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Clear Cooperation Gets Sued

It has never been made clear to realtors why the Clear Cooperation policy is needed in the first place – or agents didn’t understand or agree with its purpose.  The new way to get around the rule is for agents to advertise their coming-soon listings with no address – instead, they just include the neighborhood or tract.

From the wsj.com:

The real-estate industry’s largest trade association, the National Association of Realtors, and two of its affiliates are facing a federal antitrust lawsuit challenging a new rule that effectively bans NAR members from marketing homes privately, or “off-market.”

The lawsuit was filed Monday in the U.S. District Court for the Northern District of California by Top Agent Network, a San Francisco-based, members-only platform for real-estate agents. The suit names as defendants the NAR, the California Association of Realtors and the San Francisco Association of Realtors. It seeks unspecified damages and to reverse NAR’s newly enacted “Clear Cooperation Policy,” which went into effect May 1. The new policy requires NAR members to share their listings through the local multiple listings service rather than shopping them privately to a few contacts, a practice increasingly preferred by wealthy and high-profile sellers. Members who violate the policy face punishment, including fines.

TAN, launched in 2010, is a members-only networking and communication platform for real-estate agents who can show that they are in the top 10% of producers in their geographic area, according to founder David Faudman. Its roughly 10,000 members, who pay between $475 and $675 in annual dues, frequently use the platform to share information about off-market listings, which are for sale but not in the MLS. That function is now against NAR rules, said Mr. Faudman. “We’re concerned that this could put a huge damper on TAN, to the point that it destroys the business,” he said.

Since the Clear Cooperation Policy was enacted, Mr. Faudman said some TAN members—most of whom are also NAR members—have told him they don’t plan to renew their TAN memberships for fear of penalties from NAR. He claims the new policy is an attempt by NAR to quash alternative marketing platforms like his. “It’s quite clear to us that they’re trying to eliminate competition,” he said.

In some markets, like the San Francisco Bay Area, off-MLS listings make up a significant portion of business, agents said. Silicon Valley real-estate agent Billy McNair of Compass said that in any given year, roughly one-third of his sales takes place off-market. Some buyers pay a premium to buy a house that hasn’t yet hit the market.

Link to WSJ Article

Clear Cooperation Policy May 1st

The new N.A.R Clear Cooperation Policy takes effect on May 1st.

Next Monday, the CRMLS will begin a Coming-Soon category in the MLS for agents only. The listings can only be in the coming-soon category for 21 days, and no showings are allowed.

But the feature won’t be part of the San Diego MLS.

Realtors in San Diego County are split between one faction that wants to join CRMLS (which is the MLS provider for most of Southern California), and the other association of realtors who wants to be on their own. The compromise was a data-sharing agreement that allows both MLS systems to facilitate agent access to the county-wide inventory.  But because the SDAR won’t cooperate, there won’t be a Coming-Soon category developed in the San Diego MLS.  But it is coming to the rest of Southern California next week – but for agents only, and no showings so I guess it’s an FYI to the realtor community.

So there won’t be much change to the casual observer in San Diego County.

Multiple agents asked the question, “How can I sell my Coming-Soons if I can’t show them?”, demonstrating how oblivious some realtors are on why the new rule was created in the first place – to stop agents from doing off-market deals, and, instead, share all their listings with every realtor.

I sell yours, and you sell mine!

But realtors do have the option to take the listing as an office exclusive and distribute it among agents within their brokerage for days or weeks before putting it on the open market.  It is inevitable that 20% to 30% of our listings will be sold off-market, and they will be the choice properties that don’t need mass exposure to find a buyer.

Why will these off-market deals persist, when NAR is trying to prevent them?

Because the industry looks the other way.

As long as the inventory is tight, agents will be motivated to keep their listings within the club – at least for the first few days or weeks while they get it ready for market. If it sells prior to going onto the MLS, then great – and no risk of getting the corona from all those strangers coming around.

The Future Of Real Estate

Wells Fargo is ‘suspending’ their jumbo-loan funding of all correspondents today, and the others (like Chase) are sure to follow.  It’s one thing to stop funding loans for mortgage brokers, but to shut down the credit lines to the big players like Loan Depot, Quicken, and Guaranteed Rate is going to effectively end the jumbo-loan market as we know it.

Expect that this will become the industry trend, and blamed on the corona.

But the root cause is the industry contraction that has been going on for a couple of years now as sales decline and there isn’t enough business to go around.

The result?

Wells Fargo will still be funding jumbo loans. You’ll just have to get them directly from Wells Fargo.

You’ll be able to purchase the best homes for sale. You’ll just have to buy them from the listing agent.

The Clear Cooperation Policy is still scheduled to begin on May 1st, and listing agents will either have to input their listings directly onto the MLS within 24 hours of any public advertising, or sell them in-house.

