When you create private listing networks, who are you accountable to? If somebody says, “I want to sell my house to the neatest family in the world,” well, now you’re discriminating against single people. Is that fair? Could it be a situation of have and have not? In this instance, it’s saying, “we’re not going to play by the fair housing rules anymore.”
Transparency and equitable access to real estate listings is at risk, threatening to push the industry backwards. Currently, most homes are listed on the Multiple Listings Service (MLS), a database shared by the real estate industry. The MLS database is also what feeds listings to consumer platforms, allowing you to see for sale homes on places like Zillow, Homes.com or Realtor.com.
However, there is a growing movement within the real estate industry to reduce listing transparency by putting homes for-sale on private networks– instead of publicly through the MLS– through what’s known as a “pocket listing,” or “private listing network,” which are shared with an exclusive group of agents and hidden from the public. These restrictive practices of pocket listings and private listing networks are harmful; they negatively impact sellers and buyers and increase the potential for discrimination.
Imagine telling someone in a marginalized group that they can’t use the agent of their choice to see a home. That even though they trust their agent and have a relationship with them, that to view “certain homes” they must use a company agent they are unfamiliar with.
Zillow to prohibit listings that are privately marketed.
Zillow, the country’s largest real estate search portal, will move to permanently prohibit listings that fail to be added to the MLS within 24 hours of being publicly marketed, a defiant new standard that could immediately impact future listings as brokerages rush to launch their own private networks.
The new standard takes effect in May and comes on the heels of a decision last month by the National Association of Realtors to amend its divisive Clear Cooperation rule with the addition of a new Delayed Marketing Exempt Listings option for home sellers that will allow multiple listing services to determine how long listings can be seen by other MLS participants without being publicly listed which is being pushed by Compass Real Estate.
Days after Zillow rocked the real estate industry with changes to its rules on private listings, Redfin followed suit with a ban on listings that don’t begin on a multiple listing service, CEO Glenn Kelman said in a statement Monday
“Because we believe that all buyers should be able to see all listings, Redfin.com will not publish any listings that have been publicly marketed before being shared with all real estate websites via the MLS,” Kelman said in the statement. “To encourage home-sellers to market their listings via the MLS, Redfin is also asking MLSs to create a coming-soon designation for listings that precludes search sites from showing how long a home has been for sale and at what prices.”
Lea Pareja CEO of eXp Realty also took the opportunity during Wednesday’s presentation to criticize “a company” — presumably Compass — that has spearheaded the “so-called ‘seller choice movement,'” which eXp characterized as anti-consumer. eXp intends to follow Zillow and Redfin’s lead on this matter.
“The loudest voices behind the so-called ‘seller choice movement’ come from a company born out of greedy venture capital that has purchased all its growth without a sustainable business model or a clear path to profitability,” Pareja said. “And now, in a rush to appease Wall Street investors, they are pushing an agenda that runs clearly counter to consumer best interests.”
Windermere exec: Private listings herald 'demise' of real estate. “What’s happening today is that Compass has decided to create their private exclusive listing network. And to me, that just takes away transparency, and lack of transparency creates issues for everybody. We’ve worked really hard over many decades to create a more transparent marketplace. And now, Compass threatens to take us back decades.”
Let’s get to the real bottom of this question. Who is it good for? Study after study shows that it’s not really good for the seller. So, Bright MLS, NAR, Zillow, they all came out with studies that say it’s not good for the seller. So, is it good for the buyer that has to call your company and say things like, “Hey, how many days on market is that? How do I make an informed choice on what I should offer?”
I think the future of real estate, if this is allowed to happen, is really bad for buyers who don’t have information at their fingertips. They need to make informed decisions. I mean, appraisers probably go away. Where do they get their information from? Does Compass start their own appraisal company? Probably. Is it good for sellers? Well, we already established they don’t make more money. They have less choices.
Industry Impact of Pocket Listings
While pocket listings offer a discreet and exclusive avenue for certain real estate transactions, their impact on the broader industry raises questions about transparency, fairness, and the market’s overall health. This section explores how the prevalence of pocket listings influences the real estate landscape and the challenges it poses to industry professionals and stakeholders.
Let’s start with the impact on sellers. Research shows sellers prioritize two things: maximizing sale price and selling within a target time frame. And it’s up to their agent to deliver on those items – bringing in the best offers within the preferred timing. Brokerages tout private listings to their clients as a way to test the waters and try out a listing price. In reality, a private listing negatively impacts sellers’ ability to maximize the sales price by limiting the exposure of the listing, potentially reducing the wealth they built on the biggest financial investment they’ve made. Rather, this practice is designed to benefit the brokerages’ own bottom line as an attempt to ‘double dip’ commissions from both sides of the transaction within their brokerage.
A multi-state study by BrightMLS and Drexel University from last year found that homes listed on the MLS sold for 17.5% more than off-MLS listings, representing more than $53k for the typical seller – for nearly everyone–this is meaningful. These homes also sold faster. This makes sense. Listings with maximum exposure get the maximum price.
