Most MLS systems now export much of their data on homes for sale to publicly accessible web sites like those for which we’ve provided links to on this site. These sites make it possible for you to conduct a home search on your own in a manner that was unimaginable years ago. Prior to the advent of these public MLS systems, it was simply impossible for buyers to obtain a systematic list of homes for sale without working through a real estate agent.
Access to Data, but Buyer Beware
- They don’t contain critical information that is available in the full MLS systems that would be available to an agent representing you.
- They are designed to put you in contract directly with the agent listing the property so that you lose the option of having an agent represent you in the purchase of the home you call about.
- They are designed to provide the listing agent with your contact information so that they can contact you later to continue marketing homes to you or marketing their services as buyer agents to help you through the home purchase process.
We’ll outline of the specific limitations of these system from the buyer’s point of view below.
Loss of Assistance and Representation
In How Are Agents Paid?, we’ve explained that the agent listing a home has a marketing or “listing” contract with the owner that typically obligates the owner to pay the agent a 4-7% commission when the home sells. This contract will also specify that the listing agent will split that commission with any agent who brings a buyer to the home, shows it, and submits an offer that results in the sale of the property. The seller pays the same commission whether the listing agent sells the property directly or through another agent who brings to the buyer to the property. From the seller’s point of view, this is a great marketing system. It provides an incentive for the listing agent to locate a buyer directly, since they keep the whole commission that way. It also encourages other agents in the area to bring their buyers to the home, since they’ll get a split of the commission if “their buyer” makes the purchase.
By using the web to market homes, and particularly by making their listings available through the public versions of the MLS, listing brokers dramatically increase the chances that they can make a direct sale to a buyer and thus double their money by retaining the full commission. This direct access to buyers becomes even more important with a home that is overpriced or that has deficiencies that are making it difficult to sell. If the listing agent can find a buyer who is not represented by a knowledgeable agent, and who doesn’t have access to data on prior home sales in the neighborhood to analyze pricing, they are more likely to make the sale than they would be if there were another agent getting in the way by advising the buyer to offer less or to just move on and find a better property.
Available Properties vs. Properties that are Under Contract
- Active Properties: Properties that are actually available for you to buy.
- Under Contract Properties: Properties where the owner has already accepted an offer from another buyer and is obligated to sell that property under the terms of the contract unless the buyer backs out for one reason or another.
The failure of these systems to make this distinction can make them very frustrating to use. After looking through all of the properties in your price range, and maybe even driving by them to look at the neighborhood and the location, you call the agent and discover that someone else negotiated a contract on it two months ago.
Why isn’t this critical information on the public systems? Because the purpose of these systems is to market properties for sellers and to market real estate agents and their services. For the seller, leaving the property on the system until closing continues exposing the property to new buyers in case the current buyer backs out of the contract for some reason. For the listing agent, this provides additional contact with buyers who call on the property. The agent can encourage the buyer to look at other similar properties that she has listed or can try to convince the buyer to work with them exclusively while searching for a new home.
Data on Properties that Have Sold
Again, why isn’t this information exported to the public versions of most MLS systems? Because these systems are a marketing device for sellers and for listing agents. Sharing information that would help buyers evaluate the asking price for listed properties would undercut the purpose of the system.
Data on Listing History
Why isn’t this information available on the public systems? Because it is so valuable to buyers.
Delays and Limitations in Data Access
Inconsistency of Coverage Areas
- Coverage Areas are Limited: Each system tends to cover a certain region, defined primarily by the communities in which the member Realtors work.
- Coverage Areas are Overlapping: Communities in some areas may have 30% of their listings in one system and 70% in another. If you only search one system, you may miss 30% or 70% of the available homes.
- Coverage Areas are Undefined: As indicated above, what defines the coverage area of an MLS system is not a map but the areas in which the member Realtors list homes. Longmont Realtors will generally enter all of their listings in the system we’ve referred to as Boulder & NE Colorado. But if a Longmont Realtor lists a home located in Denver, that home may still get listed in the Boulder & NE Colorado system rather than in the one that covers the Denver Metro Area because that agent hasn’t paid the membership fees that allow him to enter data in both systems.