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“I support a common sense approach where sellers have a choice of where, when, and how to advertise their home for sale.” — Robert Reffkin
In the ongoing debate about the need for seller choice and the ramifications of rules that mandate homeowners to list on the MLS (Clear Cooperation Policy and MLS “Mandatory Submission” rules), it is important to discuss the risks and conflicts of interest presented by MLS exposure. Current MLS forms and disclosures fail to properly educate homeowners of these risks.
Selling a home is a major life event, often laden with emotion and serious financial implications. At the heart of the process lies a seemingly simple choice: whether and when to list on the MLS.
While often considered a standard step in marketing a home, this decision requires careful consideration due to the potential risks and conflicts of interest presented by MLS exposure.
These risks include, but are not limited to,
- Public price drops and accumulation of days on market.
- Buyer inquiries sold as leads instead of going to the listing agent the homeowner hired.
- The broad dissemination and monetization of homeowner’s data.
Despite these risks, NAR and MLS rules eliminate seller choice due to a lack of clear, plain-language MLS disclosures. Sellers may not grasp that they are losing the choice of how to market their home at the expense of the risks and consequences of marketing on the MLS. Moreover, they may not realize that their agent is forced to follow these conditions in order to have access to the MLS.
It is time to shed light on the less-discussed risks and consequences of listing on the MLS.
MLS disclosure on risk of days on market and price drops
Once a home is actively listed on the MLS, the “days on market” clock starts ticking, and price history (e.g. “price drops”) becomes public knowledge. MLS disclosures do not properly inform the homeseller that these “negative insights” become part of the permanent record of their listing.
These data points impact how buyers perceive the negotiating position of the seller, and this risk should be disclosed in detail. It is well known that if a property is on the market too long or experiences multiple price reductions, buyers may assume something is wrong with the home or that the seller is desperate. This can ultimately result in a lower sale price of the home.
Moreover, 40 percent of the homes on the market have a price drop, making them look like damaged goods. Current MLS rules don’t allow agents to provide homeowners the needed flexibility to test price privately. This risk and loss of seller choice should be fully disclosed.
Days on market and public price drops are not a feature of the home that the buyer is buying, it is a data point for negotiating. If the MLS tells buyers how long homes have been on the market, should the MLS tell sellers how long buyers have been searching for a home?
MLS disclosure on unintended consequences of mass exposure
What homeowners may not know is that when their listing appears on the thousands of websites that receive MLS syndication, their agent’s contact information is rarely visible, and buyer inquiries are diverted away from their agent. Buyer inquiries are almost always redirected to agents who have paid for leads generated by the homeowner’s listing — agents who may have no knowledge of their property or their neighborhood.
Moreover, once photos and other details about a property are broadly disseminated online, it’s virtually impossible to remove them. The internet has a long memory, which can have lasting consequences for both buyers and sellers. A recent uptick in criminals using information from photos of homes online makes this consideration all the more important.
One such article detailing recent property crime states that “police say people should consider removing images showing the interior of their homes on websites like Redfin and Zillow.” More transparent MLS disclosures are needed to inform sellers of the risks of sharing property details online given the potential security risks that can result from broad MLS syndication.
MLS disclosure on conflicts of interest and sale of homeowner data
When signing a listing agreement, homeowners deserve to be aware of the financial ecosystem surrounding their listing data. For example, homeowners and their agents likely have no idea that MLSs often get kickbacks from the sale of homeowner data to 20+ federal agencies, 300+ capital markets entities, 400+ property management companies, 500+ insurance companies, and 900+ mortgage banks and lenders.
Agents are not made aware of what happens to their clients’ data. Agents provide listing data and photos to their MLS with the intention of helping their clients. The MLSs then take that data and use it for their own betterment by selling it. Only the MLSs profit from this arrangement. The homeowner and the agents who invest their own money in the marketing that is sold do not benefit at all from the profits made from the sale of the information.
With four of the top five MLSs being for-profit companies, it’s clear that the for-profit MLS model will continue to take market share and that the MLS trend of monetizing homeowner data will increase over time. Moreover, both NAR and the two largest MLSs (CRMLS and Bright MLS) have venture capital arms that collectively have invested in over 100 companies, many of which use the homeowner data to operate, creating a further conflict of interest that should be disclosed.
Homeowners deserve to know the full list of entities to whom their data is being sold, how many millions of dollars MLSs and third parties make for selling their data and exactly how this data is being used. MLSs should facilitate an easy option for homeowners not to have their data monetized by third parties in any way (including referral fees from aggregators).
MLSs failure to disclose the implications of NAR’s Clear Cooperation Policy and Mandatory Submission rules leaves homeowners vulnerable to a system they may not fully understand. How many homeowners are aware that they are required to list their home on the MLS (or subject their agent to fines of up to $5,000) if they share a single social media post about their property being for sale?
By the time sellers realize the impact of the Clear Cooperation Policy and mandatory MLS exposure, they may already be in a position where their home’s market history is working against them, and their personal information is monetized a thousand times over.
MLS “Cooperation” between listing agents and buyer agents is the foundation of our industry. However, unlike when my mom started in real estate, MLSs now record days on market and price drop history. MLS “cooperation” in its modern form has evolved into a mechanism to monetize homeowner data by MLSs, aggregators and third-party data providers.
If the industry is going to uphold its commitment to improve transparency, NAR, MLSs, and state and local associations must step up and fully disclose the risks of broad MLS exposure in plain language to facilitate informed consent by homeowners. This is particularly important when policies like Clear Cooperation and MLSs’ Mandatory Submission rules eliminate seller choice by forcing homeowners to list on the MLS and relinquish control over their personal information.
Failing to make these changes will only further erode public trust and invite further scrutiny of the industry’s practices.
Robert Reffkin is the founder and CEO of Compass. He was inspired to enter the world of real estate by his mother, Ruth, a longtime agent who now proudly works at Compass. Robert completed a B.A. and M.B.A. from Columbia University and worked at McKinsey, Goldman Sachs, and as a White House Fellow.
