Latest / Dishin' Dirt with Gary Pickren / How Limited Exposure Can Lower Price, Terms, and Buyer Competition. SC New Private Listing Rules- Part 2

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How Limited Exposure Can Lower Price, Terms, and Buyer Competition. SC New Private Listing Rules- Part 2 · Dishin' Dirt with Gary Pickren

0:00
SPEAKER_01: So last week I introduced you to the South Carolina Real Estate Commission's guidance on limited exposure listings.
0:06
SPEAKER_01: What we're talking about there are your private listings, your pocket listings, your exclusive listings, whatever it is that you, your brokerage, or even your MLS wants to call them.
0:16
SPEAKER_01: But we're all talking about the same thing.
0:17
SPEAKER_01: It's when a seller has a property for sale and we limit the amount of exposure that property gets by either not including it on the multiple listing service, not putting it on particular portals, not putting it on websites, keeping that exposure limited.
0:30
SPEAKER_01: Now, this week, what I'm going to do is I'm going to walk you through the new commission approved disclosure form itself, because along with the guidance letter came a form to use when you are presented with these situations, which should be very rare, should not be part of your business model as some brokerages are trying to make it.
0:48
SPEAKER_01: When the real estate commission has already warned you that is in breach of your fiduciary duty.
0:52
SPEAKER_01: Now, what I want to do is I want to walk through some of these 11 seller acknowledgements because I think several of them are going to surprise you as a real estate agent.
1:00
SPEAKER_01: And I think if your seller were to read all 11 of them and actually have to acknowledge them by initials, it would make most sellers pause and ask themselves, why exactly is a real estate agent pushing me towards something that will most likely result in me getting less offers, less money, and more unfavorable terms.
1:17
SPEAKER_01: I'm also going to talk about what I think is the sleeping giant in all of that, and that's the debate over fair housing, because Senator Warren on the left and Jim Jeffers on the right, both of them and their committees have asked for information about these limited marketing ideas and are very concerned about the fair housing implications.
1:37
SPEAKER_01: And so when Congress gets involved, that's never going to be a good thing for anybody in real estate.
1:42
SPEAKER_01: Because the question today isn't whether limiting exposure can actually cost your seller money.
1:47
SPEAKER_01: It can and it will.
4:25
SPEAKER_01: I mean, it tells you what exactly it is and why we're having it.
4:28
SPEAKER_01: The seller is asked to separately initial 11 different acknowledgments.
4:33
SPEAKER_01: And as I said when we began this show today, if they read those 11 acknowledgements and still sign it, then they can limit their marketing.
4:41
SPEAKER_01: But most sellers reading that and realize what they're giving up are probably going to pause.
4:45
SPEAKER_01: So why 11?
4:46
SPEAKER_01: Because the real estate commission clearly wants the seller to understand that choosing limited exposure isn't simply about checking a box on your listing agreement that says, I don't want my house in the MLS.
4:59
SPEAKER_01: There are ramifications for that decision, and we want to make absolutely sure that the seller understands them, that the real estate agent has fulfilled their fiduciary duty to explain those.
5:10
SPEAKER_01: So we're going to walk through here for the next few minutes some of the most important ones.
5:14
SPEAKER_01: I'm not going to go over all 11.
5:15
SPEAKER_01: You can read the document yourself, but there are five or six here that I think we need to go over and explain what they are and why they're there.
5:23
SPEAKER_01: Number one, fewer buyers may know that your property actually exists.
5:27
SPEAKER_01: And this is an obvious one.
5:28
SPEAKER_01: The form tells the seller that limiting exposure means fewer prospective purchasers will become aware that the property is even available for sale.
5:36
SPEAKER_01: That seems and sounds to me credibly basic.
5:40
SPEAKER_01: Of course, fewer people are going to know the properties for sale, but follow that through to its logical conclusion.
5:46
SPEAKER_01: Why do we market property in the first place?
5:48
SPEAKER_01: Why do we put for sale signs in yards?
5:50
SPEAKER_01: Why do we put properties on the MLS?
5:51
SPEAKER_01: Why do we syndicate the websites through the MLS and through IDX feed?
5:56
SPEAKER_01: Why do agents then go and put properties on Facebook and Instagrams?
6:00
SPEAKER_01: And why do we have professional photography?
6:02
SPEAKER_01: Why do you hold open houses and create videos?
6:05
SPEAKER_01: Why do agents spend thousands of dollars building social media audiences?
6:09
SPEAKER_01: One reason and only one reason.
6:11
SPEAKER_01: We all say it together, exposure.
6:13
SPEAKER_01: The entire traditional real estate marketing model is based upon the premise that exposure has value.
