Robstradamus Strikes Again: Office Exclusives and Clear Cooperation Policy

I am extremely busy putting the finishing touches on a massive report on CoStar and its entry into residential real estate, but… had to take a few minutes to… um, crow. Yes, I did sprain my shoulder patting myself on the back. But thought it maybe worthwhile in case people have forgotten the issues I had written a couple of years ago, and wanted to go back and re-educate themselves on the issue.

On Day One of the virtual Inman Connect conference, there was a “panel” discussion between Courtney Poulos, an indy boutique broker in Los Angeles, and Denee Evans, CEO of CMLS. I put “panel” in quotes because it was more of a complaint-and-bitch session with Denee playing the role of punching bag on behalf of her member MLSs.

Inman’s own writeup is headlined, “Broker warns MLSs: Help us compete against Zillow or lose us” which signals the tenor of the *ahem* conversation.

Let’s leave aside for the moment that what Poulos is demanding, that the MLS help “us” compete against Zillow, is a Sherman antitrust violation, probably a Clayton Act violation, as well as a violation of various NAR Code of Ethics rules (seeing as how Zillow is a REALTOR member now, and Redfin has been one for quite some time now). If anybody from the DOJ was watching Inman that day, it’ll be interesting to see what emails are headed to the NAR Antitrust Compliance Officer that the recent NAR-DOJ settlement requires.

What the kerfuffle, and Poulos’s complaint, reveals is that the giant loophole chicken in Clear Cooperation policy, which I laid out in detail in 2019, is coming home to roost.

The Real Complaint: “No More Buyer Leads”

At the heart of Poulos’s complaint, the issue that gets her really going, is the fact that she is not allowed to “market directly to unrepresented buyers”:

Poulos is a member of the board of directors for the Greater Los Angeles Realtors Association and said she’s been lobbying for an MLS change that would allow listing agents to put “If you’re an unrepresented buyer, please contact listing agent information” in listing descriptions.

“So that when it goes out to the IDX feed and it’s populated on Zillow, Redfin etc., a buyer can now know ‘Oh, that person that’s on that isn’t the listing agent’ and the consumer can make the choice,” Poulos said.

“This is nearly impossible to get this pushed through with my local MLS, even though I’m on the board.”

In this formulation, at least, Poulos is willing to grant that consumers would prefer to contact the listing agent if given the choice, and it is patently obvious who the listing agent is on internet listing displays. But then we get this:

Citing a previous Inman Connect session with CoStar CEO Andy Florance, Poulos said Florance was “spot on” that “enormous behemoths” had been created by listing agent data and that “the unassuming, uneducated buyer” doesn’t know that when they go on a site and ask to see a house “that they’re jumping into buyer agency with somebody who’s not on the listing side.”

That is more of a full embrace of Fair Display Guidelines, which Andy Florance has also embraced when CoStar acquired Homesnap, which is in partnership with the Broker Public Portal… whose raison d’etre is, you guessed it, Fair Display Guidelines.

#4 and #5 of Fair Display Guidelines says:

4. No Ads For Other Brokerages Or Agents Displayed On Or With A Brokerage’s Listing
Only the actual listing broker and agent may be displayed on the property details page. No ads from companies that may compete with a broker’s affiliated business such as mortgage, title, or escrow companies will be displayed on an individual property listing page.

5. Leads Distributed At No Charge To The Listing Brokerage Firm
All leads will go directly to the listing brokerage firm or the agent, as directed by the firm. No leads will be diverted elsewhere. No fees will be charged for leads. Every listing will have the brokerage name and logo prominently displayed, and contact information as provided by the broker including a link directly back to the brokerage website (or other site as dictated by brokerage).

Well, that simply means no more buyer leads via the internet. That’s what Poulos appears to mean by “unrepresented buyer” — if the buyer is not already working with an agent, then the listing agent should get the first shot at him/her.

Okay, so far, so standard. We’ve heard this complaint for quite a few years now. (I will give Poulos a great deal of credit for one thing: her brokerage website does not have an IDX search on it. At the very least, she is walking the walk of no internet buyer leads, not just talking the talk.)

But then we get something new.

Clear Cooperation Is Not Working

The new hotness in complaints comes from hating on Clear Cooperation policy:

Poulos said she herself considered disassociating from the MLS due to the National Association of Realtors’ Clear Cooperation Policy, which requires listing brokers to submit a listing to their MLS within one business day of marketing a property to the public.

