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Zillow’s Stand Against Private Listing Networks, Exposes Harm to Sellers, Buyers, and Market Competition

The Hidden Cost of Private Listing Networks: Why Zillow’s Policy Shift Matters for Consumers and Competition

By Douglas R. Miller, Executive Director of Consumer Advocates in American Real Estate

Overview

In April 2025, Zillow announced it would no longer accept listings from brokers who market properties privately while withholding them from the MLS and public portals. This decision, which aligns with long-standing concerns from consumer advocates, represents a significant step toward restoring transparency, fairness, and competition in the residential real estate market. This white paper explores why private listing networks (PLNs) are harmful to both buyers and sellers, how they exploit regulatory loopholes, and why Zillow’s policy change is not just welcome, but necessary.

I. What Are Private Listing Networks?

Private Listing Networks, also known as office exclusives or delayed marketing exempt listings, are properties marketed internally by a brokerage or to a limited group of agents, often while being publicly promoted through signage, email blasts, and social media. These listings are kept off the MLS and out of public portals like Zillow, Redfin, and Realtor.com, at least initially.

Brokerages often claim that PLNs offer “discretion” or “control” to the seller, but in practice, they serve to consolidate power within large brokerages by:

    • Increasing the chances of double-ending deals
    • Steering buyers toward in-house agents
    • Denying sellers full exposure to the open market
    • Undermining small brokers and FSBO alternatives

PLNs are frequently marketed under two misleading justifications: that they allow sellers to “test the market” before going fully public, and that they protect the seller’s privacy. Both claims are largely unfounded.

Testing the market without full exposure provides misleading data and undermines the core principle of market competition. A seller cannot truly gauge interest or value without access to a wide pool of potential buyers. As for privacy, listing your home for sale inherently requires some level of public disclosure. There are already established ways to manage privacy—such as restricted showing times or NDAs for luxury listings—without sacrificing public visibility. The vast majority of sellers benefit more from broad exposure than from limited, broker-controlled visibility.

A 2021 study by Bright MLS found that homes marketed through the MLS sold for an average of 16.98% more than those that were not—further underscoring the financial risks of limiting visibility.[1]

 

II. How PLNs Harm Consumers

For Sellers:
PLNs restrict exposure, which limits competition among buyers. Fewer offers typically mean lower sale prices. Sellers are often not fully informed of the tradeoffs and may be misled into believing that private marketing is a strategic advantage.

For Buyers:
PLNs deny buyers access to the full range of available homes. This often pressures them to work with agents from large brokerages who claim to have access to off-market listings, thereby creating coercive and anti-competitive dynamics.

For the Market:
PLNs fragment the marketplace, reduce transparency, and allow dominant brokers to manipulate inventory and control who gets access to listings and when. This undermines the integrity of the entire system.

 

III. How NAR’s Clear Cooperation Policy Enabled PLNs

The National Association of Realtors (NAR) introduced the Clear Cooperation Policy (CCP) under the pretense of eliminating pocket listings. But instead of banning all private marketing, NAR carved out an exception for office exclusives—effectively legalizing a new form of inventory hoarding.

Even more troubling, the CCP was weaponized to eliminate competition from FSBO firms. These firms had offered affordable public-facing marketing services for sellers who didn’t want to use the MLS or a full-service Realtor. The CCP forced those listings off the public platforms, reducing consumer choice and insulating the MLS cartel from market disruption.

According to a 2022 paper by the Brookings Institution, the real estate industry’s reliance on self-regulation and limited competition has contributed to inflated transaction costs and limited innovation in the brokerage sector.[2]

 

IV. Why Zillow’s Policy Is a Game Changer

Zillow’s new policy prohibits listings from brokers who market properties privately while withholding them from the MLS and public portals. This move:

    • Aligns with the original intent of CCP—to prevent hidden inventory
    • Restores visibility for buyers
    • Pressures brokers to abandon self-serving listing practices
    • Signals a major tech platform is willing to challenge the old brokerage cartel

This shift also implicitly supports the role of consumer-first FSBO models by creating a more level playing field for alternative listing strategies.

