Why I'm Against the New Ban on Off-Market Real Estate Listings
A new policy that effectively bans off-market listings is wreaking havoc in the luxury real estate business. The National Association of Realtors says the rule is a positive step forward for the industry—but I have to disagree.
The rule, part of NAR’s Clear Cooperation Policy, is meant to foster more cooperation amongst agents and ultimately bring more value to the consumer. Mandatory listings, the thinking goes, will foster transparency and create a more level playing field for everyone. But working with luxury clientele for decades, I know firsthand why successful individuals find off-market listings appealing, and sometimes even necessary, for their privacy and safety.
Publicly listing a home for sale on an MLS, or multiple listing service, means that all information including the address, is aggregated to publicly accessible websites. However, when a home is marketed as an off-listing or “pocket” sale, this information remains as confidential as it could ever possibly be.
With the establishment of its new policy, the NAR’s point of view is that you bring the highest value to the property by opening it up to the public. I can share that when showing a luxury property to a high net worth buyer, that is simply not the case. The luxury buyer wants to feel like they’re purchasing something special—and more importantly, a property where the address is private. In order to better cater to the consumer, especially the ultra-high net worth buyer, I would propose a disclosure agreement that would outline NAR’s concerns associated with off-market listings, but not establish hard and fast rules that inhibit the buyer.
Many times, I work with celebrities who are not interested in having paparazzi parked outside their front door every day or fans seeking a selfie when they’re trying to leave their house to go to dinner. It can become dangerous and unsafe to have their homes listed publicly, where anyone can access their address, and their property winds up on the next Hollywood home tour.
Executives in high power positions are also at a disadvantage. When they’re going through a personal life change, such as a separation or divorce, and want to do so privately, they need to have the option to sell their home quietly without inviting the world to weigh in. In no uncertain terms, it’s an invasion of privacy.
Finally, forcing every property to list on the MLS can be a financial detriment to sellers. The MLS contains a pricing history, a potentially skewed frame of reference that does not factor in the context of the market environment at the time of sale. I’ve witnessed numerous properties struggle to sell after they were listed on the MLS at a certain price point towards the end of the recession and subsequently re-listed a few years later. Ultimately, the consumer has to lower the price and settle for less than what they wanted due to the historical market data that remains on the MLS. Pocket listings, on the other hand, help to provide other data that may better reflect the context of the market at the time.
At The Agency, the full-service luxury real estate brokerage I founded in 2011, our primary focus is to establish strong relationships, with the goal of providing the best value and benefit to our clients. Often times this means reaching out to colleagues outside of our organization and forging new relationships. This is one of the many reasons why a few of my Agency colleagues and I established ThePLS.com, which is a platform where agents across the globe can share their off-market listings with other agents, fostering a culture of collaboration amongst fellow brokers where no history is kept. This offering has been very successful for our agents, and we are working on a way to maintain this platform while still adhering to the new policy in place.
“The ban of off-market listings is disadvantageous for a number of reasons,” said Ted Foxman, one of my clients and a luxury home developer in Los Angeles. “One main concern involves the privacy and security when it comes to my personal property. Second, is no longer having the ability to gauge interest, test pricing, and quietly share an exclusive offering before publicly listing a property.”
Overall, I think the NAR’s decision is a detriment to independent brokers around the country. They have made an already challenging business nearly impossible for those who are no longer able to benefit from access to off-market listings. At The Agency, we were founded upon the principle of collaboration, and so we share our pocket listings with each other. Further than that, we want to share our pocket listings with local, national and international brokers who are looking to find their clients a perfect home. NAR has, in turn, created a law for larger companies like The Agency to benefit from, making them a lot more powerful, which is truly unfair.
As this new policy just came into effect at the start of 2020, time will tell if it’s an effective and positive change for our industry—and more importantly, the consumer.