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There has been a lot of discussion in recent weeks about the practice of marketing homes through private listing networks before — or instead of — listing them on the multiple listing service (MLS). 

As an economist, my job is to strip the emotion out of the equation and simply analyze the data — and the data is clear: Privately marketing homes usually leaves sellers worse off financially. It also creates a fractured, less equitable housing market.

Through a pair of recent studies — one by Bright MLS, the nation’s largest multiple listing service, and another from Zillow — compelling evidence shows that private listing networks and private listings, as a whole, ultimately harm sellers, buyers and the integrity of the real estate industry. (Compass has made contrary claims, but unlike Zillow and Bright MLS, has not made its data available for review.)   

The data underscores that homeowners who opt to sell privately are, on average, leaving money on the table and taking longer to close on the sales of their homes.  

A comprehensive report by Bright MLS analyzed more than 100,000 home sales and found that residences marketed privately as “office exclusives” took significantly longer to sell. These homes sat on the market for a median of 37 days, compared to just 20 days for homes that started on the MLS. 

Furthermore, claims that homes sell for more through private networks are largely a myth. The Bright MLS study found no statistical evidence that office exclusives commanded higher prices. In fact, almost 90 percent of these privately marketed properties eventually ended up on the MLS after failing to secure an acceptable offer, leaving sellers right back where they could have started (on the MLS), and potentially weeks behind schedule.

Although some brokerages may position private listing networks as a premium service, the numbers do not align with such a narrative, and if the numbers are incongruent with the concept, one must concur that, in a majority of cases, sellers are not better off.

At a loss

The financial disadvantage for sellers who do accept an offer before marketing their homes publicly is tallied up in a recent Zillow report.

The research, which analyzed 10 million transactions over the past two years, revealed that homes not listed on the MLS sold for a median of 1.5 percent less than their publicly marketed counterparts, after controlling for all the available property and market-level data impacting expected sale prices. That translates to a significant loss for the typical American homeowner, amounting to an average of nearly $5,000 per seller — or $1 billion collectively. 

Advocates for private listing networks base their argument on the principle of “seller’s choice” and assert that such platforms provide greater financial advantages for consumers. However, the data shows that sellers are actually settling for a lower selling price. 

What’s more, the loudest cries in support of private listing networks come from the brokerages themselves. When a brokerage is able to keep a listing “in-house,” representing both sides of the transaction, they are, of course, able to secure a more substantial commission. 

In a recent article, real estate analyst Mike DelPrete estimated the kind of sizable profits brokerages could extract using private listing networks by double-ending deals and leveraging their control of hidden listings to entice more buyers, essentially profiting by gatekeeping access to those private listings. 

A fragmented and inequitable market

Beyond the direct financial harm to sellers, the proliferation of private listing networks creates a host of problems for homebuyers and the overall health of the market. Buyers today expect and deserve a transparent marketplace where all available homes can easily be viewed online without having to sign up to work with a specific agent or give a brokerage their personal information as the price of access. 

The practice of agents withholding listings from the open market creates a fragmented and frustrating experience for buyers, who are left to wonder if they are truly seeing all their options, and an equally frustrating transaction for sellers, who, statistically, may be realizing significantly less proceeds than selling in the “open market.” 

The breakdown of transparency also leads to a shortage of critical market data. When homes are sold off-market, crucial information about sale prices and Days on Market is not widely available. This information deficit makes it harder for both buyers and sellers to make informed decisions.

A seller won’t have enough data to price their home accurately, and a buyer is, in essence, blindly entering into the transaction. And both may be missing information critical to assessing the skill of a prospective agent, as a private portal can easily obscure trends that may otherwise reveal deficiencies in an agent’s ability to price, market or negotiate the sale of a home.

In other words, as brokerages quietly leach more and more data out of consumers, consumers will get less and less data back.

Most troubling, however, are the fair housing implications of private listings. By limiting the marketing of a home to a select network of agents and their clients, the practice can (even if inadvertently) result in excluding buyers from underrepresented communities from learning about all available homes for sale.

Publicly accessible real estate portals and websites, by contrast, ensure that every potential buyer has an equal opportunity to see a new listing and submit an offer, fostering a more equitable and inclusive housing market. 

Another recent Zillow study furthers this point, finding that the negative financial impact of off-MLS sales is more than double for sellers in communities of color compared to those in predominantly white neighborhoods.

Facts over assumptions

The evidence is overwhelming: For the vast majority of sellers, the most effective and profitable way to sell a home is to list it publicly on the MLS, ensuring maximum exposure to the widest possible pool of potential buyers. This tried-and-true method not only benefits individual sellers, but also contributes to a more transparent, efficient and balanced housing market for all.

Jeff Tucker is the Principal Economist for Windermere Real Estate in Seattle, Washington. Connect with him on X or Facebook.