Barely a year after the National Association of Realtors settled a lawsuit and rewrote the rules for how agents get paid, the powerful trade group is examining the fate of another policy that could change how homes are bought and sold across the country.
The policy, known as Clear Cooperation, requires agents to list homes on shared databases known as multiple listing services (MLS) within one business day of beginning to market the properties. The rule is designed to cut down on what are known as “off-market” or “pocket” listings, where a home for sale is marketed semi-privately to small pools of potential buyers without being advertised widely on the MLS.
Since it took effect in 2020, the policy has sparked fierce debate within the real estate world and at times pitted its top players against each other. Proponents argue that the rule helps ensure that the industry follows fair housing laws and helps sellers secure top prices for their homes by putting them in front of the broadest pool of potential buyers. Opponents, meanwhile, say sellers should get to dictate how their homes are marketed and argue that the MLS listing requirement violates antitrust laws.
The NAR is currently reviewing whether the rule should be repealed, remain in place, or be changed. At a time when the number of homes for sale remains below historical norms and brokerages have consolidated, the decision has implications for how hundreds of thousands of homes are marketed and sold each year.
“We take for granted that you can go to any portal ... and have a complete and total data set that’s accurate in real time,” said Leo Pareja, the CEO of eXp Realty. “That only comes from the cooperative structure we have set up where everyone shares everything.”
A profitable niche
Pareja thinks his firm, the country’s largest by agent count, would benefit if the policy is repealed. But he’d like to see it stay in place because he believes more transparency is better and cheaper for consumers.
Where most real estate companies fall on the issue tends to align with whether or not they benefit from the rule. Executives at Zillow and Redfin, which aggregate home listings from the MLS, are for it. Compass, a luxury-focused brokerage that touts its access to “Private Exclusives,” is against it. Anywhere Real Estate, the parent company of franchises including Century 21, Coldwell Baker, and Sotheby's International Realty, has said it would like to see the rule remain but with changes.
Pocket listings are a relatively niche way to sell a home in most parts of the country. Data is scarce, but estimates generally put the deals at 5% or less of sales nationwide. Using deals that were listed as “sold” the same day they first appeared on the MLS as a proxy, Redfin estimates that they made up 1.8% of deals in mid-2024.
They’re most common in high-end real estate, where celebrities or other VIP clients may be keen on keeping a transaction low profile. Those sellers also sometimes want to test their listing prices in more private channels to avoid the stigma of publicly cutting prices or having a home linger on the market for months for all to see.
“With the luxury markets, they do like to keep things close to the vest,” said Linda Hussey, a real estate agent in Waikoloa Village, Hawaii. But the last pocket deal she closed was more of a matter of happenstance: The condo sellers walked into her office, and she happened to have been in contact with a buyer eager to purchase in their complex.
Pocket listings can proliferate in markets and time periods when inventory is particularly scarce, and some agents advertise their access to off-market deals in an effort to win business. In the midst of the pandemic buying frenzy in mid-2021, pocket listings totaled 2.8% of deals, Redfin said. While Clear Cooperation was designed to reduce pocket listings, they’re still permitted under some circumstances, including if a property is only marketed within one brokerage.
Unclear impact on prices
There’s debate as to whether pocket listings help sellers maximize their payouts. A seller can come out ahead by floating a price above what comparable homes are going for and finding a willing buyer. But without advertising widely, they also risk leaving money on the table. And since pocket listings frequently stay within one brokerage or with one agent who winds up representing both the buyer and seller, buyers and sellers can have limited power to negotiate commissions.
Zillow, which generally benefits from properties being widely marketed, analyzed 2.72 million homes sold in 2023 and 2024 and found that homes sold via pocket listings sold for 1.5% less on average than comparable residences that were listed on the MLS.
The brokerage Compass, which marketed more than half of its new listings in early February with some sort of off-MLS status, says its data shows that homes pre-marketed before hitting the MLS ultimately sold for 2.9% more.
Robert Reffkin, Compass’s CEO, said in an earnings call last month that the MLS policy “harms homeowner value by taking away homeowner choice.”
Matt Curtis, a real estate agent in Huntsville, Ala., shares Reffkin’s skepticism, even though he thinks most sellers benefit from having their house in front of as many potential buyers as possible.
“At the end of the day, it’s the seller’s house,” Curtis said. “I think the seller ultimately should be able to decide what they can and can’t do.”
Fair housing advocates generally support the policy, saying pocket listings can hurt traditionally underrepresented buyers' ability to compete in today’s market.
“It exacerbates potential segregation and discrimination,” said Laurie Brenner, associate vice president of housing and community development for the National Fair Housing Alliance. “When these listings are deemed as being exclusive, that, by definition, means that people are being excluded.”
The nonprofit group Consumer Federation of America believes that pocket listings harm both buyers and sellers, and has advocated that the NAR restrict the use of “office exclusives” as well.
Clear Cooperation has been subject to court battles over the years. Top Agent Network, an off-market listings service, initially sued the NAR over the policy in 2020. After several appeals and dismissals, it dropped its latest case earlier this year. The Justice Department also looked into the rule as part of a broader investigation into NAR policies.
The NAR is expected to rule on the policy in the coming weeks, but the threat of more litigation remains. Michael Ketchmark, the lead plaintiffs’ attorney in the lawsuit that upended commissions, has threatened to sue if the policy is upheld.
source: finance.yahoo.com
