Whisper Listings Spark Debate Over Fairness in Co-op and Condo Sales

They're called whisper listings — co-ops and condos and other homes available for sale only to those in the know, before they're added to a public multiple listing service, known as an MLS.

One brokerage, Compass, has taken the concept to a new level, Crain's reports. The brokerage has rolled out a curated, Compass-brokers-only website that potentially allows the brokerage to keep the buyer- and seller-side brokers’ fees in-house. Compass says the program is intended to give homebuyers and -sellers a lift in a tight housing market. Prospective buyers can bid without being muscled aside by as many competitors, while sellers can tweak pricing without coming across to the general public as desperate.

Critics see whisper listings a bit differently.

“Let’s be clear," Brown Harris Stevens CEO Bess Freedman writes in the website Inman. "Any brokerage that advocates for only marketing listings internally is not putting the client’s interests first, but rather it is an attempt to pad its own pockets. Private listings minimize competition for the client.”

But Rory Golod, president of growth and communications at Compass, says the program helps ensure fairness for sellers by preventing them from having to combat the impression that if the asking price for their home has been lowered, or if the property has been on the market for a long time, then it is of low quality or somehow less desirable.

According to a recent Compass filing with the Securities and Exchange Commission, the so-called private exclusives program is designed to test prices, obtain industry insights and generate early buzz before a property is added to an MLS. The brokerage contends that private listings help sellers avoid having “negative insights” about their homes, namely data on price drops and days on the market, published online and available to prospective buyers.

Of the roughly 2,300 listings in New York City for which Compass alone was the marketing agent, about 500 were cordoned off in mid-March as private exclusives, according to a Crain’s analysis of the brokerage’s data. Of those, 370 involved co-ops, condos or townhouses in Manhattan, the borough Compass focuses on the most.

Among the opponents to whisper listings, unsurprisingly, is StreetEasy, the popular Zillow-owned data service that relies on open listings. “StreetEasy believes in fair, transparent and equal access to real estate information, and is staunchly against anything that prevents it,” says StreetEasy General Manager Caroline Burton. “Hiding listings from the public — especially in a market like New York, which faces the biggest housing shortage in the country — not only exacerbates this issue, but puts buyers, sellers and agents at an extreme disadvantage.”