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When Gov. Ned Lamont signed Senate Bill 340 into law late last month, he placed Connecticut in an exclusive club: states that are wading into the debate over private listings.

Over the last six months, brokerages and listing portals have made mad dashes to set up private listing or “coming soon” systems that variously let real estate agents keep home listings off the MLS entirely, or let sellers “test” the market using their agents’ personal networks without accumulating dreaded days on market, before eventually listing in the traditional manner.

For SmartMLS President Michael Barbaro, the legislation is a good start but could be built upon.

“I think the legislation is a good start,” he said. “I think it needs to go a little bit further. Hopefully, we can get back to that next session. We’re very concerned at SmartMLS, very concerned with the fairness in the marketplace and accessibility. For us, that’s always paramount.”

What CT’s New Law Does

Connecticut’s new law spells out how residential listings can be marketed. The legislation defines a property as being “actively marketed” by having a sign placed on a property advertising it for sale, or that the owner has hired a real estate agent to market the property.

The law defines marketing a property as placing ads, distributing printed flyers or listing the property on a multiple listings service. Importantly, the law requires any advertisement must contain accurate contact information for either the owner or their real estate agent.

“Access to information is crucial to the homebuying process,” Patricia Mason, vice president of real estate lending at American Eagle Financial Credit Union said in a statement. “Public access to listings helps create a more equitable marketplace. Buyers should have access to the same opportunities regardless of income, financial institution or professional network.”

While private listings have long been a controversial topic in the real estate industry, Connecticut’s new law doesn’t outright ban them. Sellers can sign a form to still opt for a private listing.

“I don’t view this as a fight between transparency and privacy, because I actually believe most sellers want both,” said Jason Mudd, the managing partner of the Cindy Rainey & Team, affiliated with Coldwell Banker. “I think the real question is how to balance those interests in a way that serves the consumer.”

Part of a Bigger Battle

The legislation comes on the heels of the likes of Redfin and Zillow taking action against private and “coming soon” listings.

Redfin added “Redfin Early Access” which shows homes “buyers won’t find on other major real estate sites.” These also include pre-market listings from the major national brokerage Compass. Zillow also announced in May that its “Zillow Preview” listings will also appear on Realtor.com, and include listings from numerous major brokerage brands.

“Zillow and Realtor.com both are committed to the same principle: sellers deserve maximum exposure from day one, and buyers deserve visibility into every home available to them,” Zillow CEO Jeremy Wacksman said in a statement. “With this collaboration we’re not just expanding reach, we’re creating true seller choice while setting a new industry standard for what transparency in real estate actually looks like for buyers, sellers and agents.”

With the attention private and “coming soon” listings get on the national stage, SmartMLS’ Barbaro believes legislation such as the Connecticut bill is important.

“I think this type of legislation is critical,” Barbaro said. “We, for the first time, have public marketing, then the definition thereof codified in our statutes. We also have the definition of an MLS codified in our statutes.”

Concern that Sellers Won’t Get Full Picture

While noting that there are always exceptions, Mudd noted that even as a broker who works with luxury customers, privacy doesn’t always equal exclusivity.

“Even an affluent seller, privacy shouldn’t be confused with exclusivity for exclusivity’s sake,” he said. “That’s my concern, it feels to me like some of these other institutions, I won’t name names, are pushing it as though exclusivity is the real benefit to the consumer. I would argue that competition creates value. Sometimes discretion does, but more often than not, competition creates value if you’re trying to sell your home.”

It is crucial that agents’ clients are presented with the benefits and drawbacks of privately marketing a property, Mudd said, adding it is imperative that brokers have honest conversations with clients regarding the effects of privately marketing a property.

“Private listings aren’t inherently good or bad,” Mudd said. “Like most things in real estate, the right answer depends on what the problem the seller is trying to solve. I think for most of our sellers, they’re trying to maximize what can they get for their house. So in that case, we want to open it and expose it to as many people as possible.”

Additionally, when properties are marketed privately, there is the chance that real estate professionals are able to utilize dual agency and capture both sides of the transaction.

“When you’re a real estate professional, you have a fiduciary duty or client to put their interest above your own,” Barbaro said. “The reason you would want to privately market a property is so you might be able to get paid on both sides of the transaction: You can source the buyer in addition to the seller. When the market becomes inefficient, it’s not the multi-million-dollar clients that you’re not going to want to put in all that extra effort for. It’s the most inexpensive houses, it’s the condominiums that you’re not going to want to get. The most vulnerable amongst us are going to be those that are once again disenfranchised and disproportionately negatively impacted.”