I read “The Death of the MLS” by Bob Haywood this morning. It sounds scary doesn’t it? “The Death of the MLS”? Currently 80% of homes are sold through the Multiple Listing Service (MLS), according to the National Association of Realtors® (NAR).
So how are we going to find and sell houses in a future without the MLS? Haywood suggests people will use self-service sites, specifically Zillow. While I agree with most of his prognostication, there are a couple of points I’d like to make:
- Zillow gets most of its data from the various MLS sites around the country.
- There are other sites that are as or more effective in helping buyers find properties (Trulia and Realtor.com, for example).
This trend to self-service brings investors both new opportunities and new risks, some of which are the same thing. I’d like to look at these, since Haywood speaks from the perspective of a Realtor.
The biggest opportunity for investors is the ability to avoid at least the listing agent’s commission. That leaves 3% or more in the deal, which enables us to pay more for a property and still make money. It also gives us the opportunity to increase our profit margin, but no opportunity is without risk. This trend is already visible in the increasing number of unlisted sales through Zillow, Trulia, and Craigslist.
In this case, investors, flippers, and redevelopers are assuming some of the risks that Realtors have assumed for us. We will be held more accountable for the accuracy of information and the completeness of repairs as we deal more directly with the buying public. This last bit is important. We may be held accountable for repairs we did not do or did not even know needed doing. Further, courts have a long history of holding developers and other vendors accountable for any miscommunication with “unsophisticated” buyers.
And many buyers will continue to use buyer’s agents. A buyer’s agent is a licensed real estate agent who represents the buyer, even though they are paid by the seller. Their job is to use their real estate expertise to ensure the buyer’s interests are protected and even enhanced in the deal. They negotiate concessions the buyer might not otherwise think of, but buyer’s agents don’t necessarily assume any responsibility for accidental misrepresentations.
That said, I love buyer’s agents. Our goal at Hermit Haus Redevelopment is to offer a home the new owners can be proud of. It’s part of our win-win philosophy. We make mistakes—you’ll see us talk about some of them on this site—but our goal is to offer the best house in the neighborhood. If we do that, we make the buyer’s agent’s job easy.
In his article, Haywood discusses the (im)possibility of stopping the Uber-ization of the MLS. I really don’t want to, even if it makes my business a little riskier. I believe it’s in everybody’s best interest (except maybe a few agents) to make buying and selling houses easier. I believe the ethical redevelopers, like Hermit Haus, will thrive in this new environment. We’ve already got more experience in our leadership team than many others, and we will continue to adapt and thrive as the market changes.
As Al Stewart translated Nostradamus, “The more it changes, the more it stays the same.” Quality will prevail in the market over cut corners.