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This is a photo of my grandfather (Burt Polin on the left) when he opened his first major real estate brokerage in 1967. He was a mentor and one of the most honorable men you would ever meet. His handshake and word were worth more than any contract you could write today.
He grew his real estate brokerage to be one of the largest on the central coast of California before selling it in the late 1980s. I remember asking him once how he grew it to be such a large company. He told me it was about controlling the listing inventory. The more inventory you had, the easier it was to recruit agents, which made you grow more.
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At that time, the MLS didn’t exist in the form it is today. It was a book printed with listing inventory once per month — so it was always outdated. Because of that, the real estate business was controlled by larger brokerages that all tried to sell their own inventory internally before cooperating with other brokers.
As an agent, unlike today, if you didn’t work for one of the large firms, you wouldn’t know what inventory was for sale and sellers wouldn’t list with you. I believe history is about to repeat itself again.
From Day 1, I have believed the Clear Cooperation Policy (except for the office exclusives carve out) has been about protecting homebuyers and sellers from exclusionary and predatory practices. It provides complete transparency into the U.S. real estate market and has helped prevent steering and redlining because everyone has equal access.
Owning real estate is one of the largest generators of wealth in the U.S., especially for minorities. And for over 40 years, real estate industry leadership has worked collectively and tirelessly to create a comprehensive MLS marketplace that is transparent, fair and open to all. It’s never been perfect and still isn’t, but it is the greatest real estate market ever created in the world.
However, last week, I feel the industry took a step backward. The office exclusives carve out in the Clear Cooperation Policy was already exclusionary in practice by allowing listings only to be available to an exclusive group of buyers and brokers.
But now, we’ve created an additional MLS policy called Delayed Marketing Exempt Listing (DMEL) that further allows brokerages to hide properties from homebuyers online under the pretense of “seller privacy.”
See, the truth is, I know where this is going because I’m one of the people whose family benefited from this very practice that was commonplace 40 years ago. My family helped change it because we knew it was wrong.
The problem is, a majority of agents today weren’t here even 10 years ago, so they don’t have the historical perspective of how things were in the past. As an industry, we are horrible at educating our colleagues on why rules exist, so they base their opinions on their own experiences, which is understandable.
But from a historical perspective, the entire reason the MLS of today was created (something my grandfather and father were involved in) was to have a single broker cooperative where all listings are shared among participating agents and companies in real time. This was designed so they didn’t have to call every brokerage in town to figure out what was for sale or what was already sold. It was in everyone’s best interest, including their clients.
I remember both of my Realtor parents talking about it often as a kid. And just to be clear, I am not saying there aren’t a small fraction of sellers who need to keep their home private off MLS or sell quickly and just want the first offer.
However, that is very different than actively teaching and incentivizing agents to push off MLS transactions and tell sellers about a “new way” to market their home as if this is actually good for them.
Let’s be perfectly clear: Nothing about office exclusives or off-MLS deals being pushed today are new; it’s literally how the entire industry operated before the current MLS structure. Now, telling sellers that “days on market” and “historical price reductions” will hurt them, and therefore, they should try to sell their home as an office exclusive or delayed marketing exempt listing first is somehow the “new norm”? Seriously?
So, allowing companies to restrict the potential buyer pool who can view the seller’s property and write an offer is the answer, and it’s actually good for the seller? This is “seller choice and privacy?” No. This has always been about certain brokerages lobbying to get rid of rules that protect consumers, so they can keep inventory off the MLS, sell it internally and increase profit margins — all wrapped in a pretty spin package that sounds good to an uneducated seller.
It will simply be a matter of time before sellers figure this out, and then we’ll be dealing with more bad PR and reputation damage about our industry and profession. Less transparency will always lead to more litigation. Period.
What’s truly sad in all of this debate is that we seem to have forgotten about the very people who matter most: homebuyers and sellers. They hire us because they only do this two or three times in their lives. They believe and trust they are hiring professional representation to look out for their best interests.
Having their best interest in mind means telling them the truth. It’s putting their interests above your own. If we are telling them the truth, then office exclusives and delayed marketing exempt listings should always end up being used for a tiny fraction of sellers who need it in rare circumstances. It should be something the seller brings up during a consultation and agents have a solution for when it arises.
In no way, shape or form should it be a standard offering for agents to present in a listing presentation.
This is already happening in some brokerages and what I fear will become standard in most. You can put whatever disclosure you want for “informed consent” in front of a seller, and it won’t change a thing. We all know these disclosures will be sent via electronic signature; the seller will never read them and just sign it.
NAR’s announcement regarding CCP was, unfortunately, not surprising. They tried to thread the needle of all parties involved on both sides of the debate and are risk-averse to more litigation. I completely understand why they approached it this way, but unfortunately, I simply don’t agree with the decisions that were made.
The office exclusive carve out in CCP was already a loophole that only benefited brokerages, but now we’re creating an entirely new category called “delayed marketing exempt listings” that more brokerages will use. It will make it even harder for homebuyers to find homes for sale in an already tough housing market.
Further, sellers will end up leaving money on the table because of both these policies, which will likely increase litigation potential for brokerages and agents doing these practices.
As someone who is fiercely on the side of making things better for consumers, I don’t think this was a win. It’s something needed for a tiny fraction of sellers and will likely become a mainstream offering.
Why are we allowing a small contingent of loud voices to influence the creation of more exclusionary and predatory practices against the very people we serve?
