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With all the debate surrounding the National Association of Realtors’ pocket listing rule, there seems to be one thing most leaders agree on: the status quo isn’t cutting it.
But in a webinar Tuesday called “Pocket Listings Unveiled: The Future of Clear Cooperation,” three brokerage leaders and a multiple listing service executive clashed over whether the policy should be kept and tweaked or repealed entirely, citing brokerage competition, litigation and consumer choice.
The webinar, which was hosted by Local Logic executive Audrey Whittington, started with a brief history of NAR’s Clear Cooperation Policy, which requires listing brokers to submit a listing to a Realtor-affiliated MLS within one business day of publicly marketing it.
Liz Sturrock, chief of MLS and innovation at Miami MLS, noted that while pocket listings are not new, when an MLS CEO spoke up at a NAR MLS committee meeting years ago and said that 30 percent of the listings in his market were pocket listings, that got everyone’s attention.
“That really kind of forced the hand of the MLS committee to say, ‘Listen, we need to make sure that we have all the data in the market,'” Sturrock said.
“Now, you can make all of the arguments about why they said that, right? Was it to protect the small brokers? To protect the people who weren’t getting all of the listings? Was it to make sure that there’s great data? Was it a fair housing issue?”
James Dwiggins, CEO of NextHome, said he was almost certain the MLS Sturrock was referring to was MLSListings, which is his market.
“Basically 30 percent of the inventory in Silicon Valley, California, was off-market, being held by two brokerages, where they were telling sellers that ‘We can take your property off market. Don’t have to show it, don’t need to do open houses, don’t need to have people coming through the home. We’ll sell it internally. If we can’t do that, we’ll put it back on the market.,'” Dwiggins said.
“They were double-ending deals, basically.”
But there’s a piece of the history that isn’t being highlighted, Dwiggins stressed — the litigation that followed.
“What people aren’t getting in this conversation … was all the lawsuits that ensued after by sellers who felt they were harmed by the practice, when they were seeing houses that were identical to the ones that were held off market selling for $500,000 more six months later,” Dwiggins said.
“I’m not going to name the companies, but those two companies got sued for the very practice that we’re going to talk about today.”
In addition, the firms holding those listings either wouldn’t work with other brokers who had potential buyers and or they would use the listings to try to recruit rival agents to their brokerage, according to Dwiggins.
“[T]he managers would say, if you come work at our company, you’ll have access to this inventory,” he said.
“This is literally my market. What ended up happening was small brokerages, franchisors, and, candidly, buyers and sellers were being screwed by this practice.
“So it became a big discussion because buyers had no idea what was for sale. You didn’t know unless you went to those companies’ websites because it wasn’t on the major portals. In some cases it was; in some cases it wasn’t. It ended up being a disaster for the way the real estate community operated in this particular market, and that was the precipice of CCP being discussed and figured out.
“It’s not from the MLS necessarily losing market share. It’s because the practice was screwing the real estate community and buyers and sellers in the market.”
Jeff Hickey, vice president of technology and innovation at Keller Williams’ Go Network, said he wasn’t “100 percent against” the CCP, but that the policy wasn’t doing what it was intended to.
“Today, the brokerages that really tout their activity in that space have been recruiting away our agents,” Hickey said.
“We actually had to take a look at that and offer something to them to keep those agents and then attract additional agents so we can grow the brokerage. So we do have a solution that we use for off-market. We call it Private Collection. We abide by the rules.”
Hickey suggested the policy had lead to a type of competition among brokerages detrimental to the industry.
“At the end of the day, while we all compete with each other, I think we all have a vested interest in the survival of our industry,” he said.
“It doesn’t make sense to over-compete and then suck all the activity out of the industry. I don’t know what the answer is, but I do believe that the actual execution of the solution needs some work.”
Mike Hickman, CEO of Seven Gables Real Estate, said he would like for NAR to get rid of the CCP and that NAR had “done a very poor job” of explaining to consumers what it is.
“I think it should be repealed and replaced with policies that are … local, that make more sense for the consumer, and protect fair housing,” Hickman said.
He pointed, for instance, to an incident where a listing agent put a yard sign on a property and then put it on the MLS within 24 hours, as required by the rule, but then the seller’s daughter got sick and they couldn’t have any showings.
“He tries to get the sign down, somebody reports him, and he has to pay $2,500,” Hickman said. “Where in the world does that fit into being for fair housing? Where does it fit in to protect agents? Where does that fit into the consumer benefiting from that?”
He added that he thought it was “terribly wrong” for NAR to have a nationwide policy for all brokerages and agents and emphasized that consumers should have a choice.
“Why doesn’t the seller have a choice? I understand they can have pocket listings — or exclusive listings, pardon me — and I understand that is an option, and there are guardrails with that, but I’m more interested in what the consumer wants, and why are we not more consumer-centric instead of agent-centric?” he said.
Sturrock pointed out that in her MLS, sellers have always had the ability to opt-out of putting their listing in the MLS and Dwiggins noted that in all 400 markets that NextHome is in, sellers have that ability.
“If someone wants to do a seller opt-out for not allowing advertising, or maybe they allowed it on the MLS, but they don’t do ‘okay to advertise,’ or they don’t syndicate,” Sturrock said.
“All of those choices are available to them. You can offer Clear Cooperation, but also honor seller opt-out.”
Dwiggins blamed the state of the market for the renewed attention on the Clear Cooperation Policy four years after it went into effect.
“The real [reason] this is coming up is because it’s a shitty real estate market,” Dwiggins said. “It’s been that way for two years. There’s not a lot of people that are selling houses. Everyone’s trying to figure out how to get deals through. Recruit agents [and] increase production is how every real estate brokerage makes money. The end.”
