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Joe Rath has spent his lifetime in real estate, and he has a message for the industry: Clear Cooperation is failing.
Rath, who comes from a real estate family, today serves as Redfin’s senior director of brokerage operations and head of industry relations. His role involves working with major industry players all across the U.S., including scores of multiple listing services (MLSs).
And his work has convinced him that pocket listings — or those listings that are marketed privately rather than reaching the public — are a major problem. He believes they raise serious concerns about fair housing and jeopardize the integrity of a housing market where everyone has equal access to information.
Rath is not alone. Indeed, in late 2019 concern about pocket listings led the National Association of Realtors to adopt the Clear Cooperation Policy. The policy was touted as an effective ban on pocket listings while also offering some exceptions, for example in the case of “office exclusives” that are only marketed internally to an agent’s in-house colleagues.
Clear Cooperation has been controversial. While some have hailed it as a victory for fair housing, others — including some of real estate’s biggest names — have been more critical. The policy is also a factor in various legal and antitrust challenges NAR is currently facing.
Regardless of the controversy, Rath argued to Inman that loopholes in the policy are undermining its effectiveness. In fact, he thinks the policy is actually making pocket listings more pervasive, which reduces fairness in the housing market. And he’d like to see brokerages and MLSs step up and solve the issue.
Rath will appear on stage next week at Inman Connect Las Vegas to discuss Clear Cooperation. In anticipation of that appearance, he spoke with Inman about what exactly the problems are and why the issue matters. What follows is a version of that conversation that has been edited for length and clarity.
Inman: You’re going to discuss how we’re doing with Clear Cooperation and how well it’s serving the industry. So let’s start there. How do you think it’s going?
Rath: I think Clear Cooperation in its current form promotes the behaviors it was really intending to discourage.
I should start by saying that crafting a policy for 1.5 million Realtors is an incredibly complex task. I know from shaping policies at Redfin for many years, for hundreds to thousands of people, how difficult that is. So I would just say it was never going to be perfect. But this one came pretty close. Especially just with its simplicity. The policy itself is simple. You put listings into the MLS within 24 hours. That helps all of us ensure a fair, transparent and equal marketplace.
But I think the policy is like a superhero without powers. That’s because the office exclusive loophole favors big brokerages who can still do pocket listings within their brokerage.
You said it encourages the behavior it’s meant to stop, but you also mentioned it was close to being perfect. So did it fail? Was it good intentions but poor execution? What did you mean by that?
Exactly. Good intentions, poor execution. There’s two halves. The first half is that the policy is intended to fight against pocket and exclusive listings by ensuring that every broker puts their listing into the MLS within 24 hours. That’s something we’ve always stood behind and viewed as the most effective way to ensure that fair marketplace.
The loophole, I think we never really foresaw the degree to which that would be used as a blueprint for these exclusive networks, and to what degree big brokerages would be able to use this language as a loophole for office exclusives and use that as a new business model for themselves. That just gave the green light to share listings on internal networks that aren’t marketed to the public but certainly shared within the brokerage.
Some of the brokerages coast to coast are so big that the listings never get to see the light of day.
So how big of a problem is this right now? Are pocket listings more or less pervasive compared to before Clear Cooperation?
The easiest way to see how we know it’s not working is just the rise of all the in-house, off-MLS exclusive networks that have emerged since then within the largest national and regional brokerages. So, Howard Hanna’s Find it First, Compass’ Private Exclusives and then later Opendoor Exclusives. So their unique access to private listings was supposed to distinguish them in a highly competitive market.
They’re not doing anything wrong. This is nothing against them. They’re all playing by the rules. But it’s the most obvious example of how it’s not working. There’s no exact data on the number of pocket listings. We’ve published some before, which was basically our best guess, and we’ll have some updates at Connect.
We don’t know the exact number, but we do know that these networks are prevalent and have become a really key part of the strategy for large brokerages.
An underlying assumption in this conversation is that there is a problem with pocket listings. Talk to me about that. What exactly is the issue?
Fair housing comes up a lot. I don’t think anybody is intending to discriminate. But we have seen time and time again, and we’ve published studies on the fact, that nonwhite buyers are usually on the list of people who don’t have access to that inventory.
And just at a general level, the stakes are really high when it comes to giving everyone in America equal access to real estate information. It’s where your kids go to school. It’s where you and your family feel safe. And where you walk your dog every day. If you don’t know the house is for sale, how do you have an equal shot at competing?
Nobody should have to know what the secret handshake is, what the private listing network is, to know what homes are for sale.
So how do we fix this? You said Clear Cooperation isn’t working. So what’s the solution?
This is a problem for MLSs to solve. And I think there are solutions. It seems like the biggest concern and the reason the carve out for the exclusive inventory is over privacy. So Clear Cooperation does solve for seller privacy that way by offering up office exclusives, but it’s like a sledgehammer cracking a nut.
So individual MLSs could allow brokers to add those listings, for example, with no photos or no price. They could also require agents to share listings with other members regardless of the brokerage without the need to go public.
Those are just a few things where you’re still sharing the listing with every other MLS member, but it’s just making sure you’re honoring the seller’s privacy concerns. Because there are examples where that is important. There will always be cases — even if I think it’s sometimes inflated — to keep the listing as private as possible. But I think that’s more of a product problem than a broad, sweeping office exclusive carve out.
You mentioned the solution needs to come at the MLS level. But you also pointed out that there are these big brokerages that span large geographic areas and multiple MLSs. How do you solve this problem when there’s the vast patchwork of MLSs?
When I say MLSs I also mean the broker-members, because really the MLS exists to serve it’s broker-members.
Brokerages need to decide that we’re all going to show homes for sale or none of us are. So it definitely begins at the brokerage level. At a brokerage level, you can decide that the spirit of Clear Cooperation is something that you’re going to honor, that you’re going to say, ‘when we take a listing we’re going to put it in the MLS.’
But the minute there’s a fractured approach, or one brokerage does it but the other one doesn’t, that’s the position where we’re left having to explain why a listing is showing up when you talk to one agent but not when you talk to another. And that’s a situation that none of us want to find ourselves in.
What you’re describing almost reminds me of what they have in Europe, where they don’t have an MLS so every company has their own listings on their own website — and it’s this nightmarishly fractured system. It almost seems like it’s moving in that direction. Am I wrong there?
I don’t think you’re wrong. I can’t help but feel like we’ve stepped back in time. Big brokerages are growing pocket-exclusive networks.
I feel like there will always be an appeal to saying, ‘our agents are the ones who know what’s available for sale. Come to us and work with us as a value proposition.’ And I can see how that would be highly appealing, especially in an environment that is as competitive as this one is.
But again, people aren’t intending to discriminate but they have to know what the consequences are, where if you’re hiding it from somebody or you need to know somebody to know what’s for sale, it’s highly problematic from a fair-housing lens.
And really it’s just outside the spirit of us cooperating together as brokerages.