6:20
SPEAKER_01: And that hasn't changed.
6:22
SPEAKER_01: More eyes potentially mean more buyers.
6:24
SPEAKER_01: More buyers potentially means more showings, and definitely more showings potentially means more offers.
6:29
SPEAKER_01: More offers potentially means more competition, and more competition potentially means better results for your seller.
6:36
SPEAKER_01: So let me ask you the uncomfortable question.
6:38
SPEAKER_01: If agents spend their entire career telling sellers, hire me because I can expose your house to more people, how do we suddenly now start telling the seller that actually exposing your house to fewer people is better?
6:51
SPEAKER_01: I mean, maybe it is.
6:53
SPEAKER_01: I've never seen an explanation showing me how it is.
6:55
SPEAKER_01: But again, why?
6:56
SPEAKER_01: Why is it better?
6:57
SPEAKER_01: Because I've never seen Josh Altman or Josh Flagg or any other of the big names on million-dollar listing go on a listing presentation on that show and tell the seller, I have less reach than anybody else has here.
7:11
SPEAKER_01: In fact, they actually do the opposite.
7:12
SPEAKER_01: They go on there and talk about their reach not only outside of Los Angeles, but across the country and across the globe.
7:18
SPEAKER_01: So what's unique about your seller that now makes this true that showing less people somehow is going to result them getting better offers?
7:25
SPEAKER_01: Because fewer offers means reduced competition.
7:29
SPEAKER_01: The form takes that next logical step.
7:32
SPEAKER_01: Limited exposure may result in fewer offers and less competition among prospective purchasers.
7:39
SPEAKER_01: This is where I think the disclosure becomes particularly important to you as a real estate agent because the seller may hear private listing and think, oh, exclusive.
7:46
SPEAKER_01: In fact, that's how most of these companies try to sell them.
7:49
SPEAKER_01: And they use these words exclusive, private.
7:51
SPEAKER_01: You think of a private club or an exclusive access or VIP.
7:54
SPEAKER_01: And those are all very positive marketing words.
7:57
SPEAKER_01: And it's not by chance that they're using these words.
8:00
SPEAKER_01: They intentionally use these words when talking about limited exposure marketing.
8:06
SPEAKER_01: But in a residential real estate transaction, exclusivity can mean something very different.
8:12
SPEAKER_01: It means fewer bidders.
8:14
SPEAKER_01: It means things that the seller needs to understand.
8:17
SPEAKER_01: And sometimes the buyer that's willing to pay the most isn't even the buyer your brokerage is working with or even knows about.
8:23
SPEAKER_01: Maybe the buyer is working with an agent in a competing brokerage.
8:26
SPEAKER_01: Maybe they're relocating from California.
8:28
SPEAKER_01: Maybe they're right now sitting today in Ohio like everybody else is, looking at Zillow tonight, trying to figure out how they can get to the great estate in America, which is South Carolina.
8:36
SPEAKER_01: Maybe their agent has an MLS alert set up for when something in this neighborhood comes on the market.
8:41
SPEAKER_01: If that buyer never knows that house is available, they can't make an offer.
8:45
SPEAKER_01: They can't drive the price up for the seller.
8:47
SPEAKER_01: And here's the critical point we'll never know what that offer could have been or would have been.
8:51
SPEAKER_01: And that's what makes this loss opportunity difficult to measure.
8:55
SPEAKER_01: The private listing might actually sell it for 700 grand and everybody celebrates and everybody thinks they got a great price and a quick close and everybody's happy.
9:02
SPEAKER_01: But what if there was somebody out there in that market who was willing to pay$750 or$775?
9:07
SPEAKER_01: You don't know because nobody ever had the opportunity to make that offer.
9:11
SPEAKER_01: It was kept internally, it was kept private.
9:14
SPEAKER_01: Next, the form specifically warns that limited exposure could produce a lower sales price or less favorable terms.
9:23
SPEAKER_01: And don't overlook the second half of that.
9:25
SPEAKER_01: Terms matter.
9:27
SPEAKER_01: Maybe the highest value offer isn't simply the highest purchase price.
9:30
SPEAKER_01: Maybe somebody would waive a financing contingency.
9:33
SPEAKER_01: Maybe somebody has cash.
9:34
SPEAKER_01: Maybe somebody gives the seller a 60-day lease back.
9:37
SPEAKER_01: Maybe they accept the property as is, pay their own closing costs, close in 10 days, maybe give the seller exactly the timing they need.
9:44
SPEAKER_01: Competition doesn't just affect price, it can affect any and all of the terms in the entire deal.
9:50
SPEAKER_01: When you reduce the competitive pool, you potentially reduce the seller's ability to compare not just price, but compare terms.
