Explaining the MLS system

Almost all home buyers and sellers I know (and many real estate professionals) don't understand the differences between the MLS (multiple listing service), the real estate search engines and the listings generated from broker websites like www.CaliforniaMoves.com.

The MLS is a database service generally run by local and regional Realtor Boards for publicizing the property listings of their real estate brokers, who are members of the sponsoring board or trade association like National Association of Realtors ("NAR"). Since they are privately run, MLS systems have historically worked for the benefit of their membership. Up until 2002, MLS systems were not accessible by the general public so that Realtors would retain proprietary value of MLS data. That year, NAR opened the systems to member brokers who could then add MLS to their websites in order to compete with the developing real estate search sites.

Now, MLS generally only allow listing privileges to their membership, and this has become a fight as other entities such as FSBOs, FSBO faciliatiting agents and other non-members (see OpenMLS Project) push to make listing on MLS systems "public" with no requirement for membership. The MLS also has a key private feature not available to the public which publicizes commission splits and broker comments on properties.

Today's Inman article by NAR President Thomas Stevens defines the key attribute of the MLS is for fostering interbroker cooperation. Stevens explains that the listing of compensation split and other interbroker commentary facilitates the sale of property. In essence, without such information, brokers would need to define compensation splits among each other with each negotiation.

Although I don't see the concept discussed often, interbroker cooperation is key to why FSBOs and other business models that reduce broker commissions aren't as effective in the sales process. That's because Realtors work within cooperative systems that include broker tours and realtor marketing meetings. These forums in effect present the opportunity to recruit other brokers in finding buyers for the target property; think of it as building a virtual sales team. FSBOs are working alone without these adhoc sales teams, and this is a main point FSBO's don't realize entering the sales process.

So, MLS is another foundation for interbroker cooperation and NAR makes a good argument for its operation on that basis. FSBO facilitation firms that offer flat fee MLS listings sidesteps into MLS access, but these listings are generally black labeled by other Realtors in the system. It's a harsh statement, but MLS just operates like a private club and that's why they are under attack... the fact is the private club will still play by their rules even as interlopers (flat fee MLS listings) join. For its detractors, it's probably better to just start a new club (Craigslist, openmls.org), or business model (Zip, Redfin)

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  • 9/5/2006 5:55 PM Bonnie Erickson wrote:
    Because there are many business models among REALTORS who are MLS members, FSBO's can also get on the MLS in our area. Fee for service brokerages allow sellers to represent themselves, conduct their own open houses, place their own ads, and negotiate their own sale. One can see the difference in most of the owner generated MLS entries. Pictures are not usually as good. Measurements are inaccurate. Room abbreviates are not consistent. Disclosures are not evident. There is value to the experience that an agent brings to the table that far exceeds the MLS access.
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    1. 9/5/2006 7:38 PM Transparent RE wrote:

      Through my work in real estate settlement, I have worked with FSBOs listing on Craigslist (Craig lives in San Francisco and Craigslist has listing credibility in the Bay Area. Even Larry Cragun  advises so ). The missed details - non-professional pictures, missing disclosures - are likely in part due to the fact that Craigslist is not set up as a listing engine like the MLS. Yes, agents are much more than the MLS.

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    2. 11/18/2006 2:26 PM Kyle Else wrote:
      The difference in most of the owner generated MLS entries from a marketing side (ie: photos, virtual tours) is because the homeowner does not have the same resources available to them as licensed Realtors. For example many Virtual Tour companies on the web do not make their products and services available to FSBO home sellers to purchase. This trend of only offering marketing tools to licensed Realtors is nothing new but not much has been said about this business practice of turning away business from FSBO home sellers.
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      1. 11/18/2006 8:36 PM Pat Kitano wrote:
        Interesting how the systems related to the MLS - in this case, virtual tour companies, are also biased towards their Realtor base. Is it because these companies don't want to alienate their customer base by supplying product to FSBO home sellers (the "competition")? Thanks for the enlightening, Kyle, I may investigate this further...

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  • 9/6/2006 11:08 PM Richard Johnston wrote:
    Your definately right about the public not understanding the difference between and MLS, real estate agent IDX website, online real estate classifieds. The online marketplace is getting more confusing for homebuyers because they are using to many sources for their info.

    Serious buyer and sellers should start with Realtor.com first.
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  • 1/18/2007 9:16 PM Todd Kolber wrote:
    The problem is with the third party MLS that has a main concern of making money through ads. We offer as many public mirror MLS links as possible on our site to provide the buyers and sellers with robust information without having to deal with useless weightloss ads or make a commitment to a realtor during their search. The internet will make this happen whether realtors or brokers want it to or not. It's just about the the realtor's true incentive is to sell themselves or the property.
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  • 5/28/2008 5:53 PM Robin wrote:
    I've seen so many different FSBO's not disclosing vital information, and are completely ignorant in the laws of their state. They seem to think that this is indeed the new wave of real estate. There are many new lawsuits created because of this, they should have gone ahead and gone with an agent, would have been much less costly for them, after all, they think that they are saving extraordinary amounts of money, but in actuality, the mistakes being made are much more expensive.
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  • 4/13/2009 1:51 PM john wrote:
    I agree, I don't think the real estate community has done a good job on differentiating MLS from the FSBO and 3rd party companies out there. NAR has failed in promoting and making Realtor.com the standard.
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