The government wants to know what’s up with real estate pocket listings

NAR’s Melanie Wyne and industry attorney Mitch Skinner discuss federal regulators’ concerns ahead of June real estate competition workshop

WASHINGTON — Pocket listings and state regulations regarding dual agency and minimum service requirements may be on the agenda at the real estate competition workshop to be held by Department of Justice and the Federal Trade Commission on June 5.

That’s according to Melanie Wyne, the National Association of Realtors’ senior policy representative who spoke at the Council of Multiple Listing Services (CMLS) Brings It To The Table event Tuesday, held in conjunction with NAR’s annual week-long conference, the Realtors Legislative Meetings and Trade Expo, a.k.a “Midyear.” In conversations with the DOJ and FTC, NAR is trying to get a handle on the issues they want to cover and the questions they want to ask at the workshop, Wyne said.

“We’ve been able to identify discrete issue areas that may be of concern to them. They’re asking a lot of questions about pocket listings,” as well as state regulations regarding dual agency and minimum service requirements, Wyne told about 200 attendees at the event.

One thing that probably won’t be on the agenda? Disrupting the MLS, according to industry attorney Mitch Skinner of real estate law firm Larson Skinner PLLC, which has been representing CMLS in calls with the DOJ and FTC.

“On the calls, they [the DOJ and FTC] have said as much — [that] the MLS is pro-competitive. I don’t get the sense that they want to disrupt the MLS,” Skinner told attendees.

CMLS has stressed to the federal regulators MLSs’ role in increasing competition — a role recognized in court cases and that should not be messed with, he added.

The agencies seem to be trying to find out how the real estate industry has changed in the past decade or so, according to Skinner and Wyne.

They’re asking why technology hasn’t disrupted real estate like it has other industries, Wyne said. NAR has pointed out that “in many cases technology is not a disintermediary, it’s a superintermediary — it can be an extra added cost rather than taking costs out,” she said.

CMLS has “pushed back a little bit” on the premise leveled by some, namely Washington. D.C.-based think tank the Information Technology & Innovation Foundation (ITIF), that there’s a problem in the industry with consumer access to data. Instead, over the past 10 years access to listings has “exploded,” Skinner said.

“There’s sort of this assumption that every industry should be disrupted and that disruption is inherently good. I don’t know the answers to those questions,” he added.

Last month, NAR released a commissioned report detailing the pro-competitive benefits of MLSs. That report emphasized that listing data “doesn’t just pop up,” Wyne said, but is gathered through the efforts of brokers who submit the data to their MLSs and who might be less inclined to do so if the data were required to be open, as suggested by ITIF.

That means opening up listing data could mean less data for consumers, not more, Wyne said — an argument ITIF has rejected, pointing out that agents still have an obligation to their clients and that the idea that brokers would not exchange listing data with one another even though they would know that this action would hurt their customers represents “a low opinion of brokers.”

Wyne and Skinner highlighted brokers’ fiduciary duty to their seller clients as a fundamental factor that ITIF seemed to ignore.

“Our position is that it’s the broker and the homeseller that ultimately have control over where listings go,” Skinner said.

“The let-the-data-be-free thing ignores thousands of different things, but it’s really up to these two parties.”

But what of brokers’ fiduciary duties to the only parties that bring money to the table — buyers? Krishna Malyala, who attended the CMLS event and is CEO of real estate tech firm TLCengine, noted that NAR’s Realtor Code of Ethics imposes a fiduciary responsibility to buyers as well as sellers.

A “data chasm” between buyers and sellers currently creates information “assymetry” that favors sellers over buyers, according to Malyala. TLCengine specializes in calculating home affordability costs.

“One of the main issues that needs to be argued [at the] DOJ is access to more information to properties,” Malyala later informed via email.

Listings that don’t show up in the MLS, such as pocket listings (also called broker secret listings, quiet listings or off-market listings), throw off comps and push prices higher, skewing the market to sellers, he said.

Companies like Redfin are trying to give buyers more access to information about properties, but brokers still limit access to data by not displaying certain details such as a home’s foreclosure status, its previous sales prices and history in non-disclosure states and utility data, according to Malyala.

“I believe that the seller agents need to collect this data and disclose this because it is like having an oil tank in the ground that could leak and cause financial hardship for the buyers,” Malyala said.

Agents should also disclose another affordability factor: accurate tax data, Malyala said.

“[W]hen I bought my house, it had a veteran preference which got a 10 percent tax discount, which the agent never disclosed. So my taxes went up nearly 15 percent after it was reassessed after the sale,” he said.

There are also cases where tax data on a property is from a previous year and not the current assessment or where state laws, such as in California, cap property taxes for current owners and hike them for new buyers but that’s not disclosed, he said.

The DOJ and FTC have yet to post the agenda for the workshop. Katie Johnson, NAR’s general counsel, announced Wednesday morning at a meeting of NAR’s Association Executives Committee that she will be a panelist at the workshop at the request of the federal agencies.

When an MLS executive at the CMLS event asked whether he should attend the workshop or watch it via live stream, Wyne said that if he had questions he wanted answered, “there’s no substitute for being there.”

Article by Andrea V. Brambila

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