Morality, trust and legal risk: eXp’s CEO on private listings 

In the debate over private exclusives, eXp Realty CEO Leo Pareja has remained firmly opposed, arguing that consumers and the industry are better served when all listings are publicly accessible. Pareja and eXp feel so strongly about the issue, in fact, that the brokerage recently released a pre-marketing disclosure form for sellers highlighting the risks of choosing to forgo the MLS, and it was the first to endorse Zillow's new pro-MLS listing standards.  

Like other industry leaders who oppose the private listings push, Pareja believes there are ethical and legal issues at stake, warning eXp agents who tuned into a livestream last week of a future "fair housing disaster" and potential class action "mess" for agents who adopt such marketing strategies. 

He elaborated on his views and the risks to individual agents in a conversation with Real Estate News this week. This interview has been edited for length and clarity. 

You've said that from a purely capitalistic standpoint, big brokerages would benefit most from private listings. Given that, why do you stand firm in your opposition?

I'm the only one of us [major brokerage CEOs] who actually did this for a living and holds a broker's license — I have actually sat at people's kitchen tables and drove them around in my car, and listened to their hopes and dreams. I don't take that lightly. The moral thing is the best thing for the consumer.

I think as a leader, you have to draw a line. In pure capitalistic form, if the MLSs fall apart, there's maybe five to 10 companies left — then we're no longer competing on value and service, we're competing on who's got inventory, and there's not a lot of room for negotiation on price and commissions. I believe the consumer wins when we're competing on value and service versus inventory and in schemes.

If 'the moral thing is best' for consumers, how should agents be thinking about private listings?

As a residential Realtor, you're a member of the fabric of that community. And look, in a lot of communities, you're not just the real estate person, you're the housing expert, whether it comes to mortgages, refinancing, repairs, home equity lines and more. They really trust us. 

The part that no one can argue with me on is, would you really choose to list your own home privately? Would you? Because the answer is probably not. If you want to know the truest form of value, list your house for $1 and wait two weeks and not review offers — you will know what that home is worth by exposing it to the most people.

And with days on market — I mean, would we buy perishable foods without having an expiration date? These measures are designed to create the proper incentives as a feedback loop, right? If we remove all of them, then all of a sudden, what was once a trusted system loses that trust.

You've warned of potential fair housing violations stemming from private listings, and others have mentioned class action lawsuits — is that a real risk for agents?

I fully believe that. If your company's stance is that everyone needs to do this — and we've watched their training videos — by starting with private exclusive and then if that doesn't sell, then they put it on their website, and then the third and last option is to put in the MLS, there were two attempts to sell it through their own exclusionary process. 

When the seller is upset six months or two years later because their neighbor sold for $50,000, $100,000 or $200,000 more, I would as an agent — as a fiduciary — would want to be able to empirically say, 'No, I actually attempted the highest form of marketing.' I think there's a class action lawsuit purely on economic reasons of damages.

And then with fair housing — in 1968, we identified seven protected statuses, and that was specifically designed to protect against redlining and steering. I'm not saying anyone is intentionally doing that today, but if any group of people does not have access to the information — unless they're in business with or have access to this other small group of folks — I need someone to explain to me how they don't see that being the next problem. 

eXp has its own private listings channel. How does that fit into your strategy? 

When it comes to delayed marketing, we're just not going to participate in that because I believe it's bad for the consumer and when we go to the MLS, we're committed to being publicly displayed and I want everyone to see it. 

But with the eXp Exclusives, we've had it for years, and office exclusives are a CCP-compliant behavior. There are some examples of safety where people can't have their address appear on the internet. But I think the privacy argument is overplayed and overused — I don't think that comes up as much. If the seller truly wants it and it is compliant with CCP and your local MLS rules, then we'll support it. But it's represented less than 1,000 eXp transactions out of 350,000. 

It's not my business strategy. We don't teach it and we don't encourage it in any way, shape or form.