent that worked there was completely abused. Because the people that ran it decided that they can take advantage of independent contractor rights, put people on call literally 12 hours a day, make ridiculous demands and not pay them for their time. That’s the kind of thing that cries out for a union.

Matthew Blake: I mean it would seem to me…maybe I’m just not being imaginative enough off the top of my head, but it would seem to me that if workers are collectively bargaining for rights that they’re asking for some minimal guarantees and those minimal guarantees, especially if you’re an agent who’s whole livelihood is dependent on getting, like, this commission, I would imagine that they’re asking for some type of safety net. And that would seem to maybe return to more of an employee model and brokerage, which I know existed 40 or 50 years ago, but except for Redfin and a couple of other shops, no longer does. Is that something that you would maybe like to see more employee model?

Michael Lissack: Again, the independent contractor model as it presently exists does not limit itself to the kind of apprenticeship and professionalization and training that if we actually were going to properly serve clients, demands. So, what it does do is it cuts overhead. And it allows the big shops to spend less money on overhead because you get paid at the back end. And that’s great, but it’s shortsighted. The people that are getting hurt here are the consumer. And the extra million or so people that claim to be real estate agents are no different than the underpaid Uber drivers who are maybe getting paid for their time but not for their cars. With a real estate agent, you’re trying to do this in order to learn and gain wisdom, but you’re being abused for your time.

So, I do think that going to some kind of a hybrid model would work better. I do think that junior people would be better off if they were not strictly dependent on commissions. And I think that should the PRO Act pass and the unions become a real possibility in this industry, that that will be a megachain that will work out for the better and I guarantee that everyone at NAR [inaudible 00:28:32].

Matthew Blake: I would imagine so. I would think anyone listening to this from NAR probably hates you right now. I think the Uber example is a really good one because the drivers at Uber are famously independent contractors, and Uber is still losing money as a company, at least the last time I checked. And it’s kind of similar with brokerage where you have these agents who literally make nothing except when they get a commission and wherein an incredible housing market right now in terms of demand and I think in last fall, the home sales were the highest that they were since 2006. And yet, these companies are very low margin. The ones that are publicly traded, eXp, Realogy, they’re making money but only a little bit of money. Compass is losing money. HomeServices of America makes money, but according to their CEO, it’s because of their title and mortgage business.

So, these brokerages, you’re saying it’s bad for the consumers right now and it’s bad for the agents in many cases, but it’s not like the brokerages are making a killing out of this. And so, what is going on with the brokerages? Why haven’t they been able to be cynical, you know, better exploit the system or why haven’t they been able to better capitalize on the current business models?

Michael Lissack: All right. I’m going to ask you…Matthew, again, we’re very different in ages. But do you remember when AOL sent out CDs to the world?

Matthew Blake: Yes, I do. I do. I got one. My parents got one. Yes.

Michael Lissack: All right. Now, I went to school with Steve Case. One of the things that everybody talks about with AOL is, you know, how great it was, etc. AOL never made a nickel ever. It might have accounting that said it made some money, but that was because it was pushing off customer acquisition cost, and calling it capital. But, you know, they sent out more coasters than anyone in the world.

The big brokerages are like AOL. They’re set up so that the stock market people come up ahead, so that their executives come out ahead, but there’s no real value there. They’ve given it all away. And the fact that we live in this weird environment where investors are willing to put money in on the hope that they can get the winner take all, means what’s happening is they’re spending other people’s money. Compass spends its investors’ money. eXp spends its investors’ money. If these people actually had to do it off of actual generated profits, they’d go out of business.

Matthew Blake: So, why are they profitable? Why aren’t brokerages profitable? Or why are their profits low margin, and why do you say they’re not adding value?

Michael Lissack: Because the people who make the money are the people that are good at the business. And the people that are good at the business do not intend to share it with them, from which they happen to be affiliated. If you think that the people [inaudible 00:31:49] million dollar [inaudible 00:31:50] are paying a 15% or 20% override to the firms they’re affiliated with, you’re insane.

Matthew Blake: Right.

Michael Lissack: Right? They pay a few percent. It’s like a little franchise fee. And the firm can’t make enough money off that few percent. So, yeah, those agents do very well. And I will point that those agents have a lot of people who work for them on salary.

Matthew Blake: Right. So, what does Virtual Realty do as a brokerage? What value do you add to either the consumer or, you know…yeah. Like, what is sort of the model in which the brokerage can both make money and actually serve a role?

