Every professional involved in the real estate industry should understand and be able to talk fluently about the MLS’s true purpose and value.
What is an MLS? On the surface, the answer seems simple. A multiple listing service is a marketplace where brokers and agents help consumers buy, sell and rent homes.
But the real estate marketplace isn’t simple. Often, high profile trends absorb the industry’s focus and obscure the image of the MLS. Powerful technology companies use MLS outputs to drive attention-grabbing products and services. News headlines highlight organizations challenging traditional MLS practices in data sharing and compensation.
In light of this uncertain, ever-changing environment, a casual observer might ask, “What is the existential value of an MLS?” The truth is, the MLS has provided an abundance of value over the past century that explains its broad appeal and its continued relevance.
Being able to succinctly communicate the many benefits of the MLS in a modern environment—with historical context, and even from an international perspective—is critical for brokers and MLS leaders to ensure that transparent, liquid marketplaces continue to serve their communities. In fact, any professional who’s involved in the real estate profession should be prepared to describe the value of the MLS.
What an MLS Is Not
It’s often helpful to begin defining something by identifying what it isn’t. Oversimplified descriptions of the MLS are common. The MLS is not:
- A database
- A website or app
- A network for commission payments
- A REALTOR® association
While all of these things can exist adjacent to an MLS, or as features of it, they are inaccurate descriptions of the organization. Twenty years ago, former National Association of REALTORS® CEO Terry McDermott challenged association and MLS leaders to clearly understand the MLS with words that ring true today: “They have to make sure their members fully understand the MLS system and how it operates—that it’s not just a collection of electronic listings. … If we keep cheapening the MLS system and commoditizing the MLS by saying it’s just an aggregation of listings, we’re going to inherit a very negative end result.”
The MLS Cooperative
At its core, an MLS is a broker cooperative: an organization in which multiple competitive companies agree to abide by shared rules. This cooperation agreement empowers MLS participants to provide superior professional services and access to inventory for their clients.
Three core components of an MLS are central to its definition:
- Multiple licensed brokerage organizations
- Exclusive listing agreements between brokerages and their clients
- An organization that establishes the rules and compliance mechanisms that ensure brokers and their customers and clients cooperate efficiently within its environment
MLSs provide many offerings. The most valuable services are those that are grounded in the cooperative rules of the MLS. MLS rules have benefits similar to those of a stock market. Rules for a stock market regulate who can broker products, what they can sell, and what information must be provided about the products. The outcome of compliance with these rules is a market that buyers and sellers can trust: transparent, timely, accurate information about broadly aggregated inventory.
Rules-Based Services of an MLS
Rules for securities markets are set by government agencies, as are many of those for licensed real estate brokers. Industry organizations such as NAR, local REALTOR® associations and MLSs create additional rules through their subject matter expertise in the day-to-day business, further enhancing consumer marketplaces. Among the rules set:
- Solicitation of listings
- Forms and disclosures
- Listing input and updates
- Signs, advertising and open houses
- Usage of MLS-wide data (IDX, VOW, BBO)
- Marketing of property information
- Access via electronic keys and keyboxes
- Property showings and offer submission
- Earnest money distribution
- Closing of listings and transactions
- Compensation between parties
- Dispute resolution
- Penalties and fines for noncompliance
This list is just the services you might find defined in an MLS’s rule set. There are many other features of an MLS that brokers access regularly, such as:
- Tax records
- CMAs
- Listing alerts
- Statistical reporting
- Training and education
- Safety programs
- Industry news
- Political and regulatory advocacy
So although headlines about changes in data and compensation rules may bring some uncertainty about the MLS’s place in the industry, the plethora and importance of services that it brings to the market ensures its continuity. Being able to express the stability these services will continue to provide to markets should be a priority for every professional involved in communicating the value of an organized real estate industry.
The MLS, Defined From a Historical Perspective
The NAR library and archives team recently completed a history of the MLS. There are records, starting in 1885, of MLSs in San Diego, Cleveland, Cincinnati and Chicago.
The first national focus on the MLS was in 1912 when the immediate past president of the National Association of Real Estate Exchanges (NAR’s original name), Samuel Thorpe, called on all local boards to take part in the “exclusive agency and multiple listing plan.” Thorpe called it “the only modern, sane and effective method of selling real estate both in the interest of the broker and of the owner and purchaser.”
