US REAL ESTATE: MULTIPLE LISTING SERVICE VS. OFF-MARKET
US REAL ESTATE: MULTIPLE LISTING SERVICE VS. OFF-MARKET
US Real Estate: Multiple Listing Service vs. Off-Market
Unlike in the United States, the Multiple Listing Service (MLS) doesn't exist in France, where you can access various properties for sale across the country. However, some properties aren't visible; this is called off-market. What are the differences between these two services? What are the advantages?
US Real Estate: Multiple Listing Service vs. Off-Market
Multiple Listing Service vs. Off-Market
Multiple Listing Service
The Multiple Listing Service (MLS) is a database system that aggregates properties for sale in the United States. Real estate agencies, representing the seller, post available properties on a platform. Real estate agents, in turn, access this platform to find buyers. It's a collaborative system that provides accurate and structured data on various properties. The real estate agency offers compensation to the agent who finds a buyer for the property. This allows the agency to have greater visibility.
In pioneer days, people bought and sold real estate even before the United States became a nation. They realized they needed a way to share their information toward the end of the 19th century. Real estate professionals would meet with their local organizations to exchange information and work out agreements if one of them brought in a new buyer.
Today, there are approximately 800 MLSs in the United States.
Off-market
Off-market properties, as the name suggests, represent all real estate that does not appear in the MLS. They do not appear in trade magazines or online. Information is passed on by word of mouth, but especially by real estate investment specialists who have a substantial network and are aware of the offers available in this market.
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Advantages and Disadvantages of MLS
For the seller
The MLS offers great visibility to your property.
Better exposure : All licensed real estate agents have access to the MLS. Most potential buyers will use agents to help them find a home, so it's a great way to cast the widest possible net.
Don't be afraid of missing out: By not being part of the MLS, you may worry about missing out on potential buyers. But with the real estate agent network and open houses, you have a better chance of reaching buyers interested in your property.
Here are the disadvantages to consider:
Privacy concerns: Most sellers want as much visibility as possible for their property. But some sellers don't want to deal with a barrage of real estate agents and potential buyers. Keep in mind that you'll need to show your home frequently.
Exclusivity: Sometimes people are more excited about a property they perceive as exclusive. The idea that not everyone can see your home may encourage some buyers to make sure they are among those lucky enough to see it. It may also encourage them to bid more aggressively on the property if they like it.
Finances: Only a licensed real estate broker can list a new home on the MLS. If you go through an agent, you'll typically pay a total commission of 6% on the sale of your home (the different agents share this commission). There are also "à la carte" brokerages and flat-rate services where you pay a one-time fee instead of a commission. But unless you're a broker, there's no way to get your MLS listing without paying a fee.
For the buyer
The MLS offers access to a large number of properties. In fact, 89% of single-family homes for sale are on the MLS.
Access to a large number of properties that match your needs: The MLS helps you narrow your home search to those that meet your specific needs. A real estate agent can search for homes by area, price range, number of bedrooms or bathrooms, etc. All information about a home can be searched and the list can be narrowed down to the best-suited homes.
Easier comparison shopping: You can easily compare home prices in specific neighborhoods, and real estate agents tend to ask their sellers to price their homes based on a comparative market analysis (CMA), which is based on homes listed in the MLS or recently sold. This helps buyers know that home prices are fair and comparable, preventing them from overpaying for a home. The MLS is the most widely accepted tool for both buyers and sellers.
One of the drawbacks is that access to the MLS must be through an agent.
Agent Requirement: You will be required to use an agent to access the various properties listed on the MLS. This means that you will have to factor in their commission when making your purchase.
Competition: The more visible a property is, the more likely you are to be in competition with others. This means there may be a bidding war, and you may end up paying more for your property than you expected.
Read also: The increase in the number of foreign investors in the multi-family building market
Advantages and disadvantages of off-market
For the seller
The benefits of off-market for your property are:
Test the market for your home and its price before it sells: You can get a feel for its market value and see how the local market views your home and its price. If the price is too high, you can lower it before listing it on the MLS and avoid a reduction in the public price.
Avoid the "days on market" delay, as your home isn't officially listed on the MLS: there's no pressure to worry about your home becoming outdated or you sitting it out while buyers increasingly wonder what's wrong with it. This tactic works best for very high-end homes that take longer to sell, even in a fast-moving market.
Maintain more control over the selling process: You can sell your home on your terms—who can see it, when it's available, etc. When there are fewer homes on the market but plenty of buyers, you can be more selective and not make your sale public. This is ideal if you don't want your neighbors to know you're selling or if you're not interested in a parade of buyers.
Avoid the time and expense of preparing your home for open houses and multiple showings: Off-market properties typically receive fewer showings, but more serious buyers. This reduces the number of showings you have and the time it takes to prepare your home at the last second for an unexpected showing.
Avoid the MLS spotlight and take a more discreet approach: Some sellers find it too overwhelming to have the world view photos of their home and properties online. Once listed, your home is in the public domain and can be seen by everyone.
There are few disadvantages for sellers regarding off-market:
Fewer buyers means less competition for your home: The more people who see your home, both through the MLS and in person, the more likely your home will sell faster and for more money.
Potentially below market value: When you sell your home off-market, you'll never know how it would have fared if it had been listed on the open market where more people might be interested. In today's fast-moving market, it's not unusual to have a bidding war where the price increases by thousands of dollars or more. With fewer buyers viewing your home, you're less likely to have a bidding war to drive up the price.
For the buyer
Off-market is a good solution for those who want to take their time and don't want to compete with multiple people.
Access to homes not listed on the MLS: These properties are exclusive and offer high financial potential. When inventory is low, this provides another opportunity for potential sellers. You might find a hidden gem that most other buyers will never know about.
Less competition from other buyers means you could get a deal more easily: the fewer buyers viewing the property, the less likely a bidding war is to occur, so you could potentially get the house for less than it would go for on the market.
Avoid looking at tons of houses and the crush of buyers at open houses: it won't be as overwhelming and tiring.
Savings: You can talk directly with the seller and therefore not have to pay commission to an agent.
Assume that the best real estate deals are off-market, because it works with the network (word of mouth is very important). You have the opportunity to obtain atypical properties (not habitable therefore in need of renovation), repossessed properties, lots of properties, entire buildings, etc. The market is much freer because it is less structured, there are no rules so the opportunities are greater.
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