Zillow’s stance reflects a growing awareness that the traditional brokerage model too often prioritizes internal deal flow over client outcomes. When inventory is withheld for the benefit of internal agents or affiliate relationships, the consumer loses.

 

V. Recommendations

1. Support Zillow’s Policy – Other portals should follow Zillow’s lead to preserve transparency and buyer access.
2. Ban Dual and Designated Agency – No one—agent or broker—should represent both sides of a transaction.
3. Reinstate FSBO Access – Platforms should explicitly welcome FSBO marketing firms that do not rely on the MLS.
4. Close the Office Exclusive Loophole – Regulators should end the exemption that allows large firms to withhold listings from the public.
5. Encourage DOJ Oversight – Antitrust enforcers must monitor the use of PLNs to restrict competition and consumer choice.

 

Conclusion

Zillow’s decision to limit private listing networks is not just a policy tweak, but a stand for consumer protection, marketplace transparency, and real competition. For too long, the real estate industry has allowed dominant brokers to game the system with impunity. This is a rare moment of alignment between a tech platform, legal reformers, and consumer advocates. The market, and the public, will be better for it.

 

Footnotes:

[1] Bright MLS, “The MLS Effect: How Access to the MLS Impacts Home Sale Prices,” April 2021. 

[2] Aaron Klein, “Reimagining Real Estate: Why the Brokerage Industry Needs Reform,” Brookings Institution, October 2022. 

 

 

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Navigating Listing Broker Contracts: Better Terms For Sellers

Navigating the world of real estate can be overwhelming, especially when it comes to signing a listing agreement. Many sellers may not realize that some standard contract terms can be disadvantageous. To address this, Consumer Advocates in American Real Estate (CAARE) has drafted suggested terms and recommendations aimed at better protecting home sellers from unfavorable conditions. As the only nonprofit dedicated to consumer protection in residential real estate, CAARE provides guidance on negotiating fairer agreements to help sellers avoid unnecessary costs and safeguard their interests.

Here are some key tips from CAARE on negotiating better terms in your listing agreement.

better listing agreement terms (2)Download

1. Termination Clause

Standard language often states that the contract can only be canceled by mutual agreement. Instead, ensure the agreement allows for unilateral termination by either the seller or broker, provided there’s no ongoing contract for the property. This flexibility can be crucial if circumstances change or the broker isn’t meeting expectations.

2. Marketing Choices

Some agreements allow automated valuations and public comments on websites. While these may seem harmless, they can lower your property’s perceived value or reduce market exposure. Avoid agreeing to these terms to maintain control over your listing’s presentation and maximize market visibility.

3. Broker Compensation

Be wary of clauses obligating you to pay the broker regardless of how the property sells. Consider including an “Exclusion List” of individuals who could buy the property without incurring commission fees. Additionally, strike out conditions where broker fees apply if a sale doesn’t close due to unforeseen reasons.

4. Negotiating Commission

Standard commission structures are often percentage-based. However, you can negotiate alternative arrangements, such as a flat fee or basing the commission on the net sale price (after seller concessions). This ensures you aren’t paying more than necessary.

5. Dual and Designated Agency

Dual agency arises when the broker represents both the buyer and seller. This can limit your broker’s ability to advocate solely for your interests. It’s advisable to decline dual agency agreements to avoid conflicts of interest and secure dedicated representation.

6. Avoiding Buyer Broker Commissions

Pre lawsuit, sellers were encouraged to pay commissions that were split between the listing and buyer’s brokers. With recent changes, buyers now negotiate broker fees directly with their own agent. Instead of setting fees upfront, allow buyer agents to negotiate with you via seller concessions. This approach can save money and foster a more competitive market.

7. Referral Fees

If the broker has pre-arranged referral agreements, you may be at a disadvantage. Ensure they disclose any such arrangements so you can make informed decisions or consider other agents without hidden obligations.

8. Office Exclusives

Some agents push for “office exclusive” listings to gather feedback before public listing or avoid the hassle of showings. However, these arrangements can restrict your home’s market exposure and may lead to dual agency scenarios. Opt for open listings to maximize reach.

