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HOW
THE MULTIPLE LISTING SERVICE (MLS)
WORKS
WITH BUYERS AND BROKERS
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WHAT
IS THE MLS?
The
Multiple Listing Service (MLS) is by far the largest-available record
compilation of real estate that is, or has been, for sale.
Some MLS records are kept for as long as 8 years or more. In addition,
tax information on over 1,000,000 properties in 12 counties was
available. The complete MLS
system is primarily accessed by computer terminals that are available
only to licensed real estate agents and brokers.
Recently, most MLS listings now have a very limited amount of information that is available on the internet.
The MLS system is the most common, if not only, resource used by
real estate agents, whether searching for or listing real estate.
The reason for this is that the MLS system is arranged in such a
manner that makes searching for real estate very easy for the real
estate professional, giving access to the greatest amount of real estate
in the shortest amount of time.
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WHY
USE THE MLS?
Without
a doubt, the MLS is the most effective way to advertise real estate to
licensed agents! The reason
it is so effective is that the system not only exposes property to the
largest group of potential buyers available, but more
importantly, it brings in the serious and qualified buyers.
To understand why this is true you have to stop thinking like a
seller and think as though you were a buyer.
Buyers usually start looking at homes long before they are ready
to buy one. They start
visiting open houses and respond to newspaper ads to get an idea of what
is available, and, almost without fail, they somewhere along the line
meet a friendly agent with whom they feel comfortable and that seems
able to hand everything to them on a silver platter. Thus, a buyer/agent relationship is formed.
Agents make everything seem so convenient that in many cases,
buyers begin to feel that there is no further need for their own
investigation. Buyers
generally feel quite secure relying on a licensed agent to represent
them and handle things correctly. In
many cases, buyers believe that there is no direct cost to them for the
use of an agent because agents are generally paid out of the seller's
closing costs and therefore not by the buyers themselves.
Buyers also tend to assume there are no savings involved in
buying directly from a seller who chooses not to use an agent.
In this case, buyers assume that the seller is trying to save the
entire commission so there would be no financial benefit to them as
buyers. |
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AGENTS
WORKING OUTSIDE OF THE MLS
When
agents do contact owners who are attempting to sell their property
themselves, they are more often than not trying to acquire an exclusive
listing, although that does not always appear to be the case.
In many instances, owners will admit they are willing to pay a
partial 'buyer's side' commission provided the agent is able to bring
them a buyer. Although some
real estate sales do occur this way, it is often more likely that the
agent who initiated the contact is never heard from again because he or
she finds the business arrangement to be too inconvenient if the seller
won't give them an exclusive listing.
Agents must protect their commission in some manner before
showing a property, and dealing directly with a property owner almost
always requires more work for the agent representing the buyers because
the seller is not sufficiently prepared to deal with the issues involved
in closing a sale. So as a
matter of practicality and convenience, nearly all real estate agents
work through the MLS where they know their share of the commission is
secure by disclosure in the MLS listing and the seller's closing work
will be taken care of through the listing side. |
WHAT
YOU SHOULD KNOW ABOUT COMMISSIONS
Commissions
are what drive real estate agents and brokers.
When listing with a full service broker, the listing commission
is negotiated only with the listing broker.
The listing agent rarely discusses with the seller how much of
the commission will be shared with a selling company (a broker which
brings in a buyer), A very common selling commission split is 45% of the
total listing commission with the listing broker keeping the remaining
55%. A great deal of
emphasis is often put on what the total commission will be and what will
be done by the listing broker for that fee.
Usually, there is very little discussion, if any, as to what
amount will be paid or shared with a selling agent, although nearly all
transactions include the use of both a listing and selling agent.
The selling agent's commission or share is equally if not more
important than the amount of the total commission The tables below show
the break-down on a $100,000 transaction at the 7%, 6% and 5% commission
rate and how the money is typically split between the listing and
selling companies and their agents using the common 55/45% split. |
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3.85% |
Listing
company |
$1,925 |
Listing
agent |
$1,925 |
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3.15%
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Selling
company |
$1,575 |
Selling
agent |
$1,575 |
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7% |
TOTAL
COMMISSION |
$7,000,00 |
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3.30% |
Listing
company |
$1,650 |
Listing
agent |
$1,650 |
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2.70% |
Selling
company |
$1,350 |
Selling
agent |
$1,350 |
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6% |
TOTAL
COMMISSION |
$6,000.00 |
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2.75% |
Listing
company |
$1,375 |
Listing
agent |
$1,375 |
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2.25% |
Selling
company |
$1,125 |
Selling
agent |
$1,125 |
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5% |
TOTAL
COMMISSION |
$5,000.00 |
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As
the table shows, it is quite common for the commission to be divided
into 4 parts by the end of the transaction.