9:58
SPEAKER_01: Fourth, the seller acknowledges that limited exposure may increase the time necessary to sell the property.
10:04
SPEAKER_01: In fact, Refkin already admits that a large portion of his exclusives ends up on the MLS anyway, 30 days later, as if this is some great selling point to your exclusivity program.
10:16
SPEAKER_01: The reality is the seller's just wasted 30 days.
10:19
SPEAKER_01: Why would I want my property sitting in your internal marketing for 30 days?
10:23
SPEAKER_01: Because how many times has your seller come to you and said, hey, take your own sweet time selling my house?
10:29
SPEAKER_01: Usually by the time you're out into the driveway, they're already calling you asking why it's not on Zillow, why is it not on realtor.com?
10:34
SPEAKER_01: When are we going to have an open house?
10:36
SPEAKER_01: When are we going to get people here?
10:37
SPEAKER_01: Because I've never heard of any of y'all complaining that, you know, the seller just wants to take their old sweet time.
10:42
SPEAKER_01: That rarely, if ever, happens.
10:44
SPEAKER_01: So this creates a very interesting question.
10:46
SPEAKER_01: When somebody sells private listings by saying, well, we'll try it privately first.
10:50
SPEAKER_01: And if it doesn't sell, then we'll put on the MLS.
10:53
SPEAKER_01: Okay, well, how long are we going to try it internally?
10:56
SPEAKER_01: Three days, seven days, 30 days?
10:58
SPEAKER_01: Why?
10:58
SPEAKER_01: And why that amount?
11:00
SPEAKER_01: At what point does the private experiment start affecting the seller's timeline?
11:04
SPEAKER_01: And when the property eventually does reach the public market, what story does the market now hear?
11:09
SPEAKER_01: Is this truly a brand new listing?
11:11
SPEAKER_01: No, it's not.
11:12
SPEAKER_01: It's been sitting idle for 30 days.
11:15
SPEAKER_01: It's just been quietly been offered for weeks without selling.
11:18
SPEAKER_01: Those are the questions that brokers should be thinking about before making private first market part of their standard presentation.
11:25
SPEAKER_01: Remember, a day on the market does not mean a day on the MLS.
11:29
SPEAKER_01: A day on the market is a day that the property is offered for sale to anybody.
11:34
SPEAKER_01: So don't listen to these buffoons out there who keep saying, oh, this will hide the days on the market.
11:39
SPEAKER_01: It does not.
11:39
SPEAKER_01: It only allows you to lie and obfuscate about the days on the market, but don't be that agent who gets nailed for misrepresentation saying this is a brand new listing and it just came on the market when it's been sitting in your private listings for 30 days.
11:52
SPEAKER_01: The property's been available for 30 days.
11:54
SPEAKER_01: So go ahead and lie about that and hide your days on the market.
11:57
SPEAKER_01: And when another agent asks you, well, how long's this house been for sale?
12:01
SPEAKER_01: And you say, well, it's got two days on the market because it's only been on the MLS two days, and find your ass before the real estate commission with a grievance.
12:08
SPEAKER_01: Number four, the representation conflict.
12:11
SPEAKER_01: Now we get to one that I think is specific, especially significant.
12:15
SPEAKER_01: The seller acknowledges that limiting exposure increases the likelihood that the listing brokerage or one of its affiliated licensees may also represent the prospective purchaser.
12:26
SPEAKER_01: So why would the real estate commission specifically put that in this disclosure?
12:30
SPEAKER_01: Because if you limit exposure primarily to your own ecosystem, it logically increases the chance that the eventual buyer will come from that same ecosystem.
12:38
SPEAKER_01: Pretty simple.
12:40
SPEAKER_01: And that creates here another economic interest for the brokerage.
12:45
SPEAKER_01: I'm not saying that dual or designated representation is automatically improper.
12:50
SPEAKER_01: South Carolina law provides you mechanisms for multiple representation with appropriate consent.
12:55
SPEAKER_01: That's the key with appropriate consent.
12:57
SPEAKER_01: That issue is very different.
12:58
SPEAKER_01: The issue is: did the possibility of keeping both sides influence the recommendation to limit exposure?
13:04
SPEAKER_01: And we think we all know the answer to that.
13:06
SPEAKER_01: We all want to be truthful with ourselves.
13:08
SPEAKER_01: We know that's the purpose because the brokerage certification on the farm specifically says it should not.
13:16
SPEAKER_01: And that's the important distinction.
13:17
SPEAKER_01: Number six, the comparable sales problem.
13:20
SPEAKER_01: And this is something that Commissioner Andy Lees talked a lot about.
13:23
SPEAKER_01: When we get, we get to what I think may be the most interesting acknowledgement in this entire form.
