If you’ve ever had to buy or sell a home, you’ve probably heard the term multiple listing service, or MLS. Chiefly, it is a private database of properties that are listed for sale, along with information about each property.
While some listing information is available to the public online,real estate agents and brokers pay a fee to belong to the listing service, which allows them to post listings, see other listings. Plus, they have access to more detailed information about each property not readily available to the public.
The purpose is to facilitate more efficient buying and selling. Upon completion of a sale, the two brokers involved, e.g., the one representing the seller and the one representing the buyer split the commission.
Competition and Cooperation
Real estate is a competitive field, and the multiple listing service facilitates that competition by ensuring all listings get equal consideration. Regardless of whether the listing agency is a small firm or a large brokerage. When an agent searches for a property that meets specific criteria, she sees all the properties that meet the requirements. Therefore, the search results give the buyers, working with a smaller firm, access to a broader range of inventory beyond the properties listed by a specific brokerage.
However, the real estate business also requires cooperation among competing agents. In exchange for allowing buyers’ agents to access the listing and view the property, the seller’s agent agrees to split the commission with the buyer’s agent when the home gets sold.
This same process works in the agent’s favor when they are representing a buyer. The listing service facilitates this cooperation by allowing everyone equal access to the listings. It works on the principle that the agent who helps another sell property today may be the one to receive the assistance tomorrow.
Public and Private
The information on the listing service is far more detailed than that which is available on public real estate websites. Typically, the report lists the property’s price, age, sale history, square footage, etc. It also has information buyers don’t get to see right away, such as tax history or seller disclosures.
A seller disclosure is a list of all the known major repairs that took place on the property. Moreover, it identifies issues or hazards that the buyer may encounter. For example, if the property had its roof replaced or experienced flood damage, that’s information included the seller disclosure. Information such as this is usually not available to the general public. But giving the buyer’s agent access to the data helps that agent guide the buyer in making an informed decision. Which may, in turn, aid the seller’s agent to move the property more quickly.
Benefits and Limitations
One major benefit of the listing service is that it streamlines the process of arranging showings of the property. Among the data that is available through the MLS are details about showing times and private contact information.
Only agents can see this information due to privacy concerns. However, availability through the listing service enables buyers’ agents to show the property to their clients quickly and easily.
Generally speaking, participation in a multiple listing service is limited to licensed real estate professionals in a particular area, which means that those wishing to sell their property rather than listing through an agent are usually not allowed to register with the MLS.
There are some exceptions since each listing service is specific to a particular region. Some areas allow sellers to post For Sale By Owner (or FSBO) listings on the MLS for a flat fee.
Yesterday and Today
MLS has its roots in the 19th century when real estate brokers gathered at local offices to share information. Eventually, the National Association of Realtors (then known as the National Association of Real Estate Exchanges) formally endorsed the arrangement in the early 1900s. Today, affiliations with the NAR — and other private associations overseen by major local brokers — describe most listing services.
Needless to say, the multiple listings looked a lot different in the 20th century than they do in the 21st. Originally the listings were published monthly in book form, with updates printed once a week. Needless to say, it was awkward to carry the listings around and time-consuming to look them up.
Plus, it was frustrating. An agent might invest the time and effort to locate a listing and contact the seller’s agent only to find that the property was already under contract.
Thankfully, with the advent of the Internet, the listing service is much easier to use. Electronic searches happen instantly, and the transition of properties from “for sale” to “sold” occurs much more quickly over the days of printed listings.
The multiple listing arrangement provides the buyer with more options and the seller with greater exposure. It’s a symbiotic relationship that is mutually beneficial to all parties.
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MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.