Is This the Death of MLS? | Think Realty | A Real Estate of Mind
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Is This the Death of MLS?

With more and more websites showing available properties for sale, are we looking at the death of the MLS? One article on the topic actually featured a picture of a mushroom cloud. If the days of MLS really over, how would that affect the real estate industry?

In the past, long ago before the internet and before websites like realtor.com and Zillow existed, real estate agents and brokers had near complete control over available inventory. If you wanted to buy a home back then, you’d either have to drive around looking for for sale signs, check out newspaper ads and real estate magazines, or walk into a brokerage.

For years, brokers and agents would get a “book” of available properties every week. They could then choose for their client which properties to show, but the “book” was not to be shared with the public. When the internet became available for public use, the “book” was replaced by the MLS on line. But still those properties were restricted from public viewing.

And then Zillow, REaltor.com and Trulia changed everything. Suddenly anyone could see what was for sale, and real estate agents lost their power.

Easier Access

At the time, real estate agents feared the need for a real estate professional was over. But that has not turned out to be the case, even as more and more real estate websites come online. If anything, access to available properties for sale has made a real estate agents’ job much easier because the client can search through all properties they like, choose what they want to see, and then hire an agent to help with the offer negotiations, inspection process and closing process.

Back in January, Inman News sponsored a panel on the topic and the moderator, Brian Boero, started things off with this statement:

“The MLS itself is not doomed.” But then he quickly added that realtors shouldn’t be too happy yet because “there are persistent and in some instances, quite serious problems [with the system.” Boero noted that many brokers and agents feel that MLS is “too fragmented and feudal.”
Those brokers and agents may have a point. While it is often referred to as “THE” MLS, in reality there are lots of MLS systems around the country. According to the NAR, the first MLS took shape in the late 1800’s when real estate brokers would gather locally to share information about the properties that they were trying to sell. At some point, a group of these brokers all agreed that they would compensate other brokers who helped them sell their properties, and the MLS was born. The NAR says of this event:

“The first MLS was based on a fundamental principle that’s unique to organized real estate: help me sell my inventory, and I’ll help you sell yours.”
Real estate investors may be more familiar with the MLS in terms of looking for properties that are off-MLS, or unlisted entirely.

Conventional wisdom states that properties that are not being publicized are likely to have less purchase competition and the owners are likely to sell for a better deal. However, that’s not always the case. A savvy investor with great negotiation skills can outsmart a seller, who possibly could have fetched a higher price had he or she put the property on the market.

Not the End, but a Change is Coming

With services like Zillow, Realtor.com, and literally hundreds of other virtual MLS providers that list properties all over the country (represented by brokers and realtors and otherwise), it’s really not accurate to say that a property is unlisted anymore just because it does not appear on your local, official MLS. Some real estate websites are indeed saying that maybe realtors and real estate agents are no longer necessary. However, given that the purchase of real estate is highly regulated and the industry is prone to lawsuits, it’s doubtful too many buyers would try to do it on their own.

In that case, it seems unlikely that realtors profession will disappear. In fact, NAR is quite comfortable online and expanding its own listing services on Realtor.com. However, the traditional MLS system is probably going to continue to evolve and change – and it needs to. Battles over the rights to local MLS management will likely contribute to public perception that there does need to be change, and the losers in these battles will likely contribute to those changes.

For example, last December a court in New York State actually dissolved an MLS service and auctioned off its assets. Another MLS bought the service for $250,000 and other than the feuding board members who started the legal battle in the first place, most people using the system probably didn’t notice.

The sale and associated dissolution of the MLS occurred because board members believed that they were not proportionately represented, and it generated bad press around the MLS and the court case because local agents and brokers feared that they would lose their paid access to the database of homes for sale.

At the end of the day, real estate investors will benefit most from any MLS service by using it to find (or sell) the deals that they know fit their personal real estate investing strategies or by not wasting their time with the service at all if it does not tend to bring them properties that meet their needs! With Google and other online giants batting around the idea of launching their own branded MLS systems to compete with Zillow, Realtor.com, and other existing options, even if the MLS as we know it does “die” there will still be plenty of multiple listing services out there to use when you are looking for deals.

Kathy Fettke is the founder and co-CEO of Real Wealth Network, a passive real estate investing club with more than 24,000 members. She’s also the author of  “Retire Rich with Rentals” and host of podcasts “The Real Wealth Show” and “Real Estate News.” Contact her at kathy@realwealthnetwork.com.