Looking for clarity in the Clear Cooperation debate

With the Aug. 17 implementation deadline for the business practice changes outlined in National Association of Realtors’ commission lawsuit settlement agreement in the rearview mirror, the real estate industry has turned its focus to a new point of contention — NAR’s Clear Cooperation Policy (CCP).

As part of NAR’s mandatory MLS policies, Clear Cooperation requires brokers to list properties on an MLS within one day of publicly marketing the listing. But while the debate surrounding CCP has only begun to boil over in the past six weeks, the policy in its current form dates back to 2020 — and the intention at the heart of it goes back even further.

Saul Klein, the CEO of San Diego MLS, began his career in the real estate industry in the 1970s.

“I started selling real estate in 1975 and we had a rule called ‘Mandatory Submission,’ and it required us to submit listings to the MLS,” Klein said. “This rule isn’t new; it has been around for over half a century.”

Prior to the implementation of the current CCP in May 2020, listing brokers had two business days from the signing of the listing contract to either enter the listing into the MLS as “active” or submit a listing exclusion form, which had to be authorized by the seller, to the MLS.

Under CCP, listing brokers have two days from the signing of the listing contract to input the listing in the MLS as “registered,” “coming soon” or “active.” Additionally, within one business day of marketing the property, the listing broker must ensure that the listing’s status in the MLS is either “coming soon” or “active.”

But if the property is not marketed publicly, it does not need to be listed as “coming soon” or “active.” This is known as the policy’s Office Exclusive exception.

Despite the rule’s long history, real estate executives have been taking strong stances on the policy in recent weeks. On one side are brokerage leaders like The Agency founder Mauricio Umansky, who are firmly against CCP.

“I think that it’s anti-competitive and anti-freedom of choice, which is what our entire country is built on,” Umansky said. “I believe that a homeowner should have the choice, with full disclosure and full understanding of what they’re doing, of how they choose to market and sell their home. That should not be dictated by an association. It’s not a one size fits all.”

’Fooling themselves’

While some in the real estate industry find the argument of increased seller choice compelling, others are not buying it.

“When listing a house, you have two main goals. One is to maximize price and two is to minimize the time a home spends on the market,” Zillow President Susan Daimler said. “The data shows us that maximum exposure achieves those two goals. The more homebuyers and agents that are exposed to your listing, the faster it sells and the higher price you get.“

Klein’s take is even more blunt.

“What seller in their right mind would not want maximum exposure of their listing?” he asked. “There are of course certain people who might want their listing withheld from the MLS, but that is rare.”

Supporting these assertions is a 2023 study from Bright MLS and Drexel University. It found that sellers who withhold their listings from the MLS can potentially lose up to $50,000, with homes listed on the MLS selling for an average of 17.5% more than their off-MLS counterparts.

“Any brokerage firms today that say they want to give the seller more choice, they are fooling themselves that they have their own agenda. Because if the sellers really are informed, understand the circumstance, understand the consequences of not listing on the MLS, then I think most wouldn’t choose to not list on the MLS,” Klein said.

James Dwiggins, the CEO of NextHome, also doesn’t buy the narrative of seller choice. He agrees with Klein that brokerage motivations for ending CCP are self-serving. And brokerages, he said, will be at “massive disdvantage” if the policy goes away as larger firms will “hoard listings internally,” he wrote wrote in a LinkedIn post.

While Leo Pareja, the CEO of eXp Realty, doesn’t feel the rule is perfect, he does like the fairness and transparency it creates. This is something he has gained even more appreciation for while helming a brokerage that operates in 20-plus countries.

“In other countries, our consumers and agents have to go to eight or 10 sites to get a clear picture of what the inventory is,” Pareja said. “As I understand it, some of the folks on the other side of the argument want to be able to post some of their properties to their private website and if they don’t sell then, they’d put them on the MLS, but that isn’t how cooperation works.

“MLSs are data cooperatives and if you want to taketh then you must giveth. So, with that as our national framework, that sets the rules of engagement, which to me are paramount to the cohesiveness and totality of the dataset. If you participate, you have to participate — you can’t optionally participate.”

Pandora’s box

Many proponents of CCP also believe that repealing the rule would create more opportunities for potential fair housing violations. As Dwiggins sees it, in a world without CCP, buyers would need to search many brokerage websites to find every for-sale listing, “and may still not have access to or know about them.”

“Statistically, if any one group of people control something unique, by definition it is going to exclude another group,” Pareja added. “So, it could first-time homebuyers not getting access to affordable housing options that is being gobbled up by investors through a brokerage’s private network or something else.”

In a 2017 research paper published by Sage Journals, a peer-reviewed academic journal, the authors found that buyers most likely to lose access to pocket listings are people of color, which would be bad news in the world of fair housing.

More recently, Lisa Rice, the president of the National Fair Housing Alliance, told USA Today that “fair housing groups have been fighting pocket listings for decades and decades.”

“Discrimination is not logical. We need a fully transparent system for all houses on the market, that all real estate agents can see what’s available and what’s on the market,” Rice added.

But fair housing concerns aren’t the only worries for industry leaders when it comes to the potential repeal of CCP.

“If 5% or 10% of the data isn’t on the MLS, where is an appraiser supposed to go to get that information? And what about the banks that underwrite and finance — how are they supposed to get comfortable around the value of a property?” Pareja postulated.

Daimler wonders how a move to a market solely populated by private listing networks would impact new brokerages that want to gain entrance. In her view, if all listings are held by only a handful of firms, it would make it very difficult for a new agent or brokerage to find a property for a buyer, or to earn the business of a seller due to their lack of an internal network for advertising.

“It really disadvantages new entrants to the market — different brokerage models and different agent models, which we want to see more of,” Daimler said. “We want to see more innovation, and to me, that was the whole point of the commissions lawsuits and the settlements.”

Reform, not repeal

As the industry looks to move past this debate, some leaders believe a reform of CCP is the best option to move forward. Anywhere, which is publicly opposed to CCP, spoke out during a recent forum to clarify its position.

“We have written and presented to NAR to call for a reform of the rule rather than repeal,” said Caitlin McCrory, Anywhere’s vice president of industry relations. She added that the firm’s stance on the rule is based on the principals of consumer choice and equitable access to listings.

“We want to advocate for a policy that accommodates various seller directives, and we also believe in a policy that supports the agent-consumer relationship rather than potentially interfering with it,” she said.

“We’ve contemplated alternatives, like relaxing the restrictive one-day rule for marketing a property on the MLS, affording exceptions for certain properties or scenarios, or offering additional ways to preserve seller privacy in the process. We think the industry should be having thoughtful discussions on these alternatives.”

HomeServices of America, which also has a national footprint, is taking a measured approach to its stance on CCP. Executive vice president Chris Kelly wrote in an email that the recent upheaval in the real estate industry has made it an “opportune time” to evaluate CCP and “assess whether it has effectively advanced the goal of increasing transparency for consumers, while also respecting a seller’s ability to make personal choices regarding the marketing of their property.”

But HomeServices also believes that a “thorough examination of the data” is needed before any decisions are made.

It is unclear which path NAR will take, as the trade group has stayed silent on the issue. In the meantime, the debate marches on.