Top Agent Network, a firm that operates a members-only private group of real estate agents, is making one last attempt to stop the National Association of Realtors from enforcing a policy designed to curtail pocket listings by taking aim at the policy’s exception for office exclusives.
A year ago, TAN filed a federal lawsuit alleging NAR and fellow defendants the California Association of Realtors (C.A.R.) and the San Francisco Association of Realtors (SFAR) have violated a slew of antitrust and unfair competition laws for adopting the Clear Cooperation Policy, which requires listing brokers to submit a listing to their multiple listing service within one business day of marketing a property to the public.
The controversial rule is meant to effectively end the growing practice of publicizing listings for days or weeks without making them universally available to other agents. Some MLSs have instituted hefty fines to enforce the policy, including SFAR.
In July, the court denied TAN’s motion for a preliminary injunction against the policy, and subsequently tossed two amended complaints from the firm, the last of which dismissed C.A.R. as a defendant in the suit. In April, U.S. District Judge Vince Chhabria gave TAN “one final chance to amend” after finding that TAN had failed to allege an antitrust violation.
On May 18, TAN filed its third amended complaint, zeroing in on the policy’s carve-out for office exclusives, which allows brokers and licensees of a listing brokerage to promote a listing within the brokerage and to that brokerage’s clients one on one without having to submit the listing to the MLS. Some real estate brokers have threatened mutiny over the exemption, which they argue inadvertently benefits large, national brokerages at the expense of smaller, independent brokerages.
“Based on the Court’s helpful guidance following the last hearing, we are confident the Third Amended Complaint identifies viable antitrust claims against the NAR and its MLSs,” TAN CEO David Faudman told Inman via email.
“With its vast resources and experience defending numerous lawsuits, the NAR will no doubt bring another legal challenge in support of its misguided policy. We believe this policy has actually worsened the problem of hidden double-ended ‘pocket listings’ while harming consumers with reduced choice and increased costs. We are very confident the Court will reject such a challenge, and that we will ultimately prevail in our lawsuit.”
TAN declined to comment on why it dismissed C.A.R. as a defendant in the case.
In its latest complaint, TAN argues that office exclusives are essentially pocket listings held exclusively within a single brokerage, resulting in less inventory on the market, less exposure for listings, less consumer choice and lower quality consumer representation while boosting the fortunes of large brokerages.
“While TAN’s membership and listings have declined substantially as a result of the boycott, these listings have not gone to the MLS,” the complaint said. “Instead, there has been a large increase in the share of ‘broker exclusives.’ The large brokerages clearly recognize this as the windfall it is, and now loudly advertise their ‘exclusive’ listings.”
Industry analyst Mike Del Prete highlighted the rise in exclusive content from large brokerages in a February article.
“According to Compass.com, in September of 2020, Compass had over 17,000 listings nationally — with over 2,800 as exclusive content (either Coming Soon or Private Exclusive),” Del Prete wrote.
“These 2,800 listings (16 percent of Compass’ total inventory) were only available on Compass.com or via a Compass agent; none were on Zillow. And the percentage of listings exclusively on Compass.com is increasing. As of February 2021 there were around 12,000 Compass listings nationally, with 2,800 ‘only on Compass’ — or 23 percent.
“Nearly a quarter of Compass’ listings are exclusive content. In one of Compass’ biggest markets, San Francisco, 504 out of 913 total listings were exclusively on Compass, a massive 55 percent.”
TAN’s attorneys pointed to a recent article authored by Redfin CEO Glenn Kelman noting that pocket listings had increased 67 percent, from 2.4 percent of homes to 4 percent, since the May 2020 implementation of the Clear Cooperation Policy and that the rate has risen every month in 2021.
Glenn Kelman | Photo credit: Redfin
Kelman also pointed out that “[i]n markets with a long history of exclusive neighborhoods, like Chicago, or markets where one brokerage has significant share, like Minneapolis or Columbus, the largest brokerages are pocketing more than 10 percent of their listings.”
