The DeLeon Insight - July 2025 by DeLeon Realty

Market Conditions By City

$10,000,000

$9,000,000

$8,000,000

$7,000,000

$6,000,000

$5,000,000

$4,000,000

$3,000,000

$2,000,000

$1,000,000

Average sales price for single-family homes from 3/2024 to 5/2024, compared to the period from 3/2025 to 5/2025.

Price per square foot ratio for single-family homes from3/2024 to 5/2024, compared to the period from 3/2025 to 5/2025.

Average Sales Price

3/2024 - 5/2024 3/2025 - 5/2025

Price/Square Foot Ratio

3/2024 - 5/2024 3/2025 - 5/2025

Source: MLSListings, Inc., as of June 17, 2025 Criteria: Single Family Residential

Atherton Los Altos Los Altos Hills Menlo Park Mountain View Palo Alto Portola Valley Redwood City San Carlos Sunnyvale Woodside

Agents Push for “Pocket,” “Private,” or “Exclusive” a.k.a. Hidden Listings

By Michael Repka, Esq.

Why are some agents and brokerages persuading sellers to keep their home’s availability hidden from the vast majority of interested buyers, limiting marketing only to those represented by that agent or that brokerage? The answer is simple: More commission for the agent and brokerage.

Even if a home sells for significantly less money, the agent and brokerage will come out far ahead if they get both sides of the commission. Additionally, brokerages with access to hidden listings can use the promise of that access as bait to attract buyers interested in purchasing a home at a discounted price.

While some agents may argue that sellers should have the option to sell their home with less exposure if they value privacy or expediency over the sales price, that’s not always how it’s being presented. Some sellers are being led to believe that they will get the same price (or more) by focusing marketing solely on the small fraction of buyers already working with that brokerage. While this may seem counterintuitive, a surprising number of intelligent sellers are falling for these polished sales scripts.

Market Reality

It’s not the 1980s anymore. Gone are the days when buyers learned of homes from agents driving them around in their Lincoln Town Car or Crown Victoria. Today, most buyers first learn of a home’s availability through the Multiple Listing Service (“MLS”), third-party websites that syndicate MLS data – such as Zillow, Redfin, or Realtor. com – automated alerts from those platforms, or from public advertising.

Even when buyers first learn of a particular home from a newspaper ad, TV commercial, social media post, or via direct mail, they often visit one of the aforementioned websites for more information, including pictures, videos, 3-D tours and floorplans.

If a home is listed on the MLS, it will be prominently featured on all these third-party websites, as well as most local brokerage sites, including Compass, Coldwell Banker and DeLeon Realty. However, if it’s not on the MLS, the seller is vastly limiting exposure and with it, competition.

Desire for Commission Drives Push for Off-Market Listings

There are two distinct ways that hidden listings result in more commission – at the expense of the client. First, it dramatically increases the likelihood of the brokerage getting both sides of the commission because the home’s availability is hidden from buyers working with another brokerage or not yet working with any agent at all. Second, the brokerage can use the promise of exclusive access to these hidden listings to entice buyers to work with them. After all, buyers understand that these homes are likely to sell for less money due to the reduced exposure and competition.

Court Settlement Increases Push for Off-Markets

The real estate industry recently – and rightfully – lost a major antitrust lawsuit that found the industry had conspired to artificially maintain inflated commissions via various dubious and illegal techniques. As a result, the National Association of Realtors and most major brokerages including Compass, Keller Williams, the parent companies of Coldwell Banker, Sotheby’s and Intero, reached a settlement of nearly $1 billion and agreed to significant industry reforms, including:

1. Strict limits on advertising of commissions offered to buyer’s agents, if any; and

2. Buyers must now agree in advance to the commission that the buyer’s agent will receive from the buyer before starting the home search process.

One of the primary goals of these reforms was to encourage negotiation of the commission paid to buyer’s agents, rather than having it predetermined in the listing agreement. After all, buyer-side commission should come down, or service should improve, if buyer’s agents must compete for buyers.

Unfortunately, the settlement has done little to curb misleading practices by some agents and brokerages. In fact, some sellers have encountered agents falsely claiming that nothing has changed and they should still pre-commit to pay 2.5% commission to the buyer’s agent—nothing could be further from the truth.

The Handwriting is on the Wall

Although the local real estate industry has been largely effective in “working around” or circumventing the client-favorable elements of the settlement, many in the industry recognize that it is only a matter of time before sellers realize that they should never set any buyer’s-side commission in the listing agreement—a position shared by both DeLeon Realty and the California Association of Realtors.

Once this shift occurs, buyers will have the power to negotiate far more favorable commission rates with their agents. Naturally, they will only pay what they believe their agent is truly worth.

This is precisely why certain self-interested forces in the industry are encouraging sellers to hide listings from buyers. When listings are public, agents cannot effectively boycott them – buyers are simply too smart and well informed. But “private,” “office exclusive,” or “pocket” listings can be effectively hidden unless the buyer agrees to pay unjustified commissions to the agent or brokerage.

6 Rules to Protect Yourself

1. Sellers should never agree to preset any buyer’s agents commission in the listing agreement.

2. Sellers should never allow any period of “early access” or “exclusive access” to buyers represented by the listing brokerage. All buyers should have an opportunity to compete for the home at the same time.