9. Closing Arrangements

When selecting a closing agent, avoid brokers who steer you toward affiliated firms. Instead, request recommendations for at least three independent companies, ensuring the broker has no financial ties to them.

10. Beware of Arbitration Clauses

Real estate agreements sometimes include arbitration requirements or prohibit class action lawsuits. These terms can limit your legal rights. Choose agents who don’t impose such restrictions.

11. Home Warranties

Avoid agreeing to purchase home warranties through brokers. These products often include broker kickbacks, and the coverage may not be worth the added expense.

Empower Yourself in the Real Estate Process

By understanding and negotiating these key terms, you can protect your interests and avoid paying unnecessary fees. Always review your agreement with a real estate attorney who can advise you on state-specific laws and ensure your contract aligns with your goals. Remember, the real estate landscape is evolving, and staying informed is your best defense against unfavorable terms.

For more consumer-focused advice, reach out to us at any time with questions.

Navigating Buyer Broker Contracts: Empowering Consumers with Better Terms

When entering into a buyer broker agreement, it’s crucial to understand the terms and conditions laid out in the contract. These contracts can often contain provisions that may not be in the best interest of the buyer. To help consumers make informed decisions, Consumer Advocates in American Real Estate (CAARE) offers insights and suggestions for negotiating more favorable terms.

CAARE Buyer Broker SuggestionsDownload

Our Buyer Broker suggestions review key aspects of buyer broker agreements and how to ensure you’re protected as a homebuyer.

1. Termination Clauses

  • What They Say: “This contract may only be canceled by mutual agreement of the parties.”
  • Consider This Instead: Include a clause allowing either party to terminate the contract before its expiration without any obligations if not under contract for a property.

2. Failure to Close

  • What They Say: “If Buyer refuses to close the Purchase for any reason other than the failure of seller to perform, Buyer shall pay Broker all the compensation due under this Contract.”
  • Consider This Instead: The buyer should only be obligated to pay the fee upon successful closing. This protects you from being financially liable if the deal falls through for reasons beyond your control.

3. Additional Fees

  • What They Say: “Buyer agrees to pay an administrative fee/transactional fee of $______ in addition to other compensation owed.”
  • Consider This Instead: Be cautious of these junk fees hidden within the contract. Avoid agreeing to them as they can inflate your costs unnecessarily.

4. Protection Period

  • What They Say: “Buyer owes the Broker the full compensation if within ______ days after expiration of this Contract, Buyer purchases a property Broker has shown or exhibited to Buyer.”
  • Consider This Instead: Reject protection periods that could require you to pay the broker even if you don’t use them to buy a house after the contract expires.

5. Dual and Designated Agency

  • What They Say: “Buyer will agree to dual or designated agency representation and will consider properties listed by Broker.” OR “If Buyer declines Dual Agency, Buyer will not be shown listings owned by the brokerage.”
  • Consider This Instead: Maintain the right to cancel the contract if dual or designated agency arises, allowing you to hire a different broker without any obligations.

6. Additional Services

  • What They Say: “Buyer directs Broker to arrange for a qualified closing agent to conduct the closing.”
  • Consider This Instead: Ensure that the broker/agent assists in shopping for and comparing prices for lending, title, warranty, and insurance services. They should recommend at least three providers in each category who are unaffiliated and not offering additional compensation to the broker.

7. Arbitration & Class Action Lawsuits

  • What They Say: Terms related to arbitration or prohibitions on class action lawsuits.
  • Consider This Instead: Avoid brokerages that include such terms, as they strip you of important rights and legal recourse.

8. Referral Fees

  • What They Say: “Neither the Broker nor Agent shall accept or pay any referral fees on any transactions that involve the Buyer.”
  • Consider This Instead: Prohibit referral fees, as they can limit your negotiation power by directing significant commissions to third parties.

9. Seller Compensation

  • What They Say: “If compensation is not being offered, Buyer instructs Broker to negotiate seller credits to cover broker fees.”
  • Consider This Instead: If you’re unable to pay your broker out of pocket, include a request for seller credits in your offer to cover broker fees. Communicate this strategy with your lender.

