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The MLS is a real estate listing service created for and by real estate brokers to help one another sell their clients properties. Learn about the past, present and future of the MLS and what they must do to survive among growing competition.
The Multiple Listing Service, better known as the MLS, is a service provided by a collective group of real estate brokers. The MLS allows the brokers to list one another's properties for sale. That's good for home buyers, home sellers, and real estate brokers. In this article, you'll learn:
Today, there are over 800 Multiple Listing Services (MLSs) operating in the U.S. An MLS is a private offer of cooperation and compensation between real estate brokers. The MLS facilitates real estate transactions and is an agreement that allows the sharing of information. One of the key conditions of the MLS is the unilateral offer of compensation. Through the MLS agreement, the listing broker and selling broker agree to split the commission of a home sale.
Think of the MLS as a warehouse. All the property available for sale goes into the warehouse. Once a property is sold, it's taken out of the warehouse. However, instead of a warehouse, information about those properties can be stored in a database to be accessed over the internet. Real estate agents can access this information, giving them quick knowledge of housing inventory, which makes them more productive real estate agents.
Accessing the MLS over the internet offers real estate agent and broker members the following tools in addition to property listings:
Before the advent of the MLS, real estate agents were unaware of all available properties for sale. This hurt home sellers because many buyers who may have been interested in their property were unaware it was on the market for sale. This hurt home buyers because some might have missed out on their dream house or paid more for their home than for a comparable property they would have found on the MLS.
This all changed in the late 1800's. Real estate brokers started forming local real estate associations. Members regularly met at the offices of the associations to share information about the properties they had for sale. They agreed to compensate other member brokers who helped sell their properties. Thus, the early MLSs were born and based on a fundamental principal that's still applicable today: Help me sell my inventory and I'll help you sell yours.
From those early days in the late 1800's, the MLS has evolved. Members paid annual dues and other fees to pay for the MLS staff and any required materials and resources. Real estate agents submitted property listings to their MLS and the MLS staff compiled all the information into a book. About once a week, MLS members received the book that showed what was available and what had been sold.
Computers made it easier to create virtual MLS books. The advent of modems eventually made the printed books obsolete. All real estate agents had to do was "dial in" to a centralized computer which stored the MLS listing in a database.
Soon after, the Internet ushered in the Information Age. Some property information from the MLS started appearing on the Internet in year 1996. The information was not as current as what was available in the MLS, but it still benefitted buyers and sellers because they were able to see what's available in their price range and desired location. Property sellers gained more exposure for their listed properties and increased their chances of a quick sale at higher prices.
Although some MLS information is available to the general public via the Internet, not everyone has access to the full MLS database and tools. To have full access, an individual must be a licensed real estate agent working at a real estate brokerage, or is a real estate broker themselves that is a member of the MLS.
Agents are assigned a user login ID, also known as an MLS ID, Agent ID, or Public ID. This MLS ID is the key to accessing the MLS. Real estate agents and brokers do not share their personal access with the general public.
The MLS is not free to use. Real estate agents and brokers must pay hundreds of dollars every year in order to gain access to the MLS. In addition to that, these agents and brokers cannot simply choose to pay for the MLS access by itself, they must be a member of a local, state and nationwide real estate association, all of which have their own annual membership dues. Accounting for all of this, it is not uncommon for real estate agents and brokers to pay over $1,000 in combined fee's and membership dues every year in order to gain access to the MLS.
Before the MLS, people only knew if a home was for sale if they lived near the property, drove by the property and happened to see it or their agent worked for the real estate broker who listed the property for sale in published media. The MLS benefits home sellers by giving their properties greater exposure. With some MLS information now available on the Internet, including pictures and virtual tours, home sellers find it easier to sell their houses today than in the pre-MLS days.
In the days before the MLS, many home buyers missed out on properties more suitable for them. Their home search took longer because their agents were unaware of all available properties in real time. Even when agents were aware of homes for sale, they didn't necessarily know all the information about the property, such as how many bedrooms and bathrooms it had. Home buying is more like shopping these days. While most buyers work with agents, they still browse the available goods on the Internet and ask their agents to schedule tours for what they like.
