Tight-knit Deals: The Controversy over Private Listings in Real Estate
Competitive real estate firms in the U.S. are engulfed in a power struggle over concealed property details
When Caitlin Bigelow's San Francisco condo deal fell through last month, she breathed a sigh of relief. Her realtor, a trusted associate from Compass, had suggested she first list her home as a "Compass Exclusive."
This meant her home wouldn't be advertised publicly on popular platforms like Zillow or Redfin. Instead, the listing would be announced internally at Compass, giving only buyers represented by other Compass agents a chance to know the home was up for sale.
Bigelow received two offers using this method, including one for a whopping $2.1 million—$95,000 over her list price. She quickly accepted, but after some time to think, she began to feel uneasy.
"Only two people saw it, and we seemed to be hitting our magic number already," Bigelow told CNN. "The more I sat with that, the more I felt like, well, if two people saw it and we hit the number, what if 50 people saw it?"
The debate over private listings in the residential real estate industry has become the latest point of contention. After a landmark settlement by the National Association of Realtors last year, the private listing debate has intensified, shedding light on the questionable practices lurking in the real estate market.
What is a Private Listing?
A private listing (also known as a pocket listing) is a secret sale of a property that does not make it onto the Multiple Listing Service (MLS) or the larger public platforms. Real estate compliance consultant Summer Goralik explained to CNN that there are legitimate reasons for such secrecy, such as when celebrities and other public figures may wish to keep their home address and photos under wraps.
With US homebuyer demand overpowering the supply, private listings could mean that only select buyers have first dibs on in-demand homes. Compass, one of America's largest real estate brokerages, is not the only company that lists homes off the market, but their strategy has become synonymous with the practice.
The Consequences of Exclusivity
Critics argue that the private listing strategy can be exclusionary, further eroding consumer trust in real estate agents. Real estate brokerage eXp CEO Leo Pareja claimed that his company only handled private transactions in exceptional circumstances.
"If a portion of inventory is removed, and only shown to a small group of people, by definition, that's an exclusionary behavior that's going to hurt others," Pareja said.
One of the main criticisms is that the private listing strategy unfairly tips the scales in favor of Compass agents by pushing home sellers to make deals with other Compass-represented buyers. This could potentially result in Compass collecting a commission on both sides of the transaction.
Compass has denied the allegation, stating that many sellers have expressed a preference for private listings before sharing them more widely on the MLS. They also argued that home sellers deserve the freedom to choose how their home is marketed.
The Class Struggle in Real Estate
CEOs of prominent real estate companies have engaged in a bitter feud over the issue. Last week, Anywhere Real Estate CEO Ryan Schneider weighed in on his company's earnings call. He advocated for public distribution and transparency in the listing of almost all properties because it helps both buyers and sellers get the best deals.
One of Anywhere Real Estate's subsidiaries, Corcoran, quickly followed by launching its own private listing network, Corcoran Reserve, for sellers looking for greater privacy and discretion.
Douglas Elliman plans to roll out its own private listing network as well, though it insists that this is just one of multiple selling strategies for home sellers.
The self-serving nature of the debate has left consumer advocates skeptical. eXp Realty CEO Leo Pareja is vocal in his opposition to private listings.
"If I were being a pure capitalist, I would be on the other side of the argument, because I would be able to hoard inventory.... But I'm not. Instead, I'm saying, 'Hey guys, this is not good for the consumer,'" Pareja told CNN.
Compass' Response: A Three-Phased Strategy
Compass often employs a three-phased marketing strategy for home sellers. They debut the private listing to test the home's sales price, then transition to a "coming soon" phase, during which listings are showcased on Compass' website to generate buyer interest before being formally listed on the MLS. If necessary, the home's MLS listing is shared only after attracting competitive offers.
As of mid-February, approximately 35% of all Compass listings were either "Compass Exclusive" or "Compass Coming Soon," according to CEO Robert Reffkin.
Compass claims that 94% of its private listings in the past year ultimately sold on the public market. However, experienced agents caution that pocket listings may not always be in sellers' best interests.
Home seller Caitlin Bigelow's experience led her to conclude that private listings benefit Compass more than home sellers. Despite her mixed feelings about the process, she believes she would still begin her home sales process by listing privately, provided she does not accept any offers during that period.
[1] The pros and cons of pocket listings for home sellers[2] Real estate agents disagree on the ethics and effectiveness of private listings[3] The debate over private exclusive listings heats up in the real estate industry[4] The growing concern over secretive listings in the housing market[5] The pros and cons of off-market exclusive listings for both sellers and buyers
- In the heated debate surrounding private listings in the real estate market, tech giants like Compass, with their innovative strategies, are revolutionizing the investing scene, leveraging technology to offer privacy for high-profile clients and potentially securing better finance opportunities for home sellers.
- As the business of real-estate evolves, investing in technology and exploring non-traditional listing methods, such as private listings, could pave the way for a more competitive and dynamic sector, spurring growth and innovation in the overall finance and business landscape.