In 1916, the association’s name changed to the National Association of Real Estate Boards, and by 1924, NAREB had published “The Organization and Administration of a Multiple Listing System.” It defined the MLS as:
- A method of exchanging exclusive contracts for the sale of property between brokers
- An assurance that the listing broker retains the exclusive listing contract
- An effort to make all real estate a more liquid commodity
Those core values are a mirror of today’s MLS. They solve the same two primary marketplace problems.
- Sellers’ and buyers’ exposure to each other is limited without an agreement by brokers to cooperate in selling listings.
- Without rules to regulate interactions in the marketplace, consumers are unprotected from unethical practices that could harm them financially.
The MLS was created alongside REALTOR® professional associations to improve not just the business environment for brokers but also consumer protections for buyers and sellers.
Behind the Scenes of the MLS’s Success
The benefits of an MLS are largely dependent upon its members’ adherence to rules. An MLS’s ability to enforce its participants’ rule set defines its success.
While this is one of its least publicized values, the MLS’s compliance practices can be compared to a nation’s enforcement of laws—just as critical to an orderly society as they are to a working marketplace.
Consistency in information, services and participant experience is directly reliant upon this conformance with rules. Compliance processes to ensure that the cooperative’s regulations are followed are a key element in defining an MLS.
Variations on MLS Definitions
Many organizations have their own specialized definitions of an MLS. NAR’s policy definitions of an MLS have evolved over time alongside national policy updates. Current NAR MLS definitions include references to orderly accumulation and dissemination of information, offers of compensation, and contributions to a common database for the purposes of sales, appraisals, analyses and valuations.
The Real Estate Standards Organization (RESO) tracks MLSs by the way they identify their unique technology systems and publishes a list of REALTOR® association–operated and independent MLSs(link is external). These MLSs have their data systems certified on RESO’s Data Dictionary and Web API standards, which allows their brokers to operate more efficiently in cross-market data partnerships and technology collaborations.
The most popular web portals all have their own technology-focused definitions of an MLS—and these are definitions that consumers are likely reading. Being aware of the different ways that MLSs are described can help a professional understand the customer’s viewpoint and deliver a nuanced explanation of what information is accurate and what might need more context.
A Global Perspective on MLS
In the U.S. and Canada, there are more than 500 MLS organizations. While they have some differing elements in their business models, they generally operate on the same core principles. Outside of North America, though, these core concepts of the MLS are literally foreign to most marketplaces.
It’s assumed in the U.S. that the word “listing” in “MLS” signifies an exclusive listing agreement. But in many countries, exclusive agency and exclusive listings are rare or nonexistent. In these markets, what is called an MLS usually looks more like a web portal. These entities are often just websites full of advertisements—their accuracy and timeliness is largely unregulated—and they include only a fraction of the available properties for sale. Global real estate practitioners who’ve worked in these environments consistently express their desire for the stability that a true MLS brings.
The 2023 International MLS Forum(link is external) was evidence of this desire. The event attracted representatives from 33 countries and five continents. The content’s primary focus was on technology improvements through data standards and MLS systems. RESO and the Council of Multiple Listing Services led the discussions on creating liquid, trusted markets through rules and transparency.
The overwhelming consensus of the forum was that these countries’ practitioners want the core elements of the MLS to bring consistency and certainty to their markets. Brokers and trade organization leaders stressed the benefits that ring true, no matter the country of origin:
- Transactions are faster and more efficient.
- Data is more accurate, timely and reliable.
- Outputs become more informative and lead to better decision-making.
- Professionals and consumers experience a market that promotes transparency and fairness and offers a broad array of services.
The value of an MLS to national and cross-border transactions was echoed by not only international real estate industry stakeholders but also banking, legal, investment and government representatives. Despite disputes on specific elements of the MLS in North America, the general model is viewed by the world as a monumental benefit to markets.
MLS in the Future
Just as the services, policies and definitions of the MLS have shifted over the past century, they will continue to change. The real estate industry is moving through some dynamic phases of technology, law and practice. The way brokers advertise homes, interact with clients, get paid for their work and develop new business will all likely change over time.
If you’ve ever sold anything in an online marketplace, you know that trust is a critical element. With something as large and complex as the selling and buying real estate, the professional guidance, representation and cooperation provided through MLS is essential.
Leaders of MLSs, associations and brokerage organizations have the opportunity to face inevitable changes head-on. Communicating the many strengths of the MLS that have endured through an ever-changing industry adds clarity and confidence for all participants in the MLS ecosystem. It strengthens the industry’s professionals and the services they provide to consumers.
What is an MLS? It’s much more than a popular technology tool or a passing business trend. The MLS is what makes the market work.
National Association of REALTORS®
Reprinted with permission
