From 2009 to 2013, WAV Group spent a significant portion of our brokerage consulting on explaining what a Virtual Office Website (VOW) is and how it is different from an Internet Data Exchange (IDX) website. Now VOW websites are being discussed again in brokerage meetings and for good reason. Digital paper only brokers have been able to build spectacularly successful businesses that leverage IDX to develop referrals that take a 30% bite out of agent commissions. Brokers who care about the income of their agents should review this carefully.
Our recent analysis of brokerage P&L reports from 2020 demonstrates a remarkable increase in the referral commissions paid out to digital paper only brokers – some growing by more than 2000%. WAV Group is forecasting that agent commissions will dip over 10% in 2021 as a result of payouts on referrals by digital paper only brokers. If brokers do not react to this sea change, we believe that agents could see a 17% dip in commissions by 2023.
What is a digital paper only broker?
A digital paper only broker is a company that has a brokerage license but does not have any agents. The brokerage license allows them to join the MLS and gain access to the IDX data and receive compensation for leads referred to agents. Agents typically pay 30% or higher of their commission to the digital paper only brokers who referred the client. Examples of companies operating under this referral business model include the websites with the most amount of consumer traffic in America – Zillow.com in most markets, Realtor.com, Redfin in some markets, Movoto.com, Homelight.com, Bank of America, Quicken Loans, etc. To be clear, Zillow and Redfin do hire agents and represent a hybrid to the digital paper only broker.
Should Brokers Opt-Out of IDX and Move to 100% VOW?
The big risk to the business of digital paper only brokers is that they cannot survive without listing data. Brokers can replace their IDX websites (no registration) with a VOW website (registration required) and starve the digital paper only broker of the listing content that they need to survive. Brokers who have opted out of IDX may display their listings on their website without registration but must require registration for consumers to view the other listings in the MLS.
If you think that consumers should work with brokers who sell houses instead of advertising and lead generation, then VOW is the solution.
Good News for Client Servicing Tools
Having fewer listings available on IDX could create a strong bounce in adoption of client servicing tools. For example, every MLS in the nation has a feature that allows an agent to set up their client with direct access to the MLS data. CoreLogic®’s feature is called OneHome®, I am not sure if Rapattoni, Black Knight, Navica, or FBS have product names. But they all provide the same benefit to consumers working with a real estate agent. Other products used by agents for this purpose include Homesnap and Real Scout, along with just about every CRM on the planet. As long as consumers work with an agent – they will have full access to listings.
Good News for Agent Website Vendors
If the brokerage opts out of IDX, that means that agent websites will all need to be converted to VOW websites. Having a VOW compliant website means much more than requiring registration to view listings, but that is the easiest way to understand the difference. While there is a long list of technical requirements to be VOW compliant, user experience changes only with the requirement of registration and acceptance of the Terms of Use. Most of the great lead generation websites, like BoomTown, usually require registration anyway, so it is not a big deal.
What Brokers Should Go First?
If a small firm with a handful of listings pulls out of IDX, nobody would likely know or care. However, if a large firm with more than 20% of the listings pulled out of IDX, everyone would care. It took very little time for consumers to learn that they could not buy airline tickets from Jet Blue, Southwest, Virgin, etc. from Expedia or other third-party ticket discounters. They learned because they see the planes flying in and out of their airport and discussed in their community. The same thing would happen if a large firm pulled their listings from IDX. The properties that homebuyers see when they are driving around in their neighborhood would suddenly disappear on Zillow.com, Realtor.com, etc. A broker with 20% market share would be removing 1 out of every 5 possible homes in an already tight real estate market. The consumer would immediately head to that broker’s local website or call an agent. The brands who have 20% market share in a community are well known and easily found.
Imagine the buyer lead generation advantage that these firms would create if listings were only available for public view on their website.
Would this damage the consumer?
This is a complicated question that does not have an easy answer. I have always believed that the homebuyer should be concerned about the invasion of privacy that happens when sold listings are displayed all over the internet. A family buys a home and their child’s bedroom photos are published everywhere. That is creepy. I would appeal to the industry to limit sold listing photos on IDX to exterior images only.
As well, I do not believe that registering to a website to get professional services and access property data is a big ask. After all, data is an asset that agents and brokers invest time and money to curate before it is licensed to the MLS. Why not protect it and limit the use?
Most of all, a registered consumer gets better care and support from the broker or agent, whereas an anonymous consumer is just a ghost passing through the website, seemingly unnoticed.
Why don’t more brokers have VOW websites today?
Before the sudden evolution of digital paper only brokers, there was little reason to deploy a VOW website rather than an IDX website. The biggest advantage to a VOW website back in 2009-2013 was that sold listings were not part of IDX. Today, most MLSs provide sold data in the IDX. Today, there is little difference between IDX and VOW other than the ability to display price changes over time, and listings that have been opted-out of IDX. Remember, the VOW data is all of the non-confidential information entered into the MLS by the agent which may be shared with the consumer by any other means. I am sure that there is plenty of extra data information available for a VOW that is not included in IDX, but outside of the price change fields and the handful of listings which are not available for display on IDX, I cannot imagine that much of it matters.
More Reading
If you want to dig into the opportunity for launching a VOW website, you may want to look back at historical postings that WAV Group has written on the topic or contact me directly at victor@wavgroup.com.
WAV Group published a 5-part series on Virtual Office Websites in 2009 – oldies but goodies:
Part 1. What is a VOW and how can it help you grow your business?
Part 2. How to use a VOW to generate new customers.
Part 3. Using your VOW as a buyer’s tool
Victor, thank you for this comprehensive report on VOWs, thank you. Would you please share some of the leading technological companies providing VOW service to brokerages? Thank you