In Which Sam DeBord and I Solve the Clear Cooperation Dilemma

I did a livestream on Facebook yesterday with Sam DeBord, a good friend and a fellow supernerd in MLS-related topics. Of course, he’s also the CEO of RESO and an active participant in NAR policy circles, so he’s among the most knowledgeable in the industry on the issues.

We debated, discussed, and I’ve embedded the video below in case you didn’t catch it on the Book of Faces.

Most importantly, I thing we solved the issue with Clear Cooperation Policy. Yes, I know exactly how that sounds. But seriously, I think we did. It’s a pretty simple approach, so I’m happy to lay it out for you all.

The Discussion

First, here’s the video from the livestream, which I uploaded to YouTube:

I enjoyed it, and was quite amazed at how many people were in the chat.

Basically, we started with my earlier post stating that Clear Cooperation Policy (“CCP”) is a disaster in the making, because Sam thought CCP was a wonderful step forward, if imperfect. The immediate source of the imperfection, of course, is the office exclusive exemption to CCP.

I won’t go into everything we discussed, so let me dive into the problems and then the solution as a way of laying out the issues.

The Problem: Disingenuousness

Early on in the conversation, Sam used the phrase “disingenuous Coming Soon” and I think that word really got to the heart of the problem.

We all agree that there are times and circumstances where the seller doesn’t want the property fully exposed to the entire marketplace. We’re all familiar with the examples constantly brought up: celebrities, politicians, victims of abuse, etc. For that matter, Coming Soon as a marketing strategy is not a bad thing necessarily; if it generates excitement and interest, well, that’s fantastic for the seller.

The problem is disingenuousness. The problem is that brokers and agents have taken an exception and enlarged it to be the norm because of financial interests. There’s double-ending of course, but as I discussed with Sam, there’s also the FOMO advantage from the network effect created by exclusive inventory strategies. All of those exist to benefit the professional, not the consumer.

So when Office Exclusives or Coming Soons or whatever else is used to benefit the broker or agent, that’s disingenuous. When those tactics are used to benefit the consumer, because of special circumstances, then that’s legitimate.

The Solution: Seller Choice

The solution then is relatively simple and straightforward.

The default that is best for everyone is wide exposure and transparency — full cooperation (which is different from compensation, mind you). The default best for most situations is for the property to be entered into the MLS, syndicated everywhere, and available to all buyers and their agents. That full exposure guarantees that the seller will get the most interest, the most qualified offers, and the best price in the shortest amount of time. So we all must agree that a full, open and transparent market is the best, and that the MLS should be that open and transparent market.

When special circumstances warrant departure from that default, the MLS merely needs to make sure that those circumstances are legitimate, i.e., truly intended to benefit the seller given his/her special circumstance, rather than a disingenuous attempt to benefit the agent or broker.

The simplest approach then is what I’ve suggested in the past, especially in the MLS Path Forward paper I co-authored with David Charron. In this post, I explained the waiver process:

Closely related is the issue of waivers. I got a lot of questions on this, because people kept insisting that there are times when the client really does want to keep the listing information private, or does really want to “test the market” to see if he wants to sell at all.

Here’s what we wrote in the paper:

Waivers and Flexibility

Finally, the MLS will need to put into place some level of flexibility to allow Participants and agents to deal with the exceptions where off-MLS and Coming Soon are both justifiable and necessary.

The typical situations invoked are celebrity clients, divorces, or other sensitive situations where the client’s desire for privacy trumps considerations of wide exposure. We agree that there are situations where advertising on the MLS is against the client’s best interests.

However, we must stress that such situations have historically been rare, and usually involved high-end luxury properties and unique consumers. There is no consumer privacy justification for systematic and programmatic off-MLS marketing strategies involving exclusive inventory.

Therefore, the waiver process must be such that the exception does not swallow the rule. This is effectively what has happened to current Coming Soon processes. Be vigilant.

If a REALTOR has a celebrity client, she can request a waiver. If the client really wants only qualified buyers for a super-luxury property, go ahead and get a waiver. However, “testing the market” doesn’t really qualify for a waiver from the Primary Marketplace rule; letting other agents know that a property will be coming to market with minimal information would go further in testing the market than keeping it off the MLS.

To further clarify, I favor a flexible-yet-robust waiver process here. By that I mean the agent has to do real work to get a waiver.

Today, all that is needed is that the seller sign some standardized form. That’s not good enough in my book; it allows for too much leeway and ultimately, the exception swallows the rule.

I would rather see something more like this process for waivers:

• Agent files application for waiver along with a written explanation of why the waiver is warranted. Client must sign off on that written explanation. The essay portion is not a standardized form.
• MLS reviews the application, then contacts the client to make sure he understands what he’s asking for.
• If the client is fully aware of the pros and cons, issue the waiver.
• If the client is not fully aware of the pros and cons, issue a disciplinary notice to the Agent. At a minimum, that Agent needs additional training on fiduciary duty and informing clients. Repeat offenders get booted from the MLS because that implies trying to get around the rules rather than ignorance.

