How Do Private Listings Affect Home Buyers and Sellers?
Should home sellers and their agents be allowed to market listings privately, or should they be required to make listings viewable on all platforms right away?
That's the question at the center of a controversy currently playing out with Compass, the largest U.S. brokerage, and Zillow, the largest online real estate marketplace, on either side of the issue.
Since 2020, the National Association of Realtors' (NAR) clear cooperation policy has stipulated that brokers must put homes on the MLS ("multiple listing service") within a business day of publicly marketing their listing. Even posting about the listing in a social media channel could count as marketing, triggering that requirement.
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View RatesIn March, however, the National Association of Realtors added a provision called the "Multiple Listing Options for Sellers" policy. In it, the NAR outlined a "delayed marketing" option in which sellers can withhold their listing from the MLS for a period of time. For how long, exactly? That's still to be determined: Each local MLS system (there are more than 500) has until September to pick a timeline.
The association said this delayed marketing option gives sellers additional "flexibility" while "retaining" the clear cooperation policy.
"During the delayed marketing period, the home seller and the listing agent can market the listing in a manner consistent with the seller’s needs and interests," the NAR site reads.
The new policy has received mixed reactions from brokerages and listing sites, with some strongly opposing the change. Real estate marketplaces like Zillow pull in listings from MLS feeds, and the company has long-advocated that all listings should be immediately available on the MLS.
In the wake of the NAR change, Zillow announced it's taking matters into its own hands in a way, informing sellers and agents that if a home is initially privately marketed in violation of their guidelines, the home cannot later be marketed on Zillow. The policy is designed to make sellers think twice about going down the private listing path, as it would close off their access to the reach of the Zillow platform.
Last week, Zillow shared its timeline for implementation. Later in May, agents will start getting "listing violation notifications" if Zillow's standards are not followed. Starting July 1, the company would start blocking listings. Redfin has similarly announced that it "will not publish any listings that have been publicly marketed before being shared with all real estate websites via the MLS."
The exclusive listings in the spotlight have also been dubbed "pocket listings," and Compass and other real estate brokerages have increasingly been promoting the option to sellers in light of the relaxed NAR rules.
Compass calls them "private exclusives" on its website: "Just like many companies test products with a smaller audience before launch, listing your home as a Compass Private Exclusive allows you to test price, gain critical insights, generate early demand, and extend your marketing runway – all before going public," the site reads.
Zillow: Private listings are terrible for home buyers
In Zillow's view, private listings don't benefit anyone other than the small group of brokerage companies pushing them. And yet at some firms, about 40% of sellers are initially listing off-market, according to Zillow.
On the buyer side, Zillow argues that shoppers are better off when they can see the maximum number of listings. "Transparency is sort of the key driver in an open and fair marketplace," says Matt Kreamer, communications director at Zillow.
When homes are put on the MLS within a day, everyone has access to the inventory in their market. Buyers are eager to see what's becoming available in real-time, especially at a time when inventory is still below pre-pandemic levels in many areas.
Kreamer says Zillow's research shows that sellers typically lose money when their homes are marketed off the MLS, "which just makes logical sense because the more people who can see a home, the more likely it is to get into a bidding war and to sell for more."
He adds that brokerages will likely try to use their private listing networks to lure agents into joining their firms, pitching the opportunity of more deals.
He also says that some brokerages seem to want private listings so agents can "double-end" deals, representing the buyer and the seller. Compass adamantly denies this: "Unfortunately, there is a persistent false narrative suggesting the motivation behind Compass Private Exclusives is to double-end deals, which couldn’t be further from the truth," the company said in a recent press release.
The case for private listings
The privacy that comes with pocket listings can be the draw for some sellers — for example, a high-profile individual may not want the world to know where they live and that they're moving.
But according to Clelia Warburg Peters, managing partner at Era Ventures, that's not the main reason to list private.
Instead, it has to do with the days on market statistic, which is displayed on home listing pages and tells home buyers how long a particular property has been up for sale.
"For sellers, there is a meaningful advantage to being able to bring your home to market in a private network where you can gain market insight without accruing days on market," she says.
Peters explains that many sellers feel very attached to their homes and think they are worth more than they really are. When a listing is overpriced, it sits on the market until the seller cuts the price. She says a home that takes longer to sell because it's overpriced will sell for less than a home that was priced at an optimal level to begin with. This dilemma is where private listings can really help sellers, she says. It allows them to test the market while avoiding days on market, and that's why private listing options from companies like Compass are attractive, she says.
For buyers, there's really nothing gained from private listings, Peters acknowledges. "Theoretically, yes, having the most transparent market is in the best interest of buyers," she says. "But whether market players have any obligation to create the most transparent market, I don't know."
For now, Peters says Zillow's response will likely be a strong counter to the trend of private listings.
"At this point, people perceive Zillow as the market maker, and most sellers want to be able to have the option to list their listing on Zillow at some point," she says.
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