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Month: November 2019

Thoughts on NAR’s Clear Cooperation Policy

The National Association of REALTORS® recently announced the new Clear Cooperation Policy. This policy aims to curb the practice of agents publicly marketing “pocket” listings. Here are my thoughts on the policy.

Video Transcript

Hello, I’m Bob Burns, Real Estate Coach, Trainer, and Consultant with Leader’s Edge.

Recently, the National Association of Realtors announced a pretty substantial change to the rules of the road for realtors practicing in the United States. It’s called the Clear Cooperation policy. So, being that this is a pretty substantial change, I wanted to take a minute to share my thoughts around what this is and what this means to those of us selling real estate in the US. So I’ll start with an outline of the policy and what it is, I’ll then move on to discuss the effect that this policy will have on consumers, we’ll talk about the effect the policy has on real estate agents, and finally we’ll wrap up with the most important part, and that is, what should you do with this information, what should you do now that this policy’s going to be in place.

What is the Clear Cooperation Policy?

So, let’s get right into it and start with: What is the Clear Cooperation policy from the National Association of Realtors? First of all, you need to know that the board of NAR approved this policy by a vote of 729 to 70 votes. So, at the board levels at least, this was not controversial at all. There appears to be a lot of agreement from our leaders at NAR that this was the right thing to do. Now I think that’s a little bit different out in the field, this has been a pretty controversial policy announcement across the industry, so we’ll get more into that in a little bit. So here’s the nuts and bolts:

Effective January 1st, 2020, with an implementation deadline of May 1st, this policy is designed to combat and stem the practice of so-called “pocket” listings for MLS members. What that means is that listings must be submitted to the MLS for cooperation with other MLS participants within one day of any public marketing efforts that are going on to promote the listing. Now, one caveat to this policy is that it does not prohibit office exclusives, wherein the listing agent can promote the listing internally to agents. This policy, the Clear Cooperation policy, only addresses marketing a property to the public and making that property available to show for all MLS members.

What Does the Clear Cooperation Policy Mean for Consumers?

So, let’s move on to the effect that this is going to have on consumers. First of all, home sellers that list their house with a realtor are going to benefit by having their listing fully exposed to the MLS earlier in the marketing process. As we know, every year in the Profile of Home Buyers and Sellers, the survey that the National Association of Realtors does, the second most common place where a homebuyer is first introduced to the property that they actually purchase is through a real estate agent. The most important place is the internet, so most homebuyers find their house that they eventually purchase on the internet, but second to that, a real estate agent introduces the buyer to the property, and that’s the property they end up buying. So what that means is, to a home seller, it’s really, really important to expose their property to all of the real estate professionals in the marketplace, because one of those real estate professionals may just have the buyer for their property right now. So that’s how it will affect home sellers. Their property will be exposed to the broader marketplace and not just kept in the pocket of their listing agent.

Now, if a home seller doesn’t want their property marketed to the public or the MLS, they can still sign an office exclusive, and in an office exclusive listing agreement, it enables the listing agent to promote the listing privately to real estate agents and brokers in their office, just not publicly. We’ll talk more about that a little bit later, but from a communications perspective what this means is that listing agents need to have a more explicit conversation and a more direct conversation with their home seller clients about their marketing plan and their plan to expose it to all of the potential sources of buyers and educate the consumer so they can make a good decision about how to proceed with the marketing plan. The net-net is I think this policy will create greater transparency for home sellers, and a win to listing agents that have always communicated more transparently with their clients. It kind of levels the playing field for those of us that are really, really into clearly communicating the plan with our home seller clients. So, listing agents that were always doing a good job of clearly communicating will be at less of a disadvantage when competing against agents who are maybe a little less transparent and forthcoming about their marketing plans. I know that there are real estate agents out there that would, as a matter of practice, always hold the listing in their pocket while they marketed it publicly for a period of time in an effort to try to double-end the deal. Now, there’s nothing wrong with double-ending a deal, and there’s nothing wrong with holding back a listing from the marketplace if that is the instruction of your home seller client. We only get into trouble if a realtor is actively marketing a pocket listing to the public through their social media efforts or otherwise, and not making that listing available for other MLS members to show.

From a homebuyer perspective, I think this decision is going to significantly strengthen the case for exclusive buyer agency agreements. I know that a common objection from homebuyers to signing an exclusive right to represent the buyer with a real estate professional is FOMO, the fear of missing out of certain listings that are pocket listings of the listing agent. So this eliminates that objection to signing an exclusive buyer agency agreement right across the board, totally sweeping change. It also allows you, the buyer’s agent, to show listings that you previously could not show because they were pocket listings of the listing agent and not available on the MLS.

What Does the NAR Clear Cooperation Policy Mean for Real Estate Professionals?

So that’s the effect on the seller’s side and the buyer’s side of the transaction. Let’s transition and talk a little bit about the effect of this new Clear Cooperation policy from NAR on real estate agents. So, as I was talking about before from a listing side perspective, this new policy increases the importance that we as listing agents very, very clearly communicate our professional marketing plan to the home sellers. How are we going to expose this property to the largest swath of the buyer pool that we possibly can? It may make it a little more challenging to double-end deals, but again we have to remember where our fiduciary duty lies, it lies to our client the seller. We have to help the seller accomplish their goals before we look to accomplish our goals. That is the nature of a fiduciary relationship.