 In a desperate, fearful environment, take a guess at which will be the favorite.

We can predict how the real estate market will behave as this country gets a grip on handling the coronavirus (we’re not close yet).  During the last crisis, the first buyers to jump in were those who weren’t concerned about timing the market, they just needed a house – and the 2013 market exploded well before the data said it should have.

The first-timers will be fueled with down payments from parents or grandparents, and with very few comps available to the contrary, they will just pay the seller’s price to get ‘er done this summer.  It is certain that the corona fright will be the latest reason to hurry up and hunker down in a better home, and if the Fed can goose the MBS market and keep mortgage rates in the mid-3s, the market will come out fast. If rates are in the mid-4s, then it will be a slower ascent.

Broker management will encourage agents to keep those hot new listings in-house.  Listing agents will want to be a hero within the office and get acknowledged at the next sales meeting for selling off-market.  Office Exclusives will be sold to sellers as a price-discovery device, but when a few agents in the office want to give their waiting buyers an early preview, sellers will oblige. Surprise – we have an offer!  The next thing you know we have a deal – and the sellers are grateful that they didn’t have to be bothered with open house or strangers prancing through with little or no notice.

Civility, and fiduciary, in our society was crushed by the quote in the movie Wall Street.

‘Greed is Good’.

Expect it to be on full display once the corona is over. Or sooner:

Showings Way Down This Month

The seven-day moving average was +32% on March 8th, and now the average is -68.7%!  This is during the peak showing season too!

But at least the current trend looks like it is flattening out?  Hopefully the change of realtors being declared essential workers will mean more activity, but it might be too late already.

This will probably be the death knell for buyer-agents, especially if the ‘rona tightens the supply further, which would cause fewer listings to make it onto the MLS.

Compass Private Exclusives

When we joined Compass in the summer of 2018, it was clear that the evolution of residential resales was trending towards off-market sales.  I said then, “we have to make sure that we’re on the right team”.

The National Association of Realtors tried to affect the outcome with their Clear Cooperation policy by making off-market sales acceptable as long as they are done in-house with no public marketing. Like all policy-making done by ivory-tower types who don’t relate to the reality on the street, they have legitimized a new opportunity for gaming the system.

I think the intention of NAR was to allow for the occasional private sale by celebrities.  What they must not have considered was that all brokerages would design their own in-house system to provide privacy for anyone who wants it.

Then the coronavirus starts sweeping the country – won’t every seller want their privacy today?  Are you going to let dozens of strangers into your house?  You and your family could die!  You need to sell your home privately.

The NAR policy makes sellers and listing agents pick a path – either the property gets listed on the MLS within 24 hours after public marketing begins, or you sell it off-market. If the private sale doesn’t work, sellers can opt for the more-public MLS sale later, so trying the safer route will be an easy choice for many.

Who do you list with?

What brokerage has the best chance of selling your home for top dollar now?

Compass has the in-house system, over 800 of the top agents in San Diego County, and we are ranked #1 in market share in Carlsbad and Encinitas.  We are ideally suited to serve the private-sale market, and now we’re advertising it publicly.

Eventually, the MLS (and Zillow) will become the online marketplace of last resort like Loopnet, and buyers will be forced to work with an agent in every brokerage if they want to see all the inventory.

Why didn’t NAR see that coming?

Petition Against Clear Cooperation

How to justify pocket listings, in one paragraph:

A broker from The Agency is hoping to mobilize support against the National Association of Realtors’ controversial ban against pocket listings, drafting a new petition to urge the repeal of a policy that many agents feel will disrupt the market and hurt their livelihoods.

“It feels as if it was done without a whole lot of thought for the person impacted the most, which is the seller,” said Jamie Waryck. “I, along with several colleagues, find that very frustrating.”

NAR’s policy, which was approved in November and is scheduled to take effect May 1, requires brokers to submit a listing to the Multiple Listings Service within one business day of publicly marketing a property.

NAR argues it will help make the business more transparent, but brokers, particularly in high-end markets like Los Angeles, Miami and New York, argue that pocket listings help protect sellers’ privacy and allow agents to be more flexible with asking prices.

“A homeowner should have the right to work with a realtor and decide for him or herself whether the home is sold with full exposure to the public, with limited access to the public, in total privacy or through a combination of any of these based upon the homeowner’s personal wants and needs,” the petition reads. “The National Association of Realtors has decided to remove this right from you.”

Top L.A. agents have previously spoken out strongly against the policy, including Agency CEO Mauricio Umansky and Hilton & Hyland’s Gary Gold.

“I think we should be policed somewhat,” Gold said in October, “but not treated like children.”

Link to Article

 

How Agents Will Game the MLS 8.0

The MLS Statement 8.0 Clear Cooperation Policy is ‘a lightweight, middle-of-the-road policy that will just make the problem worse’ because it doesn’t go far enough.  It’s so full of holes that it will only exacerbate the problem, and by the time they figure it out, it will be too late to fix it.  It might be too late already.

