In this masterclass, real estate industry veterans will explore the controversial Clear Cooperation Policy (CCP), often referred to as the “pocket listing ban,” which has once again become a focal point of discussion in the industry. 

With legal challenges ongoing and the Department of Justice taking a keen interest, this masterclass will delve into the future of CCP and the evolving role of pocket listings in the real estate landscape.

James Dwiggins (CEO, NextHome), Mike Hickman (CEO, Seven Gables Real Estate), Liz Sturrock (Chief of MLS and Innovation, Miami MLS), and Jeff Hickey (Vice President of Technology and Innovation, The Go Network (KW)) participated in a masterclass moderated by Audrey Whittington (SVP of Strategic Partnerships & Industry Relations, Local Logic) to debate both sides of the policy, discussing its impact on agents, sellers, and buyers, as well as its effectiveness in promoting equal access to housing.

In this masterclass, you’ll learn more about:

• The Purpose of Clear Cooperation: Why CCP was introduced and its intended role in ensuring equal access to housing.
  
• Industry Support vs. Opposition: Major voices in favor of and against CCP, and their reasons for defending or challenging the policy.
  
• Legal Implications: Ongoing lawsuits and regulatory scrutiny from the Department of Justice surrounding pocket listings and CCP.
  
• Impact on Agents, Buyers, and Sellers: How CCP influences the market, and whether it has been effective in curbing pocket listings.
  
• What’s Next for Clear Cooperation: Predictions for the future of CCP and how it may evolve in the coming years.
  

➡️ Understanding the History of Clear Cooperation

The CCP’s Purpose

The CCP is a rule adopted by the National Association of Realtors (NAR) in 2020, aimed at increasing transparency and fairness in real estate transactions. The policy and the practice of pocket listings are controversial because they balance privacy, exclusivity, and commission opportunities with visibility in the real estate market. The debate revolves around whether the CCP benefits consumers or unnecessarily restricts agent strategies and seller preferences.

A Decline in MLS Market Share

Pocket listings aren’t a novel concept. Nevertheless, they made headlines a few years ago when James Harrison, previously CEO of MLS Listings, observed that 30% of the listings in his market were pocket listings. In fact, 30% of the inventory in Silicon Valley, California was being held by two brokerages that told sellers that they could take their property off the market, so they don’t need to show it, do open houses, or have people coming through the home. These brokerages were selling the property internally and putting it back on the market if the sale didn’t work out.

Sellers’ Ensuing Lawsuits

Several lawsuits followed, filed by sellers who felt harmed by the practice when they saw identical houses to those held off-market sell for $500,000 more, six months later.

Also, if you were another company and learned of the listing, these brokerages would not work with you unless it was handled internally. In most cases, they would shy away from you or give you access only if you joined their company.

A Precipice Towards the CCP

Some of these companies didn’t list properties on major portals, so you had to visit their websites to find out what was available. This practice harmed small brokerages, franchisors, buyers, and sellers. The lack of information about what was for sale led to much discussion that ultimately contributed to the emergence of the CCP, which NAR’s board of directors overwhelmingly passed, with only a tiny fraction disapproving.

This situation forced the MLS committee to ensure they had all the data in the market, whether it was to:

• protect small brokers and individuals who weren’t seeing all the listings,
• ensure the accuracy and completeness of the data available in the market,
• or, address potential fair housing concerns related to unequal access to property listings.

➡️ Addressing Competition on the Brokerage Side

While brokerage competition represents a big piece of the pie, it isn’t the primary motivation for the CCP. However, that doesn’t mean we should keep poorly implemented policies in place that will exacerbate these problems.

The GO Network has 14 offices — ten in Dallas Fort Worth, three in New Mexico, and one in Tennessee — and they deal with the policy on a localized level in each of those three markets. With competitors seeking to recruit their agents, they’ve had to rethink their offerings to retain current agents and attract new ones. Using private collection, they can address off-market listings more locally and closely monitor them to prevent abuse. By maintaining guardrails, the latter also ensures they abide by the rules and don’t market outside their domains.

➡️ Letting the Customer Take Centre Stage

One crucial aspect has been overlooked so far: the voice of the consumer. Consumers’ experiences and their best interests need to be better integrated into these ongoing discussions.

A survey conducted by 1000WATT asked 1,000 homebuyers what MLS stands for — 37% replied Major League Soccer and the remaining percentage answered Multiple Listing Service. Although the MLS brings tremendous value, consumers are unaware of what it represents. They also have little knowledge about the workings of the CCP and, generally, the industry as a whole. To move forward with a more consumer-centric approach, the industry must ensure that consumers are well-informed and can voice their concerns.

➡️ Being Part of the MLS’s Collective Spirit

Most MLSs, like Miami Realtors, are governed by NAR rules and regulations. However, a residential Board of Governors, made up of brokers and agents of varying sizes, decides what each MLS does in its own market. From franchisors to boutique brokerages, they collectively work together to decide what works best for the market. 

MLSs don’t want to make brokers’ lives more difficult — they exist to provide value. Everyone is trying to work together to serve the consumers, the agents, and the brokers and to ensure that there is an efficient marketplace where each stakeholder can thrive.

➡️ Examining Portal Dynamics if CCP is Repealed

If the CCP is repealed, not all listings will be added to the MLS. Some larger brokerages will likely start pulling off listings that will become in-house, or they’ll create new models to view listings that don’t appear on the big sites.

Scenario 1: Market Collapse

Brokers will have to compete and recruit on inventory within the same market space. Some MLSs will no longer exist, causing the market to collapse. The MLS will become irrelevant if Compass, eXp, Berkshire Hathaway — all these top brokerages — start to pull all their inventory, and only 40-50% of it is in the MLS.

