Zillow Data Questions Off-Market Sales

With all of the recent changes in the residential real estate world, one issue has separated itself from the rest and is floating around like an iceberg. Like those giant floating chunks of ice, there is more under the surface than is visible above the waves and in a similar manner to the damage done to the Titanic when it encountered an iceberg, there is potential for financial damage with this issue.

The issue: selling homes off the MLS.

I need to provide some background. Years ago, brokerages would list homes and then share that information with other brokerages, seeking to put together a transaction. Other brokers, hoping to represent both sides of the transaction, would try selling the property themselves. It was a clumsy system at best and, in an effort to promote cooperation and transparency, the Multiple Listing Service (MLS) was born in the late 1880s. Over the years the MLS has functioned under the premise that by sharing all listings as widely as possible, buyers have access to the most options and sellers benefit by having their homes viewed by the largest possible audience.

A couple decades ago, some agents began seeking ways to sell homes off-market (off the MLS) and the number of homes being sold this way began rapidly increasing. The idea was simple: if a listing agent could find a buyer for their listing without going through the MLS, they could save marketing costs and possibly increase their compensation by representing both sides. While there have always been off-market sales (family-to-family transfers, investor purchases, etc.), the numbers were increasing to the degree that the National Association of Realtors (NAR), instituted rules mandating that all homes being listed must notify the MLS and the seller must sign a waiver giving permission for their agent to sell off-market.

Called the Clear Cooperation Policy, it is now under attack by some brokerages who want the right to sell homes off-market to agents within their brokerage or network without alerting the wider pool of agents and buyers that these properties are available. Zillow just weighed in with a post entitled, “Listing off the MLS cost sellers more than $1B, study finds.” Their contention is simple: by reducing a listing’s exposure to a smaller pool of buyers, the lessened competition results in overall lower sales prices to the sellers.

Stay tuned: this battle is just beginning to heat up.

Carl Medford is a licensed Realtor with Keller Williams Realty and a licensed general contractor.