Private listing networks harm sellers, buyers, and fair housing

Transparency and equitable access to real estate listings is at risk, threatening to push the industry backwards. Currently, most homes are listed on the Multiple Listings Service (MLS), a database shared by the real estate industry. The MLS database is also what feeds listings to consumer platforms, allowing you to see for sale homes on places like Zillow or Realtor.com. However, there is a growing movement within the real estate industry to reduce listing transparency by putting homes for sale on private networks- instead of publicly through the MLS- through what's known as a "pocket listing," or "private listing network," which are shared with an exclusive group of agents and hidden from the public. These restrictive practices of pocket listings and private listing networks are harmful; they negatively impact sellers and buyers, and increase the potential for discrimination.

Let's start with the impact on sellers. Research shows sellers prioritize two things: maximizing sale price and selling within a target time frame. And it's up to their agent to deliver on those items - bringing in the best offers within the preferred timing. Brokerages tout private listings to their clients as a way to test the waters and try out a listing price. In reality, a private listing negatively impacts sellers' ability to maximize the sales price by limiting the exposure of the listing, potentially reducing the wealth they built on the biggest financial investment they've made. Rather, this practice is designed to benefit the brokerages' own bottom line as an attempt to 'double dip' commissions from both sides of the transaction within their brokerage.

A multi-state study by BrightMLS and Drexel University from last year found that homes listed on the MLS sold for 17.5% more than off-MLS listings, representing more than $53k for the typical seller - for nearly everyone-this is meaningful. These homes also sold faster. This makes sense. Listings with maximum exposure get the maximum price.

For the very few people who need maximum privacy over maximum price, there should be options to have a home privately listed. This practice should be the exception, not the rule because it doesn't serve the needs of most sellers. And most MLSs do allow sellers to opt out of having their listing online. But for those who believe they are making the decision to list with a private network for any sort of reduced hassle in the form of avoiding showings or timing delays need to understand the clear tradeoff they're likely making in price and selling speed.

Buyers are also hurt by private listing networks. Zillow's research shows that almost all buyers - 91% - believe they should be able to see all listings and be able to access these for free, without barriers. A private listing network creates a wall around listings - cutting off buyers from seeing all available properties. The only way they can see homes for sale in a private network is by agreeing to work with an agent from a certain brokerage, limiting access to see all listings and removing the option of which agent a buyer wants to hire. This disadvantages buyers. Buyers rely on agents to guide them through the transaction and should work with an agent who delivers real value - not value based on access to a private listing club. Choosing an agent solely for their listing access could also increase the risk of dual agency - where the same agent represents both the buyer and the seller. When this happens, both seller and buyer lose because it's not possible for an agent to effectively represent both parties' interest in a single transaction. Much like a lawyer wouldn't represent both plaintiff and defendant.

Private listing networks also mean buyers won't see all inventory, potentially missing out on homes which could be their best option. In the current market, where housing supply was down 30% from pre-pandemic levels in August, seeing the full picture of the market becomes even more critical for a home shopper and for the health of the market.

Finally, the practice of private listing neworks has real potential to increase fair housing violations. The National Fair Housing Alliance, the National Association of Real Estate Brokers, primarily representing Black brokers and agents, and the Consumer Federation of America have all cited Fair Housing concerns related to pocket listings or private listing networks. Steering - where a real estate professional influences a buyer where to look at homes - has not been completely eradicated. An influx of private listing neworks will only make it easier to perpetuate this discriminatory practice. National Fair Housing Alliance President and CEO Lisa Rice says, "Recent reports indicate a troubling rise in pocket listings, which can effectively eliminate access to housing opportunities for many individuals, particularly those from marginalized communities. This practice obscures vital information about available properties, making it difficult for potential buyers to make informed decisions. By restricting visibility to a select group of buyers, pocket listings not only undermine the democratic nature of the real estate market but also perpetuate inequities that have long plagued our housing system. Transparency in real estate transactions is essential for fostering a fair and competitive marketplace. When listings are confined to private channels, it becomes increasingly challenging to ensure compliance with fair housing laws designed to protect individuals from discrimination based on race, ethnicity, or other protected characteristics."

Sellers deserve to have their listing seen by the widest audience. Buyers deserve access to all listings. Private listing neworks create disparity across the country. Sellers should be able to maximize their outcomes by marketing to all - broadening competition to net the best offers. Buyers should have the same opportunity to see what's for sale, operating from the same starting point as everyone else. To allow anything else moves us back in history. It's not fair, it's not equal and it's not what consumers want.