The controversial rule is meant to effectively end the growing practice of publicizing listings for days or weeks without making them universally available to other agents, in part to address fair housing concerns. The Clear Cooperation Policy went into effect on January 1, 2020, and its implementation deadline was May 1. Some MLSs have instituted hefty fines to enforce it.

[The policy] inadvertently benefits huge brokerages like Zillow and totally disempowers independent brokerages and independent brokers,” Poulos said. “There’s nothing they’re doing to change it. Our MLS that I pay money for seems to have deaf ears when it comes to making changes that really help people. What they don’t have a problem with is spending money on virtual open house PDF programs that nobody will use.”

The Clear Cooperation Policy is “making us sell real estate with our hands tied behind our back in Los Angeles,” she added.

“We have celebrity sellers. We have tons of reasons why agents want to list pocket listings, or sellers want to list pocket listings, which is totally legal, but because of the MLSs’ undying loyalty to NAR rules and restrictions, we now are losing listing opportunities to Compass. And I imagine it will be like a Zillow thing too because they are allowed to market that they can do pockets in-house because so many people are under one managing broker.

“It’s just not fair. And it’s actually not true that the local MLSs, from my experience, are making any actual changes to help agents compete with big tech giants. They’re not.” [Emphasis added]

I warned against this back in 2019 in this public post, titled “On NAR’s MLS Policy Statement 8.0: A Step Forward… Into Confusion“:

Based purely on the language of the Policy and the FAQs, it appears that a large national brokerage like NRT, Compass, or eXp can take a listing, hold it off the MLS forever and communicate them to every agent in the company. Because “office exclusives” actually means brokerage exclusive: “direct promotion of the listing between the brokers and licensees affiliated with the listing brokerage… is not considered public marketing.”

So, to take just one example, Compass can take a listing, tell its 8,000+ agents about it, have them spend two months making phone calls to their sphere (surely a phone call is the very definition of “one-to-one promotion”), do a big push for 24 hours, and then submit the listing to the MLS. The fact that by that time, buyers have already been lined up ready to go means that the MLS is not the marketplace for dealmaking, but merely the filing cabinet for records.

If Compass’s 8,000+ agents do not impress you, then how about NRT’s 50,000 agents? Or HomeServices of America and its 44,000 agents? eXp at last count in June had over 20,000 agents. In fact, if you take the Top 20 largest brokerages by agent count from the Swanepoel Mega 1000 list, we’re talking about over 198,000 agents, or 15% of the total NAR membership.

That’s a lot of office exclusives and a lot of agents who will have access to them, while shutting everyone else out.

I don’t know that this policy stops the exclusive inventory issue. If anything, it seems to provide safe harbor for brokerages to conduct exclusive inventory strategies with the full blessing of NAR, so that the local MLS has no choice but the allow them.

Well, here we are. Clear Cooperation Policy is not making “us” sell real estate with “our” hands tied behind our backs. It’s making small independents sell real estate with their hands tied behind their backs. The big brokerages have no such hands tied behind anywhere.

One might wonder if that was kind of the whole point of the office exclusive loophole.

This outcome was entirely predictable. I say that because I predicted it. I recommended a different approach:

The question to be answered is not what to do about declining cooperation. That’s the old vision of the MLS as the enabler of cooperation and compensation. I would like to suggest that in 2019, the question is: Is the MLS the marketplace for buying and selling properties, or is it not?

If the answer is Yes, that dictates a certain set of clear answers centered around the MLS as the marketplace.

If the answer is No, then that dictates a different set of clear answers centered around the MLS no longer being the marketplace.

Obviously, no one listened to me… which puts my inclusion in the PropTech Newsletter’s 100 Most Influential People in Real Estate into serious doubt. But I digress….

When a broker complains that the MLS’s job is to help her compete against a fellow broker (and REALTOR)… and if the MLS fails to do that, then she and other brokers will leave the MLS, I think it is fairly clear that huge chunks of the brokerage population no longer sees the MLS as the marketplace for buying and selling properties.

I’m not sure what they see the MLS as. I guess we can surmise that they see the MLS as some kind of a big-tech data-having assistant to help them compete against… “outsiders and interlopers” even if said interloper is very much an insider.

