There's a myth that pervades the discussion of real estate amongst professionals in the real estate industry that goes something like this: Just about everything for sale/on the market is on the Multiple Listing Service. And...most FSBO's (For Sale by Owner) will eventually land there too.
While, there is a lot of truth to the statement, as REALTORS through their networks and the Multiple Listing Service do facilitate the vast majority of successful real estate transactions, there's a less well known subtext which is also true.
Today's real estate market is far more fragmented than a cursory overview would suggest. In fact, Pocket Listings which are OFF MLS transactions (meaning the listing is never listed on the open market and is sold without reporting to the Association or MLS) are not new. What's new is how pervasive the practice has become in a market which has very low inventory levels. In some markets, it is becoming difficult to accurately determine if the 'low inventory levels' are truly reflective of market activity or if they are artificially skewed due to off market listing and selling activity.
Exclusive Buying/Selling Groups comprise of REALTORS and/or Investors who trade data about market inventory within a group that excludes other REALTORS. Listings may or may not be recorded with the MLS. Both Pocket Listing advocates and Exclusive Buying Groups sometimes market the inventory privately and then subsequently list the home on the MLS if the listing does not sell within an allotted period of time. This has led to some Associations adopting more stringent rules and penalties regarding when a home is listed for sale on a listing agreement and when it is uploaded to the Multiple Listing System.
Every Broker has the right to determine, along with their client what is the best way to market a property. There are definitely issues of privacy with regards to certain types of properties which may preclude a wide broadcast. Proponents of the practice also argue that the Agent is in the best position to understand how to market the property and provide buyers or investors who are qualified to bid. But, there's an issue of potential liability to Brokers which may not be under sufficient consideration when managing the risk and liability of different sales models.
April, is Fair Housing Month. While, many automatically think about Fair Housing as a race issue, it is far broader. In fact, many of the cases which have been settled in West Michigan recently have dealt with issue such as: gender discrimination, sexual harassment, age discrimination, familial status and steering. REALTORS are bound by the laws of the United States to abide by Federal, State and Local Fair Housing Ordinances. In addition, several articles in the REALTOR CODE OF ETHICS reference Fair Housing Issues. Without the transparency of the Multiple Listing Service as well as the professional monitoring that most Associations provide to ensure compliance with the law, are Brokers inadvertently opening themselves to unmitigated risks?
When real estate professionals sell real estate, we are bound by the terms of our license and the law. When REALTORS facilitate real estate transactions, we are bound by the law, the terms of our license, the REALTOR Code of Ethics as well as the rules and regulations of the Association. This reality is not somehow magically obscured by where the activity (selling/buying of real estate) takes place. The long arm of the law reaches across the Internet and certainly has the capacity to become involved in private back room dealings or deals that reside in our back pockets.
Some things to consider when managing the risk and liability of working with Private Listings:
1. Am I familiar with the Fair Housing Guidelines? (Federal, State, Local Ordinances)
2. If the terms of the agreement are disputed, do I have the documentation in place to avoid the appearance of wrong doing?
3. Does the conversation in my 'Private Group' ever violate Anti-trust Laws or could it be labeled as discriminatory if shared? (Remember we live in a world of ubiquitous recording devices)
4. Am I exercising fair dealing in service of and protection of my fiduciary duty to my client?
We recently created a course entitled: Fair Housing: Risk Reduction Strategies. If you would be interested in sponsoring this course for your Association, Brokerage or Team, please contact us.
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