Zillow, Homes.com, and Realtor are not going to sit back with only half of the inventory. They could become the de facto MLS, allowing brokerages and people to upload listings to their portals, creating all sorts of problems for consumers, including listing duplication, data quality, and housing issues.

Scenario 2: Full-Fledged Brokerage

The second scenario involves becoming a full-fledged brokerage. The industry should be paying more attention to Redfin since they just got away from doing employee-based agents. The company is now doing a traditional brokerage firm called Redfin Next and recruiting people. 

With 220 million unique visitors, if Zillow brought over all the teams that are paying them to become Zillow brokerage, a devastating domino effect would ensue. Zillow uses data from the MLS. Having too little inventory could cause them to pivot their business, and the results could be catastrophic. We are underestimating the long-term effects. People aren’t thinking about what the conglomerates will do four or five years from now. 

➡️ Recognizing the Market Downturn as the Main Issue

There was no talk about CCP two years ago because business was booming. For the past two years, the real estate market hasn’t been doing so well. Few people are selling their houses. Everyone is trying to figure out how to make deals happen and increase profits. As the market recovers, however, concerns about the CCP will once again dissipate.

Generally, if we’re trying to help sellers, we’ll encounter one of two scenarios:

Scenario 1: Off-market Listings

The broker will keep the property off the market and sell it internally, avoiding open houses and showings, and perhaps even lowering the commission and doubling the deal, which sounds good to the seller.

Scenario 2: Listings on the MLS

Alternatively, the seller can also go through the MLS, allowing their property to be listed on popular websites such as Zillow, Homes.com, and Realtor’s which attract millions of unique visitors. If the seller had decided to go off-market, the property wouldn’t have been listed in the MLS or any of those sites, reducing the number of people who would be able to view it.

Assuming that the seller will want to sell their house for the highest price possible, they will prefer the second option.

➡️ Adopting Changes to the CCP for a Fairer Policy

The CCP is not perfect — it needs to change. This discussion on CCP has emphasized the need for improvements and clarity for both agents and consumers as to the decisions they are making. The policies currently in place have their fair share of issues, but what aspects are people most interested in fixing?

Here are some of our expert panelists’ perspectives on what needs to be tweaked:

Solutions Protecting Both The Members and Consumers

Liz Sturrock shares that Miami MLS offers seller opt-outs and ‘coming soon’ listings so that agents can advertise a property to potential buyers and other agents before the property is actively listed, provided that it’s not publicly marketed beyond internal networks. These are some of the options that exist to shield agents from fines and to take properties temporarily off the market, protecting both members and consumers. Although that involves more work for everyone, it is work that is worth doing.

When A One-Size Policy Does Not Fit All — And Needs More Safeguards

In support of repealing CCP, Mike Hickman advocates replacing it with local policies that better serve consumers and agents and protect fair housing. Because each market is different, NAR should not dictate a one-size-fits-all policy across the country. In addition, sellers should have access to more choices. Opting out should be available to them, along with information such as the pros and cons of doing so. 

Technology has completely changed the way we do business. Many of us use digital signatures on listings, for example. Most time, people sign without reading the terms that they are agreeing to and then are surprised when those same terms are raised later on. The real estate industry is then held accountable for not explaining things thoroughly enough. The documentation exists. It’s just that no one has time to read it. Putting safeguards in place will ensure that people read the documentation and understand all the implications before moving ahead.

Greater Optionality for Consumers

Although he is not completely opposed to the CCP, Jeff Hickey believes it isn’t serving its intended purpose. A better consumer-focused policy should be implemented in its place. 

The industry needs to consider the issues consumers face and address their needs from their different perspectives. Although most consumers would like to sell their homes at the highest price, some do opt to take less money for a more expedient transaction. It’s not widespread, but it’s almost 2% of the market on a national basis. GO Network’s focus is on giving consumers the option to decide for themselves what they want to do.

Office Exclusives Are Out, Clearer Opt-Out Forms Are In

Getting rid of the CCP is a bad idea if we truly want to give consumers the possibility of making informed choices. Larger brokerages will become even bigger. Many of these companies will hold back inventory. Agents at other companies won’t have access to it. The result will be a marketplace that takes us back 20 years, and it will be terrible for consumers. 

According to James Dwiggins, who spoke with sources close to the Department of Justice, office exclusives are the main problem with CCP and need to be repealed. Without them, brokerages wouldn’t have a competitive disadvantage due to limited access and visibility, which can favor larger or more established firms at the expense of smaller ones.

Besides eliminating office exclusive carve-outs, the seller opt-out form should also be more clear, highlighting advantages and disadvantages. A few things are missing from that form at the moment. It doesn’t mention that the property won’t be listed on Zillow, Realtor, and Homes.com, nor does it tell sellers how much they might lose out on. Forecasting that amount can be challenging since agents must consider price ranges, geography, demographics, and other location-specific factors. However, building local expertise can help determine that more easily. Adding these items to the seller opt-out form could gain the CCP many more supporters.

It all boils down to this: the industry needs to become more professional. The consumer should be the focus of all discussion if we genuinely want to put their needs first, and then brokerage and agent policies should follow.

However, if the industry continues to employ too many unqualified realtors, nothing will change. While MLS offers a great deal of resources, it is not responsible for explaining its purpose to consumers. It’s up to the agents.

What’s Next on the Masterclass Calendar

In the November masterclass, a Chief Economist will be joined by other industry-leading experts to discuss how fast the market will rebound after rates are reduced. To find out the answer, stay tuned for our next masterclass announcement, and be sure to register for the session!