What is MLS®? Known as “Multiple Listing Service”, MLS® is a commission-based real estate marketing platform allowing agents to cooperatively advertise and sell real estate. Here is what you need to know.
Homeowners today have numerous options of services to choose from when selling their homes. However, when it comes to real estate marketing, MLS® continues to offer some of the best advertising exposure in the industry. Supported by millions of cooperating real estate agents, MLS® represents the largest real estate marketing network in the world.
But there is always a dark side. In 2020, this gargantuan commission-based marketing platform garnished appx $118 billion in commission fees from US consumers. Similarly in Canada, homeowners spent nearly $20 billion in service-related fees to move their homes. Yet, for many homeowners selling the traditional route via MLS® remains a vastly popular option. But, before you decide which route to go, it is important to understand the MLS® model in greater detail and perhaps consider some of the much less expensive alternatives that can save you thousands of dollars in commission fees.
The MLS® system is a well established and oiled machine. Dating back to the late 1800’s, when intermediaries, known today as real estate agents, began to broker real estate deals on behalf of property owners. During this time information could only spread by word of mouth. Thus, a collaborative effort was formed, amongst the primeval agents, to establish locations in which agents gathered and exchanged information on properties up for grabs.
Today MLS® is powered solely by the internet and the millions of licensed agents that feed its database full of real estate listings. Although, the public has no formal access to the MLS® system, the respective listings in the MLS® database can all be viewed on Realtor.com in the United States and Realtor.ca in Canada.
To list your home for sale on MLS® you will need to go through a licenced agent or real estate brokerage. The system remains closed to the public for one good reason. Protecting agency commissions. When a home is listed on MLS®, a commission fee must be disclosed for the buyer’s agent. Most commonly the commission fee that is offered ranges between 2.5% to 3%, depending on the area.
When using a traditional agent who charges you 6% to sell your home, the agent will list the home on MLS® and declare a 3% commission to the buyer’s agent. When the home sells, say for $500k, your cost to sell the home at 6% is 30k. The agent that you hired will take $15k and the agent representing the buyers takes the other share. If you are willing to part with this small fortune, then do not hesitate to take this route, but if you prefer to keep it where it belongs consider the more favourable alternatives.
An alternative option to hiring a traditional agent at full-service commission is often called flat fee MLS®. It is the “middle ground” if you will, between paying a full service 6% commission and going at it alone as a “for sale by owner”.
There are many so called flat fee MLS® services available in every market of the country, just google it! Flat fee MLS® services are always rendered by a licensed real estate brokerage or realty agent. The typical cost of listing your home on flat fee MLS® ranges greatly, with services charging up to $1k and some offering it even for free! At the end of the day, MLS is all the same and there is very little difference in the exposure you will receive online weather you pay $1000 or get the services for free.
But is flat fee MLS® really that cheap or is there a catch? The answer is beware of the hidden costs! No matter how much you pay up front to list on flat fee MLS®, you will be required to disclose a buyer’s agency commission. This commission is typically 2.5% to 3%, which will amount to thousands of dollars in fees. Considering you will be doing all the work yourself; such costs are still rarely justifiable. Declaring a lesser commission can often lead to other highly unfavourable consequences, in which buyer’s agents will often ostracize your sale.
For Sale By Owner MLS® does not exist, period. There is a common misconception that flat fee MLS® is a for sale by owner method of selling real estate with no commission. But it is not. The work in showing your own home and preparing it for the sale can be considered “for sale by owner”, as you will be responsible to do everything yourself. But your listing on MLS® will not contain your contact information and will direct all inquiries to the agent or company that listed you in the database. Furthermore, your listing will be subject to showings through buyer’s agents who are entitled to the commission that you had to disclose.
Finally, it is important to note that the consumer should beware of the many “for sale by owner” marketing sites, which claim to the status of selling your home without commission, while offering flat fee MLS® services. Such companies are all in fact licenced real estate brokerages powered by licensed agents. Most often if you list your home on such sites as a for sale by owner, the agenda will be to upsell you to their MLS® services. Some “for sale by owner” companies, even go as far as offering traditional full-service commission-based representation. This is never a commission-free based transaction. You will have to fork over thousands at some future point in time!
By knowing all the important details of how MLS® works and how much it really costs, perhaps, the best person to answer this question if you.
For many, the services of a traditional agent at full commission may very well make sense. If you are not willing to do your own showings and/or negotiate directly with your buyer(s), there is no one better for the job then a good realty agent. By default, your home will be listed on MLS®, and the agent will handle all the negotiations on your behalf. Yet, you will still have to prepare your home for sale and make sure that it is clean and tidy for every showing.
Perhaps, the most confusing aspect of MLS® is the flat fee approach. Going this route, you are neither taking advantage of agency representation nor are you going to save the money had you gone at it alone as a “for sale by owner”. Here you will still have to do all the leg work, while only saving half of the commissionable equation.
The good news is that selling “for sale by owner” always makes sense! There is absolutely nothing to lose and everything to gain. The thousands of dollars in savings simply speak for themselves. Even if things do not work out, you can always default to a more traditional option.
At TradeCasa.com we believe that every willing homeowner, deserves the option to preserve their equity. Our for sale by owner marketing packages deliver the most effective FSBO advertising exposure in the industry, while offering some of the most comprehensive DIY tools and resources to guide you along the way. We do not offer commission-based services like MLS® and there are never any hidden costs or surprises. TradeCasa is the only “true” for sale by owner service in the industry with one of the highest commission-free success rates. We invite you to pay yourself, listing your home on TradeCasa is simple and will reward you with a small fortune when you succeed.