Everyone’s up in arms about private listings—and everyone has a point. But somehow, everyone’s also missing one.
Compass has been vilified for choosing to do something that NAR rules now clearly permit. Are they doing it because it’s a good business decision for them? Yes. Can listing a property off the MLS be a benefit to sellers? Yes. Both things can be true.
On balance, most sellers probably would get more money for their properties by listing on the MLS. More eyes, more interest, more money. It’s common sense. But sometimes sellers value things other than money (shocking, right?). Perhaps a very quick sale is the priority. Or not having bunches of looky-loo buyers trudging through their house. Perhaps privacy is more important than sales price and they don’t want photos plastered on public portals. Whatever the case, some sellers may legitimately want to explore the private option.
The disclosure problem
But this assumes that sellers understand the drawbacks—which they may or may not. Certainly, sellers should know how this decision could impact them down the line (like potentially not being able to list on sites like Zillow or Redfin). And they should understand the business dynamics at play here: that brokerages stand to benefit from double-ending the deal. As the option of listing privately is currently being “branded,” it’s not clear that most sellers will appreciate that their brokerage has a financial incentive to push private listings.
But if a seller does understand this, then I can see the argument that it’s “their choice.” And scare-mongering doesn’t help. Jumping up and down proclaiming that sellers are leaving money on the table and that brokerages will be sued doesn’t advance the discussion. And it also takes away agency from sellers. Sellers are not stupid, and they don’t need decisions pushed on them one way or the other.
The bigger picture: Industry self-harm
But here’s the critical problem: What is good for an individual seller can be bad for consumers writ large—in particular, for buyers. The seller who chooses to sell off-MLS is understandably acting in their own perceived self-interest. But that same seller then becomes a buyer. And if large swaths of sellers start choosing to list off-MLS, then sellers-turned-buyers are going to have their buying options severely circumscribed.
This is the classic case of the tragedy of the commons. Individuals acting in their own self-interest deplete a shared resource—public access to homes for buyers—even though it’s detrimental to the collective well-being. That lack of public access will inevitably harm those sellers down the line when they become buyers. The problem is that they don’t know it. And, sadly, even if they did know it, I’m not sure they would care. One’s immediate self-interest almost always takes precedence over some far-away “what if?” problem.
To digress for a moment: consider the errant “shopping cart people.” You know who you are. If everyone left their shopping cart wherever they felt like, parking lots would be unnavigable. Tell that to the shopping cart people. They don’t care. They assume that most people will return their shopping carts to the appropriate stall. They take advantage of other people doing the right thing. They can’t be persuaded otherwise. So too the private seller. They aren’t going to think about what their decision means for the collective.
NAR’s responsibility to the industry
Problems like this are the reason that NAR and state regulators exist—so they can balance the equities and make policy decisions that maximize the public good.
One of my favorite lines from a movie (“Dirty Dancing,” in case you’re wondering) is: “When I’m wrong, I say I’m wrong.” NAR got this one wrong in abandoning the Clear Cooperation Policy (while pretending it didn’t). And now is the time to say it was wrong and go back to the drawing board.
If NAR doesn’t address this issue head-on, it risks further fragmenting the real estate market, eroding consumer trust, and ultimately harming the very people it claims to serve. The short-term gains for some in the industry will lead to long-term pain for all.
A final note: Weekend drama
On Friday, Compass sued Northwest MLS over policies that prevent privately listed properties from later being displayed on the MLS. Coupled with recent moves by Zillow and Redfin to restrict MLS access, this signals the beginning of the industry’s implosion from within. These growing rifts show that the current structure of the industry cannot adequately serve the interests of both buyers and sellers.
It might sound radical, but sometime in the not-so-distant future, brokerages may be forced to choose a side: representing either buyers or sellers, but not both. And if that happens, the industry will have no one to blame but itself.
Sellers hire brokers to advocate for their best interests. Brokerage exists in large part because these transactions are relatively infrequent for most people, have complexities, and licensees should be trusted to educate their client. Unfortunately, in a market with historically low transaction totals and 99% of all business models are contingent on making a sale, licensees fail to realize the tension between their fiduciary responsibilities and their bills.
Consequently, too many agents influence their client to list off market and cover their rears with obliquely worded disclosures, if that.
The shopping cart metaphor is quite apt. All those isolated cases of de-facto pocket listings add up, and it only compounds the already critical inventory supply.
It astounds me that more people don’t see the self interest behind the private listing gimmick. Business models based on recruiting are standing upside down trying to differentiate themselves to attract an agent population with dwindling revenues. Private listing databases are a recruiting tactic, not a transparent, pro-consumer practice.