According to the National Association of Realtors (NAR) only HALF of buyers used the services of the Multiple Listing Service (MLS) when they purchased their most recent property.[i]
Further, this same organization admits the MLS was created to provide a way for Realtors © to compensate each other in a sale.
So, let’s examine those two points.
First, if only half of the buyers are using the MLS, what are the other half using to find properties? I bet you do this yourself: browse around on Zillow or Redfin or Realtor. When you find a property you like, you think, “Now what do I do?” Most people then simply click on an agent featured on the page and ask to go see the property. Do you know that one click, notifying an agent that you’d like to see the property, just cost you 3% of the value of the property if you buy it? That’s because if an agent brings a client to a property, the seller is normally obligated to pay that buyer’s agent 3%. So, if your Dream Home is on the market for $250,000 that click just cost you $7500.
Wait, you say. I just told you that the SELLER will pay the buyer’s agent, right? So, you are thinking you are off the hook. But, don’t you think the Seller has built the cost of the agent commission into the price you are paying for the home? Of course they have!
So, the better tactic would be to find the same Dream Home and reach directly out to the seller or the seller’s agent. The cost of the seller’s agent (another 3%) may still be built into your home cost, but you will save the other 3% by going this route. Be sure to tell the seller’s agent that you do NOT want to be represented by the seller’s agent and instead want the price of the home reduced by 3% to show that there are no commissions on your side (buyer’s side).
Next, let’s examine this statement on the purpose of the MLS made by the NAR:
“MLS is a private offer of cooperation and compensation by listing brokers to other real estate brokers.”
Why is the compensation in a real estate deal a private offer? If you are the buyer in a transaction, shouldn’t you know exactly what you are paying for in the transaction? But, it’s very private and protected in the MLS. Specifically, agents and brokers can see the compensation offered to a buyer’s agent for selling a house, but the consumer cannot. If your agent gives you a print-out of a data sheet on a house you are interested in, you will quickly see that commission is not mentioned anywhere.
Why is the MLS so secretive about what agents and brokers are earning in a sale?
Because if a consumer knew that commissions total $18,000 on a $300,000 house, they’d be furious. What about a $500,000 house? A cool $30,000 in commissions! Does that make sense to you? There is the same amount of paperwork to complete in a $100,000 sale as in a $500,000 sale, so wouldn’t the smarter way be to compensate equally without regard to the home price?
An even better alternative is to be a FSBO (For Sale By Owner) buyer and seller in Arizona.
The seller who is selling their house on their own can discount the price of the home by several percentage points since they are not paying commissions. The buyer gets the exact same home but for up to 6% less. You can still use the MLS for free by using a company like fsboTECH.com to post your property and will get the same exposure for your property (Zillow, Realtor, Redfin, Homes, Trulia and many more). Be smart and save some money in the process.
[i] NAR Home page “MLS: What is it?”