The Purpose of an MLS.
At it’s core, an MLS is meant to be a commission sharing platform between REALTORS®. It’s a way for one REALTOR® to advertise a buyer agent commission to another REALTOR® who might have a buyer for their listing. When REALTORS® sign up for access to an MLS they sign a set of agreements binding them to the terms they’ve advertised in their MLS listing. This way if one REALTOR® shows another REALTOR®’s listing, they can be assured they’ll be paid the commission that was advertised in the MLS.
They have certainly evolved to be more than that, but at their core, this is the number one purpose they still serve.
Why Are There So Many MLSs?
Because everything starts small; and as they say, all real estate is local.
Let’s take a step back in time. Decades ago, before the prevalence of the internet, information was not so easily accessible. MLSs were not online. They were local groups of REALTORS® – for nearly every market in the US – that agreed to share their commissions if they procured a buyer for another member’s listing.
When a REALTOR® had a new home sale listing, they would fax out information for about the home, and how much of their commission they’d be willing to share with buyer agents, to all REALTOR® members of their local MLS.
Evolution.
As the internet came of age in the late 90’s, MLSs started to go online. The number of them at this time was well over 1000. REALTOR® offices began to ditch their faxed property listings for logins. However, they still stayed small and local, because they were all established organizations made of shareholders, board members, and other interested parties – that were all local.
Being online presented new opportunities, as home search portals came about. If a REALTOR® is entering their listing in the MLS online, wouldn’t it makes sense for it also to be displayed on every home portal online? This way they could better advertise their listings.
Prior to websites like Realtor.com, home sellers and buyers never really heard of the term MLS. Now, everyone insists that their home be listed in the MLS when marketing it for sale.
This is the other misconception about MLSs, they weren’t originally intended to be public advertising platforms. It just evolved into having that benefit for its REALTOR® members. It also presented new opportunities for home sellers who wanted to save money through utilizing a flat fee MLS listing service to sell their homes.