13:29
SPEAKER_01: The commission addresses comparable sales.
13:31
SPEAKER_01: I want you to think about this.
13:32
SPEAKER_01: Appraisers determine value in significant part by looking at comparable transactions.
13:38
SPEAKER_01: Agents prepare CMAs using comparable transactions.
13:41
SPEAKER_01: Buyers evaluate pricing using comparable transactions.
13:45
SPEAKER_01: Sellers evaluate price using comparable transactions.
13:49
SPEAKER_01: But what happens if a significant percentage of properties in a particular neighborhood are sold through private networks without full market exposure?
13:58
SPEAKER_01: Are those sales truly demonstrating what the open market would have paid?
14:03
SPEAKER_01: Maybe, but probably not.
14:05
SPEAKER_01: So if a house sold for$600,000 privately, but would have generated multiple offers and sold for$650,000 publicly, then the$600,000 sales becomes the comp.
14:16
SPEAKER_01: The next seller appraisal potentially uses that comp.
14:20
SPEAKER_01: So limited exposures don't necessarily only affect one seller.
14:25
SPEAKER_01: At scale, it can potentially affect the data used to value an entire neighborhood.
14:30
SPEAKER_01: And that's a fascinating issue.
14:32
SPEAKER_01: And I think we're going to hear much more about this as this private listing networks try to grow nationally.
14:37
SPEAKER_01: Hopefully, we won't see that here in South Carolina as we've issued this guidance.
14:41
SPEAKER_01: But there's also another part of the disclosure that deserves an entire section of this podcast, and I think that's the fair housing argument.
14:47
SPEAKER_01: Before we move on, I want to circle back to fair housing.
14:52
SPEAKER_01: I think fair housing may ultimately become one of the biggest legal and regulatory issues surrounding private listing networks.
15:00
SPEAKER_01: As I said earlier, Senator Warren, Congressman Jim Jordan are both holding meetings and hearings on this.
15:06
SPEAKER_01: But here's a question nobody likes to ask.
15:09
SPEAKER_01: When you intentionally reduce the number of people who know a property is available, who gets left out?
15:16
SPEAKER_01: Who gets left out?
15:17
SPEAKER_01: That's the big question here.
15:19
SPEAKER_01: How were the people who did get access selected to get access?
15:23
SPEAKER_01: So who got left out and who got to see it and why?
15:27
SPEAKER_01: The commission's guidance specifically addresses fair housing concerns.
15:30
SPEAKER_01: And I think this is very significant because most of the private listing debate nationally has focused on economics.
15:37
SPEAKER_01: How does the seller get a better price?
15:39
SPEAKER_01: Does the brokerage get both sides?
15:40
SPEAKER_01: Does COMPAS have some advantage over its competitors by doing this?
15:44
SPEAKER_01: Does Zillow have access?
15:45
SPEAKER_01: Does clear cooperation hurt or does it help consumers?
15:49
SPEAKER_01: Important questions, no doubt.
15:51
SPEAKER_01: But fair housing creates a different set of questions.
15:55
SPEAKER_01: Public marketing is generally viewed as open marketing to think about traditional MLS model.
16:02
SPEAKER_01: Property goes on into the MLS, thousands of licensees can see it.
16:07
SPEAKER_01: It syndicates to public-facing websites, consumers can find it online, people can set up automated searches to find neighborhoods, and second properties come on.
16:15
SPEAKER_01: Buyers can discover the property without necessarily belonging to someone's personal network.
16:21
SPEAKER_01: And that's very significant because broad public marketing reduces the importance of who you know.
16:29
SPEAKER_01: And real estate shouldn't be a business about who you know.
16:33
SPEAKER_01: Now let's compare that with private listings.
16:35
SPEAKER_01: Who sees it?
16:36
SPEAKER_01: The agents inside that particular company, clients already working with that agent, people on some secret email list, people inside the brokerage app, people who have relationships within the particular network.
16:48
SPEAKER_01: Now ask yourself: does everyone have equal access to the network?
16:53
SPEAKER_01: And this is where fair housing concerns start.
16:56
SPEAKER_01: Intent isn't the only thing that matters when we talk about fair housing.
17:01
SPEAKER_01: You don't necessarily have to sit around your office and say, let's exclude this member of this protected class.
17:06
SPEAKER_01: That would be an obvious problem.
17:07
SPEAKER_01: But discriminatory effects can arise from practices that weren't expressly designed with discriminatory intent.
17:15
SPEAKER_01: Suppose a brokerage develops a huge private inventory system, like the one we've seen.
17:20
SPEAKER_01: Their agents circulate listings primarily amongst their existing clients.
