Understanding the MLS
This is probably the most important piece of content I can write for a home seller to read (and perhaps buyers, too). I’m going to discuss the importance of the Multiple Listing Service, how it works, and why it matters to you.
The MLS is a real estate marketplace. Like you can buy stocks on Wall Street, you can buy houses in your local area through a regulated real estate market place called the Multiple Listing Service. It sounds so kooky sometimes – why does there need to be a regulated, governing body of local residential real estate markets? And how does this affect me?
I’m giving you an overview – at least my perspective – of the MLS because I think it perplexes people and no one understands the importance of the marketplace and therefore, devalues the residential real estate sales system. I believe part of this because a lack of understanding of how the system works. I can relate, because I tried to sell a home For Sale By Owner before I was an agent.
The MLS, as a regulator put it, is the envy of the world. It is a real estate cooperative with rich local real estate data and keeps real estate agents in check – to promote a fair and competitive marketplace for consumers. Agents compete and cooperate, because sometimes they represent sellers and other times they represent buyers. In many ways, it can be considered a small agent community.
The importance of the MLS for you, a home seller, is paramount. It gets your home on the marketplace. The MLS is the de-facto place to buy and sell a house across the country because agents have a system in place. As cooperating members of the MLS, they know exactly what commission their able to earn, have access to pertinent documents about the property not available to public websites, and more. It’s kind of like a mini VIP to real estate; it gets you in the game so you’re not on the outside looking in.
Here’s How the MLS Works, or Specifically How Commissions Work
This is so important and fundamentally is related to how we make our homeowners so much more money at the closing table. In Virginia, you have generally two real estate agents involved in a transaction. You have a listing agent, and a selling agent (also known as a buyer’s agent). The listing agent is the person who represents the seller. The selling agent (buyer’s agent) represents the buyer. Confused yet?
Here’s how the system originated. Let’s say your friend has a friend that needs to sell his house and asks for your help. You are trustworthy, a solid negotiator, and have the skills to handle the sale of the property, but you don’t have a buyer. So you tell your friend you want 6% of the sales price as a commission, and that you’re going to give half of the 6% to someone who actually goes out and sells the house for you (so 3% to the guy who brings the buyer). The person that actually sells the house is considered the “selling agent,” because they’re selling the house.
So you see, the listing agent is not directly selling the house. They’re normally not showing it, they’re not bringing a buyer; they’re actually not selling it. You may ask, but the “selling agent” is actually representing the buyer and negotiating against the listing agent, right? Correct, and that’s where some of the confusion comes in. But that’s why I say real estate agents cooperate and compete – compete against each other in transactions but also cooperate with commissions among other things. It’s a delicate balance. But at the end of the day, the buyer’s agent (selling agent) is the one bringing the buyer, the one ultimately “selling” the house for the listing agent – even though it does not really seem like it.
The Cost of Listing a House Has Gone Down Significantly
Now that you understand how the system works, let’s explore why it matters. In the past, the listing agent would have to spend a lot of money mailing, printing catalogs, doing open houses, running newspaper ads, and much more to promote a house for sale. You really did need to advertise so that buyers would know about your homes for sale – and you’d need to advertise to agents.
But today, the technology efficiencies have largely automated this process and made it extremely affordable to do so. When we put a listing into the MLS, it goes out to dozens of real estate websites through a syndication. One click, and boom – there it goes. It’s really that simple. And that’s where all the buyer’s are.
Everyone knows we as home buyers start our home search online, and then we drive the neighborhoods to explore. To get comfortable with the area. And then we look online while the other person is driving around the area. Back and forth this is how home search is happening today. Buyer’s are looking on their phones and online – the majority of buyer’s actually find the home online before their agent does, which makes sense – shopping for a house can be fun.
The bottom line is effectively advertising a home for sale has gone down significantly. That is just the truth. Now agents may say they spend “thousands of dollars a month” marketing their homes. How exactly does that work? I personally think when they say they’re advertising so much, that they’re just advertising their brand to generate more clients.
As you well know, buyers are searching online. In the past, when someone wanted to find a local plumber, for example, they would probably look at the Yellow Pages. Today, they go to Google. Similarly, when someone wants to browse listings, they simply go online, and most likely to Zillow.com or Realtor.com. This is where most serious buyers are.
Advertising a home for sale on a social media post is nice but not very effective in most cases; it only promotes the agent doing a great job, which is fine, but let’s not kid ourselves – most serious buyers are actually searching for homes, not just deciding to buy a home on a whim when they saw a Facebook or Instagram ad. I think most people understand this but just don’t take a second to realize it. Home searching is systematic now – people have specific criteria they want and go from there. Blanket advertising, I’m sorry, is useless for finding a buyer with the exception of potentially luxury listings.
With all of this being said, technology has created some different challenges that did not exist before. Having an excellent smartphone is important for agent; a reliable home office of some sort; licensing fees always rise; and meeting the expectations of buyers at all hours of the night sometimes has extended the working day of an agent. The Internet also has created a lot of misunderstanding and confusion for buyers and sellers and agents need to dispel the myths and educate, or “relearn” their clients. It’s just different today, and for that reason, I don’t think agent fees should be eliminated.