10. Bonus Tips for Buyer Broker Negotiations

  • Dual & Designated Agency: This type of representation is often a source of consumer complaints. We suggest you decline it to ensure proper representation.
  • Seller Concessions: These can reduce closing costs, offer flexibility, and improve negotiation outcomes, giving you better control over your funds.

Why CAARE’s Advice Matters The real estate industry has long operated under traditional methods that may not always serve consumers’ best interests. CAARE provides guidance that empowers buyers to negotiate better terms and avoid common pitfalls. If something in your broker’s advice seems off, don’t hesitate to reach out to us.

About CAARE Consumer Advocates in American Real Estate is the only nonprofit organization in the nation dedicated to consumer protection in residential brokerage. Our goal is to ensure transparency, fairness, and advocacy for homebuyers navigating the often complex world of real estate transactions.

For more information or assistance, feel free to reach out to us at info@caare.org. We’re here to help you make informed decisions and be better protected in your home buying journey.

CAARE is not your attorney and is not licensed to provide you with legal advice. These suggested contract changes should be reviewed by your attorney. We are not familiar with your state’s laws surrounding these matters and only an attorney in your state may properly advise you. The purpose of these suggestions is to call attention to some of the contract terms we believe are anti consumer and anticompetitive. How you address these terms is a matter of law and is to be determined between you and your attorney.

How Consumers Will Benefit From the New Realtor Fee Structure

Changes in the way Realtor fees are determined should save consumers billions in real estate commissions. For the first time ever, buyers can negotiate the fee of their buyer agent. If brokerage fees are lower, more sellers will be able to afford to sell and the pool of homes for sale should increase. 

In the past, seller brokers shared their fees with buyers’ brokers. When competitors “share” fees it is the same thing as collusion and it causes fees to be higher than they would in a free market. It was an unnecessarily complex practice that made it nearly impossible for buyers to negotiate the fee of their own agent and cost home sellers hundreds of billions of dollars in inflated commissions. It allowed listing brokers to set the buyer broker fee artificially high and since listing brokers are buyer brokers half the time they benefitted from these unfair fees. The new rules will empower buyers to negotiate these fees and put them in a better position to buy the house that they desire.

And remember, buyers do not need to come up with the buyer broker compensation out of pocket. It is now standard practice to ask the seller for a credit to pay for the buyer agent. For the seller, this works out great because instead of paying a buyer broker 3%, they might only owe a small flat fee to pay your buyer agent (structured as a seller credit to the buyer). Buyers who want their offer to be more appealing to sellers will now have a huge incentive to negotiate with their buyer agent and ask for a seller credit.

Here are CAARE’s suggestions to help consumers take advantage of the new rules when negotiating fees.

Advice for Sellers:

Do not offer money directly to buyer brokers. When sellers offer money to buyer brokers, it presets buyer broker fees higher than they should be. And if the buyer has negotiated a lower fee with their buyer broker, it could result in the excess brokerage fees going to your listing agent instead of you. There is no good reason to offer money to buyer agents other than to artificially inflate the fees that brokers charge. Plus, Realtors just lost a major lawsuit for offering money to buyer brokers on the Multiple Listing Service. The case was about artificially inflating fees, and not so much about the Multiple Listing Service. Please avoid agents who suggest you continue with the practice of offering money to buyer brokers. 

Do not offer money to buyers upfront.  If you offer money to buyers, you will be giving up an important negotiating position. You do not know how much the buyer has agreed to pay their buyer broker. If you offer too much money to the buyer, the buyer may have lender restrictions that prohibit them from benefitting from your offer. The better practice is to offer nothing and let the buyer request a seller credit. If the buyer has negotiated the fee with their buyer broker, that seller credit could be far less than the amount you were going to offer. Let the buyer make the first move.

Advice for Buyers:

Negotiate the fee you will pay your buyer broker. This fee should be a flat amount that reflects the work you expect your agent to do. Avoid agreeing to a commission based on the purchase price. Your agent should be focused on getting you the best deal, not benefiting from you paying more.