17:25
SPEAKER_01: Those clients tend to come from the agent's existing sphere of influence.
17:29
SPEAKER_01: Those spheres come from personal relationships, past clients, neighborhood schools, churches, clubs, social groups, professional networks.
17:36
SPEAKER_01: I'm not saying any of those things automatically creates a fair housing violation.
17:40
SPEAKER_01: I'm saying you need to recognize the potential issue that those clubs that you might belong to, those spheres of influence might not be representative of the diversity in the United States.
17:52
SPEAKER_01: Just saying, now private networks can replicate the characteristics of the people already inside the network.
17:59
SPEAKER_01: Public exposure operates differently.
18:01
SPEAKER_01: You don't need to know somebody.
18:03
SPEAKER_01: You don't need to belong to that club.
18:05
SPEAKER_01: You don't have to have the right agent at the right company.
18:08
SPEAKER_01: You see the listings because the property is publicly available to all.
18:13
SPEAKER_01: And that's why the commission says broad public marketing will ordinarily be more consistent not only with the seller's objectives, but also with equal housing opportunity.
18:23
SPEAKER_01: And that second part matters.
18:25
SPEAKER_01: So let's create a hypothetical here.
18:26
SPEAKER_01: Imagine you have a broker that dominates the most desirable neighborhood in the town.
18:31
SPEAKER_01: They start encouraging sellers to use that private network.
18:34
SPEAKER_01: Now 20% of the homes in that neighborhood never hit the open market.
18:38
SPEAKER_01: Now 30, now 40%, now 50.
18:41
SPEAKER_01: To know those homes are available, a buyer increasingly needs a relationship with that particular brokerage.
18:47
SPEAKER_01: Now imagine a buyer from another state.
18:49
SPEAKER_01: They don't know anything about that local brokerage landscape.
18:52
SPEAKER_01: They go online, they search realtor.com, they search Zillow, they have an agent at another company, and they think they're seeing the entire inventory, all the inventory in the city, but they're not, because a substantial portion of that neighborhood is effectively invisible to them.
19:07
SPEAKER_01: Now compare that buyer with somebody already connected to that dominant brokerage.
19:12
SPEAKER_01: That buyer sees the inventory, the first buyer doesn't.
19:16
SPEAKER_01: And we should be at least asking, what does that do to equal access to housing opportunities?
19:23
SPEAKER_01: And if patterns emerge along protected class lines, the legal question becomes much, much more serious and a lot more expensive.
19:30
SPEAKER_01: One thing we also know is that steering can take new forms.
19:34
SPEAKER_01: We've traditionally thought about steering as an agent directing a buyer toward or away from certain neighborhoods.
19:40
SPEAKER_01: But technology and private networks are creating a much more subtle version of access control.
19:46
SPEAKER_01: Instead of saying you shouldn't look at this neighborhood, what happens if certain buyers simply never learn that some of the homes in that neighborhood are for sale?
19:54
SPEAKER_01: That's why I think the future fair housing debate may increasingly be more about access to information.
20:00
SPEAKER_01: Who sees the listing?
20:02
SPEAKER_01: Who doesn't see the listing?
20:03
SPEAKER_01: How was the decision made?
20:05
SPEAKER_01: Was access based upon objective criteria?
20:08
SPEAKER_01: Was the seller informed?
20:09
SPEAKER_01: And does the system produce unequal access to housing opportunities?
20:15
SPEAKER_01: Those are questions that every brokerage building a private listing strategy ought to be asking itself now rather than later after somebody files a fair housing complaint.
20:24
SPEAKER_01: Because then it's going to be too expensive.
20:25
SPEAKER_01: But, Gary, what if my seller tells me they don't want to be publicly exposed?
20:29
SPEAKER_01: That's a legitimate consideration.
20:30
SPEAKER_01: We've talked about that again.
20:32
SPEAKER_01: Private listings aren't prohibited, but seller instructions do not automatically authorize discriminatory conduct.
20:39
SPEAKER_01: A seller can't simply instruct you to violate fair housing laws.
20:42
SPEAKER_01: We've known that forever.
20:43
SPEAKER_01: Your seller can't say, don't sell my house to people of this particular race.
20:48
SPEAKER_01: If they did, you couldn't follow that instruction and you shouldn't follow that instruction.
20:51
SPEAKER_01: So the fact that a seller requests limited exposure doesn't end the analysis.
20:56
SPEAKER_01: You still need to think about how you're implementing that instruction.
21:00
SPEAKER_01: What legitimate objective is being served by limiting exposure?
21:04
SPEAKER_01: How limited will that exposure be?
21:06
SPEAKER_01: How are prospective purchasers being identified?
