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Policing the pocket listings

MLSs can investigate agents who may run afoul of clear cooperation. But it’s complicated.

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This is HousingWire’s two-part series examining the ramifications of NAR’s decision last year to ban pocket listings. Part 1 looked at the history of the ban and inherent enforcement problems it posed. Part 2 examines how MLSs have implemented the measure so far, and legal challenges to the pocket prohibition. 

Ryan Cook has a few MLS bills to pay. There’s the $87 every three months he pays to MLS PIN, and the extra $100 a month he pays as a broker for their data feed. Plus, Cook hands over fees to the Rhode Island State-Wide MLS and Cape Cod & Islands MLS.

The owner of a HomeSmart affiliated brokerage in Plymouth, Massachusetts and member of his local realtor board, Cook contends that MLS PIN – again, not owned by an NAR chapter, but with its own listing requirement – does not police said requirement. 

“It’s not being enforced,” the broker claimed. “Someone has to report it, and even if they report something, everyone looks the other way.”

Just as MLS ownership and structure varies so too does enforcement among MLSs. There’s perhaps more policing in the Cape Cod area, whose MLS is owned by the local NAR affiliate.

“I know they communicate pretty regularly there,” Cook said. “It all comes down to leadership of the MLS, and what they want to uphold.”

MLSs anecdotally report that the pocket listings ban – or their own version of said ban – has resulted in few disciplinary matters.

Midwest Real Estate Data’s “private listing network policy went into effect in April 2016,” said a spokesperson for that MLS. “Since then, we have received relatively few complaints and only a handful of fines have been levied.”

Like Cook, Dana Hubbell, a broker at Dana Hubbell Group in Chandler, Arizona has joined a few MLSs. Hubbell said paying dues to a few MLSs is needed with urban buyers considering a rural relocation.

The Arizona Regional Multiple Listings Service, Hubbell contended, is generally not policing pocket listings, particularly in the more rural, northeast region of the state.

“Agents here are kind of rogue,” Hubbell said. “They are throwing up yard signs without listing.”

The Arizona MLS reports on its website “the top violations of 2020” among listings agents. The no. 1 mishap is that the prior sold price is listed incorrectly. Eight other penalties are listed, such as incorrect open house information, none that are not likely to lead the ABC15 Arizona news. The clear cooperation policy is not mentioned, because “2020 did not present a full year of data for the year,” stated James Marcus, director of Arizona MLS.

Asked what violations have come from the policy, Marcus replied, “Nothing comes to mind at the moment.”

But even if pocket listings enforcement is light, few agents will cop to marketing homes off their local MLS. In fact, two different brokerage types say it really has hurt their business.

One is the discount broker. Ed Wright is the broker-owner of Help-U-Sell’s Platinum Edge Properties in Newport Beach, California, who for years worked, “40-50% of my sales outside the MLS.”

Help-U-Sell is an NAR member brokerage, but it often paired up with “motivated sellers” willing to work extra offloading their “more bread-and-butter, blue collar type properties” in exchange for less of a sales commission. Forgoing the MLS means extra work finding an interested buyer, but it also avoids buyer agent’s expecting a 3% commission.

“We would generate enough interest and sell the property in a reasonable time period,” Wright said. “But NAR imposed an unfair practice on us, and in many cases has forced us to charge the seller more money.”

Wright said that he has lost about 25% of his business due to the pocket prohibition.

“An agent should have the right to offer the seller the option of not listing it in the sacred MLS,” Wright said. “It’s really an anticompetitive, antitrust issue, I think.”

In lockstep agreement with Wright is the other brokerage type – the not so blue-collar home sellers.

The real lawsuits of Beverly Hills

Mauricio Umansky blossomed at Hilton & Hyland, a 28-year-old brokerage that never expanded its office presence outside Beverly Hills, and in 2011 Umansky started his own Beverly Hills brokerage, The Agency.

The Agency gathered steam partly thanks to Umansky’s spots on Bravo’s “The Real Housewives of Beverly Hills,” which feature his wife, Kyle Richards. The Agency also nabs screen time on another Bravo show, “Million Dollar Listing,” where David Parnes and James Harris fall into dramatic encounters in homes with 13 bathrooms.

In 2017, Umansky, Parnes, Harris, and fellow Agency agent Christopher Dyson started The PLS.com (“P” stands for property, not pocket) listing homes that subscribers to the newfound service did not want on the MLS.

High-end agents argue that banning pocket listings violates a celebrity client’s privacy since MLSs require exact addresses. But PLS.com also balked at other MLS guidelines – including posting days a home is on market. When PLS.com launched, Dyson acknowledged to The Real Deal that days on market –days, you, the salesperson, still haven’t found a buyer – is “Every listing agent’s nightmare.”

The PLS.com filed a lawsuit against NAR last May, arguing that the pocket listings ban took away agents’ marketing choices. The high-end listings network alleges a few ways the ban harms the housing market.

One is if there were competitors to MLSs, it would result in cascading “lower costs,” starting with the fees MLSs charge agents, according to a court filing. Another is letting “sellers customize what information they can share about a listing.” Also, PLS.com is a nationwide network of listings, unbound by MLSs varied geographical designations.

John Holcombe, a Los Angeles federal judge and Donald Trump administration appointee, disagreed. In a February order dismissing The PLS.com’s complaint, Holcombe said.

it didn’t really matter how the ban affected PLS.com or agents. What mattered was consumers and for them, “At worst, the clear cooperation policy is neutral to competition.”

PLS.com appealed to the 9th Circuit Court of Appeals – and in June the U.S. Justice Department intervened.

Richard Powers of DOJ’s antitrust division doesn’t quite say that PLS is right, and NAR is breaking the law in his 9th Circuit brief. Powers also declares that the amicus brief is not tethered to DOJ’s decision to end its NAR consent decree.

What DOJ does say is that Holcombe made “several errors of law” including overlooking potential “quality reduction, reduced consumer choice, and hampered innovation” by the ban. “Here,” Powers of the DOJ writes. “PLS plausibly alleged that the clear cooperation policy has each of these effects.”

The Biden administration throwing its weight around should concern NAR. “The DOJ typically intervenes only when it believes the matter raises serious antitrust issues that require clarification or vindication,” said William Markham, an antitrust lawyer in San Diego.

Publicly, DOJ’s recent actions have been met with radio silence by NAR, save pronouncements in July where the group said it was “blindsided” by the antitrust probe.

While The PLS.com argues competition will foster a better MLS, NAR asserts in court filings that member agents who must work with their local MLS will make a better listings service.

“Brokers benefit from the policy,” NAR’s 9th Circuit Court of Appeals brief reads. “Because it ensures information about home listings is available to more people in a single location.”

In the middle of August, NAR received some good news. A separate antitrust lawsuit over pocket listings by a separate listings network marketing exclusivity – this one called Top Agent Network, or TAN, and based in San Francisco – had its case dismissed.

The order by San Francisco federal judge Vince Chhabria voices reservations about NAR’s power in the housing market.

“The policy leverages NAR’s control of the real estate market to coerce most agents into giving up their anti-MLS activities entirely, without regard to the competitive value of these activities,” Chhabria said.

But the judge also sees NAR as a force for good, an organization that can “create and maintain an open marketplace: Once a sellers’ agent posts a listing, it becomes publicly available to all subscribing members.”

“Competitive marketplaces generally thrive on open information,” Chhabria added. “What TAN’s complaint fails to reckon with is that listings are just information.”

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