Key facts
- A class action lawsuit was filed against Compass on August 21 in Manhattan.
- Renters claim they paid significantly higher rents due to properties being kept off public listing sites.
- Independent research suggests homes marketed exclusively off the MLS sell for substantially less.
- The author advocates for a clear disclosure process for agents regarding the risks of limited property exposure.
- Regulatory bodies, including a House subcommittee and Senator Warren, are scrutinizing these listing practices.
A proposed federal class action lawsuit filed on August 21 in Manhattan against real estate brokerage Compass alleges that renters paid approximately $880 per month above the median asking rent. The plaintiffs claim this occurred because properties were withheld from public view on platforms like StreetEasy and instead circulated privately among agents. The author argues that real estate agents have a fiduciary duty to disclose the risks associated with limited property exposure, citing multiple research studies. These studies generally indicate that homes marketed broadly on the Multiple Listing Service (MLS) achieve higher sale prices and sell faster than those sold off-market or through private exclusive arrangements. For instance, Zillow research found homes sold off the MLS went for 1.3% less, with a more significant impact on lower-priced homes and those in communities of color. Bright MLS and Drexel University research indicated MLS-marketed homes sold for about 17.5% more than comparable off-MLS properties. While some brokerage-specific studies suggest benefits to phased marketing, the author contends these are often based on incomplete data. The article proposes a one-page disclosure form for agents to present to sellers, detailing the marketing strategy, independent research findings, the seller's stated reason for limited exposure, and a firm date for listing on the MLS if the property does not sell. This disclosure is intended to ensure sellers are fully informed of the potential financial implications, akin to a surgeon's duty to inform a patient of procedural risks. The lawsuit and ongoing regulatory scrutiny from bodies like the House Judiciary antitrust subcommittee, Senator Elizabeth Warren, and the New York Attorney General highlight increasing attention on these listing practices and their potential to create a two-tiered housing market.