Why we have Clear Cooperation — and why we should keep it 

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In this 2-part series, James Dwiggins provides an overview of the origin and purpose of Clear Cooperation, and makes a case for revising but not eliminating the policy.

Let's start with a bit of history. The Clear Cooperation Policy (CCP), implemented in May 2020, is a NAR-mandated policy that governs how listings are publicly marketed and entered into the multiple listing service (MLS). Under this policy, the listing broker must submit the listing to the MLS within one business day of marketing it to the public.

It's important to understand why this policy was created in the first place before keeping, modifying or eliminating it. NAR introduced this policy to address the growing use of off-MLS listings by listing agents who essentially used them as a billboard to drive consumers to contact them in order to see these homes — which limits sellers' access to the broader marketplace and undermines agents' commitment to equal opportunity.

The distribution of listing information and cooperation among MLS participants is pro-competitive and pro-consumer.

By joining an MLS, participants agree to cooperate with other members unless doing so isn't in their client's best interests. When a listing is marketed publicly, the listing broker has determined that cooperation with other MLS participants benefits the client. This policy is intended to advance the positive, pro-competitive benefits that MLS participation fosters for homebuyers and sellers.

An imperfect policy, but an important one

While the CCP was created with the best intentions, it is not without some issues, and it should be reviewed and refined over time. We know that not all MLSs enforce the policy, and some even alter the rules to fit their needs. We also know that NAR's enforcement of CCP has been limited, mostly — and understandably — due to the ongoing Department of Justice investigations. 

To be clear, I'm not saying the CCP shouldn't be modified, but I strongly believe in its core purpose, which is about putting consumers first.

One thing is certain: The push by some large brokerages and others to remove the CCP is not about helping consumers. If it were, they would be arguing that the policy should remain but simply needs to be modified to accommodate those rare cases where sellers need privacy and don't want open houses or showings — and fully understand the risks of keeping their homes off the broader marketplace. Those sellers account for less than 1% of the U.S. market.

The truth is that 99% of sellers want to maximize their sales price. Don't be fooled by the statements made by some of the larger brokerages. They are distracting you from their real motives: to keep listings off the broader marketplace for internal promotion, recruit more agents, generate internal buyer leads, double-end deals, and boost profits or even stock prices.

A free market — or greed?

These companies will say that consumers should have a choice between public and private listings, and sellers should be able to choose what they want in a free market. I'm a free market guy, and I agree with that in principle. However, the issue lies in how you frame the message to the seller and whether you are trying to influence their decision. Many of these companies will push off-market listings as if it's a good thing for all their clients. And sellers are likely to follow their agent's guidance. 

For these firms, this is and always has been about convincing sellers that keeping their property out of the broader marketplace as a "private" or "exclusive" listing is a real benefit. They'll tell the seller things like, "It's about privacy, less foot traffic, no open houses — we'll sell it internally and lower the commission amount to save you money."

I've also seen how their agents promote this idea to buyers, suggesting that they have inventory not available on the MLS or at any other real estate company, urging buyers to work with them to gain access to those listings. 

And I've seen how these companies try to recruit agents by claiming you'll have access to this inventory only if you hang your license with them. I've seen how sellers are harmed by this practice, losing anywhere from 5% to 17% of potential sales value, according to multiple MLS studies over the past few years. 

While some may criticize platforms like Zillow or Realtor.com, not listing a home on the largest real estate portals is, in my view, a breach of fiduciary duty and could easily lead to Fair Housing violations by hiding inventory from certain buyers.

A recipe for 'catastrophic' litigation

History is going to repeat itself if we aren't paying attention. 

I've seen the lawsuits that ensued from sellers in California's Silicon Valley who felt misled by agents who advised them to sell their homes off the MLS, and later found out they could have earned more by listing on the MLS. I, for one, am tired of seeing our industry in the press for negative practices, and nothing good will come from simply getting rid of the CCP.

Imagine the lawsuit that could arise if the CCP goes away and all the large brokerages across the country start holding back inventory to try and double-end deals and take other agent's buyers. Eventually, a seller who feels duped will file a class action lawsuit stating that their agent recommended this practice when they could have made more money by putting the property on the MLS. 

Damages from this kind of national lawsuit could be catastrophic. Not to mention all the news articles that would ensue, painting real estate companies as greedy and unwilling to share listings unless buyers work directly with them. That's a bad outcome for consumers and the industry alike.

Read part 2 to see Dwiggins' take on the likely consequences of eliminating CCP, and how he believes it can instead be revised. 

James Dwiggins is the co-founder and CEO of NextHome, Inc. and a third-generation real estate professional. He's been in the real estate franchise business since 2006 and previously co-founded companies in the real estate tech space.

He is also a regular speaker and media expert on real estate and other cross-industry franchise and technology advancements, and co-hosts the Real Estate Insiders Unfiltered Podcast. The views expressed in this column are solely those of the author.