Winding back the odometer and selling your apartment as new

One of the most closely watched developments in residential real estate over the past year has been the expansion of private listing networks, an initiative led by Compass — one of the nation’s largest residential brokerages and a firm with a tech-forward reputation.

The “watchers” are namely non-Compass brokers and brokerages, as well as all Multiple Listing Service (MLS) stakeholders, and their concerns are entirely warranted. We’ll define terms below, and you can decide for yourself whether this offering inclines you toward or against Compass.

Frankly speaking, I haven’t paid much attention to it, and much of it has flown under my radar, as I’ve seen Robert Reffkin, Chairman & CEO of Compass International Holdings, spend more time speaking out against Zillow staking legal claims to valuable data provided by firms like his. (Here’s an example.)

While he’s not wrong, his protest smacks of hypocrisy.

Let’s discuss, and we can decide whether that’s a valid argument, or whether I’m just a whiny non-Compass agent. (The two are not necessarily mutually exclusive.)

What’s a Private Listing Network?

Compass has created a concept called a Private Exclusive. In essence, rather than immediately listing a property on the Multiple Listing Service (MLS) — a private, centralized database created and paid for by real estate professionals which distributes and broadcasts listings across public search portals — a property is first shared privately with agents and qualified buyers within Compass’s network and affiliated brokerages.

While the relevance is limited to those actively looking at that specific property’s parameters and location, approximately 340,000 agents have access to a Private Exclusive. (That’s essentially the size of the More For LES distribution list. Just kidding.)

At this point, the listed property can be marketed, shown, and discussed without accumulating public Days on Market (DOM) or publicly visible price reductions — metrics that can alter the market’s perception of a property. The implications are simple: the longer a property has been on the market, or the more (or larger) the price reductions, the more likely the case is that a unit is either overpriced or problematic.

According to Compass, during the Private Exclusive phase, the property is marketed privately to agents and their clients. Next, it receives broader exposure through Compass and other participating websites, while still avoiding certain public market metrics such as days on market. This is called the Coming Soon phase. Finally, the property is fully launched through the MLS and syndicated to the broader marketplace, i.e., the Public Listing phase.

The first and second phases are optional, depending on a seller’s goals and circumstances.

What’s good about a Private Listing Network?

To answer this, it depends on where you stand and where you fall within the ecosystem.

Compass views the Private Listing Network as a way to offer homeowners flexibility before making a full public launch. Within the Private Exclusive phase, sellers can receive feedback from agents and prospective buyers before the listing is exposed to the broader market. This allows for the fine tuning of pricing before an initial listing price is recorded; the same applies for visible days on the market.

This period, as well as the Coming Soon phase, can also allow sellers and their representatives to begin attracting interest while completing repairs, staging, painting, arranging for photography, while building anticipation.

Finally, for sellers who prefer (or require) discretion, the Private Listing Network can reveal (or keep in confidence) property photos, floor plans, or other details.

And the bad (or controversial)?

Outside of Compass, the program has generated a bit of criticism, as you might imagine, from competing brokerages, industry organizations, and consumer advocates.

Beyond not getting invited to the party — and no one likes getting left out — industry insiders criticize the absence or avoidance of market exposure. Traditionally, the MLS has been the mechanism that provides the broadest possible distribution of listings, allowing the largest number of buyers to discover a property. A private listing network — by definition — reduces the number of potential buyers, showings, and offers that a property potentially receives. That is, of course, if you view the Private Exclusive phase on par with the Public Listing phase (and not as something analogous to “pre-marketing”).

Transparency is the next contentious issue. During the Private Exclusive and Coming Soon phases, Compass is collecting “closed-circuit” data and feedback; however, any price adjustments or absence of buyer engagement will not be reflected when (or if) the property is publicly listed.

During a recent interview on the Closed! Podcast at The Real Deal Forum, Brown Harris Stevens CEO Bess Freedman shared her take on why private listings hurt everyone, likening the Private Exclusive phase to rewinding a used car’s odometer and selling it as new.

Given that the MLS system was originally designed to encourage cooperation among brokerages and provide broad access to listings, opponents of this setup argue that concentrating inventory within brokerage-specific ecosystems makes it difficult for buyers and agents outside those networks to discover available properties.

What about the Lower East Side?

While the Compass Private Listing Network impacts the Lower East Side, it’s more of a macro issue around visibility and brokerage cooperation. As with ultra high-net-worth and high-profile individuals, private listings and discreet sales have long been in place, happening behind closed doors.

The Lower East Side may be viewed as its own private listing network, where select and established operators often market properties and make deals before they become public listings. It would be rich to consider this dynamic as a the equivalent of that of Compass — sheerly based on volume.

The real crux of the matter needs to focus on the listing agent’s client: the seller. If the seller wants to go with Compass and the Private Listing Network approach, they should do it with open eyes and without being steer by their representatives.

If they believe that their property will perform better and achieve the return they are seeking or beyond by testing privately, that is their prerogative. If they are pressed for time and already have a reasonable idea of what their property should fetch, they may be better off listing publicly from the start.

The real case, as always, is finding the right fit in terms of representation.

If you are considering a sale and want to talk through your options, feel free to reach us at More For LES.

Sources

• Compass Private Exclusives

• HousingWire: MRED Opens Private Listing Network to Agents Nationwide with Compass Data Deal

• RISMedia: Reffkin on Exclusive Listing Database — “We Want to Give Our Agents an Edge”

• MarketWatch: A Real Estate Giant Wants Sellers to List Homes Privately. Will Homeowners Benefit?

• Zillow: Private Listing Networks Are Damaging the Housing Market

• National Association of Realtors (NAR) MLS Antitrust Compliance Policy