The private listing debate quickly got messy within the industry. Real estate rivals suddenly couldn’t agree even on the definition of “private,” and the disputes have often become technical and insular—seller choice versus transparency, monopolies and conspiracies, the Wall Street boogeyman and the out-of-touch incumbents.
But as brokerage and MLS leaders updated policies and focused on their own differences (which have played out loudly in the public square and in the courtroom), private listing practices were always going to end up scrutinized through a very different lens.
Over the past couple months, multiple federal lawmakers, representing leadership in both parties, are sharply and urgently questioning whether non-public marketing and platforms reduces affordability or creates discrimination in housing markets. The president of the NAACP penned an op-ed in Time Magazine just last week arguing that private listings are “the next fight for fair housing.” And the fourth most populous state (New York) is on the verge of requiring sellers to acknowledge private listings “may reduce the number of offers…and could negatively impact (the) ability to sell or lease the property.”
As the industry struggles to find a consensus, what will be the response from real estate leaders to pointed questions from lawmakers, consumers or other outsiders? And how do arguments in support of private platforms gel with the fair housing and consumer focus of federal lawmakers?
Driving the conversation
Thad Wong is the founder and CEO of @properties, the Chicago-based brokerage acquired by Compass last year. He tells RISMedia that there is nothing new about phased marketing, with his company having used it extensively in its early days when selling new construction projects.
“I think people miss—and what’s important for an agent to educate a consumer on—is that public exposure isn’t free,” he says, arguing that a “permanent digital history” is essentially being forced on anyone who wants to sell a home—something that can be used against them in the market.
Wong also argues that consumers in general have a greater recognition that putting all the information out there publicly has drawbacks—for both sellers and buyers. Buyers don’t want to move into a home where photos and history are going to be plastered all over the internet, or hoovered up by unrelated companies trying to sell them unrelated products or services, he claims.
That would appear to be a salient point to make to consumers or regulators, as data privacy remains a broader conversation that also gets some bipartisan attention.
But the pro-private listing position in the industry has largely focused on the financial and practical benefits of “seller choice”—something that might sway many who practice real estate, but does not seem to be the focus of lawmakers and consumer advocates.
Elizbeth Korver-Glenn is a sociologist, currently working as an associate professor at the University of North Carolina, has studied real estate practices for over a decade, focused on discrimination and segregation.
She says that at the foundational level, arguments based on the idea that sellers are driving the decision to privately market their properties are “disingenuous.”
“Real estate agents are the central authority figure in the housing market for most consumers, including buyers and sellers,” she says. “We have repeatedly found across those markets that sellers defer to real estate agents most of the time—almost all the time, actually.”
Perception dynamics
In two separate letters (addressed to CEO Robert Reffkin and MRED CEO Rebecca Jensen), Republican Congressman Scott Fitzgerald and Democratic Senator Elizabeth Warren made it clear that they see private networks as “designed to insulate” and likely to create “velvet ropes” that harm first-time buyers and lower-income consumers.
Setting aside the more technical industry questions, why are private listings networks garnering these sorts of negative characterizations, especially when consumers are largely not familiar with the practice?
Cameron Paine is the CEO of Maris MLS. Also boasting significant experience in the real estate brokerage and tech sector, with leadership roles at eXp and HouseCanary, Paine describes a scenario he says will get the attention of consumers that starts with a simple inquiry: Is that home for sale?
“As your agent, I look at the MLS, and I say ‘Well, I’m sorry, it’s not for sale.’ And then you find out next week that it actually sold, that it had been for sale,” he says.
That immediately undermines trust in the agent and really, the whole system, Paine says, and is something he claims is likely happening already as brokerages, portals and MLSs shift policies and try to control more inventory.
“That is just a fundamentally flawed and dangerous, in my opinion, path for the MLSs and for brokers to follow,” he says.
That seems to be the perception of lawmakers as well, including Warren, who wrote in her letter that private networks are “effectively making…listings invisible to buyers working with unaffiliated industry professionals.”
Wong pushes back vigorously against that characterization, saying that agents and the internet effectively means no buyers are missing out on listings the way Paine describes.