The new policy just helps to define the ways that agents can avoid putting their listings on MLS:

  1. Office Exclusives Are Allowed. Agents will shop around their new listings for days or weeks among their fellow agents in the office. Only once that avenue is totally exhausted will listings find their way to the MLS.
  2. Submitted to MLS Within One Business Day.  From now on, all listings will be signed on Fridays (or postdated).
  3. Sellers Can Market Publicly. The listing agent isn’t supposed to publicly advertise the home, but……..
  4. Showings Aren’t Required. Just because a listing is in the MLS doesn’t mean agents can show it. This is the oldest trick in the book.  When an outside agents calls to arrange a showing, he/she is told that the property can be seen any time….as long as it’s between 5:00-5:05pm next Thursday.
  5. No Penalties Mentioned. There has never been a MLS police, so any enforcement will be sketchy at best. But realtors love to rat out their fellow agents so complaints will be flying – but what will be the penalty?  Most likely it will be the usual, which is a letter in the offender’s file for six months. Will it be that much?
  6. Stop Using the MLS. If it gets too complicated to navigate the rules, agents will just stop using the MLS.  This is why being on the right team is so critical now – if all the hot deals are sold in-house, then working at a small brokerage or being an independent broker will be detrimental. Those agents will only see the leftovers as the MLS becomes an afterthought.

Local compliance was first scheduled for March 1, 2020, but they pushed it back to May 1, 2020 so agents have six months to contemplate.  Will we be sitting around discussing how important it is that we share our listings with each other via the MLS?

What’s missing is that no one in the industry is demanding that we share our listings with one another because that is what’s right for consumers and agents alike. Instead, our leaders come up with a lukewarm policy full of holes and no teeth. The spotlight will cause more people to find ways around the 8.0, and proudly conduct off-MLS sales because now they are the even-sexier option.

MLS Statement 8.0 Clear Cooperation Policy

Yesterday, we entered into the final phase of the MLS implosion, with the latest blow being delivered by the National Association of Realtors themselves.  Instead of strictly forbidding Off-MLS sales, they have tried to appease everyone by concocting a lightweight, middle-of-the-road policy that will just make the problem worse:

The National Association of REALTORS®’ Board of Directors approved MLS Statement 8.0, also known as the Clear Cooperation policy, at its meeting Monday. The policy requires listing brokers who are participants in a multiple listing service to submit their listing to the MLS within one business day of marketing the property to the public.

NAR’s MLS Technology and Emerging Issues Advisory Board proposed the policy as a way to address the growing use of off-MLS listings. The advisory board concluded that leaving listings outside of the broader marketplace excludes consumers, undermining REALTORS®’ commitment to provide equal opportunity to all. The policy doesn’t prohibit brokers from taking office-exclusive listings, nor does it impede brokers’ ability to meet their clients’ privacy needs.

Here’s the full text of MLS Statement 8.0:

Within one (1) business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants. Public marketing includes, but is not limited to, flyers displayed in windows, yard signs, digital marketing on public facing websites, brokerage website displays (including IDX and VOW), digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public.

MLSs have until May 1, 2020, to adopt the policy.

Rationale: Distribution of listing information and cooperation among MLS participants is pro-competitive and pro-consumer. By joining an MLS, participants agree to cooperate with other MLS participants except when such cooperation is not in their client’s interests. This policy is intended to bolster cooperation and advance the positive, procompetitive impacts that cooperation fosters for consumers. The public marketing of a listing indicates that the MLS Participant has concluded that cooperation with other MLS participants is in their client’s interests.

https://magazine.realtor/daily-news/2019/11/11/nar-passes-mls-proposal-to-strengthen-cooperation

Off-Market Device

An article about Compass agents who used a new off-market service called Aalto to sell a special house.  Ethics and fiduciary duties are getting shrugged off, and instead the off-market sale has become the sexy option.

Hat tip to recently-married Susie for sending this in – congratulations to you and Mr. Right!

https://www.sfgate.com/ontheblock/article/Restoration-Hardware-San-Anselmo-house-real-estate-14468117.php

An excerpt:

Because of the length of the renovation and the fact that there’s nothing else like it in their Sleepy Hollow neighborhood, Hansmeyer and her husband were loathe to put the home on the Multiple Listing Service (MLS). People were already fascinated with the property and she didn’t want a bunch of neighbors nosing around her home.

“We wanted the right people to know about it but we didn’t even want our neighbors to know it was for sale,” she said. “We didn’t want to be ‘those people’ that everyone was talking about, especially because it was going to be at a price point that hadn’t really been seen in that area before.”

