On March 25, The National Association of REALTORS® (NAR) issued a new statement about their expectations for real estate agents representing sellers.  The statement was called Multiple Listing Options for Sellers; a kind of complement to the Clear Cooperation Policy that was announced in 2019.  The purpose of the new announcement is to allow more flexibility for sellers and their agents who want to restrict access to a listing of a property that is for sale.

Reading between the lines, the expanded options for sellers likely reflects pushback from sellers – and perhaps some buyers as well; pushback against NAR’s efforts to limit so called pocket listings and other off-MLS transactions.

Below we’ll examine the stated goals of these new NAR polices; we will look at some conflicting perspectives about the new MLS-centered initiatives; and look at why some interested parties seem to strongly prefer private real estate transactions.

Off-Market and Pocket Listings

The 2019 Clear Cooperation Policy worked against that common practice of off-market sales, pocket listings, and private transactions.  In an article subtitled “What to Know About Changes to the MLS Procedures,” a senior editor at Realtor.com states:

“By implementing this policy, the hope was to decrease, though not entirely eliminate, the amount of private or ‘pocket’ listings.” — Dina Sartore-Bodo, writing for Realtor.com

Which begs the question: If many buyers and sellers have historically chosen off-market transactions, why would NAR or other stakeholders want to restrict those sales?  Is the private sale of private property unethical?

Studying the original Clear Cooperation Policy, the plotline centers around off-market property.  According to an article titled “Restoring the Norm of MLS Cooperation” from NAR’s REALTOR® Magazine, editor Stacey Moncrieff cites industry experts talking about pocket listings:

“Any trend or business practice that results in less complete and less accurate property information should be a concern for Realtors®.” — Kaite Johnson (then General Counsel for NAR)

Is that true? As NAR gives back some territory in the new Multiple Listing Options for Sellers, is it because non-public transactions do in fact benefit some sellers?  If every completed sale involves not only a willing seller, but also a willing buyer, does the tradition of private real estate sales suggest that many buyers also find value in off-market deals?

“I have found that the best properties usually aren’t publicly advertised as being for sale.”– From Crushing It, by investor Brian Murray

If many buyers and sellers are happy to transact off-market, why is NAR working to decrease off-market sales?  If the sellers want these transactions, which aspects of the real estate community are lobbying to stop them?

“By establishing a national policy, it is mandatory that all Realtors® Association MLSs adopt the policy and have the same consistent standard.”– From the NAR “MLS Clear Cooperation Policy”

NAR has been explicit that there is no “opt out” for these policies for Realtors®.  While the sharing of listings in MLS system shows obvious value in so many transactions, if some parties want to transaction off-MLS, why is it so important that participation in the MLS process be “mandatory” for every deal?

Even as the MLS rules make transaction “transparency” mandatory, in the recent Multiple Listing Options for Sellers, NAR has created more flexibility.

“After many months of analysis and deliberation across the industry—including MLS leadership; association executives; brokerages of all sizes; agents; multi-cultural partners; and fair housing, policy, technology, and legal experts—NAR has adopted a new MLS policy, Multiple Listing Options for Sellers… to provide sellers and their agents more options and choice when marketing a property, while also supporting fair housing by providing buyers and their agents with equal access to important MLS property information.” — NAR

Note NAR’s expressed intention of providing “more options to sellers and their agents.”

Was there legitimate pushback from property sellers and their agents about the restrictions?  Why did NAR feel compelled to offer some relief to sellers and their agents?

Why Some Sellers and Buyers Prefer Off-Market Transactions

If some substantial percentage of real estate transactions happen off-MLS (and they do), there must be some rational reasons why sellers choose to sell in private sales.

“Sellers need a choice to keep their personal matters private. The Advisory Board factored this point into the proposal, understanding that sellers should have the option to work with a professional while keeping their property sale and transaction private.”– From “NAR Introduces New MLS Policy to Expand Choice for Consumers”

NAR acknowledges that privacy is a valid reason why some sellers want to stay off the MLS.  Real estate experts can also point to several other reasons why sellers may prefer that their property become a pocket listing for an agent or broker.

While some experts note that an MLS can help a seller to collect many offers quickly, privately-networked sales can often move even faster.  If the deal meets certain criteria, agents know buyers in the community that will purchase the property immediately; it does not get any faster than that.

For sellers that want the fastest deals or need cash quickly (in some cases to enable them to free up capital for another real estate transaction), off market deals are often extremely fast; conducted in the same week, or as fast as the same day.

There are other reasons why off-market real estate deals are popular.

“In addition, keeping these listings off the public multiple listing service means buyers won’t know if a seller has dropped or raised their price expectations.” — Michele Lerner, Washington Post

Some buyers use private communication about their property to explore what the market will pay, without committing to a sale.  Other buyers and sellers might want to keep the eventual sales price private; 12 states in the US do not require the sales price to ever become public knowledge.  Still other buyers and sellers work with one broker to buy a pocket listing in a “double-ended sale,” where the agent earns a commission from both the buyer and the seller, but the total commission payout is lower, saving one or both parties transaction fees.

While more offers and a higher price are important motivations for sellers, there are many players in real estate that prefer to do business off-market, in insider-only transactions within their network of personal relationships. Those deals are in fact private, and they are also faster and/or sometimes more profitable for the parties involved.

There is a lot of evidence that buyers seek out off-market sales as well.