Request a seller credit. When making an offer, ask the seller for a credit to cover your buyer representation fee (whether you use a broker or an attorney). If you negotiate a fee of around 1%, you will likely save the seller about 2% in commissions. Plus, if your offer only includes a 1% seller credit and a competing buyer asks for 3%, your offer becomes more attractive, increasing your chances of acceptance. Additionally, Fannie Mae, Freddie Mac, and the VA have all confirmed that concessions used for agent compensation do not count towards your concession loan limit, giving you even more flexibility in structuring your offer.

Avoid buyers’ agents who let you “skip homes.” Some brokerages include a clause in their agreements that asks if you want to skip homes that don’t offer upfront compensation to buyer agents. They wrongly tell you that you will need to pay their fee out of pocket. This is inaccurate and is a way for them to unfairly discriminate against sellers who don’t engage in price-fixing buyer brokerage fees. There is no reason to skip homes, because any offer you write will likely include a request for a seller credit to pay for your buyer representation fees. And if your request for a seller credit is denied, you can walk away from that offer with no harm done. In other words, there is no risk to you or the agent to writing offers on homes that don’t offer a buyer broker fee. In fact, homes that don’t offer a buyer broker fee are better situated to benefit buyers and sellers. Many sellers may not offer compensation upfront, but that doesn’t mean you can’t negotiate it in. If you skip homes just because they don’t list a fee, you could miss out on many great options within your budget where you could have negotiated your agent’s fee.

 

Consumer Friendly Contracts: Compensation Suggestions

New Guidelines Just Released

CAARE is thrilled to release the first draft of our model compensation language for consumers hiring Buyer or Seller Brokers. This is the beginning of a series focusing on Realtor fee agreements, which have often been unfairly standardized, making it hard for consumers to negotiate terms.

Key Points Of Our Compensation Suggestions:

  • Empowering Consumers: When crediting money directly to the Buyer instead of their broker, we enable Buyers to negotiate their agent’s fees and services, introducing healthy competition into the market.
  • Combating Unfair Practices: Our models address predatory pricing practices and aim to save consumers billions in real estate commissions.
  • Promoting Transparency: We believe Sellers should not pay Buyer Brokers, eliminating conflicts of interest and promoting fairer practices.
  • Encouraging Innovation: Our complex but flexible compensation sections give innovators more options to compete on fees.

Why This Matters:

  • Reduces Bribery: Paying someone else’s Buyer Broker is akin to bribery and can influence the advice given to Buyers.
  • Protects Fiduciary Relationships: Interfering with the Buyer Broker’s duty to their client is problematic.
  • Enhances Competition: Current systems are anticompetitive, preventing Buyers from negotiating effectively.
  • Respects Common Law Duties: Our language restores the common law duties that brokers should follow.

Moving Forward

This is just the start! We expect our compensation clauses to evolve as new business practices emerge. Let’s work together to create a fairer, more competitive real estate service market!

Questions?

Whether you are a broker trying to navigate the upcoming changes, or a consumer confused on what you are about to sign, we’d love to talk with you. dmiller@caare.org or wendygilch@caare.org

NAR is Gunning for Discount Brokers

googlea198c6af8c9d2ddd Pocket Listing – when a broker severely limits the marketing of a client’s property to collect a double commission.

In a truly misleading and anti-competitive move, the National Association of Realtors (“NAR”) has announced a new rule that directly attacks brokers who discount their fees. Instead of calling it, “A Conspiracy to Eliminate Discount Brokers,” NAR is calling this new Rule, “The Clear Cooperation Policy.” Realtors who violate this Rule can be charged with an “ethics” violation or worse. Apparently they believe that the U.S. Department of Justice will be fooled by their play on words. In order to distract attention from the real purpose of this new Rule, NAR falsely claims that the Rule is designed to stop the much complained about practice of “pocket listings.” However, CAARE has written numerous articles about pocket listings (click here) and this Rule does not prohibit pocket listings. Not even close. And yes real pocket listings are bad. NAR’s new rule “against” pocket listings actually encourages pocket listings. Confusing right? And we haven’t even told you what pocket listings are yet…

Brokers pocket a double commission with pocket listings. Sellers pocket less money.

