Beyond Pocket Listings: How States Are Filling Real Estate’s Regulatory Void

Two more states — Illinois and Hawaii — have now joined the push to restrict private residential listings, signaling that Wisconsin’s newly enacted transparency law and Washington’s advancing legislation are just the beginning of state legislative action.

Illinois’ HB 4964 follows the Wisconsin model, requiring public marketing within one business day of signing a listing agreement unless the seller opts out in writing.  Hawaii’s HB 2559 mirrors Washington’s stricter approach, prohibiting marketing to a limited or exclusive group without concurrent public exposure, with only narrow safety exceptions.

To most in the industry, this is just another chapter in the cold (and occasionally hot) war between Zillow and Compass over private listings and who controls access to housing inventory. That’s probably an accurate read – but it’s also incomplete.

The deeper reality is that states have always had the authority to regulate how real estate is marketed.  The constitutional label for this is “police powers” — the states’ broad ability to govern the conduct of licensed professions in the name of consumer protection.  And that authority is far more expansive than one may realize.

How expansive? Several states have banned buyer-broker commission rebates for years, and courts have repeatedly upheld those restrictions, even while acknowledging they may be anti-consumer or anticompetitive. When a rule is framed as governing professional conduct, courts defer heavily to state legislatures.

For decades, property listings have been de facto regulated by NAR policies, MLS participation and platform syndication. As long as that framework held, states stayed out of it.  The Sitzer/Burnett verdict, the NAR settlement and the rise of portal competition changed that calculus entirely. Industry lobbying may be behind these first legislative moves, but state legislatures just got reminded how much power they have to write the rules of the game. 

Will federal action override this? Perhaps, but not nearly as much as some might assume. After Dodd-Frank, the federal government effectively nationalized the rules for mortgage lending. Even then, states never lost control over who gets licensed, what they must do to stay licensed and how they conduct business day-to-day.

Going forward, it wouldn’t be surprising to see more states step into the fray, because they can, and because housing is far too hot a political issue to ignore.

Anthony V. Mannino, Esq. is the CEO of Dual Mind Strategies.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the editor responsible for this piece: tracey@hwmedia.com