Ten years ago, a search for real estate would have started in the
office of a local real estate agent or by just driving around town. At
the agent's office, you would spend an afternoon flipping through pages
of active property listings from the local Multiple Listing Service
(MLS). After choosing properties of interest, you would spend many weeks
touring each property until you found the right one. Finding market
data to enable you to assess the asking price would take more time and a
lot more driving, and you still might not be able to find all of the
information you needed to get really comfortable with a fair market
value.
Today, most property searches start on the Internet. A
quick keyword search on Google by location will likely get you thousands
of results. If you spot a property of interest on a real estate web
site, you can typically view photos online and maybe even take a virtual
tour. You can then check other Web sites, such as the local county
assessor, to get an idea of the property's value, see what the current
owner paid for the property, check the real estate taxes, get census
data, school information, and even check out what shops are within
walking distance-all without leaving your house!
While the
resources on the Internet are convenient and helpful, using them
properly can be a challenge because of the volume of information and the
difficulty in verifying its accuracy. At the time of writing, a search
of "Denver real estate" returned 2,670,000 Web sites. Even a
neighborhood specific search for real estate can easily return thousands
of Web sites. With so many resources online how does an investor
effectively use them without getting bogged down or winding up with
incomplete or bad information? Believe it or not, understanding how the
business of real estate works offline makes it easier to understand
online real estate information and strategies.
The Business of Real Estate
Real
estate is typically bought and sold either through a licensed real
estate agent or directly by the owner. The vast majority is bought and
sold through real estate brokers. (We use "agent" and "broker" to refer
to the same professional.) This is due to their real estate knowledge
and experience and, at least historically, their exclusive access to a
database of active properties for sale. Access to this database of
property listings provided the most efficient way to search for
properties.
The MLS (and CIE)
The database of
residential, land, and smaller income producing properties (including
some commercial properties) is commonly referred to as a multiple
listing service (MLS). In most cases, only properties listed by member
real estate agents can be added to an MLS. The primary purpose of an MLS
is to enable the member real estate agents to make offers of
compensation to other member agents if they find a buyer for a property.
This
purposes did not include enabling the direct publishing of the MLS
information to the public; times change. Today, most MLS information is
directly accessible to the public over the Internet in many different
forms.
Commercial property listings are also displayed online but
aggregated commercial property information is more elusive. Larger MLSs
often operate a commercial information exchange (CIE). A CIE is similar
to an MLS but the agents adding the listings to the database are not
required to offer any specific type of compensation to the other
members. Compensation is negotiated outside the CIE.
In most
cases, for-sale-by-owner properties cannot be directly added to an MLS
and CIE, which are typically maintained by REALTOR associations. The
lack of a managed centralized database can make these properties more
difficult to locate. Traditionally, these properties are found by
driving around or looking for ads in the local newspaper's real estate
listings. A more efficient way to locate for-sale-by-owner properties is
to search for a for-sale-by-owner Web site in the geographic area.
What
is a REALTOR? Sometimes the terms real estate agent and REALTOR are
used interchangeably; however, they are not the same. A REALTOR is a
licensed real estate agent who is also a member of the NATIONAL
ASSOCIATION OF REALTORS. REALTORS are required to comply with a strict
code of ethics and conduct.
MLS and CIE property listing
information was historically only available in hard copy, and as we
mentioned, only directly available to real estate agents members of an
MLS or CIE. About ten years ago, this valuable property information
started to trickle out to the Internet. This trickle is now a flood!
One
reason is that most of the 1 million or so REALTORS have Web sites, and
most of those Web sites have varying amounts of the local MLS or CIE
property information displayed on them. Another reason is that there are
many non-real estate agent Web sites that also offer real estate
information, including, for-sale-by-owner sites, foreclosure sites,
regional and international listing sites, County assessor sites, and
valuation and market information sites. The flood of real estate
information to the Internet definitely makes the information more
accessible but also more confusing and subject to misunderstanding and
misuse.
Real Estate Agents
Despite the flood of real
estate information on the Internet, most properties are still sold
directly through real estate agents listing properties in the local MLS
or CIE. However, those property listings do not stay local anymore. By
its nature, the Internet is a global marketplace and local MLS and CIE
listings are normally disseminated for display on many different Web
sites. For example, many go to the NATIONAL ASSOCIATION OF REALTORS Web
site, http://www.realtor.com,
and to the local real estate agent's Web site. In addition, the listing
may be displayed on the Web site of a local newspaper. In essence, the
Internet is just another form of marketing offered by today's real
estate agent, but it has a much broader reach than the old print
advertising.