21:09
SPEAKER_01: Are similarly situated buyers being treated consistently across all races?
21:14
SPEAKER_01: And what procedures does the brokerage have to prevent discriminatory effects, not intent effects?
21:21
SPEAKER_01: Which brings us directly to the person whose name appears at the bottom of this new form.
21:26
SPEAKER_01: Congratulations, the broker in charge.
21:28
SPEAKER_01: If you're the broker in charge, I'd pay very close attention to this part because the commission approval form, because the commission approved form doesn't simply have the seller signing it.
21:40
SPEAKER_01: It doesn't simply have the listing agent signing it.
21:42
SPEAKER_01: The broker in charge also signs it.
21:44
SPEAKER_01: And I think that tells you something.
21:46
SPEAKER_01: Commission doesn't view limited marketing exposure listings as something that should happen entirely between the individual salesperson and the seller without broker in charge knowledge.
21:58
SPEAKER_01: Okay.
21:58
SPEAKER_01: The BIC is now.
22:00
SPEAKER_01: Brought into the process.
22:01
SPEAKER_01: The form states of the BIC signature indicates awareness that the seller has selected limited marketing.
22:07
SPEAKER_01: So let's talk practically.
22:08
SPEAKER_01: What does this mean for your office?
22:10
SPEAKER_01: Number one, I would not sign these things blindly.
22:13
SPEAKER_01: If I'm the BIC, I don't want an agent walking to my office and saying, I need your signature right here and just sign it.
22:18
SPEAKER_01: Because what's the point of my signature if I don't know what I'm acknowledging?
22:23
SPEAKER_01: I'd want to know a few things.
22:24
SPEAKER_01: First, whose idea was the limited exposure?
22:27
SPEAKER_01: Remember, the form requires that distinction.
22:29
SPEAKER_01: Did the seller independently request it or did the agent introduce it?
22:32
SPEAKER_01: If the seller requested it, what was the seller's reason?
22:35
SPEAKER_01: If the agent introduced it, what seller-specific objective caused the agent to recommend it?
22:41
SPEAKER_01: Secondly, what does limited actually mean?
22:44
SPEAKER_01: No MLS, no syndication, no signs, no social media, internal brokerage only, selected agents, existing clients only, delayed public marketing, because limited exposure can describe a lot of different strategies.
22:56
SPEAKER_01: And the risk may depend substantially upon what you're actually doing.
23:01
SPEAKER_01: Thirdly, how long is this limitation going to be in place?
23:04
SPEAKER_01: Is it indefinitely until the seller changes their mind?
23:07
SPEAKER_01: Three days, seven days, two weeks?
23:08
SPEAKER_01: And what causes the property to move from limited to broad?
23:12
SPEAKER_01: Is it just the fact you can't sell it or that nobody in your office wanted it?
23:15
SPEAKER_01: What is the reason?
23:16
SPEAKER_01: Fourth, what did we explain to the seller?
23:20
SPEAKER_01: Did you talk about fewer buyers, potentially having fewer offers, reduced competition, potential price consequences, potentially less favorable terms, longer time to market the property, representation issues, fair housing concerns, comparable sale implications.
23:33
SPEAKER_01: Those aren't little details anymore.
23:35
SPEAKER_01: They're literally laid out in the commission approved form, which again, the commission approved form is clearly to protect the public from not being told the entire story about limited marketing.
23:46
SPEAKER_01: But it's also for your protection in those rare occasions where the seller does select limited marketing.
23:53
SPEAKER_01: And then you can document those conversations and the fact that your seller not only acknowledged the form, but your seller had informed consent.
24:03
SPEAKER_01: They knew the ramifications and they decided to move forward anyway.
24:06
SPEAKER_01: And that's the form that's going to help you if somebody ever files a grievance against you or brings a lawsuit against you on this particular case.
24:12
SPEAKER_01: This is where I also think that brokerages need to move from improvisation to procedure.
24:17
SPEAKER_01: If your company permits private or limited marketing listings, you should have a written process.
24:23
SPEAKER_01: It didn't have to be 50 pages, but you need to have a written process.
24:26
SPEAKER_01: For example, agent receives the seller request, considers recommending limited exposure.
24:31
SPEAKER_01: Agent must then identify the seller objectives.
24:33
SPEAKER_01: They must explain the broad marketing and limited marketing alternatives.
24:37
SPEAKER_01: The agent must discuss the risk identified by the commission in its form.
24:41
SPEAKER_01: Seller will then make the decision.
24:42
SPEAKER_01: Agent will complete the commission approved disclosure.
24:45
SPEAKER_01: BIC will review those circumstances with the listing agent, and then the BIC will sign and the documentation goes into the file forever.