As technology becomes more user friendly, and access to information becomes more readily available to anyone seeking to find it, the number of home buyers who find their homes using the internet is only going to increase. Just take a look at what sites like Realtor.com, Zillow and Trulia have been doing and how popular they have become.
According to a 2014 NAR (National Association of Realtors) Home Buyer and Seller Generational Trends Report, more home buyers found the homes they eventually purchased online rather than through a real estate agent. The following chart shows the top three methods used by buyers to find homes they eventually purchased:
It's not far-fetched to assume that within the next 10 years the majority of people will list, find and buy homes entirely online without ever having to meet anyone in person if they so choose. The following chart reveals results from a survey within the 2014 NAR (National Association of Realtors) Home Buyer and Seller Generational Trends Report, stating what home buyers said that they need most from their real estate agents:
According to the survey of home buyers, 64% use the services of a real estate agent for needs which resources from the Internet already provide today, for free. Negotiating price and terms of the sale may still be too early for online services to tackle, but rest assured there is some company somewhere creating a solution for that right now, if it's not already available.
The real estate associations behind the MLSs have clear opportunities to improve and expand their reach to home buyers directly, all they need to do is pay attention to what home buyers and sellers are saying in surveys conducted by the associations themselves.
Although MLSs have made real estate transactions much more efficient, they still have their issues. Chief among them is inaccurate data input. Real estate agents provide the information that goes into the MLS property listings. Like all of us, they're only human. Errors are bound to happen, such as incorrect addresses, listing prices, property specifications or missing pictures. The result of these errors is misinformation and lack of information about the property.
Inconsistency is another shortcoming with the MLS. Different MLSs can have overlapping information, or lacking information on a specific area that another MLS has information on. Real estate agents must find their own way to work around these inconsistencies, which takes away valuable time, and money that would be better spent servicing their clientele.
According to a NAR (National Association of Realtors) 2013-2014 Realtor Technology Survey, the three most popular places where Realtors placed their homes for sale were the following:
No surprises here, these also happen to be the most popular destinations where potential home buyers go to browse properties and where potential home sellers go to research what they might be able to sell their property for.
When technology is used to make it easier for people to get what they want and need, those companies and organizations involved in creating that technology stand to become extremely wealthy and successful in the process.
The following list are six actions, in no particular order, which we believe the associations behind the 800+ MLSs need to take in order to stay relevant in the future:
All MLSs should consolidate into one giant MLS to become uniform, reduce overlapping information and increase consistency where it is lacking.
The MLS must provide social media tools so agents can share property listings and industry insights directly across social media channels from within the system.
Create an internal instant messaging system so agents can leave messages and communicate with one another more easily.
Add a referral or finder's fee system within the MLS so that agents from different states and markets can refer clients to one another more easily, help one another with closing the transactions and get paid for doing so.
Regarding the administrative and accounting duties of the staff behind the MLSs, what can be automated should be automated in order to increase efficiency, save time and reduce costs which could otherwise be allocated to further improve the technology.
Create a secondary MLS system specifically designed for consumers to access over the internet for free in order to compete with third party servicers like Zillow and Trulia.
Times are changing fast. If the MLS does not do something soon in order to stay relevant amongst growing competition, they will slowly disintegrate and disappear into history. The MLS will be referred to only in historical contexts when people of the future point out how the MLS was another widely used system that was replaced by better, cheaper and faster technology.
The associations behind the MLS must overcome certain challenges that they created for themselves first, such as a decentralized authority that has difficulty coming to agreements and making changes quickly.
The most recent example of an old system being replaced by technology is Uber. There is little doubt that this company and others like it will replace taxi companies within the next ten years. The taxi companies are not unlike the current MLS system, where they have had such a large share of the market for so long that the need to innovate became less important than their need to fight off innovation.
When companies are able to consolidate and create a better, faster, and cheaper system, they greatly increase their value. If the taxi companies and the MLSs had done this many years ago there may never have been an Uber, a Zillow or a Trulia to fill the needs of consumers, home buyers and home sellers. The tremendous growth in market share these three companies have gained in recent years is a clear indication that they fulfilled an equally tremendous need.
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