Michael Lissack: I need to make something very clear. We are not a investor-driven, growth-oriented, “Oh, we have to get bigger tomorrow” kind of firm. This is a lifestyle business for the people that own it. So, we’re into this to provide service and reasonable value. And what we do is we recruit experienced agents. Again, 90-something-percent of them, it’s not their full-time job. They have other full-time jobs. But they are very experienced in doing real estate for however long they’ve done it as a part-time thing. We facilitate their ability to do it as a part-time thing to actually provide good service to the customers that they bring in and convert to clients. And the people that run Virtual Realty would not sleep at night if we were not putting clients first.

Again, if I make $250 a transaction off my agents, that’s not a lot of money, and that’s about what I make. That’s worth it if they’re providing good value to the client, and I can sleep well at night. If I have to worry about what they’re doing with the clients, there’s no way in the world that’s only worth $250. And I would get out of this business tomorrow. So, the answer is, we help find experienced agents that can actually deliver value. We give them a platform for delivering that value, and we don’t take a lot of money off the top for giving them that platform. But we’re not a growth business. If you were to turn on…you know, I mean we’re not, “Oh, we’re going to double…” No, we’re not. If we add 10 or 15 agents a month, that’s a lot.

Matthew Blake: Do you think your model could work if you wanted to be a growth business?

Michael Lissack: No. I worked for a 100% commission shop in Naples, Florida. And there were a whole bunch of 100% commission shops in that part of the world. If you try to do it as a volume thing, you need a lot of volume in order to cover overhead. And what happens is, if you don’t have a huge number of agents in shop, you can’t actually supply the support services necessary to make it work, and the whole thing spirals out of control. But it’s not really a growth business, 100% commission shops are not a growth business. They are a lifestyle business.

Matthew Blake: One last big topic I wanted to speak with you about is the multiple listing services. There are about over 500 multiple listing services in the country. According to National Association of Realtor rules effective last spring, you have to put a home on the MLS if you are a member NAR agent and you are marketing that home. What do you think of the MLSs? What do they do well? How are they helpful to agents and consumers? And what do they not do well?

Michael Lissack: Okay. So, what the MLS used to do 30 years ago and what it does today are very different. Thirty years ago, in order to ensure that you did not have to go as a consumer from shop to shop to shop to shop to find what was available in the market, an MLS served as a clearing house function. And that was only going to work if the people who have a listing in one shop told the people in the other shops how they were going to get paid so that they’d be willing to show the listings. And I will remind you, New York City resisted having an MLS until about five years ago. And indeed, in New York City, if you wanted to get an apartment or you wanted to buy a condo, you had to go shop to shop to shop because you didn’t get to see other people’s listings.

The internet changes everything. To the extent that the MLS served as a way to allow the industry to present its inventory to the consumers, we don’t need 500 MLSs. It would be good if there was not just one. It probably would be good if there were 7 or 8, but we don’t need 500. To the extent that the MLS is an enforcement mechanism to make sure that the right information is out there, that’s a really good thing. But, and it’s a big but, that’s not necessarily where all MLSs come from.

Matthew Blake: So, let’s look at a couple of the issues that you raised. The first one was you would like seven or eight MLSs maybe, but the number now are too many. It seems, from what I know, that MLSs are feverishly working to merge together, from what I’ve seen. I mean it seems like there are about 800 or 900 MLSs just a few years ago, and now there may be, like, over 500. What could be done to maybe more encourage this merger process or do it in a more, like, rational, cohesive way? Do you have any thoughts on that?

Michael Lissack: Sure. Recognize what’s actually going on, and take Zillow, Realtor.com, and probably Redfin’s website, and recognize that they should be regulated by something like a public utility commission, and turn them into what the public thinks they are. The public thinks that’s the MLS — it’s not. But most people in the general public don’t understand the difference. And if you were to make those things a public utility, you could facilitate having a few national MLSs very easily. But I mean that’s a radical change, and I’m not sure I can picture the folks at any of the places I just mentioned going along with that.

Matthew Blake: I mean what is the incentive system for an MLS? The private companies, I think they try to make money, but some of them might argue they just make money so they can give the money back to their members. What are they kind of motivated by, as you see at MLSs?

Michael Lissack: MLSs are not out there to change the world. MLSs are out there to keep the system flowing. If you want to say it’s the difference between having a lot of mud and beaver traps on a river or keeping it nice and flowing so that the boat can go down. The MLS’s job is to keep it flowing. And they believe that’s what their members want and that that’s how they’re providing the best service. When things like a lawsuit come along, that’s a beaver dam.

