Errol Samuelson: I work at Zillow and I know the harms of private listing networks

Chicago Tribune

3 days ago

It is common knowledge that more competition maximizes sales price.
But there are a few real estate brokerages insisting in ever-louder voices that competition doesn't matter, because if enough people fall for that idea, it gives them cover to double dip on commissions and attract more clients.
We must 'preserve seller choice,' they argue. And they talk up as 'innovative' a marketing strategy that puts a broker's interests ahead of their clients'.
To be clear, sellers and their agents have the choices they need to market their homes, whether their goal is to maximize price or privacy, or something in between. They can sell their home completely privately off the Multiple Listing Service and third-party websites. They can make it available only to other agents in the market to share with their buyers one-on-one. They can keep the address or photos from being shown online. They can even list it on the MLS but keep the listing off the internet entirely.
None of that is changing, nor should it. Sellers should retain full control over how and where they market their homes.
So what choice are these handful of outspoken brokerages trying to preserve? Their own. They are choosing to make more money by persuading sellers that limiting which and how many buyers can see their home is somehow good. They are engineering private marketplaces that benefit themselves while actively harming buyers and sellers, all the while framing the practice as pro-consumer.
That's especially bold when you consider that every consumer advocacy group that has weighed in on the issue — including the National Fair Housing Alliance, the Consumer Policy Center, the National Association of Hispanic Real Estate Professionals the National Association of Real Estate Brokers and Consumer Advocates in Real Estate — disagrees with them.
Here's the reality: Home sellers aren't bursting through brokerage doors begging for a multitiered private marketing strategy. They're asking for help and representation, and going along with what's being pitched to them because they trust their agent.
These brokerages use catchy marketing speak as they pitch sellers on their plans, but it all boils down to: 'Give us a few weeks to see if we can find a buyer we're already working with so we can get both commissions and use your listing to attract more clients. Odds are, it'll take longer and you'll probably lose some money, but if it doesn't work we'll put it on the MLS and sell it the way we should have all along.'
If they're being forthright, they'd ask, 'Would you like 1,000 buyers or 50,000 buyers to know about the home you're trying to sell?'
The result, of course, is that sellers waste time. And for sellers unfortunate enough to find a buyer within the private network, it almost always comes at a cost of thousands of dollars. Sometimes much, much more. And they rarely ever know.
It's too bad these brokerages are choosing this path. Study after study after study — and common sense — tell us that marketing only to a few buyers who happen to be working with the same brokerage isn't how a seller makes the most money. It's how the brokerage makes the most money.
Just last week in these pages, one Chicagoland brokerage ignored mountains of research and instead cited a 'study' by Midwest Real Estate Data showing privately listed homes sold for more money and sold faster. A quick glance shows that it wasn't a study, but a chart in an MRED white paper detailing the harms of private listing networks.
They left out the part of the same white paper that says: 'Limiting the exposure of a listing to a subset of the market can reduce its ultimate selling price, which brings the ability of the listing agent to fulfill their fiduciary responsibilities to their seller into question.' And they also didn't share the part that says: 'Legal and ethical issues regarding off-MLS listings include the ability of agents to fulfill their fiduciary duties to clients, fair housing discrimination concerns, and proper disclosure of marketing practices to clients.'
The harms of private listing networks proliferating are clear:
Remember before Zillow, Redfin and other similar sites when you didn't know what houses were for sale until your agent showed you the listing in a big book in their office, or drove you around? When you couldn't do your own vetting and deep diving and comparing? That's the world these brokerages are hoping to revert to — one in which they control the information and buyers and sellers are at their mercy.
And they're trying to somehow sell it as innovation.
Errol Samuelson is chief industry development officer at Zillow.