The Real Estate Revolution

Multiple Listing Service (Back to Top)

The Multiple Listing Service, or MLS, is a database, or directory of homes that are listed for sale by real estate brokers or agents. When a home is listed for sale in the MLS, the listing provides the maximum exposure to real estate brokers and agents that may have clients as potential homebuyers. Specific property types and detailed information in the database can be quickly located and matched to the criteria of potential buyers. 

Because this directory is so comprehensive, it has become the most powerful marketing tool in the real estate industry. In many areas, up to 85% of homebuyers first learned about the home they bought, on the internet, through a listing in the MLS. More homes are sold through the multiple listing service than by any other medium.

Prior to the Internet, access to the MLS database of home listings was available only to licensed members, and as a result had limited the alternatives that were available to the traditional listing and sales approach. Now, with the advent of easy access to this powerful database, consumers can choose money saving alternatives to the traditional sales commission.

Alternative Real Estate (Back to Top)

As a result of the change in real estate technology, there are a growing number of real estate brokers who are offering services at substantially reduced commission rates. The innovation of alternative real estate services, combined with easy access to Internet listings and research information, offers consumers the benefit of money saving options to choose from.

Another option that is becoming popular is a fee-for-service brokerage, which provides the unbundling of services for each separate option as needed by the consumer. For example, when a broker is paid to perform specific services such as, negotiate purchase offers, but not all the other aspects of a full service broker. The advantage for the consumer is the ability to choose which services are needed for a particular transaction. The unbundling of specific services can provide lower overall costs, however, the individual services would have to be compared to other service options to determine the best value. While saving money is usually the primary goal, consumers should of course also compare the level of service when choosing a real estate broker.

Although real estate commissions are negotiable, and are not fixed by law, the industry has maintained a commission level of around 6% for a traditional full service listing, but the trend for reduced sales commissions is picking up speed as more consumers become aware of the options, and as more real estate brokers adjust to the change in business.

Discount Home Listing (Back to Top)

Brokers with reduced commissions typically offer two types of home listings: A flat fee type of listing, which has a fixed flat fee that ranges from about $500 to $2,500, depending on the level of broker service and involvement. The other type is a discount listing based on a reduced commission as a percentage of the sales price, which ranges from about 1% to 1.5% of the final sales price of the home. When compared to a traditional full service sales commission typically paid to a listing agent, the savings can be very substantial.

The following is an example of a traditional 6% home listing, which is usually split between the listing agent and the selling agent at the close of escrow.

· $400,000 Sales Price
· 3% Commission to the Selling Broker = $12,000
· 3% Commission to the Listing Broker = $12,000

Here is an example of the savings from a flat fee listing compared to a traditional listing with a 3% commission paid to the listing agent:

· $400,000 Sales Price
· 3% Commission to the Selling Broker = $12,000
· Flat Fee to the Listing Broker = $500 to $2,500
· Savings Compared to a Traditional Listing = $11,500 to $9,500

The next example shows the savings from a discount listing based on a percentage of the final sales price:

· $400,000 Sales Price
· 3% Commission to the Selling Agent = $12,000
· 1% to 1.5% Commission to the Listing Broker = $4,000 to $6,000
· Savings Compared to a Traditional Listing = $6,000 to $8,000

Selling Exposure (Back to Top)

Statistics can show that up to 95% of MLS listings are not sold by the listing agent, but are sold by cooperating brokers or agents that show the MLS listings to their clients. The most important aspect of listing a home for sale in the MLS is the broad exposure to thousands of selling brokers and agents that may have clients as potential homebuyers. This exposure essentially creates a large commission based sales force with the goal of selling the homes listed in the MLS database. It generally does not matter to the selling broker whether the listing commission is discounted or not, as long as the listing offers the usual 3% sales commission to the broker that sells the home. In a discount listing, the savings to the home seller comes from the listing broker's reduced commission.

Discount Listing Brokers (Back to Top)

As mentioned before, a discount listing broker usually offers their service as either a flat fee, which could be a required up-front expense, or as a percentage of the sales price, which would be paid at the close of escrow. In general, the amount of the fee is relative to the type of service that the broker provides to the seller. An important note about offers for discount listings - some brokers may only offer to place listings in their own online database as a basic service, however, for maximum selling exposure, the seller should choose a service that includes the listing in the MLS, in which case the listing will appear in most, if not all, real estate related websites that access the MLS database. When sellers are comparing broker services and fees, there are some suggested minimum services that should be provided.

The discount listing broker's basic service should include the following:

• · Input the home listing, including a photo into the MLS database
• · Provide information and support about selling procedures
• · Assist with all purchase offers and counteroffers
• · Provide all the required selling contracts and disclosures

Additional services may be offered for an increased fee, such as:

• · Provide a home for sale yard sign
• · Hang a lockbox to facilitate showings
• · Hold open houses for potential buyers
• · Provide additional advertising
• · Schedule showing appointments
• · Order the necessary home inspections
• · Set-up and monitor the escrow and closing process

Each discount brokerage will have their own policy and procedure for the listing services offered. The home seller will need to decide their own comfort level when choosing the different service options available.

Taking more control over the process in a discount listing means that the seller could have responsibilities that the broker would normally have, such as: some of the additional service items as listed above. Also, instead of personal meetings, discount brokers may provide the necessary information and support, using the phone, email, and fax, as the primary contact. Home sellers should confirm the specific procedures of their selected broker, and discuss what the seller's responsibilities will be, to ensure a smooth transaction.