The Private Listing Market... Good For Them but Bad For You

Why Large Real Estate Brokerages Are Pushing for Private Listings (And How It’s Hurting Buyers and Sellers While Benefiting Only Them)

The real estate market is evolving rapidly, with technology, market dynamics, and shifting consumer expectations reshaping how homes are bought and sold in Chicago. One trend that’s emerged in recent years is the rise of private real estate listings—those that are not made available to the public or are only shown to a select group of buyers. While this strategy may seem to offer exclusive opportunities for sellers, it’s largely driven by large real estate brokerages seeking to capitalize on the perceived benefits of exclusivity. However, these private listings are often detrimental to both buyers and sellers, ultimately benefiting the brokerage more than anyone else. Here’s why.

1. Control and Commission Benefits for Brokerages

Large real estate brokerages are increasingly pushing private listings as a way to gain more control over the transaction process. By keeping listings off the public market and limiting them to a small network of agents or buyers, brokerages can essentially keep the deal within their own sphere. This allows them to pocket higher commissions and avoid sharing the deal with competing agents.

In traditional public listings, multiple agents can be involved, and the commission is usually split among the listing agent and the buyer’s agent. However, with private listings, the brokerage is in a position to represent both the seller and the buyer, which can result in "double-dipping" (receiving both sides of the commission). This gives the brokerage a significant financial incentive to encourage sellers to opt for private listings, despite the drawbacks for both buyers and sellers.

While this arrangement may seem to benefit the brokerage in the short term, it often works against the interests of both buyers and sellers in the long run.

2. Limited Buyer Exposure and Reduced Competition

For sellers, the primary goal is to get the best possible price for their property. A public listing exposes a home to a broad audience, increasing the chances of attracting multiple buyers and generating competitive offers. In a competitive market, multiple offers can drive up the final sale price.

Private listings, however, limit exposure by restricting access to a narrow group of buyers—often only those within the brokerage’s own network or a select group of wealthy or well-connected buyers. By reducing the number of potential buyers, sellers lose the opportunity to engage in a competitive bidding process, which can result in a lower sale price.

For buyers, private listings also create a barrier. Many buyers are left unaware of homes that might meet their needs, simply because they are not part of the "in-crowd" or do not have access to these exclusive listings. As a result, they may miss out on great opportunities, not realizing that a property that suits their needs is being sold in a limited, closed-off market.

3. Artificially Inflated Prices

Another concerning consequence of private listings is the potential for artificially inflated prices. When a property is not publicly listed and competition is limited to a select group of buyers, it’s easier for sellers and brokers to manipulate the perceived value of the home. Without open access to a wider market, it’s hard for buyers to compare prices and understand whether a listing is fairly priced.

In many cases, private listings are positioned as "exclusive" or "off-market," which can create an illusion of rarity or high demand. This artificial scarcity can cause prices to be inflated, as buyers assume they are getting access to something rare and valuable. Sellers, in turn, may end up overpricing their property, relying on the sense of exclusivity to justify the cost, even though the market may not support such a price. Buyers, on the other hand, might overpay simply because they don’t have full visibility of competing properties at a lower price.

4. Missed Opportunities for Sellers to Maximize Profit

In a public listing, the property is exposed to as many buyers as possible, allowing the seller to get maximum exposure through advertising, online listings, open houses, and social media promotions. Public listings allow sellers to benefit from competitive bidding, where multiple buyers compete for the property, often pushing the price above the asking price.

With private listings, sellers forgo this exposure, potentially leaving money on the table. Even in high-demand markets, the restricted pool of buyers limits the ability to drive the price up. Furthermore, without a competitive market, sellers may not even receive as many offers as they would with a public listing. In essence, private listings prevent sellers from fully capitalizing on the market dynamics that often lead to a higher sale price.

5. Reduced Transparency and Less Informed Decisions for Buyers

For buyers, private listings not only limit access but also reduce transparency in the market. Public listings allow buyers to compare multiple properties, evaluate the market value, and make an informed decision about what they are willing to pay. They can see comparable homes, track price reductions, and gain insights into the overall market trends.

In contrast, with private listings, buyers often lack a full understanding of how a property stacks up against others in the market. They may not even know about a property that would be a good fit for their needs. Without this comparative data, buyers are forced to make decisions in the dark, with less knowledge about fair pricing and market trends. This leads to a scenario where they may overpay or miss out on better options simply because they were unaware of them.

6. Ethical Concerns and Market Inequities

Private listings raise significant ethical concerns around fairness and equal opportunity in the housing market. By limiting access to certain properties, brokerages create an environment where only a select few have the opportunity to purchase a home. This is particularly problematic in markets where housing is already scarce and competitive, as it disproportionately favors wealthier individuals, those with strong connections, or those who have the financial means to access these off-market deals.

In some cases, private listings further exacerbate inequality in housing markets, where the ability to buy a home is already out of reach for many buyers. When brokerages push for private listings, they create an even more exclusive, closed-off system, making it harder for average buyers, especially first-time homebuyers or lower-income individuals, to participate in the market.

7. Frustrating the Homebuying Process

Private listings also make the home buying process more frustrating and opaque. Buyers often don’t know when a property has been taken off the market or sold unless they are part of the broker’s network. This leads to wasted time and energy chasing properties that are no longer available or learning about opportunities too late to act.

Moreover, buyers are left feeling disconnected from the market, as they’re unable to see a comprehensive selection of homes available at any given time. This creates a sense of exclusion, as if the housing market is designed for a specific set of people, rather than being open and accessible to all.

8. A System That Benefits Only Large Brokerages

At the end of the day, private real estate listings benefit the large brokerages the most. They give brokerages more control over the deal-making process, allowing them to profit from both sides of the transaction. By limiting competition, reducing transparency, and narrowing the pool of buyers, brokerages can keep prices high and secure larger commissions.

However, this comes at the expense of both buyers and sellers. Sellers lose the potential for higher offers and wider exposure, while buyers face limited access to properties, less price transparency, and a higher risk of overpaying. For both parties, private listings reduce their ability to make informed decisions and navigate a transparent, competitive market.

Conclusion: A Call for Greater Transparency and Fairness

While private listings may seem like a clever strategy for brokerages to control the market and maximize their profits, they ultimately hurt the broader real estate ecosystem. By restricting access, reducing competition, and creating an opaque environment, private listings harm both buyers and sellers in ways that ultimately benefit only the brokerages behind the scenes.

What’s needed is a return to greater transparency, competition, and fairness in the real estate market. Public listings, where all buyers and sellers have equal access to the information they need, foster a healthier, more equitable market for everyone involved.