Referral sites versus actual flat fee brokers

One thing has become clear from an online search for websites devoted to flat fee mls listing: the number of flat fee mls companies have proliferated over the past several years. Due in part to the housing boon, numerous flat fee mls listing websites offer consumers a range of choices for placement of a property on the Multiple Listing Service. These services save home sellers thousands of dollars over traditional real estate agents.

But is there any difference among the thousands of websites offering to list your home in the MLS for a low, flat fee? A close inspection of the leading flat fee mls websites shows that many claim to be able to list your property in the MLS anywhere in the country. To analyze this claim we first need to understand what the MLS is and what it does for home owners wishing to sell their property.

  1. There is no one nationwide MLS that covers the entire country. Each locality, state or region has it’s own MLS and some have several.
  2. MLSs are generally run by or controlled by Realtor members of the local association of Realtors and placement of a property on the MLS is restricted to MLS Realtor members.
  3. There are currently no real estate companies, flat fee or otherwise, that have membership in every MLS in the country. That would require licensing in each state and membership in thousands of MLSs - an expensive proposition.
  4. An MLS is a database of properties for sale, usually exclusive to the Realtors in the MLS coverage area, which ranges from a small town and the surrounding counties to an entire state or multi-state region.
  5. Through the MLS real estate agents offer to cooperate with one another to sell each other’s listed properties and to share in the real estate commission.
  6. Although estimates vary, the MLS accounts for approximately 75% of home sales in any given area of the country.
  7. Realtor.com  is the official website of the National Association of REALTORS®. They are the world’s largest real estate database of homes for sale and are largest most active website with more than 353 million page views monthly. REALTOR.com houses more than 2.2 million listings nationwide.  Properties listed in local MLSs may appear on Realtor.com, but not for sale by owner properties.

Given these facts about MLS, choosing a real estate website that offers flat fee mls listing presents an obvious question: "How does the website that offers to place a home in the MLS anywhere in the country operate given #2 above?" The answer may come as a shock to newbies to the flat fee market.

The vast majority of real estate companies offering flat fee mls listing on the Internet are nothing more than online referral fee generating applications. They collect your money for the MLS listing and go out and find a MLS member broker who will place your property into the MLS for a portion of the fee you pay. What’s wrong with that?, you may ask. As long as my property gets listed why should I care who gets paid?

The real problem is accountability. Let’s say you list with an online site claiming to be able to place your property on the Internet in New Jersey. The actual website operator may be located anywhere in the world and not subject to the laws and jurisdiction of the state of New Jersey. If he collects your money and can’t find a broker in NJ to list your prpperty, you’re out your $500 or so until the website operator exhausts their attempts to locate someone who will agree to list your property in your nearby MLS (for a greatly reduced share of their normal fee).

What if the California based flat fee website operator decides to look for a broker for month, or even longer. What recourse do you have? From your state licensing authority’s point of view, very little. Real Estate Commissions exist in each state to regulate the actions of real estate agents. If you have a problem with your Realtor, you can go to the State Real Estate Commission to make a claim. Alas, the Internet allows website operators to fly under the radar and out of the reach of local regulators. Once they have your money, you are at their mercy. You could attempt to settle the matter through your credit card company, but that will still take some time.

Another consideration is that the referral website owner may make claims about what is included for your flat fee that the local broker actually doing the work may not honor. Because the referral website is marketing flat fee services nationally, they can’t possibly list the inclusions and exclusions, rules and regulations for each local MLS. With referral website operators, you may not get all that you paid for.

So what’s your best bet when dealing with online flat fee listing companies? First, make sure the company you are dealing with is licensed in your state (see the licensing link below). Second, ask to speak to the broker. If the website operator refuses, try somewhere else. Third, ask for references of testimonials. Talk to someone who has sold through the flat fee broker about their experiences.

Flat fee MLS offers a tremendous cost savings over traditional real estate agent offerings. The caveat, like with all Internet companies, is to know who you are dealing with. Find a reputable company with a long track record of success.

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