“Every agent is aware of what other agents to contact for opportunities for their buyer,” Wong says. “When somebody says they’re going to be boxed out of being able to see something, that’s like saying, ‘I didn’t have a chance to buy that car because I was on Cars.com and not Autotrader.’”
Wong also frames the bigger question very differently. He notes that higher-end properties and more affluent buyers and sellers have always had access to the benefits of pre-marketing, including privacy, noting specifically that builders are exempt from many of the policies that require broad exposure on the MLS (and Zillow).
“So the builders and the wealthy are somehow treated differently than a normal American, which I just don’t think that’s right,” he says.
At least some MLSs, Wong predicts, will work to allow anyone that kind of privacy and the ability to leverage these types of marketing strategies.
“Disparate impact”
Asked whether the internet or more formalized private networks might alleviate the discriminatory impacts of informal pocket listings, Korver-Glenn is careful to say that data is needed to make an empirical judgement on that question, but that prior research suggests that even somewhat accessible private networks will likely reflect “segregating dynamics.” However, she admits that is “purely speculation.”
Wong says that kind of discrimination doesn’t happen in “any market that I work in,” emphasizing again that internet-based private networks are open to anyone. He also points out that MRED, which serves @properties’ region, has hosted its own private network for around a decade. Until recently, the MRED network hadn’t drawn much scrutiny, despite facilitating hundreds of thousands of transactions.
Reffkin also said during sworn testimony in one of the private-listing focused court cases that a fair housing lawyer “signed off” on the company’s practice of advertising private listings with a “black box” on its website, teasing private listings in a given area without showing them.
“Disparate impact” though, is the key phrase, stemming from a provision of the landmark 1968 Fair Housing Act that disallows practices or policies that result in discrimination, even if there is no overt intent or discriminatory language.
Paine highlights this standard too, and goes further, arguing that the erosion of reliable data provided by MLSs makes it much more difficult for real estate leaders to assess the impact of policy—both as it relates to discrimination, but really, when seeking to understand any effect a policy has.
“I don’t want to absolve MLSs or say that we’re doing things right. I think everyone needs to improve. We do need to listen to what our brokers are saying,” he says. “But under that headline, the only way to ensure that everyone’s being treated fairly is to treat everyone fairly—and to make sure that is true is through transparency.”
Disclosure
One of the (perhaps rare) areas of agreement within the industry is around disclosures. Most of the states that have recently passed laws focused on private listings have essentially allowed the practice to continue, as long as the seller signs a state-mandated form. Both sides of the debate have largely affirmed the importance of these types of practices.
Notably, neither Warren’s nor Fitzgerald’s letter specifically mentioned disclosure (or any lack thereof) as an issue with private listings—although Warren’s letter does touch on “transparency” as it relates to consumers.
Paine says he “doesn’t quite know yet” whether having a disclosure is a big part of making sure pre-marketing or private listings are pro-consumer. Maris has a “very blunt” disclosure for its own “confidential” listings that fall under “seller approved marketing,” which allows some pre-marketing—part of Paine’s acknowledgment that MLSs need to listen to brokers and provide flexibility.
But Maris is purposefully moving very slowly, in the process of conducting a research project with an outside company to examine the impact of these listings on its marketplace, with Paine saying this is the “minimum” MLSs need to do in order to effectively implement these new policies.
Wong says he generally supports these disclosures, cautioning that they “kind of go to the extreme.”
“I think making the consumer aware of it so they can have a conversation with their agent…is a good thing,” he says. “And if the agent can really prove to them that one process is better than the other, (and) with their fiduciary duty to (help) the seller to achieve their goals, the seller is likely going to head in that direction.”
Korver-Glenn acknowledges that the average person navigating the housing market isn’t really thinking about the effects of private listings one way or another. Again, agents are the one guiding individual choices in transactions, she says, based on extensive qualitative studies “shadowing” agents.
But the average buyer, seller or and homeowner is, in fact, acutely aware of affordability issues, according to Korver-Glenn, and the connection to private listing practices is an easy one to make.
“Whenever I talk about this issue, people are incensed, and they’re like, ‘Wait, what? There’s hidden listings?’ And then they’re like, ‘Oh, that helps me understand my experience,’” she says. “I think that there is sympathy for the wider implications of this kind of practice for the housing market, and for Americans who are just trying to buy a house.”
