MLS databases work by helping real estate agents and brokers connect buyers and sellers interested in buying and selling real estate. However, an MLS is a private database that can only be accessed by licensed real estate professionals who are active members of the NAR[1].

The concept of an MLS is not new—real estate professionals have been joining forces since the 1900s[2] to process as many real estate transactions as possible. However, with the advent of the internet, creating MLS databases is easier than ever.

Real estate websites like Zillow and Realtor.com compile national MLS listings. Every website may present a single “nationwide” database, but they are composed of hundreds of regional sources.

In some cases, when an agent publishes a new listing, they typically have the option not to push their listing out to these third party websites, so there are some MLS listings that will remain exclusive to that MLS database.

MLS and the National Association of Realtors® (NAR)

Typically, MLS users must also be members of the NAR, a respected real estate association in the United States. However, four states—Alabama, California, Florida, and Georgia[3]—have successfully challenged this requirement, making it legal in these states to participate in an MLS database without NAR membership[4].

Every MLS has its own governance system. Each one’s protocol defines how much commissions participants can earn, how they should list properties, and how to resolve disagreements between members and consumer complaints. These procedures may differ from others, but in general, they follow the rules set forth by the NAR.

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What Kind of Information Does an MLS Display?

Most real estate agents and brokers use MLSs to list local single-family detached homes, duplexes, townhouses, and condominiums for sale. These databases contain various pieces of residential estate, including pre-owned homes, pre-foreclosures[5], foreclosed houses[6], and real estate-owned (REO) properties[7].

Commercial properties for sale have their own databases, although some MLS members choose to mix commercial and residential listings together[8].

Not all properties that are bought and sold are registered on the MLS. For example, home builders may have their own sales agents who deal directly with potential buyers to ensure more control over negotiation and costs[9]. Other real estate professionals, like house flippers or wholesalers, may choose to generate their own buyer leads and sell their properties outside the MLS.

Rental properties may also be listed MLS[10]. Many landlords prefer to look for renters themselves to avoid paying any third party, but some landlords choose to advertise their units on the MLS by hiring an agent for added exposure.

How Are Disputes Settled in an MLS System?

Established organizations that are responsible for overseeing an MLS also run an ethics committee whose purpose is to address complaints from participating agents and brokers about each other.

Mediation, arbitration, or a combination of both is an ethics committee’s approach to dispute resolution. This body hears all parties, considers events in context, and figures out the applicable rules on the matter.

The ethics committee handles all MLS-related issues, but commissions account for most of the cases, particularly “procuring cause”[11] cases. This happens when participating agents and brokers argue over who is responsible for involving a property buyer in a transaction; the one who gets credited for “causing” the sale gets the commission. Recently, however, the internet has made “procuring case” issues more convoluted.

Likewise, the ethics committees of an MLS aims to resolve consumer complaints against member agents and brokers. MLS organizations want to keep these cases from reaching state licensing boards as much as they can.

Here are the main benefits of MLSs to real estate stakeholders.

Increased Property Exposure

Licensed real estate agents that use an MLS database are more likely to find serious buyers quickly. These selling agents can benefit from a much larger network of real estate agents and brokers rather than relying on their own efforts.

The MLS members that represent the selling and buying parties get to split the commission. So, the incentive to introduce buyers is high for participating agents and brokers.

The properties displayed on regional MLSs may show up in an aggregated national database. However, property information available for public consumption is merely a condensed version of the comprehensive local MLS data, which is private by nature.

That is why For Sale By Owner (FSBO) properties[12] tend to stay longer on the market and get sold for less than those listed on the MLS.

Improved Equity

Access to an MLS database can level the playing field for smaller players in any real estate market. Less established participating agents and brokers can offer properties listed by their bigger counterparts. As a result, they can neutralize their limitations and put themselves in a better position to help their clients.

Participating agents and brokers observe strict guidelines when listing properties to an MLS. This is to protect the integrity of their local property database and enforce consistency. Here are some specifications:

• Some MLS systems might require different property details. But as a general rule, more specific and detailed information is better.
• Listings with less data may appear less frequently in search results and on MLS reports. That is why it is in the best interests of agents and brokers to fill in as many data fields as possible.
• MLS users are required to enter properties into the system shortly after the listing agreement is inked. Failure to list a property within a specified time frame (usually within 24 to 48 hours) can result in a fine.
• Members may not have to enter complete property data immediately, but they have to share everything the network needs to know about their listings, including quality photos and helpful directions, by the deadline. Penalties await offenders.

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An MLS helps real estate transactions transpire more quickly, but they are not the only viable source of property listings. Real estate sellers, buyers, and investors can get useful data by other means.

