Realtor association bans a longtime marketing practice
Starting next year, real estate agents will not be able to purchase a home outside of the multiple listing service, a practice that has frustrated buyers in tight warehouse markets like Metro Denver.
By 729 votes to 70, the directors of the National Association of Realtors voted Monday to ban people using a multiple listing service, or MLS, largely controlled by local brokerage associations, from publicly marketing a home without listing it first.
“It’s been brewing for some time and it’s finally coming to a head,” said Greg Zadel, a Firestone realtor who chaired the committee that recommended the ban to the NAR board.
Listing agents using the MLS, pretty much anyone looking to survive in business, have a day to list a home that they publicly market outside of their own realtor.
“Pocket or” Coming Soon “listings are often intended by listing agents to fill their own pockets at the expense of their sellers,” said Jim Smith, owner of Golden Real Estate in Golden and proponent of the new rule.
Expressing a widely held view, Smith argues that the only way to find the best price for a home is to make it available to the widest possible audience of buyers. Limit the pool of buyers and the seller will be understaffed.
He calculates that of the last 5,000 sales on REColorado, the local MLS, 194, or 4%, were zero-day listings. That is, they have already turned up sold. This figure excludes the unknown number of homes that were completely sold outside of the MLS.
For buyers, the practice meant that there were a smaller selection of homes to choose from and that a dream home might have come and gone without them ever knowing that it was available.
“Sellers may miss out on the opportunity to sell at a higher price, and property choices for buyers are limited,” Stephen Brobeck, senior fellow with the Consumer Federation of America, said in a statement.
The CFA, which supports the new rule, urged the NAR to go further and block real estate marketing within a broker before listing.
In some markets, transactions outside of the MLS can account for 20%, 30%, or even 40% of all sales, and there is a contrary school of thought that supports this practice.
“This problem is going to hurt many home sellers because it takes away decisions,” said David Faudman, CEO of Top Agent Network, a private platform that connects top performing agents.
The top tenth of realtors sell about 90 percent of the homes, Faudman noted. In contrast, about half of realtors never sell a home in any given year.
The choice of the seller is another problem. Some sellers don’t want photos of their intimate space to be visible to the world online, nor do they like the idea of strangers roaming around at screenings or buying agents gossiping about how a nasty divorce motivates sales, Faudman said.
Firms like Zillow Offers and Opendoor have exploited these concerns by offering sellers “instant deals” that promise a quick and private sale.
Seasoned listing agents have also tried to arrange quick sales and purchase properties within their network of seasoned buyer agents, Faudman said.
Zadel counters that agents can continue to make all the preparations they made before. Other agents can be called in to provide a pricing opinion or to discuss recommended repairs and marketing strategies.
But the house has to go to the MLS soon. The new rule does not prevent sellers from arranging a private sale, for example to their grandchildren or a family friend, or from selling the property themselves.
However, Faudman believes that forcing it all onto the MLS eliminates alternative sales strategies and inhibits market innovation.
“There are problems with this rule on so many levels,” he said. “Nobody has to come between me and the customer and tell me what is best.”
Zadel meters with a fragmented market place a much greater risk that consumers will not be treated fairly and sellers will not get the best possible price.
“You have to reconcile a functioning market with a fair market,” said Zadel.