By Mark Blazek, President
Greater Chattanooga Association of REALTORS®
Last week we discussed how off-MLS listings are at an extreme disadvantage, as such listings are not getting maximum market exposure when hidden from more than 1450 REALTORS® in the market. While some sellers may desire an off-MLS listing for the privacy factor, there are other important factors to be considered such as skewed market data and potential violations of fair housing and antritrust.
Consider this scenario: A seller has a high-end property and wishes to maintain some semblance of privacy while their home is on the market. The seller asks his agent to keep the listing off the MLS but share the listing with a few select peers, who are known to work with a certain demographic. This scenario seems to be a positive one for both the seller and agent; however, there are potential pitfalls that we need to explore.
As an off-MS listing, the property is not exposed to full population of potential buyers and this lack of exposure potentially decreases the chance of the seller obtaining the highest and best price for their home. When only a few are aware of the property, less than a few may make an offer. A seller might get their asking price, but did they receive the highest and best offer? That seller will never know when their home is not exposed to the entire buying public, thus increasing the seller’s chances of receiving higher or even multiple offers.
In an isolated incidence, this may seem like a no harm, no foul situation. The home sells – seller and buyer are happy and life goes on. But let’s consider the impact of off-MLS practices on the entire real estate industry. In most cases off-MLS listings end up in the MLS at or near closing – the listing agent is eager to show their ever-increasing closed sales volume. Yet, the more this happens, the less valuable the MLS data is for all future sellers and buyers. Eventually, “days on market” will mean nothing, and future sellers will make list price decisions based on skewed comparables. Also, buyers will make offer price decisions based on that same skewed data. Everybody loses.
Setting aside the value of the MLS data, a seller still may maintain they are more comfortable that their agent is marketing their home, not to the masses, but to the right “type” of buyer. What we all must keep in mind is the fair housing law, which prohibits discrimination on the basis of race, color, national origin, religion, sex, familial status and disability. In addition to these protected classes, the REALTOR® Code of Ethics also prohibits discrimination based on sexual orientation.
In addition to potential fair housing violations, sellers and listings agents must consider the ramifications of to whom the property is NOT being marketed. Can we say antitrust? A seller may benefit from a reduced commission, but a select group of agents working outside the MLS could be interpreted as price-fixing. This certainly would be the case if the agents involved agree to certain commission splits in exchange for information about off-MLS listings. Penalties for antitrust violations can include treble damages, hefty fines and imprisonment up to ten years. I think we all would agree such penalties are ones we all want to avoid.