Friday Flash: Clearing the air on Clear Cooperation

NAR’s Clear Cooperation Policy was instituted five very long years ago.

It has been challenged in court, reviled, defended, and become the subject of focus by our Federal Government, which, having overseen the removal of compensation from the MLS, now seems to believe that cooperation must also go.

I think they are wrong there (more on that below), but that’s not what I want to address first.

I would like, first, for us as an industry to have an intellectually honest debate on this issue. I’m seeing a lot of posturing.

Where you stand depends on where you sit

Compass CEO Robert Reffkin called the CCP “anti-homeowner” during his Q2 earnings call because it forces “negative insights” such as days on market (so much for transparency).

Earlier this week, Reffkin called for emergency action by the NAR to repeal the rule, expressing a fear that failure to do so will provoke more legal action from the Department of Justice (apparently this legal risk is more dire, to the point of requiring pre-emptive surrender, than that associated with repealing CCP, most notably fair housing and dual agency claims).

Reffkin’s arguments are debatable, to say the least. At most, they are only part of what’s going on here.

Some big brokers, among whom Compass is the most vocal, want to accelerate their private listing efforts. Compass has been quite clear about their desire to become a listing destination. Given years of eroding margins, and the potential for commission compression in a post-settlement world, big brokers would like to keep as many transactions in-house as possible and fully leverage their hard-won market share. A critical mass of private, exclusive listings is also a big recruiting lever.

Why not just say that? It’s an obviously rational position, and one that is not inherently evil.

Many small brokers, or franchisors who serve small brokers, have voiced support for CCP because they think it promotes fair housing and limits the practice of dual agency. I believe they are sincere in this position. But they also support it because they stand to be hurt if large brokers are able to sell more of their own listings off-MLS with CCP out of the way.

Why not just say that? Again, a rational position any business owner can understand.

There’s a nuance to this big/small divide, though. A brokerage like Compass has concentrated market share in several key areas. Keeping more listings private will create more in-house deals for them. Other big brokerages, especially those that are virtual, like EXP, have broad market share — lots of agents spread relatively thinly. In-house networks aren’t as powerful for them, and they are therefore more likely to support leaving CCP in place.

Pretty obvious and reasonable.

“Paper” brokerages like Zillow, which have created big consumer audiences around MLS data and earn significant parts of their revenue by referring leads to buyer agents, have a clear incentive to see CCP remain in place. Fewer listings in the MLS = fewer dollars.

The issue is most straightforward for MLSs. They do not want yet another piece pulled from their Jenga tower.

Every one of these industry participants believes in fair housing. All believe in their own idea of what is best for The Consumer. I know this because I know people who sit in all of these roles. I am not calling that into question.

What I do want is for this policy — and the stakes involved in keeping, killing, or modifying it — to be debated more fully and candidly, without the bullshit, and without, as I am increasingly suspecting, the invisible hands of those who benefit from the shadowed chaos of a marketplace without a strong MLS coming into play.

Where I stand

I understand all of the positions above. I think they balance, or net out, as a draw.

But then there is the higher consideration. The dimension that is not rational. The special burden we carry as an industry so deeply important to our economy and society. The one that forces us to think about what we value, and what’s more important than who loses and wins inside our business.

For me, this consideration decides it. The CCP should stand, and be fought for.

I wrote this in 2021 about office exclusives:

…

“…this is about what kind of industry we want to be, and what kind of housing market we want to create: open or closed.

It is that simple. It is that important.

I often think of those buyers out on Long Island, the ones we watched get steered or blocked from properties and neighborhoods a couple years back, and just how much more screwed they would have been if virtually all the listings were not on the MLS.

In a world where “office exclusives” dominate, people like those on Long Island have no recourse. They can’t talk to another agent, at another company, in another office, to access the same property. The door is closed.

The brokers I know and respect have fair housing in their hearts. They don’t want to close the door on anybody. I don’t for an instant think that Robert Reffkin at Compass wants to make housing less accessible.

But this is mostly not about intent. It’s about effect.

Open or closed.

Which do we want?”

…

I want open.

This language, from Compass’ Private Exclusives site, feels decidedly closed:

“In an inventory constrained market, access to listings is everything. Working with a Compass agent from the #1 brokerage in the U.S. opens the doors to homes that are not available to the public yet or may never hit the market.”

If the Justice Department thinks the MLS is fundamentally anti-competitive and anti-consumer, they should meditate on what it means when housing is labeled “Private Exclusive.”

They should look hard at Europe, as they did when comparing commission rates to those found in the United States, to understand what happens to consumers when listings (otherwise known as “homes”) are closely held.

They should reconsider the framing of this issue as one of potentially anti-competitive “cooperation” and recognize that this is, unlike the compensation question, a different matter — one of openness, access, and fairness.

And, please, for all of us, finally: Can we not get snagged on the privacy red herring? There are plenty of ways to keep a celebrity’s listing off Zillow, or to keep looky-loos out of a trophy property. These are easily-handled exceptions being used as a wedge to advance a very broad and consequential change.

These are strange, stressful, and exciting times in real estate. Survival is at stake for many. I expect arguments over issues like this to be intense.

Let’s just be clear.