I just believe there should be better options, and for many people, a flat fee listing service makes a lot of sense because it provides a full-service option and gets the seller more money in the sale of their home.
The MLS is a real estate marketplace. Like you can buy stocks on Wall Street, you can buy houses in your local area through a regulated real estate market place called the Multiple Listing Service. It sounds so kooky sometimes – why does there need to be a regulated, governing body of local residential real estate markets? And how does this affect me?
I’m giving you an overview – at least my perspective – of the MLS because I think it perplexes people and no one understands the importance of the marketplace and therefore, devalues the residential real estate sales system. I believe part of this because a lack of understanding of how the system works. I can relate, because I tried to sell a home For Sale By Owner before I was an agent.
The MLS, as a regulator put it, is the envy of the world. It is a real estate cooperative with rich local real estate data and keeps real estate agents in check – to promote a fair and competitive marketplace for consumers. Agents compete and cooperate, because sometimes they represent sellers and other times they represent buyers. In many ways, it can be considered a small agent community.
The importance of the MLS for you, a home seller, is paramount. It gets your home on the marketplace. The MLS is the de-facto place to buy and sell a house across the country because agents have a system in place. As cooperating members of the MLS, they know exactly what commission their able to earn, have access to pertinent documents about the property not available to public websites, and more. It’s kind of like a mini VIP to real estate; it gets you in the game so you’re not on the outside looking in.
Here’s How the MLS Works, or Specifically How Commissions Work
This is so important and fundamentally is related to how we make our homeowners so much more money at the closing table. In Virginia, you have generally two real estate agents involved in a transaction. You have a listing agent, and a selling agent (also known as a buyer’s agent). The listing agent is the person who represents the seller. The selling agent (buyer’s agent) represents the buyer. Confused yet?
Here’s how the system originated. Let’s say your friend has a friend that needs to sell his house and asks for your help. You are trustworthy, a solid negotiator, and have the skills to handle the sale of the property, but you don’t have a buyer. So you tell your friend you want 6% of the sales price as a commission, and that you’re going to give half of the 6% to someone who actually goes out and sells the house for you (so 3% to the guy who brings the buyer). The person that actually sells the house is considered the “selling agent,” because they’re selling the house.
So you see, the listing agent is not directly selling the house. They’re normally not showing it, they’re not bringing a buyer; they’re actually not selling it. You may ask, but the “selling agent” is actually representing the buyer and negotiating against the listing agent, right? Correct, and that’s where some of the confusion comes in. But that’s why I say real estate agents cooperate and compete – compete against each other in transactions but also cooperate with commissions among other things. It’s a delicate balance. But at the end of the day, the buyer’s agent (selling agent) is the one bringing the buyer, the one ultimately “selling” the house for the listing agent – even though it does not really seem like it.
The Cost of Listing a House Has Gone Down Significantly
Now that you understand how the system works, let’s explore why it matters. In the past, the listing agent would have to spend a lot of money mailing, printing catalogs, doing open houses, running newspaper ads, and much more to promote a house for sale. You really did need to advertise so that buyers would know about your homes for sale – and you’d need to advertise to agents.
But today, the technology efficiencies have largely automated this process and made it extremely affordable to do so. When we put a listing into the MLS, it goes out to dozens of real estate websites through a syndication. One click, and boom – there it goes. It’s really that simple. And that’s where all the buyer’s are.
Everyone knows we as home buyers start our home search online, and then we drive the neighborhoods to explore. To get comfortable with the area. And then we look online while the other person is driving around the area. Back and forth this is how home search is happening today. Buyer’s are looking on their phones and online – the majority of buyer’s actually find the home online before their agent does, which makes sense – shopping for a house can be fun.
The bottom line is effectively advertising a home for sale has gone down significantly. That is just the truth. Now agents may say they spend “thousands of dollars a month” marketing their homes. How exactly does that work? I personally think when they say they’re advertising so much, that they’re just advertising their brand to generate more clients.
As you well know, buyers are searching online. In the past, when someone wanted to find a local plumber, for example, they would probably look at the Yellow Pages. Today, they go to Google. Similarly, when someone wants to browse listings, they simply go online, and most likely to Zillow.com or Realtor.com. This is where most serious buyers are.
Advertising a home for sale on a social media post is nice but not very effective in most cases; it only promotes the agent doing a great job, which is fine, but let’s not kid ourselves – most serious buyers are actually searching for homes, not just deciding to buy a home on a whim when they saw a Facebook or Instagram ad. I think most people understand this but just don’t take a second to realize it. Home searching is systematic now – people have specific criteria they want and go from there. Blanket advertising, I’m sorry, is useless for finding a buyer with the exception of potentially luxury listings.
With all of this being said, technology has created some different challenges that did not exist before. Having an excellent smartphone is important for agent; a reliable home office of some sort; licensing fees always rise; and meeting the expectations of buyers at all hours of the night sometimes has extended the working day of an agent. The Internet also has created a lot of misunderstanding and confusion for buyers and sellers and agents need to dispel the myths and educate, or “relearn” their clients. It’s just different today, and for that reason, I don’t think agent fees should be eliminated.
I just believe there should be better options, and for many people, a flat fee listing service makes a lot of sense because it provides a full-service option and gets the seller more money in the sale of their home.