Lesson 11 - How to Use the MLS Lesson # 11 How to Use the MLS By: Ron Mead Ron Mead Training This lesson is for paid members only. If you have not paid, this is piracy, and not the fun kind. Please register or get the Free Trial at FortunesAndFreedom.com Share Your Thoughts: 2011 Ron Mead Training - All Rights Reserved 1 www.fortunesandfreedom.com Lesson 11 - How to Use the MLS Lesson #11 HOW TO USE THE MLS Let’s Review Hopefully you’ve been able to get out and view quite a few houses by now. You should be getting a pretty good feel for property values in different neighborhoods in your town or city. You’ve probably also had an opportunity to talk with several real estate agents and they’ve helped you become more familiar with current market conditions. We are now approaching the halfway point of this course so I am going to give you a little breather this week. I know we have covered a lot of ground in a couple of short months so please take this week to review the first ten lessons and make sure you understand everything and be sure you’ve completed all the short assignments I have provided for you. By visiting houses that are for sale, as I mentioned, you can get an idea of the current selling prices for various homes. But there’s another resource that may be able to benefit you. Multiple Listing Service The Multiple Listing Service (MLS) is a database service developed by, and exclusively for, real estate brokers and their agents. If you elect to tap into this service, it can provide you with a detailed picture of what has transpired over the last year or so, and give you a snapshot of market activity. To access the MLS, you will need to connect with a cooperative real estate agent who subscribes to the service. But don’t worry, 99.9% do! This real estate agent can be an invaluable asset. With him/her using the MLS, you can find out some key areas of information for homes that have sold (e.g. square footage, price per square foot, property taxes, year built, sales price, days on market, features and amenities, etc…). All these can give you insight when you are looking at homes you are considering purchasing. One of the biggest challenges new investors have is determining the value of a home they are thinking of buying. This is especially true in today’s market of declining prices. What was true just 12 months ago may not apply today. There are so many factors that make each home unique, but I like to look at one ratio to try to level the playing field. If you are comparing houses in the same or like neighborhoods, cost per square foot is one measurement that can help you compare apples with apples. Let’s see how cost per square foot is computed. Share Your Thoughts: 2011 Ron Mead Training - All Rights Reserved 2 www.fortunesandfreedom.com Lesson 11 - How to Use the MLS Computing Cost per Square Foot For a very basic example, that has easy math, let’s say you are looking at a house that is 2,000 square feet and the owner is asking $100,000. To compute the cost per square foot, you would take the selling price, $100,000, and divide it by the number of square feet in the house, 2,000, and the result would be $50/square foot. If that same house of 2,000 square feet was for sale for $200,000 the cost per square foot would jump to $100/square foot. So the simple formula to compute the cost per square foot: Divide the selling price by the number of square feet in the house. Now, let’s say you are looking at house that is 1650 square feet and you are thinking of offering $145,00. You’d like to see how it compares to other houses in the neighborhood that have sold in the last 4 months. If you divide the possible purchase price of $145,000 by the square feet, 1650, you come up with a cost per square foot of $87.88. Next you can meet with your new best friend real estate agent and ask if they can use the MLS to tell you what is the cost per square foot of comparable homes selling in that neighborhood. Let’s say they come back to you and tell you that comparable homes have been selling in the $110-120/square foot range. That indicates that you are in pretty good shape with your offer; however, if they tell you the range is more like $65-75/square foot, you might want to reconsider. You might be a little high. One word of caution: Don’t make this cost per square foot your sole determining factor. It’s only one guideline of many. It’s simply a very quick way to see if it’s a property that might be worth pursuing. So there are some ways the MLS can assist you. It may take you a little while to find a real estate agent to work with, but in today’s market most are quite eager to help if they feel you’ll be sending business their way in the future. As I said, I’m keeping this lesson short to give you a chance to catch up. So that’s all we are going to cover today. See you next week! Share Your Thoughts: 2011 Ron Mead Training - All Rights Reserved 3 www.fortunesandfreedom.com Lesson 11 - How to Use the MLS This Week’s Activity Please do a brief but complete review of the previous 10 week’s lessons. We’ll want to make sure you are on top of everything for the next phase of lessons. Be Happy, Take Chances, Live Life Fully! Fortunes and Freedom: A Guide to Real Estate Riches Next Week - Lesson#12 “Using the Classifieds and Craigslist” Get Connected and Stay Updated Be a true friend and send someone a Free Trial Share Your Thoughts: 2011 Ron Mead Training - All Rights Reserved 4 www.fortunesandfreedom.com