In my 30+ years in real estate, I’ve held various roles ranging from agent and manager to speaker, trainer and coach. Throughout this time, I’ve witnessed numerous significant shifts and changes within our industry.

Amidst the many ups and downs, both big and small, nothing has rivaled the potential impact of the recent commission lawsuits, their subsequent rulings and the inevitable cascade of appeals to follow.

One change in particular stands out conspicuously, and that is the adoption of NAR’s Clear Cooperation Policy (CCP). Implemented just three years ago, this policy is now at the forefront of the legal scrutiny encompassing our industry.

From my perspective, it serves as the focal point contributing to the current legal challenges. Let’s take a look at its continued relevance and whether you feel, as I do, that it’s time to entertain the notion of discarding this policy.

Background on the Clear Cooperation Policy

The CCP was introduced by the National Association of Realtors (NAR) in November 2019.  It mandates that residential listings must be submitted to a broker’s multiple listing service (MLS) within one business day of agents publicly marketing these properties to buyers.

This policy was introduced not only to promote more equitable access to listings across the industry and provide greater transparency for homebuyers in their search process but also to align with the vision of NAR’s leadership. They believed that broadening the exposure of listings to all fellow members would more effectively serve homeowners, ensuring that their properties received widespread attention.

Additionally, this approach was designed to discourage the practice of “pocket listings,” where agents might be tempted to limit the visibility of a listing to their individual office, potentially compromising the homeowner’s best interests.

Pre-CCP era: A largely lawsuit-free landscape

Notably, in the decades prior to the CCP’s introduction, the real estate industry did not face the same degree of anti-trust lawsuits and scrutiny around commission structures or listing strategies. Lawsuits related to commissions were exceptionally rare — indicating that the prevailing practices were not considered inherently anti-competitive.

This stands in stark contrast to the lawsuits emerging post-CCP. The policy, despite positive intentions, may have triggered unintended legal consequences now coming to bear on the industry.

Mounting legal challenges directly related to the CCP 

Most significant is the recent lawsuit filed by the U.S. Department of Justice’s Antitrust Division (DOJ) alleging that the CCP allows residential brokerages to collude on commissions charged to homesellers and buyers. This lawsuit also questions the role of MLSs in exacerbating these anti-competitive dynamics.

Within a year of the CCP’s November 2019 implementation, the original DOJ lawsuit emerged — representing a rapid legal response and suggesting a direct correlation to this policy change. 

In addition to the high-profile DOJ lawsuit, individual class action complaints have also accumulated nationwide, alleging price-fixing and anti-trust violations related to commissions and MLS listing practices. As these lawsuits continue to emerge, they provide mounting evidence that could potentially be used as ammunition for further legal action directly spotlighting the CCP as a pivotal issue.

Industry impacts and evolving market dynamics

The implementation of the Clear Cooperation Policy undeniably altered our industry dynamics. With the CCP mandating that listings must hit the MLS within one business day of any public marketing, the overwhelming majority of properties for sale are now accessible first and foremost to buyer agents.

However, a significant drawback emerged: By enforcing this policy, limitations were forced on homesellers. Previously, a homeowner had the flexibility to choose exclusive listing arrangements, tailoring the sale process to their specific needs and preferences. The CCP, however, limits this discretion, potentially making the selling experience less personalized. There is no option to “opt out.”

It’s important to recognize that most real estate agents aim to provide comprehensive, client-focused service. The CCP’s restrictions, while well-intentioned, have led to some feelings of frustration and limitation among agents who strive to cater to their client’s unique requirements. The policy, while enhancing transparency and fairness, also raises questions about the balance between open access and individual seller autonomy. 

Will revoking the CCP hurt buyer agents?

Prominent research firm Keefe, Bruyette, & Woods suggests that revoking the CCP could result in over 50 percent of real estate agents leaving the industry altogether. In an interview with Real Estate News earlier this year, a KBW analyst stated: “We estimate that more than half of U.S. real estate agents could be driven from the industry….”

While this is the opinion of one analytical firm, it does support the theory that, under the CCP, the market may have become oversaturated with agents who would struggle to stay competitive without having widespread access to listings. Essentially, it suggests that the policy environment protects an excess of agents — including lesser-performing ones — by locking down and funneling listings through the MLS.

Plaintiffs in several class action lawsuits have picked up on that practice and labeled it anti-competitive as well. A recent suit filed in Georgia alleges that the CCP and corresponding commission structure serve to protect inferior real estate agents “who might not be competitive in a more rigorous market environment,” as the suit reads.

The plaintiffs are basically alleging that, by keeping unproductive agents afloat through mandatory listing practices, the CCP ultimately restricts consumer choice and industry accountability. It proposes that home sellers lose the flexibility to choose listing strategies that suit their needs, high-caliber agents miss out on opportunities to prove their value, and that subpar agents remain buffered from free-market pressures.

Obviously, this case has yet to be heard, so it remains to be seen if the final judgment will shed any light on the validity of the allegations. What I will say about it is that it represents an urgent and crucial call to all individuals representing our industry to raise the bar of professionalism, transparency, communication, and training. 

Our duty: Progress through change

Rather than shying away from scrutiny, the duty of our industry should be to lean into change through ongoing improvement and evolution.  Given the accumulation of legal responses in the years following the rollout of the CCP — combined with the criticism around restricted listing options for homeowners and barriers to agent competitiveness — it seems time for industry leadership to reassess their current stance.

While it was created in an attempt to enhance fairness and transparency, certain aspects of the policy now directly conflict with the DOJ’s standards around fair market competition.  

As an industry, it’s time to reevaluate which policies truly serve homeowners and empower agents to provide value in an ethical yet dynamic marketplace. Getting this delicate balance right is no easy feat — but rigid protectionism will not propel us forward.

Exploring alternatives: Navigating real estate practices beyond the CCP

Considering the potential removal of the Clear Cooperation Policy invites the question: “How would we do business moving forward?” One possible answer is actually the most straightforward. The National Association of Realtors, along with our network of cooperating real estate agents and brokerages, thrived long before the CCP’s inception just three years ago. Therefore, one solution lies in reverting to the practices we upheld not so long ago. 

The crucial aspect of this approach involves ensuring that homeowners are fully informed about their options – and the potential benefits or consequences — of whether to keep their listing exclusive or to place it on the Multiple Listing Service (MLS).

It is also imperative that we, as industry professionals, advocate for the MLS, articulating its substantial benefits clearly. This includes informing homeowners that opting out of the MLS could potentially lead to fewer buyers, fewer showings and possibly a lower selling price.

By communicating these consequences explicitly in writing and obtaining a homeowner’s acknowledgment, we still respect the choice and preserve the right of each individual homeowner to decide the path best suited for their unique situation. 

Darryl Davis is the CEO of Darryl Davis Seminars. Connect with him on Facebook or YouTube

This post was originally published on this site