He recommended that NAR close the “office-exclusive loophole” at its annual meeting in November.
“[T]his well-intentioned policy had the unintended consequence of creating a monopoly on a monopolistic practice, favoring the big brokerages who can still pocket listings within their own brokerage, in what are known as ‘office exclusives,’” Kelman wrote.
In an emailed statement, NAR’s vice president of communications Mantill Williams, told Inman the trade group continues to believe TAN’s lawsuit has no legal merit and “will continue to vigorously contest it.”
“The Clear Cooperation Policy was created in order to protect the best interest of consumers and promote equal opportunity for all,” Williams said. “It ensures that publicly marketed property listings are widely available and accessible to all consumers. The Clear Cooperation Policy also ensures that a broker receives the seller’s consent when they choose to keep their property off the MLS and therefore waive the benefits of the MLS.
“While NAR believes that marketing a property on the MLS serves the best interests of the vast majority of sellers and buyers, the Clear Cooperation Policy still allows for flexibility for those with privacy concerns. We regularly review our rules and policies to protect consumers and provide transparency as well as address new information and developments and will continue to do so.”
In its complaint, TAN pointed out that off-MLS marketing conducted on TAN could also be justified for the same privacy reasons.
“In its October 2, 2020 motion to dismiss in this action, NAR asserted that the Policy is procompetitive because it ‘gives a seller complete control over how her home is marketed’ and ‘she can forgo the benefits of a multiple listing and market her property to a limited group of potential buyers . . . through an office exclusive’ — the exact thing NAR portrays as horrific and exclusionary when done through a service such as TAN,” the complaint said.
According to TAN’s complaint, even brokerages with tens of thousands of agents have smaller local footprint than TAN’s network in some areas, resulting in a smaller audience for listings.
“Compass, the largest independent brokerage in the United States, with a large San Francisco office, has approximately 1,500 agents employed in the San Francisco Bay Area,” the complaint said.
“This compares to over 3,000 Bay Area agents within TAN’s network. Most local brokerage offices, including for the major large realtors, have far fewer agents in each office. By shifting all off-MLS marketing into broker exclusives, NAR has ensured that off-MLS sales end up siloed in small, mutually exclusive islands.”
Because smaller brokerages have fewer colleagues to market a property to, sellers wishing to market their property off the MLS, or buyers wishing to buy an off-MLS property will be forced to hire an agent at a large brokerage, the complaint argued. In addition, such agents will provide lower quality representation because their brokerage is representing both sides of the transaction, according to the complaint.
“Thus, sellers are harmed by seeing a reduced audience for their listings, and buyers are harmed because they are locked out of viewing pocketed listings except for their own agent’s brokerage,” the complaint said.
“Buyers and sellers are also harmed because ‘office exclusive’ sales are, by nature, ‘dual agency’ sales in which the same brokerage sits on both sides of the transaction. This situation robs consumers of the independent advice they expect from an agent and creates an inherent conflict of interest. TAN, on the other hand, attracts agents from all brokerages and virtually eliminates double-ended deals in transactions connected through the platform.”
Moreover, removing marketing alternatives to the MLS has lowered housing supply by discouraging “marginal” sellers who wish to avoid the “fast-moving circus” of selling a home through the MLS, according to the complaint.
“Off- MLS marketing provides for alternative strategies, such as leaving a home on the market for extended periods of time, to see if a willing buyer at the right price happens to come along,” the complaint said.
“In this manner, off-MLS marketing can ‘loosen up’ inventory by allowing tentative home sellers to enter the market at their own pace. By restricting alternatives marketing the Policy works to tighten inventory, raising prices.”
TAN contends that higher prices offer no consumer benefit. “Consumers sit on both sides of the transaction — the higher income to sellers is offset by the higher cost to buyers,” the complaint said. “However, because agents are paid out via commission, increased prices do increase the amount of money paid from consumers to real estate agents.”
SFAR declined to comment for this story, citing pending litigation.
Read the complaint:
Email Andrea V. Brambila.
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