A core principle of mine as some of you know from podcasts is “Strong opinions, weakly held.” That is, when presented with new data, new evidence, then my opinions are subject to change.
Last year, I wrote something up on BrightMLS’s Off-MLS Study saying that the conclusions of the report were overstated and based on thin and problematic data. In particular, I had issues with the data presented:
Simply put, there is a large discrepancy in the median sale price between On-MLS homes and Off-MLS homes. However, that’s difficult to call a “performance difference.”
Really, the only conclusion one can actually draw from that data is that On-MLS homes have a higher median sale price compared to Off-MLS homes. But consider the possible reasons:
- A seller might do Off-MLS for run-down handyman special homes.
- Investors might sell their properties Off-MLS for a variety of reasons.
- The wealthy tend to use an agent, which means On-MLS.
And so on and so forth. The ultimate sale price tells us nothing about “performance” of one method of marketing over another.
Unlike most organizations, BrightMLS actually took some of the criticism in the spirit in which it was offered and made improvements. And they recently released a new version of the study.
This is a huge improvement over the old study, and I think the conclusions in this one are far better supported.
Since I find few problems with the study, this should be quick and enjoyable for all.
The headline of the study is that homes sold On-MLS sold for 13% more than homes sold Off-MLS in BrightMLS’s market area:
Homes listed and sold on the MLS sold for an average of 13.0% more than comparable homes sold off-MLS. After controlling for property and neighborhood characteristics, this analysis found that homes marketed and sold on the Bright MLS between 2019 and the first quarter of 2022 had sales prices that were 13.0% higher than comparable homes that were not listed on the MLS. This amounts to an additional $45,471 to the seller for the typical home sold over the study period.On average, homes selling off-MLS over this time frame sold for $349,773 while similar properties sold on-MLS sold for $395,244. [Emphasis in original.]
Unlike last year’s study, we were not provided with Low/Mid/High square footage of the properties, but “controlling for property and neighborhood characteristics” implies that the authors did the work necessary to control for different sizes.
The key change, I think, is that BrightMLS addressed the Office Exclusives thing head on:
Ultimately, most homes that begin as office exclusives are not successfully sold that way, which extends the time period for a sale. Only 12.6% of properties that were initially marketed as office exclusives were successfully sold as an office exclusive. Nearly two-thirds (63.0%) of office exclusives were eventually promoted and sold on Bright MLS. The remaining 24.4% of properties marketed as office exclusives between April 2021 and December 2021 had still not sold or may have been removed from the market as of the end of the first quarter of 2022.
The study results also apply to office exclusives: Promoting a prior office exclusive listing by entering it into the MLS brings in a better price for the seller. Over the April 2021 through December 2021 period, homes that were originally marketed as an office exclusive but ultimately were listed on the MLS sold for 22.2% more than homes that were sold as an office exclusive. Homes also tended to sell more quickly when they were listed and marketed on the MLS than when they were promoted as office exclusives. The median days to a contract for homes selling on the MLS between April 2021 and December 2021 was 7. Homes that switched from an office exclusive to an MLS listing were on the market typically for 18 days before they then sold in 6 days on the MLS. [Emphasis added]
That’s solid work, and I think this report tends to support the conclusions far better than the 2021 version.
I am still somewhat disappointed that the study did not provide the one metric I really did want to see: List-to-Sale price differences between On-MLS and Off-MLS. From last year’s post:
You see, in order to really measure performance, what we really need is the List-to-Sale ratio. If the On-MLS properties showed a List-to-Sale of 99.2% versus the Off-MLS properties showing a List-to-Sale of 80%, then we have a true measure of performance. That really can tell us that marketing a home on the MLS results in higher sale price compared to what might have been.
The problem is that Off-MLS properties have, as you could imagine, no List Price. Public records data does not contain any list price, any reductions, any WEST (Withdrawn, Expired, Suspended, or Terminated) data, etc. It only has the final sale price.
But it’s a tiny disappointment since as I said, it’s very difficult if not impossible to get the List Price for Off-MLS properties, including Office Exclusives (unless the brokerages doing Office Exclusives voluntarily provide the List Price).
Maybe future versions of the study could find a way to get the List Price so we can look at performance differences there. On the other hand, if the authors did correct for a lot of the data (non-arms length transactions removed, filter out flips, new construction, multiparcel sales, etc.) then the end result (13% improvement in sale price) seems pretty solid to me.
An Answer to My Question/Objection
Last year, I thought the data provided what was actually not great news:
In fact, the only conclusion that this study and the data supports is that brokerages would see a 66% increase in GCI income by embracing Office Exclusives as a strategy. It’s actually worse than that, once you take the broker splits and such into account. If you do that, it turns out that a brokerage will actually make more money post-split from the 37% of the transactions that it did as an Office Exclusive than it will from the 63% that it did as a cooperative on-MLS deal.
That might not be the point of this study, and yet… there it is. I know this much is true.
This year’s study puts that to rest, I think, pretty conclusively. Only 12.6% of Office Exclusives sold as an Office Exclusive. So of the 37% above, only 12.6% of that sold for a 66% increase in GCI –> or about 4.6% of the listings marketed as an Office Exclusive led to that happy GCI ending for the brokerage involved. And those 4.6% of the listings sold for $100K less, which means $6K less in GCI. That might wipe out whatever profit gains the brokerage might make.
There are still some strategic reasons why a brokerage might want to emphasize Office Exclusives (see this post for more) but I don’t think increased profitability from an in-house transaction is necessarily one of them now.
Strong opinions, weakly held. New data, new information, new analysis means new conclusions. And kudos to BrightMLS for redoing the study and releasing the findings.