The year was 2016. The billionaire was Len Blavatnik. And the house was the Wildenstein mansion, a 20,000-square-foot property at 19 East 64th Street.
After a handshake deal, Blavatnik thought the house was his — until heirs to the art gallery fortune accepted an offer for $79.5 million from HNA Group. Blavatnik sued and lost.
But the story doesn’t end there.
With the Chinese conglomerate under pressure to sell off its assets, the billionaire pounced, paying $90 million for the house in February before it ever hit the open market.
Like a growing class of uber-wealthy New Yorkers, Blavatnik tapped into a trove of residential listings that the rest of the world has no access to.
While off-market deals have always existed — especially in the uppermost echelon of the market — a recent uptick in whisper listings has caught the eye of the Real Estate Board of New York, which is now considering cracking down.
In March, REBNY’s residential board of directors — which sets rules for how listings must be disseminated to brokers — drafted a proposal that would have required agents to turn down whisper listings altogether. But the move elicited immediate blowback from many of the city’s largest residential firms, prompting the board to scrap its plan.
“You can’t legislate what the seller wants to do,” said one brokerage chief. “I’m doing what my seller wants, not what REBNY wants.”
The issue is now on the agenda for the board’s next meeting, which is set for May 10. And the board is now scrambling to figure out what change — if any — it should make to its universal co-brokerage agreement.
Until a few years ago, REBNY members — which account for the vast majority of the Manhattan brokerage world — were required to share listings with other firms within 24 hours of signing an exclusive.
The reason was twofold: Keeping a listing secret gives the listing agent (and close colleagues) a competitive advantage in finding a buyer and representing both sides of a deal, and blasting out listings to a wide pool generally translates to higher prices.
That rule was scaled back a bit a few years ago because 24 hours was proving to be an unrealistic timeframe for preparing photos and marketing materials. Now the rule requires agents to share listings immediately after a first showing, or after the listing is posted on any website.
Sellers can opt out of that arrangement in writing to keep the listing private. But those have historically been reserved for limited cases — think celebrities, CEOs and Upper East Side matriarchs with pricey homes they don’t want anyone to pop into and tour.
But the rub today is that an increasing number of brokers are reportedly promoting this opt-out to sellers, pitching it as a way to keep listings exclusive. Then they’re repackaging their stockpile of off-market listings to win more business.
That is not sitting well with everyone.
“I personally don’t like them,” said Elizabeth Ann Stribling-Kivlan, president of Stribling & Associates. “Unfortunately, some people think by showing them to a small network, that shows some kind of power and influence. Unless there’s a really viable, bona fide reason to do it, what’s the point?”
Veteran agents said there is a slew of legitimate reasons for whisper listings, sometimes called pocket listings or “ours alone” listings.
Hall Willkie, co-president of Brown Harris Stevens, which handles five or six off-market deals a year, put it this way: “It’s not something brokers should promote. But if the seller has needs or wants, we have to be able to respond.”
Willkie said too many agents are using whisper listings as a marketing ploy — and that the industry should police individuals who promote their access to off-market deals.
“There should be a rule that states that’s wrong,” he said.
Back to the dark ages?
There’s no data on how many off-market listings are floating around at any given time. But at least a half dozen luxury properties have quietly traded hands over the past year.
One recent deal closed in March, when an unknown buyer paid $25.6 million for disgraced producer Harvey Weinstein’s Greenwich Village townhouse. Meanwhile, billionaire Vincent Viola reportedly sold his 20,000-square-foot Upper East Side mansion for $80 million in an off-market deal in December.
And last year, an entity tied to pop star Taylor Swift shelled out $18 million for a Tribeca townhouse — a transaction that later became fodder for a lawsuit when Douglas Elliman claimed the singer owed the firm $1 million in unpaid commissions. According to the suit, an Elliman agent had a written promise to represent Swift in the purchase of 153 Franklin Street when it wasn’t on the market, but the agent was later cut out of the deal.
The big issue for the brokerage community when it comes to whisper listings is that they’re a throwback to the days (pre-1990s) before shared listings sites — when agents kept the properties they were marketing close to the vest and only shared them with their tight-knit circle of trusted colleagues.
“My mother would read the New York Times every week and try to decipher classifieds,” which typically didn’t list building addresses, said Stribling-Kivlan. “Unless there’s a good reason for security or public safety, I think transparency is really, really important,” she added. “The more transparent we are as an industry, the better we can be.”
Over the past year, however, agents have hoarded pocket listings with increasing frequency.
Compass maintains a database of quiet listings — which saves buy-side agents considerable legwork.
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And some Compass agents have promoted that database in email blasts sent to their contacts. “Turn on your off-market access,” read one such email sent last month from a New York agent. The email contained links to eight properties that were not listed on the open market.
