A four-year-old rule that controls how and where homes are listed for sale is being fought over by the real estate industry. The result could change how the average American buyer looks for a home.
A policy started by the National Association of Realtors that went into action in 2020 has been the subject of a lot of heated debate among big names in the field.
Clear Cooperation is a policy that says as soon as a house is for sale and everyone knows about it, the real estate agent who is selling it has to put it on the market with a multiple listing service and then with everyone else within one day.
An MLS, or multiple listing service, is a private database that real estate agents use to help people buy and sell homes. In the past, only real estate agents who paid a fee could directly access an MLS.
These days, though, businesses like Redfin RDFN -8.01% and Zillow Z -1.21% ZG -1.33% get listings from local MLS systems and put them on their websites. That’s how most people who are looking for a home now find homes for sale in their area.
The argument is mostly about pocket listings.
People are arguing about whether the Clear Cooperation policy is bad for people who are selling their homes.
The NAR strategy gives some flexibility in how public listings need to be set up.
People who want to sell their home privately can get an exception to the Clear Cooperation policy and sell it without putting it on the market if they have a good reason. They could be a famous person who wants to stay out of the press or a couple who is going through a messy divorce.
Now, though, some brokers want these exceptions to be the standard. They don’t want to be forced to put their inventory on public databases; they’d rather choose to do so.
The founder and CEO of the huge real estate broker Compass COMP -2.59%, Robert Reffkin, is one of the most well-known people speaking out against the Clear Cooperation policy. A Compass spokesperson told MarketWatch that Reffkin’s main point is that people who want to sell their home should be able to choose where, when, and how to offer it.
A representative said, “Sellers shouldn’t have to choose between Clear Cooperation and another option right now.”
Compass says that the NAR’s rule, which says that real estate agents have to list homes for sale on an MLS, causes more “pocket listings” than any other rule in the history of real estate.
Pocket listings are ads that aren’t shown to the public. People who are in the know use them to get deals on homes in today’s competitive housing market.
Right now, a person who wants to buy a house can use Zillow to look through all the ads for homes for sale in a certain area.
But they could only see pocket listings from real estate agents. These are homes that aren’t for sale because the seller doesn’t want the listing to get out there. These off-market listings don’t have to follow Clear Cooperation rules, which is why they don’t show up on Zillow or other sites.
Compass says that if the Clear Cooperation policy is got rid of, there will be more listings for sellers, but not on Redfin or Zillow.
Compass can have its own listings as long as they are kept secret and only appear in pocket listings. Without Clear Cooperation, Compass could list its own homes for sale on its website, where people looking to buy a house could look for them.
Some brokers are also worried that the Justice Department might look into Clear Cooperation. This could start a new round of cases like the ones that changed how real estate commissions are paid in the end. This feeling is connected to the time after a big deal over commissions, which caused several brokerages to get hit with big fines.
According to Inman, the Park City Board of Realtors in Utah has already said that it will no longer enforce the Clear Cooperation rule because it is afraid of being sued.
Brokerages argue for freedom of choice for home sellers
Mauricio Umansky, co-founder and CEO of real-estate brokerage the Agency, has long-standing gripes with how the NAR deals with pocket listings. He said the issue ultimately boils down to the freedom of choice for home sellers.
What you’re doing is not allowing a free market to come out and make the user experience better.’
Mauricio Umansky, the Agency
Umansky said, “What you’re doing is killing the free market that would make things better for users.” “I’m looking at it from both the buyer and the seller’s points of view.” I also think the seller should be able to pick how they want to market their house.
Redfin CEO Glenn Kelman doesn’t agree with these points of view.
The argument “takes our attention away from the more important question: Why has America’s biggest broker pushed for homeowners to be able to list their home as a pocket listing?” he wrote in a blog post, likely referring to Compass.
“We can’t be too polite to think about one answer that makes the most sense from a business point of view: to turn a market into a monopoly,” he said.
Kelman suggested that people should work together in some way to make sure that listings are advertised to the public.
“Actively listening to the perspectives and feedback of industry participants regarding the Clear Cooperation Policy,” said a spokesperson for NAR. The group is also “open to this important ongoing dialogue with the ultimate goal of helping NAR members and consumers succeed.”
