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The debate surrounding the National Association of Realtors’ (NAR) Clear Cooperation Policy is raging on. And while most of the talking points espoused on both sides of the debate remain fairly consistent, those who are in favor of the policy have recently started to claim that an agent who doesn’t list their sellers’ properties on the MLS may be exposing themselves to legal liability.
“I think they’re inviting a class-action lawsuit by sellers who get hurt in this very concentrated effort and maybe a visit from the Department of Justice,” Leo Pareja, the CEO of eXp Realty, said recently on his firm’s fourth-quarter 2024 earnings call with investors.
Pareja isn’t the only executive who feels this way. In a recent LinkedIn post, NextHome CEO James Dwiggins noted that “Off MLS” or “Office Exclusive” listings could be at the center of future class-action litigation against brokers and agents.
“Brokers — you better be training your people correctly, so you don’t get a negligence or misinformation claim,” Dwiggins wrote in another post. “It’s one thing to offer sellers the ability to list ‘off MLS,’ but it’s a lawsuit waiting to happen if your agents are telling sellers it will increase the sales price of the home.”
Mindful approach needed
Much of the legal concerns expressed by Pareja and Dwiggins lies in how the option to list a property off the MLS is presented to sellers.
“With these office exclusives, agents are telling clients they can use the internal network to test the market, when in reality, what they are doing is tricking their own clients into this through misleading scripts, convincing them to agree to keep the house off the market so the broker could try and get a double commission,” said Douglas Miller, an attorney at Miller Law PLLC, who represented plaintiffs in the commission lawsuits.
Marx Stercow, the managing attorney at Sterbcow Law Group, agrees that agents and brokers need to be mindful of what they tell consumers about private listing networks. But he doesn’t feel this is much different from the care they are currently supposed to take when dealing with other issues.
“I mean, they already have to watch what they do and say to the public,” Sterbcow said. “I think that’s just people trying to rile up and create worry because the real estate industry, in their eyes, is breaking apart and Humpty Dumpty is not going to be put back together. We are moving to a completely new industry and people need to see that.”
After a year characterized by antitrust litigation in the real estate industry, Sterbcow believes many agents and brokers are looking to distance themselves from NAR in an attempt to lessen their potential liability.
“The reality is, continuing on the MLS and continuing with the Clear Cooperation Policy, all that does is just puts all of these big brokers back into a position of potential antitrust issues in the future,” Sterbcow said. “And these brokers don’t trust NAR that much anymore. They’ve gotten themselves in quite a bit of trouble for relying on them and their policies.”
Jerrold Bregman, a partner at BG Law, shares a similar view.
“When you have an organization like NAR that has a monopoly over a utility — which the MLS is, as it’s a required tool for Realtors to be successful — and that monopoly uses its power in a way to benefit large Realtors and agents who choose to be Realtors, some would say it is an improper use of monopoly power,” Bregman said.
“Rights of sellers are trampled by this rule that is imposed by NAR as a monopoly power in many markets and that raises antitrust concerns.”
But Bregman also agrees with Miller and other industry professionals that if proper disclosures are not made to clients, agents could be opening themselves up to liability.
“There really needs to be disclosures. I think if an agent does a pocket listing and holds on to the listing without ever listing it on the public MLS so they can make a larger commission by being on both sides of the deal, that is wrong and rightly exposes them to liability,” Bregman said.
Restraint on trade?
Sell-side lawsuits, however, are not the only legal challenges that some industry professionals are concerned about.
In a 2023 consumer survey, Zillow found that 91% of buyers believe they should be able to see all of their housing options for free and without barriers in a single location. This data suggests that buyers who learn they can only access certain listings if they work with one brokerage or agent may sue these players over potential restraint-of-trade trade claims.
“It is kind of hard to claim to be a fiduciary for your client when you completely dispense with the ideas of supply and demand by hiding a listing from all possible buyers,” Miller said. “Those who don’t want CCP are putting a restraint on trade. They’re trying to keep competitors out and they’re trying to make this some kind of a service that it’s not. This serves no one except the brokers that are doing this. And I consider it to be misleading.”
In addition to restraining trade, there is the potential for claims of fair housing violations against both agents and sellers who choose to utilize private listing networks, said Charles Cain, an attorney and the president of Alliance Solutions.
“A ‘work around’ on CCP requirements, particularly during COVID and the market through the spring of 22 was the pocket listing,” Cain wrote in an email. “That gave the not yet official listing broker time to shop a prospective listing within its own shop before giving outside companies the opportunity to even see that the property was for sale.
“Fair Housing advocates said that in so doing it did not provide a level playing field particularly for minorities to even have the opportunity to bid on a house as there were prospective offers to purchase that were agreed to often within minutes of a listing going live in the MLS. I think listing, especially exclusively, on a private network poses some of the same risks.”
Cain feels that some disgruntled buyers may even go as far as bringing fair housing claims against individual sellers who opt to use private listing networks instead of the MLS.
“What if the seller says they only want it listed on a company or third-party independent site and not on an MLS? Might that put the seller back into the same Fair Housing box that pocket listings might have but here it is an affirmative act by the seller,” Cain wrote.
“That changes the perspective and I think strengthens a Fair Housing argument against the seller by virtue of their limiting exposure of the property for sale.”
Bregman, however, doesn’t believe these arguments have a chance.
“I think that to the extent discrimination is brought into this debate, it’s a red herring issue. That is, I don’t think it is a real driver of the debate,” Bregman said. “It is a false basis to argue in favor of the required MLS listing to advance the economic interests of NAR and larger brokerages who have the work around in CCP of ‘office exclusives’ and who want to keep that exclusive inventory only for their agents.”
While attorneys may not agree about the exact scope of the legal risk in using a private listing network, they do agree that if a firm is considering moving in this direction, they should properly train their agents on discussing the pros and cons of listing on and off the MLS with their clients.
“I think that a prudent Realtor would have an actual conversation where they discuss the benefits and burdens of being on the MLS,” Bregman said.
