The recipe for fixing Clear Cooperation — and avoiding chaos 

Thinking big about residential real estate success requires a big-picture perspective. Industry Decoded features industry experts who can enrich your understanding of issues affecting the industry as a whole.

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. Missed part 1? Read it here.

My family's real estate legacy dates back to 1967. I've been in this business my entire life, as were my grandparents and my parents. I remember the days before the digital MLS when my parents had to pick up the MLS book once a month — a printed book with all active listings known at that time. They still had to call every real estate office to see what was for sale, because by the time the book was printed, some of the inventory was already sold in-house. 

We take for granted the efficiency and fairness the MLS brings to today's marketplace. You only need to look at how the rest of the world operates to see how great we truly have it.

From 2012 to 2020, I had countless conversations with my agents about how 30% of the inventory was not in the MLS in Silicon Valley, leaving them in the dark. Large companies wouldn't tell anyone what inventory they had, because they wanted to market the home internally. 

Imagine having to explain to your buyer why they are finding inventory on other companies' websites or seeing advertisements for homes for sale that their agents didn't know about. This was not that long ago, and it's why the Clear Cooperation Policy (CCP) was put in place to begin with.

The consequences of scrapping Clear Cooperation

If we get rid of CCP, this is what residential real estate could look like:

• Small brokerages and franchisors will be at a massive disadvantage because large brokerages will hoard listings, making it nearly impossible to compete.

• Large brokerages will use this "internal inventory" to recruit agents away from the smaller companies.

• Agents will have to call every real estate brokerage to see what's for sale, or worse, they may not have access to that inventory regardless.

• Buyers will be forced to search on all brokerage websites to see what listings are for sale, and they may still not have access to or know about them.

• Zillow and other major national portals get their listings from the MLS. If they no longer have all the listings inventory, that disrupts their business model, so they might decide to pivot and figure out how to win long term. This could be the very thing that pushes them in a different direction — the one the industry has been talking about for almost two decades where they go head-to-head with traditional real estate companies.

• Or, if more than 15% of the inventory is not available to the big portals, they'll likely switch back to getting data directly from brokerages with some type of revenue share. MLSs across the country will be adversely affected by this and could even end up going away completely — only making these portals more powerful and the source of all real estate.

• Most sellers and every homebuyer will hopefully hate this practice. They currently benefit from a marketplace where almost every listing for sale in the U.S. is available on every agent, brokerage and national real estate website. Removing the system we've spent decades creating would be detrimental to the very people we serve.

This is the future we're moving toward if CCP is eliminated. Greed will be the driver, just as it was before the policy was enacted.

Improve it, don't remove it

The MLS system in the U.S. isn't perfect, but it's the best in the world. It's why other countries are trying to copy and implement something similar. The CCP is a good policy in principle, and while it can be improved, removing it is not the answer.

Here is my proposal on how to revise the CCP. We start by getting rid of the "Office Exclusives" carve-out, which only benefits the brokerage. Even the DOJ is not happy with it. For the 1% of sellers who actually want to keep their home off the MLS, NAR creates a disclosure/opt-out form that explains the pros and cons of having your home on and off the MLS. 

Each local MLS conducts a study, with NAR's help, to estimate the average value homes sell for on and off the MLS so sellers can make an informed decision. This would include a requirement of showing the seller what their home is potentially worth, and the potential loss they would incur if they don't put it on the MLS marketplace.

Let's pretend the local study shows an average loss of 7% when a home is sold off the MLS versus on. If that home was worth $400,000, the opt-out form would be required to show the home's potential value and the potential loss of $28,000 in proceeds. The language would be standardized by NAR and used across the U.S., with no adjustments by brokerages or agents. In addition, the listing agent would have to submit the form to the MLS, and the seller would have to speak with an MLS representative to make sure they truly understand their decision. 

This is somewhat similar to the policy used by Northwest MLS, and it helps eliminate any potential steering by the agent or brokerage. If the seller truly understands the trade-offs and has had an educated conversation about it with the MLS, they can keep their home off-market. I believe that 99% of sellers, when given the full picture, will opt to list it on the MLS.

I encourage everyone to educate themselves about this issue and the impacts it would have in your market. Removing the CCP will certainly harm consumers and put your business at risk. 

Let's not allow greed to take us back 20 years.

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.