Private Listing Networks and the Clear Cooperation Policy Part 1

Private Listing Networks and the Clear Cooperation Policy Part 1

Over the past few weeks we have seen a new round big changes in the real estate industry. In August there was a kerfuffle over commissions and Buyer Broker Agreements. This time it is the seller side of the equation.

So, if you think the changes that happened last year were wild, you ain’t seen nuthin’ yet! If nothing else, real estate keeps us all on our toes. So here is the rundown.

PRIVATE LISTING NETWORKS
Prior to COVID-19, the real estate community saw the rise of “Private Listing Networks.” These are lists that display homes for sale without being shown to the public on Multiple Listing Services (MLSs). In the Bay Area, there was TAN (Top Agent Network), but they began cropping up nationwide as well. I believe they were created by top agents as a networking platform with other top agents. This makes sense for several reasons:

• 70% of the real estate agents nationwide did not do 1 transaction in the prior year.
• Pareto’s Law - the 80/20 rule - holds true in real estate that 80% of the transactions are done by 20% of the agents.
• So, if you have a special property that is of a super-premium price point, you are more likely to get a buyer from one of those top agents.

If an agent were not invited into a Private Listing Network, you would not be privy to those listings. Networking is what we do as agents to promote properties and expand the potential buyer pool.

Exclusivity and restricting potential eyeballs are contradictory to servicing my listing and protecting the best interests of my client. I get that a lot of agents do not do a lot of transactions, but what if someone has the perfect buyer? Why exclude what could be the perfect buyer?

TAN caught the eye of some of the national brokerages, and it became the blueprint for their own private listing networks. This primarily allows them to control their inventory and boost their bottom lines. If you privatize as many listings as possible, you can potentially control the eyeballs of buyers as well. This does two things for mega-brokerages: 1) create more opportunities for the company to represent both the listing and buy side of transactions (“dual agency”) and 2) take business away from rivals such as Zillow.

CLEAR COOPERATION
Enter the National Association of Realtors (NAR) to this debate. They are highly involved in creating the rules that MLSs nationwide adhere to (such as August’s Buyer Broker Agreements). They also sought to curtail private listing networks by creating the Clear Cooperation Policy (CCP).

Clear Cooperation has several key points:

• Any listed property with public facing advertising (mailers, newspaper ads, for sale signs, etc.) must be entered into the MLS within 24 hours of such advertising.
• A new status was created for the MLS called Active Coming Soon. This allowed a property to be either be listed as Active Coming Soon or as Active, each with its own functions.
• If a property was not listed in the MLS, it could only be marketed within the listing brokerage.

It is that last bullet point that gave some of the largest brokerages in the country a moment to pause and think. The thought was not about how best to represent and market a listing to the benefit of a seller, but, rather, how best to gain a competitive advantage over smaller brokerages and to further their own financial gain. Their thought process may have been something like:

• We’re a mega-broker, so we can just market our listings to our offices and grow our own private listing network.
• If we can get enough listings on our own private listing network, we can rival the MLSs in number of properties and buyers.
• Maybe we can also force MLSs to abandon Clear Cooperation and allow us the flexibility of maintaining our own private listing networks without fear of fines from the MLS or of having our access terminated.
• We just need to come up with a plan to convince our sellers that this is actually in their best interest!

This is when the “Spin Doctors” took over.

OPPOSITION GROWS

Clear Cooperation was a well-intended policy but was not completely well-thought out. NAR felt that off-market listing networks simply promoted the interests of brokerages above the interests of sellers. Personally, I agree with NAR’s position. But it caused mega-brokerages to double down on their private networks and look for ways to circumvent the policy.

What’s more, third-party aggregators of real estate information – like Zillow, Redfin, Realtor.com and Homes.com – also started thinking about how to circumvent Clear Cooperation. Real money was at stake here for them as well. They started drawing lines in the sand and establishing alliances based upon each company’s financial stakes.

Between the mega-brokers and third-party aggregators, litigation, opposition to the policy, and creative solutions occurred that NAR could never have foreseen. If there was any doubt about the Law of Unintended Consequences, Clear Cooperation dispelled it completely.

That is probably enough information for this segment. Join us for Part 2 as we point out the business strategies employed by the major players going forward.

Thank you for reading.