• Online Marketplaces. Property listing platforms exist to help selling and buying parties directly connect. Other than displaying national listings, they may come with a house valuation feature and other useful functionalities. However, the most popular of these platforms have become lead generators for realtors. Their owners monetize their high traffic in different ways, which includes collecting steep fees from real estate professionals who want to use them. The organizers of many MLS systems dislike services like Zillow[13] not only because they are direct competition but because these platforms steal intellectual property, post outdated or incorrect information, and operate with little to no accountability.
• FSBO Sites. Unlike comparable online real estate platforms, FSBO sites fill a market niche. These peer-to-peer marketplaces serve the unique needs of DIY sellers and buyers. FSBO site operators can share their listings with local MLSs for increased property visibility.
• Public Records. Government offices can provide fresh resources for anyone interested in pre-foreclosure, foreclosure, and REO listings. In addition, newspapers still display legal notices like Notice of Default or Notice of Sale can provide information about discount real estate for sale. Although accessible by anyone, these public records are immediately available in the databases of MLS organizations and online marketplaces.
• Bank Sites. Not all lenders publicly advertise the assets they want to get rid of on their sites, but they may entertain inquiries about their REO properties from individual buyers. If a bank lists its properties for sale, it normally intends to sell them in bulk.

A multiple listing service (MLS) is a regional database of consolidated property listings from participating real estate professionals and firms. MLS databases are a source of information for different sorts of homes for sale, including single-family dwellings, duplexes, and condos, but they may also include commercial real estate and residential property rentals. To gain access to an MLS database, a user must hold an active real estate license, pay for a subscription to the database and be an active member of their regional chapter of the NAR, although some real estate investors and other stakeholders may use other means to gain data from an MLS.

The primary benefit of having access to an MLS is exposure. For a listing agent, it offers exposure to a wide audience of agents who are actively looking for property on behalf of their buyers. For a buyer’s agent, it’s exposure to what inventory is currently available on the market.

MLS users that represent home sellers can give their listings much wider exposure, while those that serve buyers get incentivized by bringing business to the network. If there is some disagreement between two members, the ethics committee of the regional chapter of the NAR can step in and use mediation, arbitration, or both to resolve the dispute. This body also hears and addresses complaints from sellers and buyers against MLS participants.

1. Militana, T. (2019.) How to Access the MLS. RealtyNA. Retrieved from https://realtyna.com/blog/how-to-access-mls/
2. Ericson, C. (2016.) What Is the MLS? The Multiple Listing Service, Explained. Realtor.com®. Retrieved from https://www.realtor.com/advice/buy/what-is-the-mls-multiple-listing-service/
3. Inman. (2014.) Can you name the 4 states where MLSs can’t require members to be Realtors? Retrieved from https://www.inman.com/wire/can-you-name-the-4-states-where-mlss-cant-require-members-to-be-realtors/
4. National Association of REALTORS®. (n.d.) When Is a Real Estate Agent a REALTOR®? Retrieved from https://www.nar.realtor/about-nar/when-is-a-real-estate-agent-a-realtor
5. Esajian, J. (2021.) Buying Pre-Foreclosures: An Investor’s Guide. FortuneBuilders. Retrieved from https://www.fortunebuilders.com/pre-foreclosures/
6. Segal, T. (2021.) Buying a Foreclosed Home. Investopedia. Retrieved from https://www.investopedia.com/investing/buying-foreclosed-home/
7. Karani, A. (2020.) How to Find REO Properties in 2021. Mashvisor. Retrieved from https://www.mashvisor.com/blog/how-to-find-reo-properties-2021/
8. Laborde, M. (2019.) Is There an MLS for Commercial Real Estate? Elifin. Retrieved from https://elifinrealty.com/is-there-an-mls-for-commercial-real-estate/
9. Desimone, B. (2018.) 5 Things Every Home Buyer Needs to Know About New Construction. Zillow. Retrieved from https://www.zillow.com/blog/the-home-buyers-guide-to-new-construction-194376/
10. Smyth, D. (2021.) How Do I Put a Rental Property on MLS? SF Gate. Retrieved from https://homeguides.sfgate.com/put-rental-property-mls-7312.html
11. Lamont, C. (2016.) Understanding Procuring Cause. Wisconsin REALTORS® Association. Retrieved from https://www.wra.org/WREM/Dec16/ProcuringCause/
12. Brandwein, S. (2021.) What is FSBO? An Objective Overview of For Sale By Owner. HomeLight. Retrieved from https://www.homelight.com/blog/what-is-fsbo/
13. Sagers, K. (2020.) Why Do Realtors Hate Zillow? Today I’m Home. Retrieved from https://www.todayimhome.com/post/why-do-realtors-hate-zillow