The Truth Behind the Private Exclusive Listing Shell Game

A shell game, according to Merriam Webster, is “a swindling trick in which a small ball or pea is quickly shifted from under one to another of three walnut shells or cups to fool the spectator guessing its location, is a version of one of the oldest and most widespread forms of sleight of hand.”
Robert Refkin has elevated that game by crusading to have the real estate industry modify the rules of Multiple Listing Systems, ostensibly to “allow consumers to make choices about how they market their properties. ” But that’s where the sleight of hand comes in. The change in rules is not about the consumer’s innate desire for a specific type of marketing but the agenda of Mr. Refkin’s firm.

Unlike many other articles about this issue, I don’t wish to debate whether consumers should be allowed to decide how their property is marketed because that isn’t the crux of this particular shell game. In most states, a real estate agent’s job includes following their clients’ lawful instructions, but this is not about consumer choices being restricted, its about the real estate agents presentation of choices the consumer hadn’t even thought of.

For decades, I have trained agents to believe that sales should be defined as “helping someone do something in their best interest, that they would not have done if the salesperson were not present”—counseling and assisting rather than coercing or exploiting. The Compass Three Step Program is more accurately described as “helping someone do something in Compass’s best interest, that the consumer would not have done if the salesperson were not present.” It is more accurately the manipulation of the consumer by the salesperson to create a financial benefit for their firm and themselves.

When is a Choice Not a Choice?

The term “Hobson’s Choice” indicates something that provides the illusion of choice but is not a real choice. And that would most accurately describe the “consumer’s choice” the real estate industry spends so much time discussing. Various theoretical reasons are presented for the choice that Refkin suggests consumers want. Those reasons for choosing a private exclusive listing have been easily addressed by the real estate industry for over 100 years with the existing rules set. In this new model, consumers are introduced to the program through manipulation disguised as concern and counseling, which contradicts the obligations of agency under which most real estate practitioners receive their licenses.

I had a chance to experience this first hand. I was approached by a Compass agent who wanted to list some properties I own at the New Jersey shore. The agent was pleasant and persistent. She had sold a similar property for me when another broker listed it. I invited her to send me a listing proposal explaining what they would do to market the property. On page 6 of the proposal, I was introduced to the Compass Pre-Phase, which is described as follows: “Pre-marketing is a proven strategy to build anticipation, drive demand, and help sellers get to the best offer faster. Compass Real Estate offers a unique platform that gives your property valuable exposure to both agents and consumers before it hits the market and begins accruing critical “Days On Market”

The marketing plan begins with Stage 1 – Private Exclusive Listing (Non-Public), in which I was informed (not asked or consulted) that they will:

• Launch listing on Compass.com as “non-consumer searchable coming soon”
• Email to individual clients and add to their Private Collections.
• Post on Compass Workplace (exposure to 500 local agents and 15,000 national agents)
• Notify other Compass Agents through an email newsletter
• Discuss listing at Compass Real Estate sales meeting

When you analyze the promises and compare them to the tasks, you see that the promises are empty. For example the 15,000 Compass agents are overwhelmingly in other markets and could not sell one of these properties because they are not licensed in New Jersey. The tasks accomplish nothing except allowing Compass and its agents to prohibit the property’s exposure to any consumer not working with Compass.

After I read the presentation, I called the agent and thanked her for sending me her proposal. We discussed their marketing suggestions, and I asked, “Why, for even a minute, would I not want my property exposed to every potential qualified buyer in the world?” She answered this question (or avoided answering it) by inviting me to a client appreciation event at her office so I could meet other sellers with whom they had worked. I thanked her, but explained I just wanted to get my properties sold and I wasn’t looking for an evening out. When people deflect the answer to a question, it’s because there is no easy or logical answer for them to give. The lack of a straightforward response to my question emphasizes to me the lack of consumer benefit to the program, even by its proponents.

It’s All Fun and Games Until Someone Loses $100,000

In the controversy surrounding private exclusive listings, the supporters of that type of limited marketing speak at great length about consumer choice and privacy, but these conversations are all about generalities and unnamed clients. Now that the discussion has reached mainstream media, we are learning that consumers don’t volunteer for or request the “choice”, no matter what Mr. Refkin and his firm would have you believe. And that’s good. Perhaps you think I am too critical of the suggestion made by the agent who wanted to list my properties. Maybe I had too much experience to be swayed by her suggestion (which does not avoid the shell game of this choice being the agent’s suggestion and not the consumer’s desire), or maybe I prejudged its benefit because of my opinion. None of that matters because we have specific facts that show issues with the deployment of the program and its significant harm for the client.

Recently, Caitlin O. Bigelow wrote a post entitled “Compass Exclusive Almost Became a $100K Mistake,” in which she relates her experience with the program. “At our Realtor’s suggestion, we listed our home on Compass’ Private Exclusive, an off-market option that quietly shares your home with Compass-connected buyers before it hits Zillow or the MLS.”, she explains, Not ” I wanted to market my property this way”, or “I desired exceptional privacy during the sales process”, or the troubling “I wanted to restrict who saw my home”, but based on “our Realtor’s suggestion” she made a choice.

She goes on to explain that they sold the home at the asking price (which again, “At our Realtor’s suggestion” was lower than she and her husband had hoped, only to have that buyer fail, and the property go on the open and unrestricted market, where she received multiple offers, and six days later accepted one that was $100,000 higher than her asking price (In her words” long live the free market”)

Sellers Feel They’re Being Poorly Served

Ms. Bigelow is not alone. In a recent StreetEasy survey , sellers who had used a Private Exclusive Marketing program ad similar things to report. Three out of four of them said their agent had suggested the program. Over 40% of the sellers said that the agent’s reasoning for recommending a private listing strategy was simply that it was standard practice at their brokerage.

The survey goes on to note that roughly one in three of these sellers experienced seller’s remorse, more than twice the norm., and 16% of the sellers “fired their agent” more than three times the norm, while 92% of the sellers surveyed felt that if their home would sell more quickly if publicly listed and 94% felt they would get the price they want if listed that way. Certainly, those sellers didn’t seek this choice, and the idea that this marketing practice is a response to consumer requests is just nonsense.

Agents Need to do Better

I don’t believe it’s an accident that the companies in favor of this type of marketing specialize in expensive properties where the additional commissions earned might lead to substantial extra income for the agent and the firm. While Refkin and Compass have led the charge, companies like The Agency and Douglas Elliman have supported the concept. Coincidentally , all three firms have a focus on higher-end properties where the impact of even a small percentage of additional commissions is significant .

The idea that this is about choice for the consumer is disingenuous and an absolute red herring. Its about the compressed real estate market, the financial benefits to the companies involved, and the additional benefits that might accrue to the listing firm’s website . But as real estate licensees, that’s not what we’re supposed to be concerned about when list a property for someone.

Real Estate Agents in the Unite States are considered fiduciaries. As a result, they are required to put the best interests of their clients before their own. This shell game is not that. Respecting consumer choice should begin with the consumer originating the request, not with a strategy designed to steer them toward a choice introduced by their agent primarily benefiting the real estate agent or firm.

If seller’s believe that public listing will sell their home faster and get them the price they want, then let them. An agent or firm steers the consumer in any other direction at their own risk. While the vast majority of real estate agents still seem to support consumer choice, I have a sneaking suspicion that some attorney, somewhere, is just waiting for the opportunity to generate an expensive piece or pieces of litigation.