Surgeon General Real Estate Warning

Private Listings

My Grandpa Irving and my Grandma Harriet were both medical miracles. Both would smoke two packs of cigarettes a day. Grandpa Irving used to drive from Joliet (before it was known for its prison and now relegated to hosting an 89-year-old Engelbert Humperdinck concert at the Joliet casino) with Grandma Rosetta and see us every Sunday. He’d watch the Bears game and get Chinese food. The Bears losing made him smoke a lot.

Grandma Harriet was also a chimney. Even when she was sick and on oxygen, she would sneak a puff. Once she hid a cigarette in her purse when she saw my Aunt Linda coming. The purse started to smoke—and thank goodness it didn’t catch fire. Fortunately, the Surgeon General also put warning labels on cigarette packages.

Get ready to read Surgeon General–type warnings on listing agreement addendums. At least from us.

Right now, there’s a real estate war going on. Compass, a national firm, merged with Anywhere, which consists of Coldwell Banker, Century 21, Sotheby’s, ERA, and others. There’s lots of speculation about why, but one of the theories is “private listings.”

Your friendly Realtor pitches you that with private listings, you’ll get to pre-launch your home without having much traffic through the house and no need for lots of marketing or worrisome strangers trampling through. The home launch builds excitement, generates early demand, and validates pricing. Sounds wonderful.

Except that’s exactly why the Surgeon General warning is needed.

For starters, Zillow and other major portals won’t list your property if you later decide to open it up to the rest of the world. Think Soup Nazi: “No Zillow for you.” Redfin is another that won’t showcase your home. Put another way, if you say “Please Release Me” (Engelbert’s big tune) to private listings after you started that way and you later want to market your home to the public at large, Zillow won’t release it on their website. So, here’s the Surgeon General warning:

Try private listings, and your home can be severely damaged in the number of eyeballs that see it if you choose to go public a week later.

Here’s my opinion. I suppose if you’re an unsavory character and don’t want the world to know you’re skedaddling out of the country, it might make sense. Some argue that the uber-wealthy might want the same.

But here’s the rub: the ultra-rich didn’t get enormously loaded by selling on the cheap. Imagine if one of the well-to-do had a fine piece of art. (Well, no need to imagine—they do.) Would they sell it only to a neighbor and not take it to auction? Sotheby’s saying, “oh go to Aunt Gertrude first to build excitement and see if you can skip the whole auction process”. Basically, that’s what’s going on with private listings.

It doesn’t take a rocket scientist to know that capitalism in its purest form works in tune with the free market. If you curb demand by not letting 19 out of 20 potential buyers (the approximate share of the largest brokerage is approximately 5-6% not even 6-7), you’re not going to get the highest price possible.

So, why would a firm promote this? It could be that they truly believe this will serve the public at large. My judgment, after about two seconds of thought, is the ole “double dip.” The Realtor would like to double their pay. Who wouldn’t? Except… is that doing right by the client?

The fiduciary duty that a Realtor has to their client is no different than that of a doctor or lawyer. If we get both sides, wonderful. However, the goal must be to serve the client’s needs. 99%+ of clients want to maximize price.

I’ve had clients tell me on occasion that they need a fast sale or they don’t want the world trampling through their home. In the offseason, it sometimes makes sense to sell quickly for less because the cost of carry and lost opportunity costs make better financial sense.

But in none of those scenarios did I ever recommend keeping the open market at bay.

There’s a lot of legal back-and-forth right now, More about that here. But for now, since it would be nuts for a seller to have their home blacklisted by the biggest portal possible, it’s not really an issue as Sellers aren’t interested in that occurring.

My guess is, if the portals drop this policy, you’ll see the 3,696 brokers in Palm Beach County, for example, form alliances—meaning the consumer will have to work with 50+ separate Realtors just to see what properties are available. MADNESS! At the end of the day, what is bad for the consumer usually never occurs and I think that is what will happen here.

If a real estate agent promotes private listings as a smart way for you to market your home, leave them as fast as possible — in a puff of cigarette smoke.