“Interestingly, the house he recently purchased was sourced through a broker that he has worked with for some time. Brokers often contact him before the properties even hit the market, as they trust that he is not overly picky when it comes to the condition of the property, he pays in cash, and he is easy to work with.”– Anton Worman, from Free Houses in Japan

The cash-for-homes real estate companies provide another example showing a healthy, functioning side of private real estate sales.  Regardless of pushback from some stakeholders, there is a lot of satisfaction in off-market sales.

Many buyers prefer off-market, particularly because a lack of competition means a lower purchase price.  In exchange for being fast and dependable, for waiving contingencies, for buying property “as is,” buyers can get better deals; and there is nothing particularly amoral about that.

PropTech Companies Embrace Clear Cooperation Rules

When NAR requires agents to add data to MLS systems, companies that rely on access to agent listings are clear winners; some “disruptive” third-party proptech companies benefit from information aggregated via the MLS function and shared via IDX.

While many agents and brokers find success in private sales, technology companies that want access to property data created by agents have been more enthusiastic about NAR’s MLS requirements.

“The default best for most situations is for the property to be entered into the MLS, syndicated everywhere, and available to all buyers and their agents.” — Rob Hahn, from the Notorious R.O.B. website

“Default best” for whom?

Rob Hahn is the CEO of a technology company that explicitly wants to “decenter” traditional real estate functions. As his company stands to benefit from access to property data literally created by agents, he supports mandatory MLS rules that would help that information to be “syndicated everywhere.”

“This policy is intended to bolster cooperation and advance the positive, procompetitive impacts that cooperation fosters for consumers.” — From a description of the “MLS Clear Cooperation Policy” on NAR’s website

Many buyers and sellers are successfully cooperating in existing off-market sales; there is no issue with cooperation for those deals.  The requests for cooperation and the lobbying for more “procompetitive” terms seems particularly applicable to third-parties that rely on data sourced from the MLS; for the traditional players, the new requirements on seller’s agents add external friction to otherwise satisfying off-market deals.

One feature of the new Multiple Listing Options for Sellers seems to be responding to this legitimate demand for off-market sales by specifically allowing sellers to comply with some MLS “transparency” directives, while also limiting required “cooperation” with third-parties’ tech companies that are less-than-friendly to traditional real estate models.

“Delayed Marketing: Is an exempt listing where the seller has directed the listing broker to delay the public marketing of that listing through IDX and syndication for any period as allowed by the local MLS in its unfettered discretion.” — NAR’s “Multiple Listing Option for Sellers”

The information in online property listings is created directly from the relationships that real estate agents develop with sellers.  When NAR requires its Realtors® to supply the MLS with more transaction data, proptech companies that want to disrupt existing sales channels may benefit most of all; many of these new tech companies would like to find ways to compete directly with the brokers that create the listings in the first place.  We can see why agents and brokers might not want to help proptech toward those goals.

The recent additions of the Multiple Listing Options for Sellers seem to specifically address some pain imposed by these mandatory MLS rules on sellers and agents, that primarily seems to benefit the new tech companies.

Protecting Sellers

One area where the Clear Cooperation Policy creates more agreement is with the protection it affords for inexperienced sellers.

“[P]ocket listings generally have been perceived as benefiting the listing firm more than the client.” — From a NAR resource called “Window to the Law: Understanding the MLS Clear Cooperation Policy”

There are indeed agents that take advantage of sellers by aggressively encouraging exclusive representation, and then even blocking sales with outside agents in effort to “double-end” the transaction.

While the practice of dual agency (capturing the commission from both the buyer and the seller), is not unethical, it can create perverse incentives, and blind spots, when each party does not have their own, independent representation.

For experienced traders, this dual agency can provide benefits when an inside agent brings together two parties for a pre-arranged, mutually beneficial, off-market transaction.  For less savvy sellers and buyers, it can also create artificially long sales cycles, can cause buyers to be over-charged, or sellers to be under-marketed, and other conflicts of interest for the buyer, the seller, or both.

Dual agency – where only one broker is involved in facilitating a transaction between a buyer and seller – is a timeless feature of real estate markets around the world. Dual-agency, off-market property transactions in Japan are a very common practice, going hand-in-hand with the increased usage of third-party property portals.

In other markets like the UK, however, the practice of “double dipping” by agents has been effectively banned; only allowed when both the buyer and seller give explicit informed consent.

As a part of NAR’s new guidelines, the expressed consent provides a more obvious benefit for buyers and sellers.  Per the new Multiple Listing Options for Sellers, when a seller chooses to engage in either an exclusive listing with a broker, or delayed marketing that bypasses third-parties, the informed consent is now a more explicit part of the relationship.

Requirements of seller’s agents to obtain a written statement where the seller acknowledges the limitations of off market sales does seem to enhance consumer protection in the marketplace.

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It is fact that not only some sellers, but also many buyers, prefer off-market transactions.  While detractors will claim that pocket listings hurt “consumers,” many buyers and sellers actively benefit from off-market transactions with enhanced privacy, lower purchase prices, faster and easier closes, and high-trust transactions with pre-vetted partners.

To the consternation of new tech ventures, off-market transactions also favor personal relationships.  That human-touch is timeless and often a completely healthy feature off-market real estate.

Experienced buyers and sellers know that many of the best buildings and best deals are sold, between insiders, long before the public ever hears about them. There is nothing illegal or unscrupulous about that. That insider access is part of the earned privilege of being educated, of having established roots, reputation, and connections in a local real estate market.