Likely referring to Compass CEO Robert Reffkin, who has been the most vocal opponent of the policy, Dwiggins added, “This whole debate is coming up from one individual who’s bringing this front and center because they’re trying to figure out how to create increased profits and stock price. That’s just what this is. About two years ago, nobody was talking about CCP because everybody was making tons of money.”
Dwiggins said the debate around the policy bothered him because all but 1 percent of sellers want to sell their home for the highest price possible.
“[I]f we’re genuinely talking about what’s good for sellers, you can say … ‘We’re going to hold it off market. We’re going to sell it internally. We won’t have to do any open houses. We’re not going to have to have any showings. I’ll work internally with it. We might even lower the commission amount. We’ll double-end the deal. It makes it easier.’ The seller goes, ‘That sounds great. Let’s go that path,” Dwiggins said.
“The other path is ‘Mr. and Mrs. Seller, the greatest marketplace ever developed on Planet Earth is the MLS. It’s better than every other country, which is why every country is trying to copy it. You’re going to get 220 million unique views on Zillow, Homes.com, and Realtor[.com]. If it’s not in the MLS, your property won’t be on any of those websites and we’re going to reduce the number of people that will be able to see it.’
“Which script do you think the seller, if they heard either of those two options, is going to want to do? Door No. 2. Because they’re going to go, ‘I want to sell my house for the highest price possible.’ This whole debate is occurring because the market sucks and everyone’s trying to figure out how to make money.”
He said he’s talked to seven MLS executives who have done studies on how much money a seller is losing by selling off-market instead of selling via the MLS, five of them private studies and two of them public.
“If you do the math and say, ‘Mr. and Mrs. Seller, this is what your house is worth. This is potentially the amount of money that you could lose,’ as soon as they see the number, … they’re like, ‘I don’t want to lose that much money.’ Immediately, they go, ‘I want $28,000 to $50,000 more.'”
According to Dwiggins, the big problem with the policy — and the aspect of it that the U.S. Department of Justice doesn’t like — is that office exclusives are allowed under the rule.
“If that wasn’t there, you wouldn’t have this competitive disadvantage,” Dwiggins told Hickey. In an op-ed, Dwiggins has proposed eliminating that exception to the rule and offering sellers disclosures that clearly spell out how much money they could be leaving on the table if they sell off MLS.
The current forms don’t “specifically say that you won’t be on Zillow, Realtor[.com] and Homes.com, which I think if the seller knew that they’d be like, ‘What?'” Dwiggins said.
“No. 2 is, it doesn’t tell them what the approximate price [is] that they would lose.”
Hickman agreed with having a disclosure, but disagreed with the idea of listing how much sellers will lose “because there’s no way to forecast that. You have to look at price ranges, geography, demographics and all those things,” he said.
Hickman also questioned whether the MLS actually does lead to higher sale prices, noting that Art Carter, the CEO of the largest MLS in the country, California Regional MLS, had told him that out of 100,000 subscribers, 58 percent of them sell one house or less in the MLS annually.
“That begs the question of, does it really have to be distributed more? Does it really calculate that the more they see it, the better house you get, or the higher price you get?” he said.
“To your point, James, I think you are correct that that’s what a seller does want,” added Hickman. “The question is not ‘How do you carve these things out?’ The question is ‘How do you write a better policy that works for our markets?’ Because the CCP has forced agents underground.”
Sturrock stressed that MLS executives aren’t trying to make brokers’ lives more difficult.
“We are all trying to serve the consumer, serve the agents and serve the brokers all together to help make sure that there is an efficient marketplace where everybody here can thrive,” she said.
“We want the consumers to get the most money for their properties as well. We want everybody here to be successful. I don’t think all of those things have to be mutually exclusive.”
Getting rid of the CCP would be “horrendous” for consumers, according to Dwiggins.
“What will happen is you’re going to see large brokerages get bigger,” he said.
“You’re going to see all of these companies hold back inventory. Everybody’s agents at other companies won’t have access to it. It will create a marketplace that will take us back 20 years minimum.”
Whittington asked the panelists: What happens with Zillow, Realtor.com and Homes.com if the CCP is repealed and 30 percent of listings don’t make it into the MLS?
Dwiggins suggested one of two scenarios would happen. The first: “You’re going to see everybody take their corners, and then they’re all going to compete on inventory, and they’re going to recruit on inventory,” he said. “It’s going to destroy the marketplace. I think MLSs will go away. I’m not saying all of them.
“What happens if Compass, eXp, Berkshire Hathaway, all these top brokers start pulling all their inventory, and the MLS only has 40 percent or 50 percent of the inventory?” Dwiggins added.
“It makes it so it’s not as relevant. We’ll take the marketplace we’ve spent 20 years building and destroy it,” he added. “If we think that Homes.com and Zillow are just going to stay there and only have 50 percent of the inventory, you’re out of your mind.”
According to Dwiggins, one possibility is the portals will become a de facto MLS that allows consumers and brokers to upload listings — with all the attendant accuracy problems and “the experience goes to crap.”
The other possibility is that the portals become brokerages with their own agents.
“If Zillow decided, with 220 million unique visitors to go, ‘We’re gonna take all the teams that are paying us money and bring them over to Zillow brokerage,’ that’s gonna be scary for everyone,” Dwiggins said.
“You’re not looking four years or five years down the line at what the conglomerates would do. They aren’t going to sit back. They will pivot, and they will pivot hard, if they think the very thing the industry has been scared about for 20 years could become reality based upon this decision. The domino effects could be catastrophic.”
Whittington noted that CoStar had become the de facto database for commercial listings. “Nobody can touch them,” she said.
Sturrock added, “They send a cease and desist letter to anybody who they think is trying to get into their market. Anybody else who tries to build a competitive model, they will just sue into oblivion. We’ve seen it happen time and time again.”
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