A recent Silicon Valley Association of REALTORS® meeting focused on the different real estate marketing philosophies, with many REALTORS® in attendance questioning the validity of off-MLS listings clubs and the fiduciary duty of agents to their sellers.
Real estate brokers/agents representing sellers use the multiple listings service (MLS) database to share information about properties with other brokers/agents who may represent potential buyers. Listings not placed in the system negatively affect the integrity of the MLS data. In recent years, private clubs with members who share listings to just a select few, have sprouted, raising concerns about potential risks to the agent, the seller, and even the possible collapse of the MLS system.
According to Jim Harrison, president and CEO of MLSListings Inc., off-MLS activity in the counties of San Mateo, Santa Clara, Santa Cruz, San Benito, and Monterey, the 5-county area the MLS serves, represented 21 percent of total home sales in 2013, up from 15 percent in 2012, and 12 percent in 2011. By sales volume, this accounted for $4.8 billion of the 2013 market share in the 5-county area.
Harrison noted MLSListings Inc. is, in fact, "the largest private listings club in Northern California," with over 16,000 subscribers/members who are qualified licensed brokers/agents and abide by rules of the National Association of REALTORS® and the California Association of REALTORS®. The MLS has agreements with other California MLSes to share property and listing information representing about 21 counties and more than 65,000 subscribers, so agents' listings get the best exposure.
Eric Trailer, founder and CEO of Producers Forum, a private listings group, said when he launched Producers Forum in 2011, he intended it to complement – not compete - with the MLS. "It was intended to answer the wants and needs of agents, which the MLS didn't provide," said Trailer.
Producers Forum currently has 1,600 members who are licensed real estate professionals from around California, Nevada and Oregon. Trailer said the private listings club leverages agents to provide specific information about buyers and off-MLS sellers. Buyers are vetted by members.
Studies show properties in the MLS receive a higher price than those sold off-MLS, from 5 percent more to 17 percent more and higher. Trailer did not contest this finding. Instead, he noted the main reason given for not marketing a property in the MLS is convenience, not price. Sellers may not want to go through the typical property marketing preparation process.
Another reason given for off-MLS listings is sellers value their privacy and do not want information about their home widely distributed on the Internet, to which Harrison countered MLSListings does not require agents to post listings on the Internet; nor does it require agents' listings to be syndicated. Sellers worried about security can limit exposure of their home and show their home to buyers whenever it is convenient for them.
REALTORS® questioned Trailer on how agents can fulfill their fiduciary duty to their client if they don't expose a property to every possible buyer, especially at a time when inventory is low.
"With multiple offers, a seller could receive the best price and the best terms. To not test the market in such a sellers' market as we have today would not be in a seller's best interests," remarked one agent.
Trailer insisted members of the Forum are fulfilling their fiduciary duty to their clients because they are abiding by their clients' wishes.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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