If you have ever had a Realtor pitch you with promises of reduced foot-traffic, test-marketing your home, pre-MLS listings, office exclusive listings, “Coming Soon” listings, or the promise of a long list of buyers who want to buy your home, then you’ve been pitched for pocket listings. Pocket listings are almost ALWAYS bad for sellers because they severely limit the marketing of your home (on purpose). If you limit the demand for the home, you can expect to see your home take longer to sell and sell for less. The usual result and goal of a pocket listing (a severely limited marketed listing) is that during the off-MLS period, sellers will receive a mediocre offer for their property from an in-house agent and that the sellers will feel coerced into the safe, “bird in the hand” decision. Sellers are intentionally placed in an extremely distressed decision making position so that the broker can “pocket” a double commission. A DOUBLE COMMISSION. That’s a lot of money.

The exception is the rule and why consumer groups hate pocket listings

NAR’s new rule “prohibiting” pocket listings has an exception for all those hated pocket listing practices listed above. The exception truly is the rule. NAR’s new policy is a ruse designed to fool and placate consumers, legislators, regulators and even some consumer groups. Pro-consumer brokers who compete on price and offer fabulous benefits to consumers have just had one of their most valuable consumer tools surgically extracted by their competitors. Consumers who seek out the advice and counsel of discount brokers who over innovative ways for DIY consumers to sell their houses without Realtors are now more likely than ever to be forced into paying a commission.

Perhaps one of the biggest reasons consumer groups abhor pocket listings is because they are accomplished through deceipt and betrayal. Realtors in most states are construed to be trustees of their clients’ affairs (“fiduciaries”). Offering a fiduciary level of service means that Realtors are baiting consumers with the highest form of service possible under the law. It means that Realtor clients have the right to expect that their agents will represent their best interests above all others, especially their own. Betraying that duty of loyalty for self-serving purposes is often construed to be a criminal activity (theft by swindle). Yet, that is what pocket listings are all about.

A Clear Conspiracy Policy to increase seller commissions

A group of the largest over-priced brokerage competitors in the country met for months to come up with this rule designed to stop brokers from offering cost saving help to DIY home sellers. DIY sellers often want to market their homes without paying the extraordinarily high commissions that MLS members charge. The last thing many DIY sellers want is to market their homes on the MLS because the purpose of MLS “advertising” is to attract brokers by offering them high and standardized commissions.  If a DIY seller’s advertisements are aimed at Realtors, they are likely to attract offers demanding high commissions. That’s exactly what many DIY sellers are trying to avoid. NAR has effectively removed that consumer choice.

NAR’s Rule directly harms consumers ($200 vs $12,000 in fees)

With NAR’s new rule, DIY sellers can no longer secure the assistance of brokers to help them sell their properties off the MLS. If a broker helps a seller advertise their property on Zillow and not the MLS, that broker can be fined and have their MLS access denied (that would put most brokers out of business). Yet, the last place many DIY sellers want to market their home is on the MLS because the main purpose of the MLS is to offer compensation to brokers. 3% in fees can easily translate into equity-stripping figures so high that it often completely eliminates any home selling profits for sellers.

Most DIY sellers are trying to avoid paying commissions. NARs’ new rule makes sure that if they use a broker, that they’re more likely going to end up paying other brokers the high fees that they are trying to avoid.  The purpose of the new Rule is to make sure that brokers who help DIY sellers can no longer offer those services that really help consumers save money. That will likely result in DIY sellers going at it alone. And unfortunately, DIY sellers often need the help of brokers to make sure that they are using the proper forms and complying with local laws. And up until now, those sellers often received the help of these discount brokers for $99 – 199. Now, NAR’s new will rule will likely result in sellers paying the standardized buyer broker commission of 2.5-3% (up to $12,000 on a 400k home).