At the same time, if the same Agent or the same Participant brokerage is submitting a waiver on 40% of listings… that warrants a closer look. If the reason is that 40% of the Agent’s clients are celebrities, fine, no problem. If it isn’t… well… we have a clear attempt to circumvent the rule.

I think this really is the solution to the Clear Cooperation Policy debacle.

A blanket rule that if you are a member of the MLS, then there are no exceptions, no Coming Soons, no Office Exclusives, nothing: the listing must be in the MLS, period, end of story.

However, you may request a waiver from just about any requirement or rule on behalf of your seller client. Want to keep the address secret? Apply for a waiver. Want to keep the price secret? Apply for a waiver. Want to do a Coming Soon campaign for a month? Apply for a waiver.

The only thing that the MLS needs to do then is to make sure that there is truly informed consent on the part of the seller. That is, the MLS simply needs to make sure that the request is legitimate, at the request of the seller, and not disingenuous. A simple interview/phone call/Zoom with the seller for 10 minutes ought to do the trick.

The MLS Is the Correct Entity to Determine Legitimacy

There is no justification for the MLS to interfere with a seller’s right to sell or market his property however he sees fit. Some of the rules of the MLS today do just that.

There is, however, every justification for the MLS and the REALTOR Association to a lesser extent to ensure that the professionals are not behaving in a disingenuous fashion to benefit themselves at the expense of the consumer. All that we are suggesting is that the MLS ensure that the seller truly understands what is being sought and that the agent did not misbehave.

I imagine the conversation to be something like the following.

MLS: I see here that you are looking to do a Coming Soon strategy for three weeks?

Seller: Yes I am.

MLS: You know that will limit the exposure of your home, and might mean you get less for your house than you would with full exposure?

Seller: I do.

MLS: Could I ask why you’d want to do this?

Seller: I have three small children and two big dogs, and if I could get a reasonable offer even if it’s not as much as I could get before I have to do a bunch of showings, I’d prefer that.

MLS: Okay, great. Thank you!

The seller here clearly understands the pros and cons of a Coming Soon type of a strategy. There is real informed consent. Why would the MLS prevent that seller from pursuing his preferred strategy? The only thing the MLS needs to establish is that the listing agent did not disingenuously steer the client into strategies that hurt him.

And I do argue that the MLS is the correct organization to do this work. Brokerages have self-interest, as do agents. REALTOR Associations maybe could be involved, but their focus really is on Code of Ethics and professionalism, rather than on the day to day functioning of the property marketplace. That is the MLS’s role.

In terms of enforcement, this blanket-plus-waiver is easier to administer than the current CCP rules. It can be financed via application fees for waivers — make the fee a reasonable amount for some MLS staffer to do a 15-30 minute call. The goal isn’t to make money from these fees, or to discourage legitimate applications for waivers. The goal is to pay for staff time and effort to ensure legitimacy of the waiver request.

Broker-Owned MLS Should Experiment

In his post, Glenn Kelman called upon NAR to do something about office exclusives in the November meeting. Sure, that makes sense to do. But I think in the meantime, the broker-owned MLSs could experiment with this blanket rule plus waivers system. They don’t need to wait for NAR to approve or not approve any kind of policy. They can do what they want, as NWMLS has already done.

And that learning can inform the rest of the industry as to what the correct approach should be so that policies at the NAR level can be built on empirical experience, rather than political expediency.

Win-Win-Win

Let me conclude by strongly recommending all MLSs, NAR, and various other entities to pursue this policy that originally came from David Charron and myself, and now from Sam DeBord and me. It’s a win-win-win.

It’s a win for the brokers and agents who want to pursue legitimate marketing strategies for their clients. It’s a win for them in that they don’t look like idiots in front of consumers about a property that is not in the MLS at all. At a minimum, they should be able to tell their buyer clients that information on this property is limited, due to a special waiver, but that as a member of the MLS, they can find out more.

It’s a win for the consumer, as buyers should have transparent access to all properties on the marketplace that are not in special situations. Those special circumstances should be fairly limited as these rules eliminate games by agents and disingenuous fuckery. If special circumstances do exist, the MLS knows about them and can mediate between the buyer agent and the listing agent to make information available as needed. The seller wins by having full control over how his property should and should not be marketed without arbitrary MLS rules standing in the way. All he needs to do is to make clear to the MLS that he is fully informed, and fully in control over marketing decisions made by his agent.

It’s a win for the MLS as it reasserts its place as the primary marketplace, and the facilitator of both information transparency and special situations. It allows the MLS to meet the needs of all of its stakeholders without impossible enforcement burdens, like trying to figure out what is and is not “public marketing.” Simplify the enforcement, put in a way to finance that enforcement, and liberate the agents and the consumers who work with them.

Who loses? Those brokers and agents who want to game the system, figure out loopholes, think of various ways to take advantage of their clients for their own benefit…. I don’t have a problem with that. Do you?

So there it is. If there was a problem, yo we’ll solve it. Now check out the hook, while my DJ revolves it.

-rsh