Domino effect likely as MLS pre-marketing holdout shifts course 

When Northwest Multiple Listing Service (NWMLS) unveiled a new listing status last week, the Washington state-based MLS said it was designed to offer members more marketing flexibility. The pre-marketing trend is continuing to reshape the industry — and how MLSs respond, particularly in states where new legislation seeks to curb private listings, is becoming clearer.

In NWMLS's case, its new "First Look" option arrives shortly after the state passed a law restricting private listings and comes in tandem with the resolution of a lawsuit Compass filed against the MLS last year over the same issue.

NWMLS adjusts to a changing market

Prior to announcing First Look, NWMLS and its leadership team had been vocal advocates of full-market transparency. The MLS previously had a long-held policy prohibiting pre-marketing and supported SB 6091, a bill restricting the use of private listings in Washington state, before the legislation was signed into law earlier this year.

In a June 11 panel discussion, NWMLS President and CEO Justin Haag characterized the new law as promoting market competition and fairness by ensuring that a home listing is accessible to everyone when it is marketed for sale or for rent. 

NWMLS's Sept. 4 rollout of First Look thus runs somewhat counter to Haag's earlier stance. The status gives homesellers and listing brokers the opportunity to publicly market listings for up to 21 days before those listings enter active status. It also provides brokers the option to host showings and publish the listing on Internet Data Exchange (IDX) websites during the First Look period.

Most notably, listings using the new status will not publicly display days on market or any pre-launch price adjustments, although that data will be available internally to NWMLS subscribers.

While this move appears to be a major reversal from the MLS's previous messaging about market transparency, it may have been a necessary concession to end costly litigation with Compass and keep pace with the industry's pre-marketing wave.

In an email, Haag told Real Estate News that the new listing status aims to "balance seller flexibility with market transparency." First Look's launch was not a response to pressure from any one brokerage, Haag added, but the result of "shifting industry landscapes and evolving consumer expectations."

What about the new state law?

Washington state's recently enacted law prohibits "marketing residential properties to an exclusive group of prospective buyers or real estate brokers, unless the residential property is also concurrently marketed to the general public and other real estate brokers." 

The law does not, however, include language about listing portals, private listing networks or multiple listing services, nor does it provide definitions for "private" or "public" marketing.

Given that First Look listings must be submitted to NWMLS and all of its 30,000-plus broker members at the same time that marketing of the listing begins anywhere, the rule change is unlikely to run afoul of the law, industry experts say. 

Alloy Advisors Co-founder Russ Cofano told Real Estate News that NWMLS's approach to what an MLS is, and to its core value proposition, was "tested" over the course of its 16-month-long legal battle with Compass. "But for the litigation, I don't think they would have done what they did with 'First Look,'" Cofano added.

With litigation dragging on and costs mounting, the settlement may have been the best available path for resolving the lawsuit. "There's no doubt that in negotiating this 'First Look' status with Compass that Northwest MLS relied on the new law," Cofano said, noting that it requires listings to be marketed publicly and available to all brokers in tandem with any other marketing.

"If I was Northwest MLS, I would be leaning hard on that — 'available to all brokers' could be interpreted to mean [available] 'in the MLS,'" Cofano said.

Haag told Real Estate News that First Look was created to be "consistent with both the letter and the spirit of" SB 6091: "It strictly supports the state's public marketing mandate by preventing any firm from walling off inventory into private, invite-only buyer silos."

How 'First Look' may impact the industry

Now that one of the last major pre-marketing holdouts has developed its own pre-marketing solution, it's likely that other smaller MLSs will follow, according to Cofano. 

"For [NWMLS] to acquiesce to this kind of organized coming-soon status is a sign to probably a lot of other MLSs who are still wrestling with the idea that they're going to have to [resolve] the same issue," Cofano said. "I think this is where the industry's going to land: having a reasonable coming-soon period, having some flexibility on where that listing needs to go, and then once that period expires, then the historic share and share alike rules kick in and the listing is distributed everywhere."

Given the manner in which First Look listings must be distributed among all MLS members, Cofano also sees the status — paired with the state's new law — as a way to perhaps force Compass into a more transparent direction.

"From a Compass perspective, what we're seeing is Compass' 3-phased marketing approach is quickly becoming a 2-phased marketing approach; that this private exclusive category is going away," Cofano said. "Clearly, Compass cannot do their private exclusive category [in Washington], as they originally marketed it, because in that scenario, as I understand it, [those listings] would have sat only [internally] on Compass' website and not be distributed out to any third party, including the MLS."

As Haag sees it, NWMLS is striving to adapt to a changing market while preserving important tenets.

"As the real estate market changes, our job is to adapt our rules to meet those consumer needs while fiercely protecting the things that matter most: consumer choice, broad access to housing inventory, and fair competition among all brokerage firms," Haag said.