I believe NAR should have completely gotten rid of office exclusives and simply put DMEL in place with an informed consent disclosure and additional safeguards to make sure the seller truly understood what they were agreeing to and signing. That would have allowed “seller choice and privacy” but still made all listings available to MLS participants and homebuyers through Virtual Office Website (VOW) feeds at the very minimum.
If extra privacy was needed for a seller, make the address not viewable to consumers like Airbnb or VRBO, and/or only have one photo. I believe that as an industry, we will look back at office exclusives and delayed marketing exempt listing status and wish we had taken a very different direction.
Unfortunately, here is how I believe this all plays out now:
- More large real estate brokerages launch their own office exclusives program — pulling more inventory from the MLS and general marketplace. They will be forced to do it to compete and retain their agents, even though they don’t want to or believe in this practice. Tech vendors like RealScout and Final Offer are already pushing technology to facilitate this, and I’m sure others will join in soon. MLS and Realtor association value will decrease the more this occurs, eventually leading to the “death spiral” for many.
- Comps and appraisals will become so much harder for everyone. A lot of MLSs don’t currently require off-MLS deals to be entered into the MLS at the closing. The more large brokerages pursue the path of office exclusives, the larger the problem becomes for everyone to price homes accurately, including appraisers.
- The largest franchisors lobby NAR and MLSs to make rule changes so they can launch their own office exclusives across all franchisees and brands. Don’t expect them to sit on the sidelines and let large brokerages take market share. If NAR or MLSs don’t comply, they’ll simply ignore MLS policy or move toward an alternative of the MLS so they can compete. Don’t forget, the largest real estate companies in the U.S. are franchisors, not brokerages. They will influence decisions to suit their needs.
- Mergers and acquisitions will increase. If you’re not part of a larger brokerage or franchisor, it will be difficult for small independent operators with little market share to survive in this new world where more office exclusive listing inventory is not available on the MLS. Remember, it’s already happening today. A few large brokers are already holding back inventory and saying you can only view their office exclusive inventory by being part of their brokerage. Imagine a world where all major brokerages and franchisors are doing this.
- We now have to explain IDX syndication and how it affects public websites, VOW feeds and “delayed exposure” to a homeowner who just wants to sell their house and get the highest price possible 99 percent of the time.
- You’ll need to introduce yet another policy and “informed consent disclosure” if they want to do an office exclusive or delayed marketing exempt listing. This will become a mainstream talking point that will only confuse sellers even more.
- The big problem with an “informed consent disclosure” will be how it’s written. Does it clearly explain to sellers that they are likely leaving money on the table? Does it clearly explain their home won’t be in IDX search on every website that grabs data from the MLS, including your website, your company’s website, and the large portals such as Zillow, Homes.com and Realtor.com? Does it clearly explain that while large portals such as Zillow, Homes.com and Realtor.com will have those listings available under a VOW feed, the consumer must register to see them now? Last time I checked, most people on the internet don’t like registering and giving up their name and email address to see information, which is what a VOW feed requires to be compliant.
- How long will each MLS give as a timeframe for delayed marketing exempt listings? One, seven, 14 or 30 days? The longer the timeframe, the more detrimental the policy will be to your business and fair competition in the local market.
- So much of your current technology works off IDX feeds, and it’s very likely your tech vendor is scrambling right now to figure this out. As inventory drops in your MLS IDX search because of DMEL, the value of your company’s website, personal website and mobile app will decrease. They will all have to switch to VOW feeds to keep you competitive, and the costs for VOW feeds can be more depending on the MLS. Expect those costs to be passed down to you because your tech vendor likely won’t eat them. Finally, the required registration to see all the listings in VOW feeds will alter the UI in all of your tech products. You will need to spend time learning about these changes so you can help your clients with the new process. Expect your lead generation efforts to decrease from these changes.
- Expect large brokerages to exploit the DMEL policy and cut deals with major real estate portals so those portals have exclusive access to that listing inventory without forcing consumers to register under a VOW feed. I could see a player like Homes.com doing this with major real estate brokerages to give them a distinct advantage over their rivals. Again, MLSs should be very mindful of the timeframes they allow under DMEL.
- Some MLSs will likely separate from NAR to create their own policies, which could lead to more fragmentation across the industry. You could see a world where bordering MLSs have very different policies to address a common issue.
- Dual agency becomes a massive problem. The more dual agency occurs by keeping inventory off MLS and selling it internally, the more E&O Insurance costs will go up, or eventually, they will simply not offer E&O insurance if you are doing this practice at all. Right now, dual agency is banned in roughly nine states. Expect this to become a major talking point over the next 24 months with lots of litigation ensuing.
- Finally, lawsuits will be filed from sellers who didn’t understand what they were signing and felt they could have gotten more had their home been on the MLS and open marketplace. Class action lawyers will file suits against real estate brokerages and agents using all their marketing materials as, “Exhibit A,” showing how they steered sellers into listing it as an office exclusive or DMEL. Homebuyers will likely sue for exclusionary practices as well.
In closing, I hope I am wrong on all my predictions. I hope when you see me in hallways at events, you can point to how far off my predictions were, and I have to acknowledge I was off in conspiracy land. I truly love this industry and think what we do as a profession is one of the hardest in the world.
You work without a guaranteed paycheck, for countless hours, seven days a week to shepherd people through one of the most expensive, stressful transactions they will ever do in their lifetime. The MLS and industry are not perfect by any means, but it’s the best in the world today, and we’ve made so much progress. I just hope we don’t take it back 40 years because we feared a tiny contingent of loud voices. I truly want to be wrong.
James Dwiggins is the Chief Executive Officer of NextHome, Inc.
