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The words “free market” have been bandied around the real estate community a lot lately. Unfortunately, flowing like unfettered fallen logs in the backwash of a broken dam is the notion that “anything goes.” This is simply not true: Any market needs guardrails.
The attempt, currently being made by those brokerages that actively oppose Clear Cooperation, is to grab market share by withholding listings from the general populace and instead closing deals in-house, thus securing both ends of the transaction and increasing their revenue. This tactic effectively removes these listings from the general populace and, in my opinion, is the antithesis of a free market.
A quick internet search of the words “free market” provides the following definition: “An economic system in which prices are determined by unrestricted competition between privately owned businesses.” In truth, this principle applies to publicly traded companies as well, with the primary example being the stock market. Interestingly enough, the stock market has extensive guardrails to ensure that everyone has equal opportunity.
Insider trading, as such, is forbidden by law, and those who violate the law are subject to prosecution, as discovered by Martha Stewart. In my opinion, any attempt to “hoard” listings or sell in-house before they are accessible to the general public is the same as insider trading.
How guardrails work for other financial entities
While some would like to call the MLS a “monopoly,” it is very similar to the stock market where all publicly traded stocks are available to all. There are different stock markets — the Nasdaq and the New York Stock Exchange being the two most widely known — which cater to different types of companies.
The stock market works as well as it does because of its full transparency, price discovery policy, ease of access to those who wish to buy and sell stocks, and its exemplary execution. Removal of CCP would remove full transparency, ease of access and execution.
In the same way there are multiple stock markets, there are also differing MLSs as well. Although most are aligned geographically, in our region, we have six MLSs and any seller can put their property on any one they so wish. Additionally, we have different vehicles for varying types of commercial properties and products.
If you want a definition of a monopoly, think of a large brokerage that is trying to hoard both sides of a listing for itself and run small brokerages out of business, much the same way Walmart has destroyed countless small businesses who could not stand up to the giant. There has to be a level playing field where all brokerages, regardless of size, have equal access to every listing.
Historically, large entities that dominated the landscape to the detriment of others were broken up by antitrust legislation, including Standard Oil, American Tobacco, AT&T and Microsoft. Current antitrust lawsuits involving Apple, Meta, Amazon and Google, to name a few. In the world of real estate, I believe there is a play by some large brokerages to gain a monopoly on listings, thereby shutting out competition — in effect, going against antitrust policies.
While some have considered NAR to be a monopoly, in truth, they hold no listings, have no real estate sales and are not a brokerage in any sense of the word. They are a trade organization that provides the guardrails that have, until now, kept real estate sales in the United States from returning to the “wild, wild west” out of which the need for structure was born in the first place.
Do we need more choices when it comes to trade organizations to which we can become members? Possibly — so long as they all provide equal access to all available listings.
To add to this issue, there are some brokerages who now want their own internal “MLS.” In other words, they want to remove the guardrails that not only provide equal access for all but maintain the integrity of the system so that everyone is operating from the same rulebook. Unfortunately, that playbook is being portrayed as “bad” and a monopoly.
Is there such a thing as a good monopoly?
A monopoly is not necessarily a bad thing. As an example, the Panama Canal came into existence due to the need to shorten shipping routes and provide an option to the exceedingly hazardous trip around Cape Horn. Wikipedia explains, “Cape Horn is a rocky headland on Hornos Island, in southern Chile’s Tierra del Fuego archipelago. It’s surrounded by wild seas off the southern tip of South America where the Pacific and Atlantic oceans meet. The albatross-shaped Cape Horn Monument commemorates the lives of thousands of seafarers who perished attempting to sail around the cape.”
Imagine, for a moment, that every major shipping company and any nation with a significant navy decided to build their own canal. While some have considered the idea, the logistics involved are virtually insurmountable. As such, the Panama Canal then constitutes a monopoly for those looking to find a shorter, safer and much faster shipping route from one side of the Americas to the other.
Does it need to be improved? Absolutely — it is currently a chokepoint and operated by a potentially unstable government. That does not mean, however, that there needs to be an abundance of other canals — the current one needs to be improved to meet modern demands.
Ironically, even with CCP, sellers are allowed to sell off-market facilitated by the same brokerage that listed the property (where allowed by law — rules and restrictions vary state-to-state). Even under the current CCP rules, if a seller chooses to sell off-market, they may do so by communicating this intent to the MLS (our Association of Realtors provides a simple form to facilitate this) so that the data can be tracked and to ensure that sellers are made aware of how their choices may affect their potential financial outcome.
In reality, off-market transactions happen every day; in my opinion, however, brokerages that oppose CCP want this activity hidden from the public eye. Personally, I believe this is a huge conflict of interest for their sellers.
Is a national MLS the answer?
As for the idea of a National MLS? I think it is a great idea to put all listings in one location so that there is equal access to all across the nation. There is already a move in states such as California to consolidate access to as many statewide MLSs as possible.
The first question that must be asked, then, is “Who gets to run such an MLS?” The second question is, “What rules will govern that MLS and who gets to decide what those rules are?” A third question would then be, “Will every signed listing make it to that MLS so that the sellers have the best possible chance to get the highest and best offers on their homes?”
Human nature being what it is, we need guardrails to help guide reputable agents and prevent the more reckless of the breed from operating outside the lines. If CCP is determined to not be the ultimate solution, something very similar should be there to replace it.
At the end of the day, we need a fully transparent system that favors the consumer, not the broker, so that when the dust is settled, sellers can be confident they have received the highest and best for their property and buyers can rest in the fact that they had full, transparent access to the largest pool of properties possible.
The article represents the author’s ideas alone and does not necessarily represent the opinion of their brokerage and/or local MLS and Association of Realtors.
Carl Medford is the CEO of The Medford Team.