Convoluted and complex are hallmark traits of anti-competitive schemes

The best anti-competitive schemes are often the most complex. And true to form, NAR is presenting convoluted and misleading talking points to attain their untoward goal of making sure everyone overpays for Realtors. They start off by reassuring the public that NAR is, “Pro-Consumer” and “Pro-Competitive.” Then they tell the public that they are eliminating the nefarious practice of pocket listings. Sayin it doesn’t it make it so.

Whenever a group of competitors meets and comes up with a policy that results in the elimination of a less expensive form of competition, you can bet it’s going to attract some attention. However, so far NAR has been successful in fooling a lot of people. Even the Consumer Federation of America came out and mistakenly “applauded” NAR for their new policy against pocket listings (click here). CAARE hopes to change all that with an information campaign designed to attract the attention of consumer lawyers and the DOJ.

 

CALL TO ACTION

We need your help. We are an underfunded non-profit charity and are unique in that we are the ONLY organization taking on issues like this in residential real estate. Here’s how you can help:

  • Click on the donate button at the top of the page.
  • Send this article to your Attorney General’s Office and suggest that they reach out to us.
  • Complain on the FTC and DOJ complaint hotline website pages.
  • Send this article to your local news organizations.

Our advice for consumers:

  • Stay away from big brokers – ALWAYS.
  • Selling a house is easy. Hire a discount broker and an attorney and you will save thousands and get better service and unfettered advice.
  • If a Realtor proposes that you consider a “Coming Soon” or “Office Exclusive” listing, run away – FAST. 
  • Make sure your listing contract states that no buyer brokerage fee will be paid to anyone if there is no buyer broker. That windfall should go to the sellers, not the brokers.
  • Consider owner-hosted open houses instead of Realtor open houses. Realtor open houses help Realtors find buyers to buy other properties. And make sure you listing contract states that you save the buyer broker commission if you find the buyer.

 

Minnesota Realtors are Lobbying Hard for an Anti-Consumer Law

Our Executive Director, Doug Miller, testified before the Minnesota Senate Commerce Committee on March 6th, 2019 about a Designated Dual Agency Bill that the Realtor Association is attempting to pass. This law conceals the conflicts of interest from the consumer and consumers are actually encouraged to divulge confidential negotiating information to untrusted parties. The bill was introduced by a Senator who is a Realtor. The chair of the Senate Committee was a Realtor and the bill is moving to another committee in which the same Realtor is chair of that committee. Here is a rough white paper that Mr. Miller wrote on this topic to be distributed to Minnesota consumers.

DesignatedAgencyWhitePaperMN

 

It’s Soooo easy to become a Realtor. Should you trust them?

It’s Not Rocket Science.

In fact, becoming a Realtor may have some of the lowest entry standards of any profession. Only 11 states require a high school education and most require only 90 hours of pre-licensing education (some as low as 30 hours) geared towards passing the exam. Montana requires a 10th grade education…  These people are selling houses?

Continuing Education Requirements

To make matters worse, many states approve classes on self-promotion for continuing education credit. Classes that teach Realtors to join more than one place of worship and to call all their friends and neighbors and sell them your services. In other words, classes that have no redeeming licensing value are getting approved for credit.

Then Why Do They Charge So Much?

Forget about all the Realtor talking points about how many people they have to split their fees and all the competition between Realtors as explanations for why their fees are so high. In an efficient marketplace, those things just don’t matter. Real estate fees make no sense and are artificially high because the listing broker controls how much the buyer broker makes. In other countries, the buyer agent is an hourly employee who drives buyers around. When the buyer finds a house, the buyer uses an attorney to draw up an offer. Commissions total 1-2.5%.

Prior to the Multiple Listing Service (MLS), commissions were approximately 2.5% or less in the United States. However, when the MLS arrived and listing brokers started “sharing” their commissions with agents working with buyers, all of sudden real estate commissions doubled. The MLS is now a way for Realtors to horde data and force people to pay for a buyer broker whether they want one or not.

Are Buyer Agents Free?

Of course not. But Realtors will tell you all day long that they work for free. The National Association of Realtors came to the rescue of Realtors by providing Realtors with an absurd “Code of Ethics” that makes it “ethical” for Realtors to lie to you and tell you that they work for free. Here it is:

Standard of Practice 12-2

REALTORS® may represent their services as “free” or without cost even if they expect to receive compensation from a source other than their client provided that the potential for the REALTOR® to obtain a benefit from a third party is clearly disclosed at the same time. 

