The mental gymnastics some brokerage heads are doing to justify the surge in Private Listings is mind-numbing. The seller choice argument is, quite frankly, tired.
Of course sellers have a choice — they always have. Every time anyone brings up that sellers who go the private route will receive fewer offers, less competition and even a lower sale price, a pro-PLNer will scream “seller choice!”
A calculated business strategy
Are we really to believe that so many people now are choosing to settle for less exposure, or are they being encouraged?
The explosion of private listing networks is, in my view, a calculated business strategy. Compass, which recently acquired Anywhere, is also the largest and most vocal proponent of the practice. It also happens to be the brokerage facing scrutiny from numerous lawmakers around the PLN practice. Compass is the largest brokerage in the world, so of course its size, scale and influence contribute to the controversy as well.
Alongside the seller choice mishigos, I often hear the argument that developers use private listing strategies, so why shouldn’t everyday sellers be afforded the same option? Well, no one is saying they don’t have the choice, but “could” and “should” are two very different concepts.
A seasoned developer who builds a product with the intent to sell is different from sellers who are putting their existing homes on the market. The primary goal of a new development launch is to fund construction and meet pre-sale targets. A single project can contain dozens or even hundreds of similar units, making its sales strategy fundamentally different from selling a single, existing property.
Even when a new development is not yet publicly listed in the MLS, it is typically supported by substantial advertising, PR campaigns, public filings and other records that make the project — and the inventory being created — known to the market.
Private listing networks are fundamentally different. When a brokerage implements them at scale, individual resale homes can be kept entirely out of the MLS and effectively invisible to the broader market.
Unlike a new development, there may be no advertising campaign, public filing or other indication that the property is even for sale. A buyer who isn’t inside that private network could have no idea the home exists.
New development and private listing networks are not the same. That is why brokerages typically have entire divisions devoted to new development marketing and why market reports separate new development inventory from resale figures.
Disappearing metrics
Now that the PLN debate is in full swing, we are also seeing efforts to diminish the importance of metrics that help buyers and sellers understand market value.
Compass CEO Robert Reffkin has called Days on Market a “killer of value” for sellers.
I actually agree with him here, which is why good agents ask sellers to price, list and market their property in the right way. The value-killer is often overpricing, which keeps a home on the market longer. Like it or not, days on market exist, and I bet every seller who becomes a buyer wants that information.
Competition drives price
The bottom line is that competition and transparency are the drivers of a free market.
I once represented a woman selling her mother’s classic seven-room apartment off Madison Avenue. When I announced it at our Corcoran sales meeting, countless agents said they already had buyers and asked to show it early.
I called my client, but she said, “If agents at your firm are frothing for this apartment, imagine how many agents at other firms will be. Competition drives price up.”
We put it on the market without any prior showings, and it was an absolute madhouse — six or seven full-price offers, followed by a highest-and-best, ultimately resulting in a sale well above asking. That’s what happens when you use the full market as your launching pad: maximize exposure, create real competition and let the market determine the price.
Brokerages that make private listing networks a core part of their business strategy are hurting the open market and consumers.
Transparency is not a luxury
NAACP president Derrick Johnson said it best in a recent opinion piece he penned about the dangers of PLNs for TIME: “Transparency is not a luxury. When buyers can compare homes, prices, and time on market, they can make informed decisions. Sellers reach more potential buyers, and the market works more fairly for everyone.”
You can scream seller choice all you want, but I don’t think any seller would choose to have their property used as a pawn in battles between big brokerages and aggregators.
Bess Freedman is the CEO of Brown Harris Stevens in New York City.