24:52
SPEAKER_01: That's not bureaucracy for the sake of bureaucracy.
24:55
SPEAKER_01: That's risk management.
24:56
SPEAKER_01: And that's what this form is going to help you with.
24:58
SPEAKER_01: Because remember, what we're trying to answer two years later is why did we do this?
25:03
SPEAKER_01: Your file has to tell the story.
25:05
SPEAKER_01: A good transaction file should allow somebody who wasn't involved in the transaction to open it 24 months later and understand exactly what happened and why.
25:13
SPEAKER_01: Why did the seller choose limited exposure?
25:15
SPEAKER_01: What alternatives were discussed?
25:17
SPEAKER_01: What was the seller trying to accomplish?
25:19
SPEAKER_01: Who suggested the strategy?
25:20
SPEAKER_01: What did the seller acknowledge?
25:22
SPEAKER_01: And did the broker approve?
25:24
SPEAKER_01: If the file tells a story, you're going to be in a lot better position.
25:27
SPEAKER_01: Now, if the story is the agent introduced it because they told him it would be a good marketing strategy, and we put it on internally for 30 days, and when it didn't sell, we then went to the MLS.
25:35
SPEAKER_01: That's going to be a much harder position to take.
25:38
SPEAKER_01: Here's a policy I would be very nervous about reading in a guidance.
25:42
SPEAKER_01: All listings will first be marketed internally for seven days before being offered to the public.
25:47
SPEAKER_01: Or this is a fantastic marketing strategy, and we need to be pushing our clients toward that.
25:52
SPEAKER_01: Any of these forms, they don't have to be as blatant as these.
25:55
SPEAKER_01: I think these examples here I've given you are very blatant examples, but I think what I've seen already in the marketplace, whether it's down at the coast in South Carolina or nationally, is not as blatant as this.
26:04
SPEAKER_01: It's saying things like, you need to put these properties internally because this is a great marketing strategy to help you price the property, to help find out what the market's going to do, and to help correct any issues with a house before it gets marketed to the broader public.
26:17
SPEAKER_01: All that stuff that a real estate agent should do as a real estate agent.
26:20
SPEAKER_01: If you can't do that, you shouldn't be a real estate agent in the first place.
26:22
SPEAKER_01: It's all gaslighting.
26:23
SPEAKER_01: What concerns me is where is the individualized seller analysis?
26:28
SPEAKER_01: The commission says limited market listing should generally be the exception rather than the ordinary course of marketing residential real estate.
26:36
SPEAKER_01: And it says they should be approached based upon professional judgment rather than part of a brokerage business strategy.
26:44
SPEAKER_01: That's not what's happening at the coast of South Carolina right now.
26:47
SPEAKER_01: It's being done as a brokerage business strategy.
26:51
SPEAKER_01: A blanket policy starts looking less like this particular seller needed or wanted privacy and it makes it start looking more like this is how our company does business, especially when you're out there bragging that about 50% of our listings go to exclusive listings before they go onto the public marketing as part of our three-way marketing plan.
27:09
SPEAKER_01: That's exactly where this conflict issue has become much more pronounced because now the brokerage isn't reacting to an individual client objective.
27:17
SPEAKER_01: The brokerage is funneling clients into a system that benefits the brokerage competitive strategy, whether it's for getting both sides of the transaction for more commissions or it's trying to limit the data that's going on to Zillow.
27:29
SPEAKER_01: And then asking the seller to sign a disclosure, I would be very cautious with that model in light of this guidance.
27:35
SPEAKER_01: Any seller looking at that disclosure would normally start asking questions.
27:39
SPEAKER_01: So what about incentives?
27:41
SPEAKER_01: Here's another question Bick should be asking.
27:43
SPEAKER_01: Are your agents being incentivized to create private listings?
27:47
SPEAKER_01: Do private listings count differently toward awards?
27:50
SPEAKER_01: Does it receive enhanced lead opportunities?
27:52
SPEAKER_01: Does the brokerage market agents based on access to exclusive inventory?
27:56
SPEAKER_01: Are there internal financial incentives associated with keeping transactions inside the company?
28:01
SPEAKER_01: Again, I'm not saying every incentive is illegal.
28:03
SPEAKER_01: I'm saying look at the potential conflict.
28:06
SPEAKER_01: If your compensation system encourages an agent to recommend limited exposure, while the agent owes a fiduciary duty to put the seller's interest above the agent's own interest, you need to think very carefully about that structure.
28:18
SPEAKER_01: And if I'm the bick signing these forums, I definitely want to understand that.
28:22
SPEAKER_01: Next, you need to train your agents on what not to say.
28:25
SPEAKER_01: BICs need to listen to how agents are pitching private listings, because words matter.