Buyer agents are trained to lie to you about their fees being free in order to prevent you from negotiating their fees. In fact, savvy home buyers negotiate very large rebates from buyer brokers (from smaller firms) all the time. By forcing consumers to pay for a buyer broker whether they want one or not has more than doubled the commission cost of buying or selling a house.

Why are Brokers Paid a Commission?

One of the requirements of putting a property in the MLS is that Realtors must offer a commission to other brokers who find the buyer. The MLS is not simply a database. Rather, it is a way to force buyers and sellers to pay for a buyer broker. It would be far more efficient if the MLS did not exist and only a public facing portal like Zillow did their job without any strings. Take away the MLS and we could start to see fees be commensurate with the complexity of work being done.

If Realtors charged more like attorneys do, the cost of hiring a Realtor would come way down. Yet attorneys are far more qualified and educated.

Isn’t It Important to Have a Qualified Agent Representing Me?

Maybe. The problem is that few agents/brokers can provide representation because they have inserted so many conflicts of interests between them and their clients. Whether it be selecting a title company or steering buyers towards in-house listings or listings that pay big bonuses, the conflicts are rampant and often undisclosed.

When you think about the type of work an agent does, you quickly realize that few, if any, are really qualified to do the work for which they are hired. Unless you believe that 90 hours of education on how to pass an exam prepares an agent to practice law and draft binding contracts, you quickly realize that few of the jobs being done by Realtors SHOULD be done by Realtors. They are not qualified to handle the financial aspect of qualifying a buyer. They are not trained in the science of determining the value of a property (appraisal). They are not qualified to inspect a home and most can’t even measure a house. They can put a sign in your yard or drive you around though.

Isn’t Buyer Representation Important?

Maybe. If it’s done by a highly qualified professional who actually represents the buyer. The low entry standards to the profession make this highly unlikely. Worse, most brokerages spend an enormous effort to guide buyers to their own listings where the broker simply can’t negotiate for their clients.

The best way to find out if buyers want to hire buyer agents is to allow them to pay for the buyer agent out of their own pocket. Have the sellers pay their broker and the buyers pay their own. We believe it is highly likely that most buyers (who already find the house they want to buy without a Realtor) would go at it alone or hire a much more qualified attorney to draft the offer and save a ton of money in commissions.

Why Are the Entry Standards So Low?

Realtors are free employees for brokers. They get to supervise them and the agents work exclusively for the broker, but agents are treated like independent contractors. The “masses of asses” business model (first coined by a large group of brokers called the “dirty dozen”) makes it possible to hire as many Realtors as you want. They don’t care that the turnover rate is 70% every two years. All they care about is that they have so many Realtors working for them that everyone will have a friend or neighbor who is a Realtor. The more Realtors you have in your office, the more likely that they will sell to a friend or neighbor. This is why there are 2.5 homes sold every year for each active real estate licensee.

The National Association of Realtors is the most powerful industry lobby in the United States. It is political suicide for legislators to go against them. In the last election, they boasted that over 90% of all the candidates they backed got elected. That’s in both the state and federal elections. Think about that a minute.

They also appoint the regulators (often ex-Realtors) and write their own laws. The current president of the Association of Real Estate Licensing Law Officials (ARELLO.org) is a Realtor. They are the biggest advertiser in newspapers and it is risky business for newspapers to write negative Realtor stories. They own our government and have set their fees and standards accordingly.

In other words, the entry standards are low because the big brokers want it that way.

What Can I Do About It?

Read our website for tips and traps in selling and buying a home. Engage the services of small independent brokers who will negotiate their fees and not expose you to dual or designated agency. Make sure your agent is qualified and well educated. If you want to avoid paying a buyer broker, talk to some brokerage firms that pay rebates or find an attorney who is also a broker who may be able to help. Use an independent title company and hire an attorney before you sign anything – especially the buyer representation contract or the listing contract.