Why Clear Cooperation Could Have a Bigger Impact Than The Sitzer/Burnett Settlement

There is a war playing out behind the scenes in the real estate industry that could potentially have a bigger impact than the Sitzer/Burnett settlement from a few months ago.

It involves Clear Cooperation. The Clear Cooperation Policy is a rule that requires realtors to list properties on a multiple listing service (MLS) within one business day of public marketing. There are currently court cases that will be coming to a close within the next few months that will likely amend the policy or scrap it altogether.

It may not be clear what exactly that means if you are not in real estate, but trust me when I say that it could have a huge impact on how we transact real estate. 

If I sign a listing agreement to sell a home, I technically MUST put this home on the MLS within 1 business day of public marketing. The goal of this is to ensure fairness to the consumer so that the entire public has an equal opportunity when it comes to buying real estate.

Equally as important is if you are an agent, it ensures equal access to properties across brokerages. An agent at company X, for example, would have the same access to inventory as an agent to company Y because of clear cooperation. This technically helps prevent competitive advantages in terms of accessing inventory from broker to broker. 

Clear cooperation benefits buyers, sellers, and agents but there are pros and cons. As mentioned previously, the best argument in favor of clear cooperation is the equal access buyers have to listings. Because every listing is in one place, you don’t need to reach out to each and every brokerage in order to find out what they have for sale. It’s all in one place on the MLS.

It’s also a benefit to sellers in that when they sell their home, they know that every buyer will have the opportunity to buy their home which means more exposure and higher likelihood of finding the right buyer sooner than later. 

However, some sellers might prefer to have more autonomy when it comes to selling their home because after all it is their property. Clear cooperation does not offer that autonomy, which is a problem, albeit a small problem that primarily impacts a tiny percentage of sellers, especially in the higher end market.

Some sellers may want privacy or a quiet sale. Clear cooperation goes against that in a big way. Other sellers may want to test out an aspirational price without accumulating market time. This is also impossible with clear cooperation. Some MLS’s have recently rolled out a private market, which admittedly solves a lot of these problems. Chicago Association of Realtors is an MLS that has a very strong private market, but a lot of other MLS’s are not adopting this change. A decision that might bite them in the ass and ruin it for everyone.

When we look at the pros and cons for brokerages and agents, it gets a bit more complicated and murky. Depending on the type of agent or brokerage, it could have negative or positive impacts. 

For the larger brokerages out there, getting rid of clear cooperation will likely positively impact them. Larger brokerages responsible for a bigger % of the market share will now be able to represent more transactions on both the buy and sell side because there is a good chance that someone at the same company will have the right buyer. If you’re a larger brokerage, you’ll look to capture this additional income in order to avoid paying out a fee to an outside brokerage. 

This will also be used as a marketing ploy in order to drive more business on the buy and sell side. Scarcity is one of the easiest things to commoditize, and getting rid of clear cooperation would do exactly this. 

Imagine for a minute you are interviewing two agents. One is at a small boutique brokerage and the other is at a larger national brokerage. The larger national brokerage is responsible for about 20% of the transactions in your local market, but the smaller brokerage is only responsible for a measly .2%. 

All else being equal, if brokerages are no longer required to list on the MLS and can now keep properties “in house”, I think it would be safe to assume that the larger brokerage will have additional inventory that the boutique brokerage might not have access to. This makes it much harder for the smaller brokerage to remain competitive and bring in new business. It could create a snowball effect where the smaller brokerages get smaller, and the bigger brokerages get bigger.

The same can be said for the power brokers of a market as well. Top agents who do the most transactions will also benefit greatly because of their ability to pair buyers and sellers. There are some huge power brokers in our local market that are at boutique brokerages. This puts them in a precarious position. They would be foolish to not consider pairing up with larger national brokerage in order to have access to more listings. I would be lying if I said this wasn’t part of the reason why we decided to partner with Compass.

Agents who think outside of the box will also scoop up market share. I cannot stress this enough. An agent’s reach will be a huge asset. If agents are no longer required to list properties on the MLS, I would imagine that an agent’s Instagram, TikTok, or Youtube presence, for example, would become more important in the eyes of a seller.

The big losers are small brokerages, passive Realtors, and potentially syndication platforms. It will no longer be enough to just browse the MLS in order to find the right listings for your clients. Who you know has always been important considering real estate is a relationship business, but it will now be more important than ever.

Zillow recently announced that they will be getting into the lending business. I don’t think this is coincidental. My gut tells me they are looking for an additional income stream to tap into on the chance that clear cooperation gets scrapped. 

Zillow greatly benefits from clear cooperation because they sell all of the buyer leads that inquire about a property on their platform. However, they’re not Zillow’s listings. They pull these listings directly from the MLS. So if there are less listings on the MLS, that means there will be less buyer leads for Zillow to sell to brokerages. Zillow is a dynamic company, and I am sure they will find a way to remain at the center stage when it comes to their platform. 

In my opinion, all of this could potentially be avoided if the MLS’s nationwide came together and made it mandatory to have some kind of private market that promotes clear cooperation. This not only solves the qualms some sellers have, but it would also ensure that agents and buyers still have equal access to listings. 

If you are interested in exploring the topic further, there was a good podcast from Housing Wire that came out this morning and inspired me to put together a quick blog. Enjoy!

https://podcasts.apple.com/us/podcast/housingwire-daily/id1518666256?i=1000677893020