Some of the leading concerns with Private listing networks
Lack of Market Transparency: Private listing networks contribute to a lack of transparency in the real estate market. Since these off-market transactions are private, it becomes challenging for industry professionals to understand how many homes sell in a given area. This opacity can impact property values and distort market trends.
Difficulty in Assessing Comparable Sales: Real estate agents and appraisers rely on comparable sales data to determine the value of a property. The absence of Private listing networks from public records makes it difficult to assess comparable sales accurately, leading to potential challenges in property valuation.
Potential Violation of Fair Housing Laws: The selective nature of Private listing networks, where properties are marketed only to specific buyers, raises concerns about potential violations of fair housing laws. Excluding certain groups from accessing information about available properties, even unintentionally, can be perceived as discriminatory…. Imagine telling someone in a marginalized group that they can’t use the agent of their choice to see a home. That even though they trust their agent and have a relationship with them, that to view “certain homes” they must use a company agent they are unfamiliar with.
Impact on Cooperative Brokerage Practices: Private listing networks disrupt the cooperative nature of the real estate industry. The traditional model relies on collaboration among agents and brokers to ensure a broader market reach. With pocket listings, the exclusivity can reduce cooperative practices, affecting the sharing of commissions and market insights.
Introduction of Clear Cooperation Policies: In response to the challenges posed by Private listing networks, industry organizations, such as the National Association of Realtors (NAR), have introduced Clear Cooperation Policies. These policies mandate that properties must be listed on the multiple listing service (MLS) within a specific timeframe of being marketed to the public. The goal is to enhance transparency and ensure a broader audience can access property information.
Ethical Considerations: The ethical implications of Private listing networks are a subject of ongoing debate. The potential for a single agent to represent both the buyer and the seller in an off-market transaction raises questions about conflicts of interest and the adherence to fair practices within the real estate profession.
As the real estate industry grapples with the evolving landscape shaped by pocket listings, it becomes imperative to strike a balance between the desire for privacy and the need for transparency. Clear cooperation policies address some of the challenges associated with off-market transactions, emphasizing the importance of openness and collaboration within the real estate community. The industry impact of pocket listings underscores the ongoing dialogue about maintaining a fair, accessible, and ethical real estate marketplace.
Legality of Private Listings
The legality of Private listing networks, also known as pocket listings, has been a subject of discussion and regulatory scrutiny within the real estate industry. Understanding the legal landscape surrounding private listings is crucial for sellers and buyers to navigate the complexities of real estate transactions. This section delves into the legal aspects of private listings, exploring key considerations and regulations shaping their use.
National Association of Realtors (NAR) Regulations: The National Association of Realtors (NAR), a prominent trade association in the real estate industry, implemented the Clear Cooperation Policy to address the use of private listings. This policy, effective January 1, 2020, requires properties to be listed on the multiple listing service (MLS) within one business day of marketing to the public. The intention is to promote transparency and ensure that listings are accessible to a broader audience.
State-Specific Regulations: Real estate regulations can vary significantly from state to state. Some states may have specific laws governing private listings, while others may rely on industry standards and NAR guidelines. Sellers and agents should be aware of the legal requirements in their respective states to ensure compliance.
Ethical Considerations and Fair Housing Laws: While private listings are not inherently illegal, ethical considerations come into play, especially concerning fair housing laws. Excluding certain groups from accessing property information in private listings may raise concerns about potential discrimination. It is essential to align private listing practices with fair housing principles.
Potential Impact on Commissions: Private listings can have implications for commission structures. In traditional real estate transactions, cooperating brokers often share commissions. In private listings, where collaboration is limited, the listing agent may retain the entire commission. Sellers should clarify commission arrangements with their agents based on the listing approach chosen.
Market Transparency and Comparable Sales: The legal aspects of private listings also intersect with market transparency and comparable sales analysis. Appraisers rely on public records, including MLS data, to assess property values. Private listings may introduce complexities in the appraisal process, potentially affecting property valuations.
Potential Changes in Regulations: The legal landscape surrounding real estate practices, including private listings, is subject to change. Regulatory bodies and industry associations may revisit and adjust policies over time. Staying informed about any regulation updates is crucial for all stakeholders in the real estate transaction process.
Consideration of Local Practices: Sellers and agents should consider local practices and norms when deciding on private listings. Understanding the expectations within a specific market can help ensure that private listings align with legal and ethical standards.
In conclusion, the legality of private listings involves adherence to industry regulations, state-specific laws, ethical considerations, and fair housing principles. While private listings are not inherently illegal, sellers and agents must navigate the evolving legal landscape and consider the potential impact on transparency, commissions, and market practices. Compliance with relevant regulations is essential for a smooth and legally sound real estate transaction.
For the very few people who need maximum privacy over maximum price, there should be options to have a home privately listed. This practice should be the exception, not the rule, because it doesn’t serve the needs of most sellers. And most MLSs do allow sellers to opt out of having their listing online. But for those who believe they are making the decision to list with a private network for any sort of reduced hassle in the form of avoiding showings or timing delays need to understand the clear tradeoff they’re likely making in price and selling speed.
At The Cascade Team, we truly believe “once that property is inputted into the listing service to be shared with other brokers, our position as a company is, we’re going to share it with everyone.”
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