What is an MLS?
A Multiple Listing Service (MLS) is a part business and part technology. There are over 800 MLSs spread across the United States with the primary purpose to help member agents collaborate around buying and selling transactions. Despite the massive fragmentation, the benefits of having a common system at a local level are significant. The MLS creates a common data exchange and record keeping platform that enables agents to consistently advertise, communicate and track the business of transacting property. With multiple objectives, it is hard to know what this means for the consumers, which is why we are taking the time to review how to effectively read an MLS sheet.
When visiting a property with an agent there is almost always a formal printout shared with prospective buyers – the MLS sheet. There are two versions of the sheet, one that is intended for public consumption and another that is for agents only. For example, agents would see how many agents have shown the property, the commission split being offered by the listing agent and any comments the listing agent wants other agents to know about when showing the home. On face value, the MLS listing sheet is a great tool for keeping track of all the details. While they are error prone, they are what most everyone references so as a starting point it works. Instead of getting lost in all the details here are the top five things to look at given you likely already narrowed it down by location, schools, commutability etc.
1. DoM also known as Days on Market
Days on Market is an indicator of how recent the property has been listed and when considered in conjunction with interest and price indicates how fast the property is likely to sell and at what price. A newly listed, well priced property with a lot of sustained interest is likely to move quickly and have less price movement. A property that has been on market for three months is likely to show a price reduction to help stimulate interest and after some time could potentially indicate an opportunity to negotiate.
2. MLS Listing Price
Primarily, price is an indicator for how the agent and seller are presenting the property, not necessarily an indication of its value. An aggressively priced home in a segment with a lot of buyers often stimulates bidding wars, which result in the price rebalancing. Well priced homes in popular market segments tend to move quickly because there is inherently high value. While overpriced homes are often easy to spot in the context of other homes offering similar configurations.
Pricing information almost always shows recent price reductions. It is a good idea to look at the pricing history to understand how many and when the reductions took place. If the property was recently reduced its unlikely that they will feel like significant reductions in a negotiation, especially if there is good exposure. However, multiple reductions often reveal a poor starting price or an issue impacting desirability given current inventory. While this could be an exciting finding, remember if whatever challenge is present is not resolved, you too will have it when it comes time to sell.
3. Heating Ventilation Air Conditioning (HVAC)
A properties HVAC is a critical aspect in creating comfort. This equipment is made to last decades and as such is often very expensive certainly thousands often much more. Given its contribution to the comfort and enjoyment of the property, carefully consider the type, condition and age of the system. Older systems are often less efficient but may well last longer than anyone expects, so age alone doesn’t make them bad. If the system looks like it needs to be replaced, then consider it as part of your price negotiation. Finally, while you are unlikely to be able to alter the fuel type your system uses to operate, that may factor into your monthly costs and often how it works impacts the quality of the climate it creates. Typically, a home with baseboard heating did not have air conditioning originally, so review how the retrofit was accomplished.
Often an overlooked feature, how the property gets its water impacts how complicated the systems that support it are. Typically, city provided water is the simplest, where the property is hooked up to a main line and pulls as needed. Alternatively, well water requires pumps to move the water around the property, often worked through a set of filters, sanitized and held under pressure for distribution inside the home. Without a generator, water use is limited during power outages. Well systems are more complex to maintain and that is offset by not paying for water. Many people enjoy the taste of well water over the often heavily treated municipal water. Regardless of it being city or well, the pressure of the water has a direct impact on your enjoyment and appliance efficiency, so be sure to check it during your visit.
There are two popular systems for property waste to travel from the home, either a city sewer or a septic system. Like city provided water, the simplest is a property connected to a municipal sewer system that handles the volume and treatment of the waste. Septic systems on the other hand tend to be expensive to install and require cleaning every couple years. What is important here is to know that the septic system is sized appropriately for the home. A home that expanded over time might still be running on the original septic system. These systems can be simple or complicated and it is important to get a sense of which you have as it directly impacts the cost to maintain, fix and replace. Most complex systems perform better and last longer, so if the property under consideration has a septic system have it inspected as part of due diligence.
Stay focused on the details that matter most
The MLS sheet provides an almost overwhelming amount of information. DoM, Price, HVAC, Water and Waste are the key elements that help you make sense of the homes position in the market, what it is like to own the property and some idea of how comfortable it would be to live there. Given that the data in MLS sheets is not always accurate, focus in on the elements that matter most and are likely less error prone.