At first, her realtors Laura Reinertsen and Kristin Sennett took the home on as a traditional “pocket” listing, talking to other agents in her network to see if they might have a buyer for the turnkey property.

“Every fixture and finish was custom made to her specifications and she is very particular about lines and design,” Reinertsen recalled. “Light fixtures lined up exactly with the line between the refrigerator and freezer. And everything was like that. It was perfection and we had to find somebody who would pay for perfection in an area where people wouldn’t ordinarily pay for that.”

The typical home in the neighborhood sells for about $700 a square foot. Hansmeyer was looking for more than double that amount. So her agents suggested Aalto, a new “private listing” service just for Marin County (it recently expanded to San Francisco as well) that splits the difference between the privacy of a traditional pocket listing and the mass exposure of the MLS.

It immediately made sense to Hansmeyer and her husband. “We both come from a retail background and understand the way people buy,” she said. “We felt like the ability to visit a website just made sense to us. It’ll get in front of the right people.”

Only buyers working with an agent can see the homes on Aalto, and even then the exact locations are cloaked so that only qualified, interested parties can tour the home. Sellers can only use Aalto if they have signed a listing agreement with an agent, and they must agree to sell if a buyer is willing to meet their requested price.

These prices may be higher, but because multiple offers are much less common on Aalto, buyers have the certainty of knowing that the listing price is the real price. There’s no need to play the underpricing to get multiple offers game because the whole point of Aalto is that you only need one buyer. Owners who wouldn’t even have listed their homes otherwise use Aalto “just want to see if that buyer is out there that might be willing to pay a price that other people can’t understand,” Reinertsen said.

The service went live in early 2019 and was quickly adopted by top-tier agents. Reinertsen and her team sold over $30 million in homes on Aalto so far this year, more than half their overall total. She believes the move has happened quickly because the market was hungry for just this kind of middle ground. “Before that people would ask, ‘What do you have off market?’ But there really wasn’t a vehicle to sustain that marketplace. We could say, ‘We have this in our pocket.’ But there wasn’t the exposure to keep it top of mind,” she said. “Aalto just keeps the information out there and circulating.”

And that’s important when homeowners are asking for prices even higher than their already expensive counterparts. These homes often take longer to sell and their owners tend to value getting their price and maintaining their privacy over a quick sale, Reinertsen explained. “Our clients are private people and I think a lot of them have been through the MLS system before. They know if they go that route every single neighbor is going to come through that home. Every single friend of the neighbor is going to come through that home. And that makes people uncomfortable,” she said. “And I think that they also believe, because our market is so hot, that if their home doesn’t sell on the MLS after 10 days on the market, they’re not going to get their number.”

The number Hansmeyer had in mind was $6.5 million. She and her realtor knew it was worth it, and they were willing to wait. “She was confident in her craftsmanship and we were confident in her ability so we knew the buyer would appear,” Reinertsen said. “It just needed to be out there.”

After several months, a buyer who Reinertsen called “perfectly matched” for the property appeared. It sold for $6,262,000 in April. Had the home been in Ross or Kentfield, she said, it could have sold for over $10 million.

The End of Coming Soon/Off-Market Deals?

The National Association of Realtors is attempting to regulate a change in the Coming Soon environment – see above. The way it is written, however, will just take us back to the days when off-market deals were done behind closed doors because they are permitting the ‘office exclusives’.

Coming Soons were the industry’s public admission that we do off-market deals, and to give you a chance to get your piece of them. But now the N.A.R. wants brokerages to pick a lane.

The choices:

1. Comply with the new rule, and change the name of your off-market deals to ‘office exclusives’, where no one can see them.

2. Don’t do anything, and pretend that off-market deals aren’t happening at your shop.

3. Declare publicly that off-market deals are a vital part of your business, and keep marketing them as Coming Soons to the public, in spite of any changes in the N.A.R. rules. What are they going to do?

Numbers 1 & 2 above are the less-transparent choices, and the easier way to go for the agents who justify their off-market deals by saying the seller got what they wanted.

Number 3 is the fully-transparent admission of the truth – agents like to pad their wallets with off-market deals, and don’t see anything wrong with that.

Off-market deals aren’t going away, regardless of the rules.  The existing rules already state that all listings are to be inputted onto the MLS within 48 hours, but it gets ignored and there is no policing or penalties.

It’s better for everyone involved – agents, buyers, and especially sellers – to put every listing onto the MLS to ensure full exposure so everyone can compete. Buyers would feel they had an equal chance to buy, sellers get top dollar, and all agents get a fair chance to earn a paycheck.

But N.A.R. and the industry’s upper management looks the other way.  It will take a class-action lawsuit or new regulations from the federal government to bring real change.

Here are Rob’s thoughts:

https://notorious-rob.com/2019/09/on-nars-mls-policy-statement-8-0-a-step-forward-into-confusion/

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