I receive a lot of real estate related questions. Each month, I’ll share a selected topic with you. Hope you enjoy reading them as much as I enjoy writing them!
Q: What is the MLS and how does it work?
A: MLS stands for Multiple Listing Service. It is an electronic posting system on which real estate professionals 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 service.
I have colleagues in several European and Asian countries. When buyers want to buy a home there, they have to painstakingly visit every local 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. This is the best way 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 listing 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 the local real estate board that all listings of a member brokerage must 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 This is in contrast to most 3rd party real estate websites which infamously contain egregious errors, misinformation, outdated data, and outright fraudulent listings. (See Buyer’s Corner on page 5)
(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 at the beginning. 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. As always, keep sending me your real estate questions.
Until next month, take care!