Here’s the other thing that it means. And this really isn’t a change, it just shines a spotlight on this, what I believe was an incorrect practice in real estate, and that is the practice of post-dating listing agreements. Here’s the deal with post-dating listing agreements. So you’re at the listing appointment today, the home seller wants to list today, they want to list, but they don’t want their house to go on the market for another two weeks. They don’t want to make their house available, it’s not ready for showings for another couple weeks. You don’t want to leave that appointment without a signature, so some of you in the past may have post-dated the listing agreement.

Here’s why that’s not a good idea. Let’s say the listing agreement commences, starts, two weeks from the date of that appointment. What if the homeowner talks to their neighbor, and the neighbor refers a buyer to them who purchases the property before your contract starts. I’ve seen it happen all over the U.S., and it’s really a sad situation, because the listing agent doesn’t have the right to compensation until the listing agreement commences. So, don’t post-date your listing agreements. Instead I would suggest that you sign two listing agreements: an office exclusive, wherein you have an agreement of compensation with that home seller, and with the home seller’s permission, the ability to show that property during the term of the contract with their permission, and you have the right to get paid if the listing sells during that period. Then, you’ll have just a regular, exclusive right to sell listing agreement that commences at whatever date the seller wants to make their listing available to the public. It’s always been a best practice to do that, to sign an office exclusive and then an exclusive right to sell, that allows you to publicly market the property. NAR’s Clear Cooperation policy just makes it more important and shines a spotlight on that as a best practice.

From a buyer’s agent perspective, we’re still talking about the effect of this rule on real estate agents. If your client sees the listing, this is really, really important, if you’re a buyer’s agent and your buyer sees the listing, now, you can be sure that you can actually show the listing. In the past, if the listing was a pocket listing, this was happening all over the place, a listing agent would promote a pocket listing on social media or even sometimes put a sign in the yard, or send out mailers, then buyers who saw that advertisement would call their buyer’s agent, and that buyer’s agent wouldn’t be able to find the house on the MLS, and they wouldn’t be able to show it, and all sorts of complexity ensued. So, this really, at the root of it, alleviates one additional objection to homebuyers signing an exclusive right to represent a contract with a real estate agent. So, from a buyer’s agency perspective, it is definitely a good thing. From a listing agency perspective, depending on your practices, you may have to change and tweak what you were doing a little bit.

What Should Real Estate Professionals Do Regarding the NAR Clear Cooperation Policy?

So, what do you do with this information? This is big, it’s going to continue to evolve and become clear. It’s brand new, there’s a lot of discussion in the industry right now. Here’s our advice from Leader’s Edge on what to do with this policy:

First thing to do is what you always should have been doing, but we need to up our game. We need to make sure we’re fully explaining the strategic benefit of being listed on the MLS to our home sellers. Having a clear, concise, robust marketing plan that the seller agrees with is just fundamental to effectively listing and selling property. So if your seller, for whatever reason, decides they don’t want to be on the MLS for a period of time, here’s the advice: sign an office exclusive while you’re there, with that home seller, that commences immediately, and that office exclusive ends when the seller is ready to put the house on the MLS and begin the process of marketing to the public. So, you sign two listing agreements, an office exclusive and then an exclusive right to sell. Now here’s the thing, if you have an office exclusive, you cannot promote that listing to the public. That means no Facebook posts, no sign in the yard, no fliers, no mailers, you can only promote that property within your own brokerage. If you slip up, or you accidentally say something about the listing on Facebook or post a photo or whatever, within 24 hours of that public advertisement, we will be required, starting January 1st, to list the property in the MLS. So just to make it abundantly clear, during an office exclusive, or prior to the period of listing the property on the MLS for other cooperating brokers to show, you may not promote your listing publicly at all. Not on your website, not on Zillow, not on Facebook, not on Twitter, not in print, including mailers, and not with a “For Sale” sign in the yard. Any of those things are public-facing advertisements, and if you do that, within 24 hours after that advertisement becomes effective, you need to list the property in the MLS for cooperation. And again, I’m going to reiterate this, don’t post-date listing agreements. The best practice is to sign an office exclusive that commences immediately, and then sign an exclusive right to sell for when the homeowner wants to begin the public marketing process for their property.

The Most Important Advice About the NAR Clear Cooperation Policy

Here’s the most important advice I’m going to share about this change in the rules from the MLS. Don’t get sucked in to the industry drama and debate that is already ensuing around this decision. While the other agents are sitting around debating the ethics or the right and wrong of this or the nuances of this, you’ll be out there listing and selling real estate and making a great living for you and your family. So, there’s our advice around the NAR Clear Cooperation policy, I hope you found it valuable. If you did, and you think other people can benefit from this, share the video, let’s spread the word, and let’s keep listing and selling real estate.

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