top of mind
Where Off-Market Listings Lead
The MLS provides an efficient, transparent, fair market. The industry
needs to make that case, or watch the system unravel.
When you think of the U.S. stock market, it’s the New York Stock Exchange or NASDAQ that
comes to mind. But as Michael Lewis’s
new book, Flash Boys, reveals, there are
more than a dozen exchanges—and that
doesn’t even count the “dark pools,” the
private systems operated by most major
U.S. investment houses for the benefit of
their big-money clients.
Real estate has its own dark pools—
top producers using “off-MLS” networks
or “coming soon” previews. Some agents
market off the MLS at the seller’s request.
Others say it helps them avoid working
with ineffective agents. And some do it to
capture the full commission. Sellers have
long permitted this option, and not many
brokerages or MLSs have taken strong
steps to discourage it. A few brokers have
issued stern language about duties to
seller clients. NAR General Counsel Katherine Johnson issued a similar warning
in her June 16, 2014, realtor.org article,
“Coming Soon: Is It in the Seller’s Best Interest?” Still, the promotion of off-market
listings seems to be expanding.
Now, after years of tight inventory
and consolidation of market share by
top agents, third-party aggregators are
getting into the act. One online portal’s
move to accept “coming soon” listings
from agents who pay for the company’s
services creates the potential for a new
housing marketplace outside the control
of the producers of the listing data.
Multiple listing services were created, first and foremost, as a consumer
service—a complete, accurate picture
of homes for sale. Where a formal MLS
doesn’t exist, consumers must go to numerous sources to learn what’s available.
Cooperation and compensation were
baked into the MLS. Want to know how
important those practices are? Think
about commercial brokerage, where
everything is subject to negotiation right
up to the closing, and imagine fighting
over commission splits in front of home
owners at a closing table. Then read Flash
Boys to find out how securities traders
game the system.
Does the MLS benefit real estate professionals? Absolutely. Does it also benefit consumers? Absolutely. Is it perfect?
No. Systems like the MLS can always be
Where Do We Go From Here?
improved. Yet, if off-market listings be-
come the norm, here are consequences
that may follow:
b More double-ended deals
b Fewer listings available to agents
working with buyer clients
b Less information for sellers and buy-
ers about current sales activity
b More disruption to the system of
cooperation and compensation
b An increase in litigation by sellers who
discover that only some buyers were
aware of the sale
The broker-agent relationship will be
strained further as some brokerages
insist that their agents not use “coming
soon” tactics, while some agents do so
anyway. And the REALTOR® organiza-
tion will be weakened by a decrease in
membership or avoidance of REALTOR®
and MLS rules.
One portal’s move into off-market listings
only formalizes what has long been going
on among many top-producing agents.
And the reality is this: Entrepreneurs
will continue to come along seeking to
challenge the current producer arrangement. We face the possibility of a future
with multiple marketplaces, each with its
own rules, services, and costs. For those
who have relied on just one, the MLS, this
is wrenching to contemplate.
The MLS is the most accurate,
complete data set of homes for sale.
The process of cooperation and compensation is the fairest to consumers
and the most transparent. The system
provides the most benefit to the most
parties in housing transactions. Why
has there been so little emphasis on this
point? Perhaps the time has come for the
incumbents to compete on the basis of
Steve Murray is editor of
REAL Trends and president
of REAL Trends Consulting
Inc. [ realtrends.com] This
commentary was adapted
from a June 2014 article in REAL Trends.
Note: Opinions expressed in “Commentary” do not necessarily reflect the position of the National Association of REALTORS® or REALTOR® Magazine.
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