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Multiple Listing Service (MLS)-Advertising Space or Industry Tool?

Aug 17, 2007
The answer to the question really depends on your location. If the question was asked in the USA, I think 99% of realtors would respond 'industry tool'. Ask the question in Europe and the answer would be reversed with 99% of estate agents referring to MLS as digital advertising.
So what makes this technology be seen by the same industry, in two large geographical markets, in two totally different ways?
The answer I like to call the 4P's.

PRODUCT, PROFESSIONALISM, PRACTICE, & PERCEPTION

1. PRODUCT

What is MLS?

A Multiple Listing Service in real estate terms can mean two things. One form refers to the type of agency agreement entered into between a realtor and vendor. Whilst this governs the documentation for entry into the MLS database (USA), it is the database itself that most people think of when the MLS is mentioned.
MLS, (in the US) is simply a database of property for sale in the marketplace.
In economic terms, it attempts to create the perfect market, bringing all buyers and all sellers of property together in one place.
In the US market, putting aside FSBO, (For sale by Owner) and the small number of private transactions, the MLS has effectively achieved this 'perfect market' status.

In Europe, however, MLS is something completely different. So different in fact that it cannot really be defined as MLS. Instead I am going to call it ALS or Advertising Listing Service.
ALS differs from MLS at a fundamental level because it fails in the primary objective of an MLS to create a perfect market. ALS provides only half of the solution in that, at its most successful, it can only bring all the sellers in the market place together in one place. In reality of course,a proliferation of ALS providers, (advertising companies) means that any one provider fails in even being able to achieve this goal.
ALS therefore reverts to the rules of advertising. It is limited by the marketing success of the provider to gain exposure to as large a portion of the market as possible. The cost of exposure is then duly passed onto the advertiser, the estate agent. The increased costs of competition for exposure, in turn limits the number of sellers, further limiting the success of any one provider to create an effective market.

The benefits of MLS as an 'almost' perfect market are; reduced cost and a quicker transaction timeframe. Governed by the most basic of the laws of supply and demand, buyers and sellers are able to find each other more quickly and as an effective monopoly, the MLS does not have to compete for its place in the market thus reducing the cost of providing the service. In the US part of the cost to the realtor can therefore be used to regulate the profession.

PROFESSIONALISM, PERCEPTION & PRACTICE

Here the two market differ greatly. In the US, all real estate agents are required to be licenced. In obtaining the licence they have to prove by way of examination that they are proficient in the General Principles of Real Estate and have a working knowledge of current legislation affecting the industry.
Within a framework of regulation comes trust. Trust in the profession by the public. Trust between professionals within the industry to be able to co-operate with each other.
The regulation of the industry in the US helps to define one aspect of practice that fails in the markets across Europe.

Who is the Agent acting for?

In the US this is defined by the type agency contract entered into and further defined by regulations governing Dual Agency, (acting for both buyer and seller). The notification rules for this 'Conflict of interest' are clearly set out and require all parties to agree in writing before proceeding.(rules differ from state to state). The role of the agent is therefore defined and all parties to the transaction are under no illusions of who is acting for who.

Across Europe regulation is virtually non-existent. Looking after the interests of the parties involved tends to fall on the solicitor,(attorney) as the only regulated 'professional' involved in the transaction.

The ambiguity of the client/agent relationship only enhances the lack of trust in the professional relationship which may, for the most part be conducted in good faith, but which ultimately is left open for abuse.
In the end the agent/client relationship is reduced to that of salesperson/shopper, belittling the vast majority of agents, who practice their profession in an exemplary manner.

Conclusions

The US market is a model to be followed. Needed regulation is not overbearing and allows the MLS to facilitate efficiency within the industry, which when all is said and done, means that sellers of property, sell quicker. Buyers find what they are looking for quicker, and Agents facilitate more sales.

In Europe, changes are afoot. If individual countries within the European Union fail to regulate at a National level under increasing pressure from the public, then the EU now has the power to legislate. Until recently this was not possible, but with the harmonization of contract law across the E.U., the path to EU-wide Agency Law Directives from Brussels are now a possibility.
Bad property law is already being challenged at E.U. level with the Spanish LRAU 'Land Grab Law' being challenged in the European Court of Human Rights under the 'Right to property' Protocol of Article 1 of The European Convention of Human Rights.

Frameworks for developing trust in a professional environment are being put into place. AMLA, The Association of Multiple Listing Agents recently launched a fully fledged MLS for the Spanish Property Market offering a commitment to standards and education alongside a MLS system at a fraction of the ALS providers.

The market in Europe is changing, to the benefit of all. The pace of change will be set, not by the industry and government, but by the consumers who are demanding in greater numbers, their desire to be represented properly in one of the biggest purchases of their lives. The US model whilst not perfect, is a good place to start.
About the Author
Neil Ebsworth is co-founder of AMLAspain.com, a Costa Blanca Propertyportal for the Real Estate industry in Spain.
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