Happy August! Time truly flies. In a blink of the eye, the
summer is almost over! Many are ready for cooler weather. Hope you
have a great August.
Some of you have asked me various real estate related questions that can be
answered by explaining how the MLS system works. So here it is…
What is the MLS and how does it work?
MLS stands for Multiple Listing Service. It is an electronic posting
system on which real estate agents post their listings of homes for sale.
It is the backbone of the residential real estate industry. At the core of
its complex structure, there is simple elegance in how this unique system works
for everyone’s benefit.
First, let’s consider markets without the benefit of a multiple listing
I have colleagues in several European and Asian countries. When buyers
want to buy a home there, they have to painstakingly visit every brokerage and
ask to see its in-house inventory of listings. It’s hard to scour the
market and find every home that’s a potential match. There is no
comprehensive system. Buyers have to go and shop at brokerages that
work for the seller.
In contrast, home buyers here have access to ALL listed homes. A buyer
can work with an agent to scour the MLS for all listed homes that match the
buyer’s criteria. A buyer gets to compare and make the purchase decision
based on the best fit, value, and terms. There is the best chance to find
the right home compared to any other method. An agent can show homes
listed by all other brokerages. As a result, a buyer’s agent has inventory
of every listed home on the market. And a listing agent has access to all
the buyers in the market place.
For a system to be so time-tested and work so well, there are 3 fundamental
attributes it must have: (1) The listings inventory must be
comprehensive. (2) The information must be reliable. (3) There must
be incentive for all to use it.
(1)The comprehensive listing inventory is achieved by the stipulated
agreement of MLS members and local real estate board that all listings of a
member brokerage will be posted. Effectively ensuring the MLS contains
virtually all homes listed for sale.
(2) The reliability of the information and listing status is enforced by
rules and regulations that result in fines for mistakes and
non-compliance. It is both supervised and self-policed. Any agent
can report errors in a listing by a simple click of a button. This
is in contrast to most of the 3rd party consumer real estate
websites which famously contain egregious errors, misinformation, and outdated
(3) Finally, the incentive is accomplished by the fact that when a listing
is posted on the MLS, there is compensation offering to buyer’s agents for
procuring buyers. The listing brokerage is in effect recruiting all the
available agents to bring buyers to complete the sale of a listed home.
This is why a Keller Williams agent can sell a RE/Max listing, a Coldwell
Banker agent can sell a Watson listing, and so on.
The benefit for a home buyer has been illustrated above. For a home
seller, the benefit is maximum exposure to all potential buyers. When you
want to sell a product, you want every potential customer to know about
it. Through MLS and its myriad syndications, a home listed on the MLS
even has global reach. I routinely receive international inquires on
homes I list locally! Maximum exposure creates maximum demand which results in
highest achievable price.
Now you know the importance of the MLS, make sure your agent understands the
inner workings of this system and how best to maximize its utility as a
tool. A tool is only as good as the individual using it.
Hope this discussion has been informative for you. I can talk about
real estate all day but I must stop here! :)
Until next month, take care!