Getting What You Want. Good and Hard.

Suppose for a moment that the MLS does as Poulos wants, and allows for listing agents to advertise to “unrepresented buyers” in the comments. Clearly, every listing agent everywhere will do the same.

The MLS will also somehow refuse to implement Clear Cooperation, allowing Poulos and others to do as much Coming Soon as they want.

Furthermore, the MLS does as Poulos wants and starts taking active steps to “compete in this increasingly virtual environment” against Zillow and Compass and Redfin and all of the other targets of FUD (fear, uncertainty, doubt). Let’s even say the MLS does that somehow without getting sued for a variety of antitrust violations.

What is the likely outcome?

Poulos and the indies appear to think that the outcome will be a nirvana where they are getting an assload of buyer leads off of their listings, without Zillow, Redfin, and others to interpose themselves in between their listings and the buyers who want to talk to the listing agent.

The more likely outcome, in my view, is that the MLS will cease to exist except as a repository of sold information. Compass, to take just one example, would obviously have zero interest in putting listings on its website that says, “Contact Courtney Poulos, Listing Broker, for more information” when the whole point of IDX is to capture the unrepresented buyer lead on one’s own website. So Compass pulls out of IDX completely, and goes Office Exclusive for all of its listings.

Coldwell Banker does the same. HomeServices does the same. KW and REMAX do the same. eXp looks at the situation, looks at the many tens of thousand of agents it has, and does the same. The luxury brokers in Los Angeles all do the same.

They’ll stay in the MLS, of course, as a place to put the transaction in once the sales contract is signed; that’s useful information for doing comps. And they’ll want the benefit of the unilateral offer of cooperation and compensation. But marketing? Pshaw! Nah.

As I went into great detail in my previous posts on this subject, the whole point of exclusive office listings is to create a FOMO effect in buyers, in sellers, and in agents. It’s not precisely about dual agency; it’s more about in-house designated agency and the ability of brokerages to funnel buyer leads to their own agents, as well as the ability of listing agents to funnel leads to buyer agents on their teams.

ACME Realty, Poulos’s company, has 31 agents; Compass has 17,000 agents. eXp has over 40,000 agents. Who has more listings? Who has more internal networks for bringing buyers to listings? Who does she think really benefits from killing off IDX? She thinks she’s losing listings to Compass today; what does she imagine it’ll look like tomorrow, after she gets what she wants from the MLS? The Compass agent can tell the seller, “We’ll put your listing in front of 17,000 top agents!” What’s an ACME agent going to say?

When eXp calls her top agent with a recruiting pitch that goes, “Why are you sharing your listings with so few people, when you can be sharing them with 40,000 of your best friends?” what is she going to say?

Seeing as how I was correct about how the Clear Cooperation loophole will play out… let’s hope that the MLSs don’t give in and give brokers what they want. If they do, well… the brokers are going to get what they want. Good and hard.

Sometimes, just sometimes, it’s better to get what you need.

-rsh

Share & Print

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email
Share on print
Print
Rob Hahn

Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

8 thoughts on “Robstradamus Strikes Again: Office Exclusives and Clear Cooperation Policy”

  1. “When a broker complains that the MLS’s job is to help her compete against a fellow broker (and REALTOR)… and if the MLS fails to do that, then she and other brokers will leave the MLS, I think it is fairly clear that huge chunks of the brokerage population no longer sees the MLS as the marketplace for buying and selling properties.”

    No, it’s not. One agent who misunderstands policy, anticompetitive concerns and basic IDX concepts is not a foundation to build an argument upon.

  2. ROB,

    IMO when the dust settles the most interesting brokers will supply and offer consumers the ability to buy and sell any way they want – MLS, “pocket”, “through our database”, direct from the listing agent and, yes, FSBO. All buying and selling options on the transaction table.

    Why not?

    “Sell the lady what she wants” – Marshall Field

  3. Sam spend five minutes scrolling any “Mastermind” forum and you’ll quickly realize that 99.9% of agents misunderstand policy, anticompetitive concerns and basic IDX concepts.

  4. I am a real estate agent and if we can get rid from these scumbags named “MLS” I will have a big party in my beach house in Malibu.

Comments are closed.

The Future of Brokerage Paper

Fill out the form below to download the document