Private listings and the risk of lower home sale prices

A lot of industries have subpar reputations and bad actors. Lawyers have their own subset of comedians telling jokes about them. Doctors have a peculiar word for their faulty fellows. The “used car salesman” was always a foil for us real estate agents by having a reputation for being worse. Private listings may do more damage to our reputation than good.

However, we work hard to boost our reputation. During the height of the short-sale market, sales stifled to a quarter of what they were, and the average price sold went down 35%. It was like getting a 35% pay cut and having your hours compensated cut by 75%!

Plus, no health insurance or 401k. I once paid $10 for gas with a set of quarters found around the house and waited for a check to clear to bring one of our kids to a needed doctor’s appointment. Those short-sale clients who see me around town today still give the biggest hugs and gratitude for the work I did. Those sales were fulfilling as well, seeing people move on with their lives.

I’ve hired hundreds of real estate agents over the years and every single one of them wants to help people. Of course, money is important. My advice — which I tell every new agent — is to concentrate on getting the letter of recommendation and doing a wonderful job. The money will follow in referrals and take care of itself. 

Private listings keep sellers from getting the best possible price

Today, we real estate professionals are forced to offer a new program to sellers who we represent. It’s called a “private listing.”

This new option is mandated by the Dark Powers in our industry.  It’s a weird idea. Mostly because it can keep the seller from getting the best possible price.

We offer it because a small number of our customers want to keep their business out of the public eye.  They have their reasons. None of our business.

Unless Law enforcement shows up to the Open House.

Private listings are something I don’t recommend

Private listings keep the listing secret from much of the buyer population.

If a buyer is unaware of a product, how is the seller supposed to get the best price with the most advantaged terms? If you’re a homeowner, selling your home and this sounds a bit crazy to you, it’s because it is.

As a real estate broker for 26 years, I’m accustomed to crazy. So, a question might come to mind.

Why in the world is this private listing craziness occurring?  Giant corporate brokers have been suing each over and scrambling to come up with private listing plans in the last year.  The pitch to the seller goes as follows: Wouldn’t you like to not have to have people trampling through your home? Client nods yes. And I’m sure you’d find it nice to not have days on the market accumulate in the MLS?  Bigger nod by client. And, wouldn’t it be great to test the market first?  Of course!

But, in my opinion what happening here is straight-up gaslighting. Our brokerage posts a disclosure upfront that our sellers read and sign before we list a property for a private sale. No different than how the public discovered cigarettes were bad for your health and officials were forced to tell the truth about aftereffects. We are saying that private listings may be bad for the terms you get and for your wallet. Our disclaimer reads as follows:

Your home will not be listed with any public Multiple Listing Service (MLS). Potential Buyers will be unable to view homes not listed on a public MLS website and will not receive alerts for new listings and price adjustments.

Certain real estate brokerages and online portals may have policies which may restrict you from listing on their websites and might prevent your listing from having a full exposure to the buyer pool. Anything less than 100% exposure to all potential Buyers could result in a lower selling price.

Listing your home as an Echo Fine Properties Private Exclusive can limit the number of buyers who will see your home, extend your marketing timeline and create awareness among Echo Fine Properties agents regarding upcoming inventory. The Echo Fine Properties protocol generates interest with private marketing and provides valuable feedback before deciding to go public. Since the entire pool of Buyers may not have access to view your home, private listings is not a true indication of price and marketing.

Private exclusive listings, also known as off-market or pocket listings, are legal in Florida, but private listings are subject to the rules and regulations of the Multiple Listing Service (MLS) and the National Association of Realtors (NAR). Florida law requires that a listing agreement include the commission details agreed upon between the seller and the listing agent, but this information is no longer allowed in MLS listings. Exclusive private listing may result in Limited Exposure of Properties.

So, the next question is, why would the brokers be promoting this if it can harm their own client? Easy answer. The double dip, although that’s been disputed. No, not the George Costanza from Seinfeld double dipping. This double dipping is more nefarious. The modus operandi in my opinion by having both sides of the transaction is so the real estate agent can double dip their earnings. Not mentioned in the advertising flyer so much, right? 

Are we setting ourselves up?

On August 17, 2024, NAR mandated that real estate agents must have Buyer Broker Agreements (BBA) explained, negotiated and signed by their clients the same way a listing agreement is signed by the homeowner. Their purpose was to disclose that commissions were really paid by the buyer. The industry lost hundreds of millions of dollars in lawsuits and settled hundreds of millions more. 

I see the exact same thing coming from sellers who are unaware of the potential loss of terms and dollars. In no case can you test the market by not exposing all potential homebuyers to a property available for them. Even if someone bought a home at full price off market, by not having all potential buyers witness it, a bidding war may have been stifled. And some buyers are going to meet a seller in the grocery store and tell them that, “I was in the market and would have paid more money if I was only aware.” Just like that our industry will have the next class action lawsuit. 

While I can’t carry a tune and never played a musical instrument, I can blow a whistle. Hopefully, this sounds an alarm.

Jeff Lichtenstein is the broker of Echo Fine Properties in Florida.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

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