That email and others, however, have angered Compass rivals who said that advertising off-market listings en masse undermines the legitimate reasons for keeping a pocket listing. Compass declined to comment.
“The problem is with people saying this is a way I’m going to market myself, this is only for a select few,” said Willkie. “It should be only at the seller’s insistence or request.”
And even Compass President Leonard Steinberg — who’s had off-market listings himself —doesn’t think they should be the norm.
“All of a sudden, there’s this need to call 100 agents and ask them if they have anything quietly listed. It’s painful,” he said.
Steinberg said he generally steers sellers to market their properties as widely as possible, and thinks pocket listings are bad for the industry unless there’s a specific reason why a seller needs privacy.
“You have to navigate them one at a time,” he said. What’s more, he added, “It makes some agents look like superstars because they found a secret under a rock.”
Stribling-Kivlan invoked both ethical and financial arguments.
“It goes against the basic tenets of economics,” she said, since fewer people see and bid on properties. “It doesn’t lead to the highest and best price.”
One member of REBNY’s residential board pointed out that listing agents never know where the buyer is going to come from — it could be a newbie broker or a top Manhattan agent who brings in a buyer. But without blasting it out, it’s impossible to know.
“When a brokerage has a whisper listing that they share with some but not all members of the industry, it doesn’t give the seller the widest exposure to the greatest audience,” said one member of REBNY’s residential board.
Over the years, the city’s smaller brokerages have accused larger rivals of trying to keep off-market deals within their own firms to pocket the commission on both sides of the deal. In the days — or weeks — it takes to photograph, stage and post a listing online, there’s definitely a gray area.
“At every sales meeting, I ask whether anyone has any exclusives coming up,” said Steven Goldschmidt, Warburg Realty’s chief information officer, adding that plenty of high-profile sellers don’t want their personal information blasted to every agent in the city.
But, he said, the universal co-brokerage agreement is enormously valuable.
“It’s got to be shared,” he said. “We don’t want to go back to the dark days before we shared listings.”
The control conflict
Ironically, the rise of whisper listings coincides with an industry-wide brouhaha over listings data. And it comes at a crossroads, when competition is at an all-time high and brokerages are being assaulted from all sides.
Last summer, REBNY accelerated the rollout of its syndicated listings feed, dubbed the RLS (or Residential Listing Service), after StreetEasy started introducing features to monetize its site — including a $3-per-day fee to post rental listings. To date, most residential firms have opted to send listings directly to the RLS. But StreetEasy has declined the feed, citing concerns over the accuracy of data (an argument brokers are now also making about StreetEasy).
But some sellers — particularly of pricey real estate — see a downside to widespread transparency, because it also means buyers can easily see how long properties have lingered on the market.
“A lot of sellers are still very unrealistic about their prices,” said one source. “What they don’t want is to list their property and then just see it not sell and have all these days on market,” the source noted.
Steinberg said some sellers are scared by search engines that display the newest listings first. “Just because something has been on the market for six weeks, it shouldn’t be on the bottom of the list,” he said. “The fact that it edits on that level scares some sellers and agents, especially in a growing inventory world.”
Pocket listings, on the other hand, aren’t as easily tracked.
Jonathan Miller, founder of appraisal firm Miller Samuel, said keeping a listing quiet is essentially an attempt to exempt it “from market forces in the name of exclusivity.” While that might be painted as a win by a listing broker, it doesn’t usually land the seller a higher price.
“Because the value is not vetted in the market, there is a higher probability that sellers won’t get their price or buyers will overpay,” he said.
Blavatnik seems to fall in the second camp. Less than a year after HNA paid $79.5 million for the mansion, he paid $90 million — a $10.5 million premium despite the softening luxury market.
And there are other similar examples. In California, Canadian investor Daryl Katz paid a record $120 million last month to buy the Malibu estate of Kurt Rappaport, CEO of high-end brokerage Westside Estate Agency, in an off-market deal.
According to Miller, nearly 17 percent of deals in Los Angeles that closed during 2017’s fourth quarter were done without a listing broker. In L.A., however, the luxury market is dominated by a handful of star brokers known for dealing in off-market transactions.
Local firms are so rooted in that culture that last summer, Mauricio Umansky, CEO and founder of the high-end brokerage the Agency, helped to launch a private, national off-market forum. The Pocket Listing Service is a membership-based portal where agents can share off-market listings not available on the local MLS.
In New York, entrepreneurs Steven Szczur and Jonah Landman launched a similar platform called HomeCanvasr in 2014. The membership-based site lists properties in Brownstone Brooklyn that haven’t yet hit the market — but the platform hasn’t gained widespread traction.
But many argue that a blanket moratorium on whisper listings isn’t in the industry’s best interest, either.
“It’s a difficult call. We work for the sellers,” said Warburg’s Goldschmidt. “If the sellers say they don’t want us to co-broke, do we turn down every seller and not sign exclusives?”