Clear Cooperation Policy: The worst policy NAR has ever created
There are a lot things that impact the real estate industry and the consumer, but most blogs do not discuss them. Advice regarding how to prep your home for the market is very important, but so are the policies that impact your bottomline and ability to sell your home how you want to; and I have been wanting to rant about this particular policy for a while. When I say I hate it, I truly mean that, and when I say it is the most asinine policy the national association of realtors has ever put forth (and there are quite a few of them), I mean that too. It is almost like NAR is thumbing its nose at its members, the consumer, and the law. But, before I go off, I need to explain exactly what this abomination is.
In the previous post I talked about the MLS, what it is, and that in order to have your property listed in the MLS a blanket offer of compensation must to made to the brokerage/agent representing the buyer. That blanket offer of compensation to the other agent is called “cooperation”, and the clear cooperation policy ensures that realtors and their sellers have no option but to “cooperate”. It is also important to note that NAR controls the vast majority of MLS systems in the United States, with access to them tied to NAR membership. If a real estate agent wants the data that goes along with MLS access, they must be a member of NAR, and because of this there are almost no residential real estate agents not affiliated with NAR.
So how does this demon document work? When a listing agreement is signed, the realtor has 5 business days to put that property in the MLS. During those 5 days the property cannot be marketed to the public, which according to NAR includes, but is not limited to: brokerage websites, agent websites, social media, yard signs, flyers, third party listing sites such as Zillow, or other applications. Even the property owner must refrain from public marketing. If any form of public marketing occurs the realtor then has 1 business day to place the property in the MLS. The property owner can opt to keep the property off the MLS, but the owner and realtor are not allowed to market it to the public.
However, there is one carveout, and that is what NAR calls the “office exclusive”. This allows the property owner to keep the property off the MLS, but it can only be marketed to other agents within the listing agent’s brokerage, and no public marketing can take place.
Now, how does NAR enforce this policy? Well, through severe automatic fines, and then if there are further violations through the kangaroo court that is their grievance process. And when it comes to the grievance process, NAR has given the local associations and MLS the authority to fine its members up to $15,000. All fines flow to the association and a failure to pay the fine results in the member losing MLS access. This would ruin the career of most real estate agents. If you think that sounds more like a racket than a trade association, you aren’t alone. But, I digress and will return to this specific topic another time.
So, let’s break this down. NAR has created a policy that for all intents and purposes mandates use of the MLS, which NAR controls. An agent can no longer market a property off of the MLS using other technology, websites, social media, or their own website; and a property owner is prohibited from publicly marketing their own property until their agent has placed it in the MLS. With this comes the blanket offer of compensation to the the buyer’s agent that is required to place a property in the MLS. Should a realtor run afoul of this policy they are met with unreasonable fines up to $15,000.
So, who benefits from this? It certainly isn’t the home seller. Their sales options are now limited to the MLS and they are now forced to make that blanket offer of compensation to the buyer’s agent. Using a “coming soon” period to build energy or a properly advertised off-market sale is no longer an option. Does it benefit NAR members? Yes and no. If you are a buyer’s agent you can rest comfortably knowing that the seller will pay your commission; however if you are the listing agent, your ability to act in the best interests of your seller is no longer your choice.
In my opinion, this policy exists for one purpose and one purpose only, to strengthen NAR’s monopoly on the residential real estate industry. By mandating reliance on the MLS system, and by enforcing it with severe penalties, they have taken complete control over residential real estate sales. They are ensuring buyers’ agent compensation, which ensures that there will be more realtors. More realtors means more dues to NAR (to the tune of over $217,000,000 per year and the doesn’t include dues to the local and state associations). Realtors now have one choice for listing a property, the MLS, which effectively kills innovation and competition. No realtor is going to risk a $15,000 fine to try something not pre-approved by NAR; and under NAR’s decree, 1,400,000 realtors are required to conduct business in almost the exact same way.
The other beneficiaries are the largest real estate brokerages who now have a monopoly on off-market listings. Prior to this policy taking effect we could effectively market a property off market using SEO, word of mouth, signs, mailings, and third partly listing sites. Unfortunately, that is no longer an option for smaller brokerages, brokerages like us that provide a higher level of service by embracing the technology that larger brokerages do not. This policy kills our ability to enhance competition through innovation, and although we still use that technology while marketing our listings, we can no longer use it to compete with the larger brokerages for pocket listings. It is interesting to note that this policy was called the “pocket listing ban” when it first came out, but pocket listings are up significantly since its creation.
The large brokerages also benefit due to the fact that one of their agents could procure a buyer for any listing, resulting in more revenue for that brokerage. The assurance of a commission paid by the seller also increases the number of agents in the market, which in turn increases revenue through commissions and fees for the large brokerages.
The national association of relators has issued a decree mandating how 1,400,000 realtors must conduct business, forcing them to use a system that they control, with the main beneficiary being NAR itself and large brokerages. They have decided that they know what is best for every home seller in the country, forcing them to place their property in the MLS and pay the buyer’s agent’s commission. It is a policy that kills innovation and competition, bringing an entire industry under the control of one supposed “trade association”…
So, how is the not an antitrust violation?
I am a member of NAR, the Florida Realtors and Pinellas Realtor Organization, although not by choice. When I joined Tina at KPG I didn’t want to be a part of those associations. I didn’t agree with their policies, their control over the industry, and I didn’t want to be dictated to by organizations that, in my opinion, put their own best interests above all else. However, Tina received notice stating that she would start getting fined if I did not join. So as a member, albeit an unwilling one, I have watched the conduct of these associations for several years, and I firmly believe that NAR has crossed a significant line. NAR ceased to be a true trade association years ago, and this policy only confirms that. NAR is the residential real estate industry in the United States. Whether you are an agent, broker, corporation, or home seller, we are all mere vassals to NAR.
Two weeks ago the Department of Justice backed out of an antitrust settlement agreement with NAR. The DoJ has decided that they want to do a deeper probe into NAR’s conduct, rules, and policies. As a dues paying member of NAR and someone that wants what is best for this industry, I hope that the DoJ has this terrible policy in their crosshairs.
Until next time,
Zach