Paper Brokerages Cause Disruption

With no walls and little operating costs, Paper Brokerages proliferate and become a major force overnight. Paper Brokerages are companies that join multiple listing services (MLSs) in order to gain access to listing data and subsequently display it online. They do not, however, provide traditional brokerage services to consumers; they are created to generate leads for other brokerages. Paper Brokerages that obtain a brokerage license, or partner with a licensee who can be their “broker of record,” are able to display Internet Data Exchange (IDX) listing feeds compiled by MLSs. As Paper Brokerages don’t have the same operating and cost structures as traditional brokerage companies, the concern is that they are “misusing” the MLS system and that the widespread adoption of the Paper Brokerage business model will undermine participation in IDX and the MLS system itself.

As the real estate industry evolves and increasingly experiments with different business models, IDX opens a new variation of models not originally contemplated. Existing big brokers have become vulnerable because some MLS services have enabled non-traditional entrants (basically non full-time brokers) to utilize their information in a variety of ways. In some cases the owner does the negotiating and sale with the buyers agent and uses the cooperating brokerage company to facilitate the closing. This shift has marginalized large brokers, causing many to consider withdrawing from the MLS, and others to question the viability of MLS going forward.