Long live NAR: Agents won’t defy powerful trade group in pocket listings spat

Two antitrust lawsuits take aim at the ruling, which went into effect on May 1

Los Angeles /
Jun.June 02, 2020 04:00 PM
Gary Gold, Hilton & Hyland agent, Paul George, and Deandre Jordan, Jeff Bezos, and Garrett Camp (Credit: Getty Images, Flickr, Hilton & Hyland, Google Maps, Realtor, Pintrest, and iStock)

Gary Gold, Paul George, Deandre Jordan, Jeff Bezos, and Garrett Camp (Credit: Getty Images, Flickr, Hilton & Hyland, Google Maps, Realtor, Pinterest, and iStock)

Don’t get Gary Gold started on the National Association of Realtors’ ban on pocket listings.

“I think it’s pathetic what’s happening right now,” he said. “Having these global laws imposed on local real estate issues is crazy.”

Gold, a top Hilton & Hyland agent, has spent years in the exclusive, celebrity-soaked world of Westside Los Angeles real estate. It’s a world in which the most expensive deal ever done — Jeff Bezos buying David Geffen’s Beverly Hills home for $165 million this February – happened while Bezos was partying on Geffen’s yacht.

Geffen, suffice to say, did not put the home on the NAR-approved Multiple Listings Service. Nor did former L.A. Clippers all-star DeAndre Jordan put his Pacific Palisades abode “on the market” for current L.A. Clippers all-star Paul George to eventually buy it. Top agents estimate that about a quarter of L.A. homes sold in the $10 million-plus range have been whisper, or off-market, listings.

That NAR – not a government body, but a private, for-profit trade group – has imposed a “law” making his listings viewable to anyone via an MLS infuriates Gold and other prominent agents.

Indeed, last month, the San Francisco-based private listings service Top Agent Network filed an antitrust lawsuit against NAR, a lawsuit Gold says he supports. Another antitrust lawsuit was filed at the end of May by a different private listings company, the aptly named Pocket Listings Service. Both lawsuits seek to undo the pocket listing ban, which went into effect May 1.

So, is Gold going to stop paying his NAR dues, join the lawsuits, and march through Beverly Hills arm-in-arm (or rather, six feet apart) with other luxury real estate agents?

“Eh, I’m not looking for a cause,” Gold says. “I’m just looking to sell houses.”

Gold’s attitude carries the day among California’s elite real estate agents. They say they are offended and bottled up by the pocket listings, but have no plans to openly defy the rule.

That’s because pocket listings raise a much larger issue: the role that NAR, a 112-year-old lobbying machine that trademarked the word “Realtor,” plays in residential real estate.

For most agents and brokers interviewed, NAR simply does more good than bad, including supplying the industry’s ethical and administrative guidelines. Ultimately, defying the pocket listings ban becomes entangled with defying NAR, and real estate pros won’t go there.

DJ Grubb, of The Grubb Company

DJ Grubb, of The Grubb Company

“I believe in a fair, transparent, and open playing field, and that’s what the MLS provides,” said D.J. Grubb, broker at The Grubb Company in Oakland.

Should one private organization have the power to govern that playing field?

“That’s way too philosophical a question,” Grubb said.

NAR, MLS, and pocket listings protest

NAR has 1.4 million dues-paying members, including the bulk of the country’s residential real estate agents.

 
Bob Goldberg, CEO of NAR

Bob Goldberg, CEO of NAR

Some dues go to federal lobbying. The trade group, led by CEO Bob Goldberg, has spent $13 million through the first five months of 2020, pushing the federal government for homeowner and agent friendly policies from mortgage forbearance to enabling independent contractor agents to collect unemployment. According to the Center for Responsive Politics, only the U.S. Chamber of Commerce has spent more this year on lobbying.

And some dues go to operating MLS systems across the country, such as the California Regional MLS.

Spencer Krull, managing broker for Southern California at Side, credits the MLS and the popularity of websites like Redfin that aggregate MLS data as “leveling the playing field.”

Spencer Krull of Side

Spencer Krull of Side

Without the MLS, Krull said, the process of finding a home to buy can operate “like a high school clique” or secret society, where only some agents know about a property’s availability.

NAR says pocket listings erode the MLS’s utility as a one-stop shop. The organization declined to make its executives available for an interview, but in a video on NAR’s website titled “Window to the Law,”  the association explains that pocket listings artificially depress inventory and increase prices — benefiting a few privileged agents at the expense of the majority of homebuyers.

Pocket listings, NAR general counsel Katie Johnson said, violate a “realtor code of ethics” in place since the organization’s 1908 founding.

“Sometimes there are high-profile celebrities or someone going through a divorce situation. I think the seller should have the option to not list the property.”

– Aaron Kirman, a luxury broker at Compass

The trade group’s board of directors passed a policy last November banning pocket listings, and it instructed local NAR chapters to implement the protocol by this May.

