Then and Now
A decade ago, a search for real estate might have started in the office of an area real estate agent or just by driving around town. At the agent's office, you'd spend an afternoon flipping through pages Housers of active property listings from the area Multiple Listing Service (MLS). After choosing properties of interest, you'd spend many weeks touring each property before you found the right one. Finding market data to enable one to assess the price tag would take more hours and a lot more driving, and you still might not manage to find most of the information you needed to have really comfortable with a fair market value.
Today, most property searches start the Internet. An instant keyword search on Google by location will probably get you tens of thousands of results. If you spot a property of interest on a real estate web page, you can typically view photos online and maybe even have a virtual tour. Then you're able to check other Web sites, such as the local county assessor, to have a concept of the property's value, see what the present owner taken care of the property, check the true estate taxes, get census data, school information, and even take a look at what shops are within walking distance-all without leaving your property!
As the resources on the Internet are convenient and helpful, using them properly can be quite a challenge due to the volume of information and the issue 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 quickly return tens of thousands of Web sites. With so many resources online how can an investor effectively utilize them without getting bogged down or winding up with incomplete or bad information? Believe it or not, understanding how the business enterprise of real estate works offline makes it easier to understand online real estate information and strategies.
The Business of Real Estate
Real-estate is usually bought and sold either via a licensed real estate agent or directly by the owner. A large proportion is bought and sold through real estate brokers. (We use "agent" and "broker" to refer to exactly the same professional.) This really is for their real estate knowledge and experience and, at the least historically, their exclusive usage of a database of active properties for sale. Access to the database of property listings provided probably the most efficient way to find properties.
The MLS (and CIE)
The database of residential, land, and smaller income producing properties (including some commercial properties) is commonly called a multiple listing service (MLS). In most cases, only properties listed by member real estate agents can be added to an MLS. The principal intent behind 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 a variety of forms.
Commercial property listings will also be displayed online but aggregated commercial property information is more elusive. Larger MLSs often operate a professional information exchange (CIE). A CIE is comparable to an MLS however the agents adding the listings to the database aren't required to offer any specific type of compensation to one other members. Compensation is negotiated outside the CIE.
In most cases, for-sale-by-owner properties can't be directly added to an MLS and CIE, which are typically maintained by REALTOR associations. The lack of a managed centralized database will make these properties more difficult to locate. Traditionally, these properties are located by driving around or trying to find ads in the area newspaper's real estate listings. A more effective method to locate for-sale-by-owner properties is to find a for-sale-by-owner Internet site in the geographic area.
What is a REALTOR? Sometimes the terms real estate agent and REALTOR are employed interchangeably; however, they're not the same. A REALTOR is an authorized 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 obtainable in hard copy, and even as we mentioned, only directly available to real estate agents members of an MLS or CIE. About a decade ago, this valuable property information started initially to trickle out to the Internet. This trickle is now a flood!
One reason is that all the 1 million or so REALTORS have Web sites, and most of these Web sites have varying amounts of the area MLS or CIE property information displayed on them. Another reason is that there are numerous 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 info more accessible but in addition more confusing and subject to misunderstanding and misuse.