The MLS goes public

“In real estate, MLS data sits at apex of change, specifically MLS information that is pushed to Internet every minute of day.” – Bradley Inman, Publisher of Inman News

Once an exclusive tool for real estate professionals, multiple listing service (MLS) has in recent years become a very public platform for real estate listings. The MLS is nation’s most comprehensive database of properties for sale – four out of five homes sold in United States are listed on MLS. MLS properties are available to agents and brokers worldwide, and are now accessible via consumer Web sites such as Realtor.com, WSJ.com, Excite, Netscape, AOL and MSN. MLS listings also appear on local, regional and national brokerage Websites through Internet Data Exchange (IDX) agreements that allow participating Realtors to share listings and display them to consumers. Even though only licensed realtors can list property on MLS, system has begun to figure prominently for $110 billion independent seller (for-sale-by-owner or FSBO) market. About 13 percent of real estate sales are now FSBO, conducted without a broker’s assistance.

Type “flat fee MLS” into any major search engine, and you’ll see dozens of real estate professionals willing to list your property in MLS for a fee. If you are willing to pay a commission of 2-3 percent, you can attract attention of thousands of agents who will show your property to prospective buyers. You can then reduce cost of sale to about half a traditional 5-6 percent sales commission, plus cost of MLS listing. If you find an independent buyer working without an agent, you could make a sale with no commission at all and pay only an MLS listing flat fee. Displacement

Currently, about 2.4 million real estate licensees operate nationally, according to Association of Real Estate License Law officials. The NAR has more than one million members, up from about 760,000 members five years ago. Many real estate professionals and industry observers expect a significant decline in this number because some tasks traditionally performed by agents and brokers can now be done more quickly and easily by Web-enabled consumers.

“Historically fundamental driver of real estate industry was control of information. The real estate agent and real estate office were only sources of comprehensive information on which properties were for sale and those who might be interested in buying them. With this control revenues were practically guaranteed.

Moreover, because this exclusive control was akin to a monopoly by virtue of multiple listing service (MLS) any firm of any size could serve customer equally well. As a result, number of real estate companies grew without regard to market efficiencies.

Simply put, traditional model is too inflexible. Consumers are seriously questioning value of a real estate agent. They frequently feel that many of traditional tasks undertaken by agents are now either no longer required or can be done by consumer themselves.”

– Swanepoel & Tuccillo, Real Estate Confronts Profitability

The quotes above, from a popular report on emerging real estate business models and dwindling profit margins, highlight a number of issues traditional real estate professionals are now facing. And if real estate industry has grown historically without regard to market efficiencies, issue has only been compounded since 2001, as new agents signed on in droves, lured by low interest rates and skyrocketing home prices in many areas. It’s likely that number of traditional real estate agents will decline, while new types of real estate jobs will be created to deliver value to Web-savvy customers.

End part 1

Networking If you want best deal possible on an investment property, than there are some people you'll want to be friends with. City hall clerks and bank employees may know what properties will be available on foreclosure and when they will go on market. Real estate agents usually know everything real estate related within their respective territory. Some prospective landlords even run ads in local newspapers.

Many individuals interested in entering investment property market may even join local landlord or investment property owners organizations. These types of organizations hold regular meetings where you can get inside scoop on what's for sale in your area. The National Real Estate Investors Association is an online organization that provides a wealth of information and resources to potential investment property owners.

Financial Preparation Get your finances in order. The less debt you have when you walk into your local lending institution, better loan you'll get. This is common sense, but it's even more true for those seeking financing for an investment property. This is because lenders know that people are much more likely to default on a rental property than on their own homes. This means that bank will demand a larger down payment and higher interest rates that you may have expected. It's also a good idea to have some extra cash left over to make unforeseen repairs should they arise.

By wisely choosing an investment property time horizon, making contacts in investment property community, and preparing proper financial means, your investment may become a significant means of supplementing retirement and other savings accounts.