The policy states all homes must go on the MLS within 24 hours after they are marketed in any fashion, including everything from a “For Sale” yard sign to agents emailing about the property. Local NAR affiliates can mete out up to $5,000 in fines for the first violation, and even more for subsequent infractions.

Luxury real estate agents say the rule hurts their business.

“It inhibits our clients,” said Aaron Kirman, a luxury real estate broker at Compass. “Sometimes there are high-profile celebrities or someone going through a divorce situation. I think the seller should have the option to not list the property.”

“Unless the MLS loses its monopoly power, even a top agent still needs MLS access to be competitive.”

– David Faudman, CEO of Top Agent Network

The lawsuit filed in San Francisco federal court by Top Agent Network makes a similar argument, as does the complaint in L.A. federal court by Pocket Listings Service, which was started by The Agency’s James Harris, David Parnes, Christopher Dyson and Mauricio Umansky.

Instead of simply enjoying its market dominance, the lawsuit contends, NAR is stamping out competitors.

David Faudman of Top Agent Network

David Faudman of Top Agent Network

“With Top Agent Network you cut through the noise,” said the company’s founder and CEO David Faudman. “You can get valuable feedback on market conditions from other brokers. But the rule has dampened enthusiasm for our product.”

Can’t top agents leave NAR?

“Unless the MLS loses its monopoly power, even a top agent still needs MLS access to be competitive,” Faudman stated.

Andre Barlow, a former lawyer at the U.S. Justice Department’s Antitrust Division, says the lawsuit could have merit.

“The next lawsuit is by a group of sellers. They say, ‘You are forcing me to market a property in a way I don’t want to market it.'”

– Spencer Krull, Managing Broker of Side in Southern California

“Trade associations have to be careful not to serve as a forum for rivals to collude or enter into agreements to boycott a competitor,” Barlow said. “So, yes, the ‘pocket listings’ ban could very well be a violation of antitrust law.”

Barlow, now in private practice in Washington, added, “NAR has had antitrust problems in the past and has been involved in a number of antitrust lawsuits.”

One such lawsuit filed by homebuyers in Chicago federal court accuses NAR of colluding with top brokerages to increase real estate commissions.

Some wonder if the pocket listings ban will produce its own consumer lawsuit.

“The next lawsuit is by a group of sellers,” Krull said. “They say, ‘You are forcing me to market a property in a way I don’t want to market it.’”

What good is NAR?

In late 2018, Rob Hahn, founder of real estate consulting firm 7DS and a longtime industry observer, posited that “the vast majority” of NAR members primarily join simply to access the MLS — an MLS that NAR now is pushing to have even more comprehensive reach.

But there’s not necessarily anything wrong with that. NAR spokesperson Mantill Williams stressed that the pocket listings ban is in the “best interest of consumers,” an argument USC law school professor Erik Hovenkamp said is plausible.

“The MLS surely promotes trade,” Hovenkamp said, noting the database lends market access to agents and consumers. “To the extent the new rule enhances the MLS, it is pro-competitive.”

But whatever the lawsuit’s outcome, even pocket listing proponents sound ready to ultimately accept NAR policy.

Kirman said he supports the lawsuit, but adds, “I am going to comply with the ban. I believe we have to follow the rules.”

Hilton & Hyland’s Jeff Hyland, who knows many things secret and unofficial in luxury real estate, took a similar stance. “Of course we will comply with the NAR guidelines,” he said.

That’s partly because agents do see NAR as a force for good.

Amid the coronavirus pandemic, for example, agents have applauded NAR affiliates for help with small business loans and unemployment benefit applications.

State chapters like the California Association of Realtors also draw up sale and even leasing forms. “They create all our contracts,” Gold said. “Buyers and sellers don’t need to make their own contracts, but they have these tried and true forms.”

The readymade contracts shave attorney’s fees, agents said, even on complex sales of multimillion-dollar investment properties.

Agents also say NAR adds respectability to their work.

“NAR sets up rules for how you are supposed to behave,” Krull said. “The code of ethics is really serious stuff.”

Those rules, Krull notes, also have a practical benefit: “The self-policing keeps the [state body] Department of Real Estate at bay.”

Indeed, agents and brokers see NAR, and not the Department of Real Estate or another part of government, as their true authority.

“Agents conflate the MLS with the government,” grumbled Faudman of Top Agent Network. “They keep telling me, ‘I don’t want to break the law.’”

A California Department of Real Estate spokesperson denied that NAR is the de facto regulator of real estate agents.

“DRE’s mission is to protect California real estate consumers. DRE works collaboratively with industry partners and stakeholders, including NAR and CAR, when our interests align and acts unilaterally when our interests diverge.”

Faudman said that he is optimistic his lawsuit will gain traction, save his company, and make NAR think twice about its next “overreaching” policy. But he noted fighting NAR is an uphill battle.

“They have monopoly power,” he said. “They’re like a local utility, and we’re getting a solar-powered roof.”


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