Change Starts With You

In the spring of 2019, when a two-bedroom, two-bath in my building hit the market, I immediately called the listing agent whom I happened to?know. “I’ll be watching your every move,” I said jokingly. “Are you interested in selling?” he asked, reading between the lines. “Just call me if you have a?buyer,” I answered. The fact was that I had planned on putting my apartment on the market in the fall but simply couldn’t fathom the thought of decluttering, painting and staging with two boys under 7 and a full-time job. The legos sorting alone felt completely insurmountable. So that’s how I came to sell off-market. It wasn’t because I needed privacy. It wasn’t because I didn’t want to pay full commission. It was because it was easier,?or I was lazy. Both are valid.

Interestingly, as I recounted the event to friends, family and neighbors after it closed, the story began to take on an air of mystique and insider intrigue that I have to admit?was really?gratifying. “Oh, how smart you are,” “brilliant move,” and “well played” were common reactions. It totally fed my ego. Enough that I started to lead with “we sold off-market” because it sounded cool and glamorous and far from the lego litter box that was my reality. It wasn’t until my husband finally caught my attention in one of these humble bragging moments and rolled his eyes that I realized how ridiculous I sounded. Nobody wants to admit the sexy factor associated with off-market sales, but given the high profile names that bought and sold NYC property off market recently (Jeff Bezos, Jacqui Safra, Joseph Tsai, Julia Koch, Justin Timberlake), how can it not be perceived as something better and more elite than on market? According to Urban Digs, off market sales in the NYC luxury market ($4M plus) were up 75% in 2021 YoY and 96.7% if you exclude new development deals. It’s not surprising?in a city with an abundance of cash and a shortage of inventory. It is also no coincidence that this is happening more in one of the only major U.S. markets that does not have a multiple listing service governed by the National Association of Realtors.?

In 2019, NAR tried their best to get rid of “pocket listings” because of obvious fair?housing risks by instituting something called the Clear Cooperation Policy. (As an aside, there’s no difference really between an “off-market" or “whisper” or “pocket listing.” “Off-market” has become the term du jour because it sounds less conspiratory and more transactional.) NAR’s Clear Cooperation Policy is straightforward—members must share their listings via the MLS within 24 hours of any public marketing: signage, social media, eblast, etc. or face fines and/or possible membership expulsion. The policy does not, however, include “specialized listings” like pocket listings “when privacy and exposure are concerns, such as with divorce or a celebrity client.” That’s quite a loophole, if you ask me. After all, what constitutes a celebrity client? I mean half the city of New York has at least one?Law & Order?credit on their IMDB. Does that count??REBNY’s?Universal Co-Broke Agreement is similar. Article I.5(b) says “No Exclusive Broker and/or Participant shall promote or encourage an Owner to engage in the practice of Pocket Listing(s)” and yet Article I.5(a) states that any owner can decide to opt out of disseminating their property to the RLS as long as they fill out the “Owner Opt-Out Form.”

So what’s the big deal? Why are pocket listings perceived as bad and what exactly are the fair housing risks? The controversy can be boiled down to two issues: fiduciary?responsibility and access. If an agent is representing a seller and they suggest they have a buyer and could do an off-market deal, and that buyer happens to be unrepresented, then perhaps the agent is not acting in the best interest of their client. This assumes that the seller could make more money if the property were listed on the market. And say that the direct buyer that the agent has belongs to the same social circle, the same race, the same religion as the sellers and their community/neighborhood.?Doesn’t that deny access to buyers who do not fit that criteria??Doesn’t that pose a problem??Isn’t that akin to steering? You see the minefield here. But it’s not an easy problem to solve and certainly not something simple to police. We need more innovative reform in our industry if things are ever going to really change.

I hear so many agents brag about how they are just as happy to help a buyer purchase a $500K home as a $5M home. Most of them are lying. Unless you are selling homes for fun, it’s simple math. Would you rather make $12,500 or $125,000 for the same amount of work? You choose. But when they tell you they do it for the relationships, there’s some truth there. They help the daughter buy her first $500K apartment in the hope that they can sell her dad’s $5M down the line. There is built-in disincentivization to work with lower price points in our commission structure and that’s a large part of the problem. This is why, to a large extent, we are seeing so many off-market deals trade in the luxury market. Yeah, there’s the privacy and celebrity thing but it’s also about financial motivation. If I’m an agent with a $5M buyer who has exhausted all inventory and is still super motivated then you better believe I’m going to turn over every stone trying to find them something. I’m not going to do that for the $500K buyer. It’s just not a good?return on investment.

Here’s a bold idea. If the real estate brokerage community really wants to make a change that benefits the underserved and underrepresented, we should lobby for a new kind of accreditation system—one that earns points for actually helping people versus clicking next on a screen. What if, instead of sitting through 20+ hours of continuing education every two years, we actually earned credits by helping people? You could get points for sending a letter to sellers for that low budget buyer who can’t find anything or by helping a voucher client find a new rental. Or what if, instead of continuing?education, we had mandatory community service hours? I know the idea of that makes the jaded laugh out loud. But isn’t it better than a bunch of policies with loopholes and opt-out forms?

Off-market chatter is not only going to dominate industry regulatory conversations over the next few years, it will also be a consistent question you get from clients. Asking the right questions will help you to know the difference between the wanna-be celebrities and the lego-laden. Asking the right questions of yourself will also be important. Is this practical? Does this serve me or my client? Who am I excluding, intentionally?or unintentionally? As always, change starts with you.?

Until next week,