In addition to Internet marketing, listing agents may
also help the seller establish a price, hold open houses, keep the
seller informed of interested buyers and offers, negotiate the contract
and help with closing. When an agent provides all of these services it
is referred to as being a full service listing arrangement. While full
service listing arrangements are the most common type of listing
arrangement, they are not the only option anymore.
Changes in the
technology behind the real estate business have caused many agents to
change the way they do business. In large part, this is due to the
instant access most consumers now have to property listings and other
real estate information. In addition, the Internet and other
technologies have automated much of the marketing and initial searching
process for real estate. For example, consumers can view properties
online and make inquires via email. Brokers can use automated programs
to send listings to consumers that match their property criteria. So,
some agents now limit the services they offer and change their fees
accordingly. An agent may offer to advertise the property in the MLS but
only provide limited additional services. In the future, some real
estate agents may offer services in more of an ala carte fashion.
Because
of the volume of real estate information on the Internet, when people
hire a real estate agent today they should look at the particular
services offered by the agent and the depth of their experience and
knowledge in the relevant property sector. It is no longer just about
access to property listing information. Buyers and sellers historically
found agents by referrals from friends and family. The Internet now
provides ways to directly find qualified agents or to research the
biography of an agent referred to you offline. One such site,
AgentWorld.com, is quickly becoming the LinkedIn or Facebook for real
estate agents. On this site an agent can personalize their profile,
start a blog, post photos and videos and even create a link to their web
site for free. Once unique content is added to their profile page the
search engines notice!
Some have argued that the Internet makes
REALTORS and the MLS less relevant. We believe this will be false in the
long run. It may change the role of the agent but will make
knowledgeable, qualified, and professional REALTORS more relevant than
ever. In fact, the number of real estate agents has risen significantly
in recent years. No wonder, the Internet has made local real estate a
global business. Besides, Internet or not, the simple fact remains that
the purchase of real property is the largest single purchase most people
make in their life (or, for many investors, the largest multiple
purchases over a lifetime) and they want expert help. As for the MLS, it
remains the most reliable source of real estate listing and sold
information available and continues to enable efficient marketing of
properties. So, what is the function of all the online real estate
information?
Online real estate information is a great research
tool for buyers and sellers and a marketing tool for sellers. When used
properly, buyers can save time by quickly researching properties and,
ultimately, make better investment decisions. Sellers can efficiently
research the market and make informed decisions about hiring an agent
and marketing their properties online. The next step is to know where to
look online for some of the best resources.
Internet Strategies
In the sections that follow, we provide
strategies and tips on how to use the Internet to locate properties for
sale and research information relevant to your decision to purchase the
property. There are many real estate Web sites from which to choose and
although we do not mean to endorse any particular Web site, we have
found the ones listed here to be good resources in most cases or to be
so popular that they need mention. One way to test a Web site's accuracy
is to search for information about a property you already own.
Finding Real Estate for Sale
Despite
the widely available access to real estate listings, many believe that
MLS databases continue to offer the most complete and accurate source of
real estate information. Most MLSs now distribute content to other Web
sites (primarily operated by real estate agents). An excellent starting
point for MLS originated content is the national NAR Web site,
realtor.com, which is also the most popular web site for searching real
estate listings. Virtually all local and regional MLSs have an agreement
with realtor.com to display much of their active listing inventory.
Some
local and regional MLS systems also have a publicly accessible Web
site. However, to get complete information you will most likely still
need to find a qualified local REALTOR. Many local real estate agents
will also provide their customers (via email) new listings that are
input into the MLS that match their predefined criteria. This can be
very helpful to a busy buyer.
There are also many Web sites that
display both real estate agent listed and for-sale-by-owner properties.
Some of the more popular Web sites include zillow.com and trulia.com.
These sites offer other services too. For example, zillow.com is best
known for its instantaneous property valuation function and trulia.com
for providing historical information. Another source of properties for
sale is the state, regional, and local Web sites associated with
brokerage companies; for example, remax.com or prudential.com. Search
engines like yahoo.com and classified advertising sites like
craigslist.com also have a large number of active real estate listings.
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