Another possibility would be for an agent to agree to list a
property at say 6% and then offer to pay even less than 45% of that 6%
to a buyer's agent in order to recover some of what was lost negotiating
the full commission. So why
is this so important? Consider
from the point of view of the agent with a potential buyer.
The agent has all the information about his or her buyer's wants
and needs and need only input this information into the MLS computer in
order to produce a customized list of properties, complete with color
pictures, that match the buyer's needs.
From this possibly extensive list, the buyer's agent must now
select which properties to present to the clients first.
With the buyer's agent able to see how much commission is at
stake, it is fair to surmise that the selling commission on a listing
could possibly be a motivating factor when the agent has to choose which
properties to present first. The buyers might easily find a suitable match to their tastes
before the list of potential properties is exhausted. For this reason, you will from time to time see premium
pay-outs offered to encourage a listing to be shown first or even
exclusively. An extra
$225.00 or more to a selling agent can have interesting motivational
effects. While it is
possible for a commission to be negotiated on an offer of less than the
full asking price, it does not happen often.
With all of this in mind, a property seller needs to give a great
deal of thought to selling agent commission splits, since these agents
are the ones, after all, who have considerable control and influence
over their buyers. |
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BUYER
BROKERAGE
In
the last few years, buyer's agents and buyer brokerage has become very
popular. So popular in
fact, that "buyer's only" agents and companies exist strictly
to represent the buyers. Naturally,
buyers are quite agreeable to this arrangement.
With exclusive representation, buyers now have someone who works
in their best interest, something the listing agent can't possibly do
because their responsibility is to the seller.
Many agents are now commonly using exclusive contracts which bind
the buyers and agents together as a listing does with sellers and
agents. When this is the
case, the buyer owes a commission to the agent even if the buyer buys
without the use of the agent. Under
this arrangement, buyers rarely seek out properties for sale by the
owner, they simply let their agent do the work. Buyer's are willing to sign into this type of contract
because the service is usually excellent and the agent will put in a lot
of time for a buyer who has committed to them.
In fact, many agents generally won't even work without a buyer's
contract, since they could end up putting in countless hours and lose
out when a buyer buys with another agent.
Good agents are highly productive with their time.
With a contract, the buyer understands their commitment to
working with the agent. |
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SO
WHAT DO I DO?
If
you have some time to invest, selling by owner, when done properly, can
save you thousands of dollars. You
must, however, expose your property to the entire market.
If you don't, it is possible that the potential savings gained in
selling yourself will be lost from the inability to obtain the maximum
sale price. The more buyers
you can reach, the better. Any
seller who has experienced multiple offers probably knows the value of
having several buyers bid up the price.
One of the obstacles that has traditionally been encountered by
the do-it-yourself sellers is the inaccessibility of the Multiple
Listing Service. Access to this resource has just not been possible, Another
problem has been the uncertainty of what to do once a buyer has been
found. An attorney is
typically engaged to assist with the process, a solution that can be
quite expensive. |
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THE
SOLUTION!
Direct
Access, Inc. and Direct Access Title, Inc. are the solution. We offer the most complete and economical service available
to the do-it-yourself property owner, providing maximum exposure to the
market though the use of MLS. Additionally,
we can provide everything a seller needs to get them through the selling
process from start to finish, including such items as forms, signs, lock
boxes, sign riders and most importantly, excellent technical service.
At your request, our closing service, Direct Access Title Inc.
will handle your closing, allowing you to rest assured that everything
will be taken care of efficiently and economically. |
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THE
BOTTOM LINE - FLEXIBILITY
If
you find your own buyer, you pay absolutely NO COMMISSION!
If an MLS agent brings you the buyer, you pay a reduced commission (for
example 2.7%-3.15%). You can cancel at any time, because there are no
long contracts and there are never any additional selling premiums or
commissions due to Direct Access, Inc. when you sell.
And best of all, you can sell with confidence because our
professional services can back you up if you encounter any situation
that you don't quite understand or with which you aren't quite
comfortable. |
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DIRECT
ACCESS INC. 6337 PENN AVENUE SOUTH, RICHFIELD.
MN 55423
(612) 866-5242
(651) 688-8888 |
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