Matthew Blake: Yeah.

Michael Lissack: And it’s easier to tell people, “I’m just going to put water over the beaver dam and ignore it,” than it is to deal with the structural issue. Unfortunately, if you do that for too long, you end up with things like the condo collapse in Miami.

Matthew Blake: And you do say that the MLSs, despite this path of least resistance, they seem to be taking…they do provide a good service and that they provide some type of centralized database. And then you have the idea of making Zillow or Redfin a public utility. The idea of a centralized database, you think, is good. Do you think that, like, agents should have some type of requirement?

Michael Lissack: The problem with a requirement is that… Here’s the two sides of the requirement problem. On the one side, there are people who actually need privacy. And on the other side, there’s the people who say, “But if you do that, you create the opportunity for a fair housing violation. Two wrongs do not make a right.”

Matthew Blake: Yeah.

Michael Lissack: So, it is disgusting if people in the industry are committing fair housing violations.

Matthew Blake: Right.

Michael Lissack: And it is more disgusting if they’re doing so at the direction of their seller. But the flipside of that is, that does not mean that there are not people who need privacy. And the rules are one-size-fits-all. And that’s where the problem is. And the reason the rule is one-size-fits-all is, again, MLS does not want to be in the business of deciding, “Well, a beaver dam that’s 12 inches high is okay, but one that’s 14 inches high is too tall.” That’s the kind of situation they want to avoid.

Matthew Blake: Mm-hmm.

Michael Lissack: So, they end up with a one-size-fits-all. By definition, one-size-fits-all rules have some group of people for whom they are a real problem.

Matthew Blake: Those are the people now that need privacy. Is that what you’re saying?

Michael Lissack: In general, the problem with you must put it in the MLS right away is twofold. On one side, there’s the people who need privacy. And then you turn around and say, “Well, that can be accommodated by just making it an in-house listing.” Okay. So, now you’re saying that I have to go and only use a big firm that has a lot of agents. I’m going to just do it as an in-house listing. And all of the little boutiques who might actually provide you with much better service are excluded.

Matthew Blake: And just to explain to the audience, the in-house listing, my understanding, is that there is an exception in the NAR’s clear cooperation policy where you don’t have to put it in the MLS if you’re just listing it within your brokerage.

Michael Lissack: Correct.

Matthew Blake: So, have you seen, say, the larger brokerages take advantage of this at all so far?

Michael Lissack: Yes. But again, because I’m in so many states and I deal with so many people, I’m not going to name names on this one, the guilty parties know exactly who they are.

Matthew Blake: But they have been able to sort of use this to their advantage, some of the larger brokerages.

Michael Lissack: I mean all they’re doing is recreating the Manhattan World of 10 years ago.

Matthew Blake: Mm-hmm. This has been a very interesting conversation. One final sort of huge question I kind of want to leave you with is you talked about, you know, your desire to see independent contractors unionized. We talked about the pressures the MLS is having, the pressures that NAR arguably is facing. What do you see changing in the real estate economy, say, five years from now? What do you think is just going to continue with the status quo, and where do you see maybe actually change happening?

Michael Lissack: Shakeouts happen when you go from a seller’s market to a buyer’s market. Anyone who thinks that the seller’s market is going to continue forever is wrong. Now, whether it’s going to stop in 6 months, 3 years, 5 years, 10 years, I don’t know. When it stops, there will be major changes.

Matthew Blake: Michael, anything before we go that maybe you wanted to discuss or anything that’s on your mind percolating that we have not debated and talked about during these last 30 minutes?

Michael Lissack: Customer service is the most important thing. If there’s anything that upsets myself and my colleagues at Virtual Realty Group more than anything else, it’s the agents who do not seem to understand that they’re in a service business and that they need to actually treat clients as the most important people at least for the 10 or 15 minutes that you’re dealing with them. If you learn to listen, if you learn to put your clients first, you can provide great service. Great service is deserving of value, and that value gets paid. To do anything else and to take shortcuts, etc., is to undercut the value proposition and to hurt all of us.

Matthew Blake: Thank you. And with that, I think we will wrap up this episode of “Houses in Motion.” Michael Lissack of Virtual Realty, thanks so much for agreeing to do this. It was really fun.

Michael Lissack: Thank you.