Key facts
- Private listings may lead sellers to question the completeness of public listings when they become buyers.
- Research indicates off-MLS sellers may receive 1.5% to 3.7% less, with a median loss of $4,975.
- Private listings can take 37 days to contract compared to 20 days for full MLS listings.
- Approximately 87% of private listings eventually come to the MLS.
- A market that hides part of its inventory creates suspicion, which can be priced into all listings.
Darryl Davis, a real estate speaker and coach, argues that the increasing use of private listing networks, while potentially benefiting sellers in the short term, ultimately erodes buyer trust in the broader market. He suggests that the practice of withholding properties from the Multiple Listing Service (MLS) creates suspicion, as buyers may question what homes are not being shown to them. This can lead to a situation where public listings are viewed with skepticism, potentially impacting prices and market times for all properties.
Research cited by Davis indicates that sellers using off-MLS transactions may receive between 1.5% and 3.7% less than those listing on the MLS, with a median loss of $4,975. Additionally, private listings reportedly take longer to contract, with Bright MLS finding they take 37 days compared to 20 days for full MLS listings. The House Judiciary antitrust subcommittee has also inquired about the impact of private listing networks on consumer information availability.
Davis points to George Akerlof's Nobel Prize-winning work on used cars, which demonstrated that when buyers cannot verify the quality of what is offered, they rationally discount everything. He posits that this mechanism applies to real estate, where a significant share of hidden inventory can flip the signal of a public listing from 'available' to 'why is this one out in the open?' He notes that about 87% of private listings eventually appear on the MLS, suggesting they are often held back temporarily rather than remaining exclusively off-market.
To address this, Davis advises agents to shift the conversation with sellers. Instead of focusing solely on marketing strategy and price for the current home, agents should first inquire about the seller's next purchase. This reframes the discussion by highlighting that any decision to limit exposure for their current home will also impact their ability to see other homes when they become buyers. He also recommends providing buyers with a transparent view of inventory, including homes that may not be publicly visible, and documenting the seller's understanding of the trade-offs involved in private listings.