28:30
SPEAKER_01: If your agents are out there telling sellers private listing gets higher prices, well, first of all, where's your data?
28:37
SPEAKER_01: I doubt you have the data to prove that because that goes against every economic model system in the history of economics.
28:44
SPEAKER_01: You'll get a better buyer.
28:45
SPEAKER_01: What does that even mean?
28:46
SPEAKER_01: You'll get a better buyer because we've pre-qualified buyers.
28:50
SPEAKER_01: Well, your pre-qualified buyers are a fraction of the pre-qualified buyers in the marketplace.
28:55
SPEAKER_01: This creates exclusivity.
28:57
SPEAKER_01: How does exclusivity benefit the seller?
28:59
SPEAKER_01: We're not talking about a private country club.
29:01
SPEAKER_01: We're talking about trying to sell their house.
29:03
SPEAKER_01: We have buyers other companies don't have.
29:05
SPEAKER_01: All companies have buyers you don't have.
29:07
SPEAKER_01: So be careful about making these claims that you can't substantiate.
29:11
SPEAKER_01: And if you need to be very careful if you're using selective statistics, if you're going to tell sellers that your private listings sell faster or for more money, you need to understand what data you're using and what properties you're comparing it to and whether the comparison is actually meaningful because the jury is going to be making that decision.
29:29
SPEAKER_01: Again, all of this goes clearly against centuries of economic theory.
29:33
SPEAKER_01: Because if that statement is what persuaded the seller to give up broad exposure and maybe money as well, it may become extremely important later in a lawsuit or a grievance.
29:44
SPEAKER_01: This isn't just about compliance, guys, it's about supervision.
29:47
SPEAKER_01: Ultimately, this is a supervision issue.
29:49
SPEAKER_01: The BIC is responsible for supervising brokerage activity.
29:53
SPEAKER_01: And the commission has now put the BIC directly into the documentation process.
29:58
SPEAKER_01: So if you're a BIC, I think your question should be: do I know how private listings are being used in my office?
30:03
SPEAKER_01: How many are doing it?
30:04
SPEAKER_01: What agents are doing it, and why?
30:05
SPEAKER_01: Are the sellers requesting these?
30:07
SPEAKER_01: Are the agents recommending them?
30:09
SPEAKER_01: And we need to see some type of justification.
30:11
SPEAKER_01: And are we seeing the same justification over and over as to why this same agent is pushing these same private listings?
30:18
SPEAKER_01: Are buyers from outside our brokers getting reasonable access?
30:20
SPEAKER_01: And are we creating fair housing problems?
30:22
SPEAKER_01: Are agents properly explaining the disadvantage?
30:25
SPEAKER_01: Guys, it goes back to what Leo Pere at EXP told me.
30:28
SPEAKER_01: 300,000 transactions worldwide last year and less than 1,000 were private.
30:34
SPEAKER_01: That tells you the numbers of these should be in the less than 1% of your portfolio.
30:39
SPEAKER_01: Those are the questions I would be asking as a big.
30:41
SPEAKER_01: Because here's the problem with compliance.
30:43
SPEAKER_01: Nobody cares about a file when the transaction goes perfectly.
30:46
SPEAKER_01: The file becomes very important when somebody is unhappy after the fact.
30:50
SPEAKER_01: It may be six months, it may be two years.
30:53
SPEAKER_01: People remember conversations very differently.
30:55
SPEAKER_01: And the sellers will say, Nobody told me that.
30:57
SPEAKER_01: And your agent simply saying, Yes, I did, the investigator is going to say, Show me.
31:02
SPEAKER_01: Show me where you said it.
31:03
SPEAKER_01: And that's why this new form matters for you guys.
31:05
SPEAKER_01: That's why this big signature matters.
31:07
SPEAKER_01: That's why this guidance matters, because the commission has now told you the issues it believes you should be considering with this type of marketing.
31:15
SPEAKER_01: So don't wait until there's a complaint to start thinking about it.
31:19
SPEAKER_01: Now, when we come back next week, or we're going to take this one step further because there's a question that every agent should fear after a public sale.
31:28
SPEAKER_01: What happens when the neighbor sells their property for substantially more money by going on the public market?
31:33
SPEAKER_01: Then we're going to tackle what I think may be the most controversial statement in this entire guidance.
31:38
SPEAKER_01: Limited marketing listing should not simply be part of a brokerage's business strategy.
31:44
SPEAKER_01: Because that statement puts South Carolina directly into the national battle over private listing networks.
31:50
SPEAKER_01: Please like us, share us, subscribe.
31:52
SPEAKER_01: Have a wonderful weekend and a safe Labor Day holiday, and we'll be back again next week.