Listing Off the MLS Cost Sellers More Than $1 Billion

Selling a home is one of the most significant financial decisions homeowners make, and maximizing their return is a top priority. However, a recent study by Zillow reveals that sellers who opt out of the Multiple Listing Service (MLS) may be leaving thousands of dollars on the table. The study found that in 2023 and 2024 alone, off-MLS sales cost homeowners more than $1 billion in potential earnings.

So, why does selling off the MLS result in financial losses? Let's break down the data and explore why listing on the MLS remains the best choice for most sellers.

The Financial Impact of Skipping the MLS

According to Zillow's analysis, homes sold outside the MLS framework fetched, on average, $4,975 less than their MLS-listed counterparts. This discrepancy wasn't uniform across the board; in certain states, the losses were even more pronounced:

• California: Median loss of $30,075
• Massachusetts: Median loss of $20,171
• New York: Median loss of $13,749

The study also highlighted that lower-priced homes bore the brunt of these losses. Properties in the bottom 5% price tier experienced median losses of 3.1%, whereas luxury homes in the top 5% saw a modest decline of 0.4%. This trend suggests that off-MLS sales might disproportionately disadvantage sellers of more affordable homes.

Understanding the MLS and Its Significance

The Multiple Listing Service (MLS) is a centralized database where real estate professionals list properties, ensuring maximum exposure to buyers. The benefits of using the MLS include:

1. Increased Visibility

• Homes listed on the MLS are seen by thousands of buyers and agents, leading to more interest and competition.
• Properties typically receive more offers, often leading to bidding wars that push the price higher.

2. Market Transparency

• MLS listings provide accurate and standardized data, helping buyers and sellers make informed decisions.
• Unlike private sales, MLS listings prevent unfair pricing practices and ensure a fair market evaluation.

3. Faster and More Competitive Sales

• MLS-listed homes often sell faster due to their higher visibility.
• More competition among buyers means sellers are less likely to accept lowball offers.

The Rise of Private Listings: Motivations and Misconceptions

Private listings, often referred to as "pocket listings," involve selling a property without making it publicly available on the MLS. Proponents argue that this approach offers sellers greater control over who views their property, potentially ensuring privacy and exclusivity. However, this strategy can come with significant drawbacks.

Zillow's CEO, Jeremy Wacksman, has been vocal about the pitfalls of private listings. He suggests that some brokerages might promote off-MLS sales to "double dip" on commissions, representing both the buyer and the seller, which can lead to conflicts of interest. Wacksman emphasizes that such practices often benefit the brokerage more than the homeowner, who might be missing out on better offers from a broader pool of buyers. 

Moreover, there's a concerning trend of misinformation among real estate agents. A survey revealed that 56% of agents believe private sales yield higher prices, a misconception that can adversely affect their clients' decisions. This highlights the need for better education within the industry to ensure agents provide advice that aligns with market realities.

The Clear Cooperation Policy: Ensuring Fair Play

In response to the challenges posed by private listings, the National Association of Realtors (NAR) introduced the Clear Cooperation Policy in 2020. 

What is the Clear Cooperation Policy?

• The rule states that any property marketed publicly (e.g., social media, flyers, emails) must be listed on the MLS within one business day.
• This policy promotes transparency and equal opportunity for buyers while protecting sellers from potentially unfair practices.

While some brokerages have pushed back, arguing for sellers' autonomy in marketing their homes, the overarching intent is to prevent practices that might limit a property's exposure and, consequently, its selling price.

Making Informed Decisions in Real Estate

For sellers, the decision to list on the MLS or opt for a private sale should be made with a clear understanding of the potential financial implications. While private listings might offer a sense of exclusivity, they can inadvertently reduce a property's market exposure, leading to lower offers.

Engaging with a knowledgeable real estate professional who prioritizes the seller's best interests is crucial. Such professionals can provide insights into current market trends, the benefits of MLS exposure, and the potential pitfalls of private listings.

In the ever-evolving real estate landscape, information is power. Sellers are encouraged to ask questions, seek clarity, and make choices that align with their financial goals and personal preferences.

Conclusion

The real estate market is complex, with various avenues available for selling a property. However, as recent studies indicate, opting out of the MLS can have substantial financial repercussions. By understanding the role of the MLS, recognizing the potential downsides of private listings, and collaborating with informed professionals, sellers can navigate the market more effectively and achieve optimal outcomes.

Remember, in real estate, as in life, visibility often translates to value.