3. The listing agent should include an addendum to the listing agreement with a detailed list of what home prep, staging, marketing and inspections the agent will pay for as a part of their listing agreement. Sellers should not accept vague promises like “I will reach out to my network” or “I will use my best efforts.”

4. All listing agreements should end no more than 45 days after the home is placed on the MLS. If the seller is unhappy with the agent’s efforts, or if they feel that the agent was deceptive in getting the listing, then the seller will not extend. If the seller is happy, they will extend the listing agreement even if the home has not sold. The agent should have to earn that extension.

5. Sellers should have an express agreement regarding the maximum commission they will have to pay if the listing brokerage also represents the buyer.

6. Sellers should get a predefined credit for the amount that the agent would have otherwise spent on staging, home prep, inspections, included legal services and marketing, if the home is in fact sold off-market.

Why Do Some Sellers Agree to Let Listing Agents Hide Listings

Some may wonder why a seller would ever limit exposure to only buyers that will generate a dual-sided (or “doubleended”) commission for the listing brokerage. The reality is the deck is stacked against clients because some unscrupulous agents or brokerages have developed multi-stage scripts to persuade sellers to do something that is intuitively against their financial best interests.

Rarely do agents start by saying that they are going to limit exposure entirely. Rather, they emphasize that they will promote the home to all interested buyers – but only after giving early access to buyers that they represent.

As a result, buyers that would have been willing to pay more, or that would have fueled additional competition, don’t get the opportunity.

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While this still doesn’t make sense, some sellers report hearing agent arguments that include:

• A home should be prepped, touched-up, improved, cleaned, and staged before hitting the market so buyers see the property at its best. So far, so good. However, agents then argue that the property should be shown to their buyers before it is ready.

• Other agents claim that pricing homes can be tricky, especially for less experienced or less knowledgeable agents. Showing the home to a small portion of the market, they say, will give the agent information about its actual fair market value.

Once the agent obtains an offer, they are perfectly positioned to tell the seller that all the feedback that they have received indicates that the seller should accept the offer, even if it is lower than they originally thought. As a result, the seller ends up in contract without knowing what the result could have been with broader exposure and maximum competition.

• Other agents dangle an unrealistically high price and suggest “testing the market.” While the agent knows that this strategy is unlikely to succeed, it almost always includes a listing contract duration of at least 90 days – far longer than advisable. When the dust settles, the homeowner finds themselves contractually obligated to work with an agent that lacks the experience and marketing resources of more capable competitors.

The Tide is Starting to Change

Compass, one of the area's largest brokerages, has faced significant negative press related to its position on off-market or office-exclusive listings. Recently,

Compass announced that it will start sharing a portion of its off-market or office-exclusive listings with other agents if the other agent comes to their office.

While this is a small step in the right direction, it still begs the question: Why hide these listings from the vast majority of buyers that use the MLS, Zillow, Redfin, or other brokerages’ websites? Similarly, why hide them from agents that don’t know to stop by the listing brokerage’s office? Additionally, some agents report being turned away when they asked for Compass’s list of off-market listings. Although Ken and my subsequent interaction with Compass’s management did result in a reassurance that one of our realtors/attorneys can pick up the list weekly, the question still remains: why make it this difficult if the goal is to get the highest possible sale price for the seller?

Zillow and Redfin have taken a stance against brokerages that encourage this hidden listing strategy. They have announced that agents that hide their listings at the beginning and only offer them to their clients will be barred from promoting these homes on Zillow and Redfin’s very important platforms when, and if, the homes ever come on the MLS.

It is hard to imagine that hiding listings from so many buyers, whether this restricted access is only temporary or for the duration of the listing, is consistent with an agent’s fiduciary duty to the seller. This risk is so significant that a knowledgeable real estate attorney would urge any agent engaging in this type of questionable practice to get a signed waiver from the seller saying that the seller knew that they could have had full marketing and promotion but it was the SELLER’s decision to limit exposure to only a small portion of the potential buyers. If not, there may be another major class-action lawsuit around the corner.

for $126,100.1 In 2024, that has increased to $407,600, generating appreciation of more than 223%.

However, this poorly written tax code did not index the exemption amount to home price appreciation or inflation (which has effectively doubled over this timeframe). As a result, while very few homeowners paid capital gains taxes in 1997, many now face them in exorbitant amounts. Additionally, the federal capital gains tax rate was lower in 1997 – just 20% – and has since increased to 23.8%.2 Most state tax rates on capital gains have also increased, with California’s additional tax rate increasing from 9.3% in 1977 to 13.3% now. In California, the combined federal and state capital gains rate went from 29.3% to 37.1%.

This capital gains dynamic, fueled by appreciation and inflation, is even more burdensome in coastal regions. I have experienced this firsthand, as I am a residential real estate broker in Palo Alto, and I can recall when the median home price in Palo Alto was $540,500 in 1997.3 In April 2025, the median price of a home in Palo Alto was $4,150,000 – an increase of 667%.4

The large appreciation homes around the country have seen, coupled with no increase in the exemption amount, has greatly increased the capital gains sellers must now pay. As a result, we have, and will continue to see, a sharp reduction in the number of homes available for sale as sellers seek to avoid this significant tax liability. As I said in The Epoch Times, “This outdated capital gains law has resulted in an artificially-created housing shortage… Some of these sellers could now be facing capital gains taxes of over $1 million.”5

While capital gains is a more pressing issue in California and other coastal states with high home values, the negative impact on housing supply that is already unfolding in California will also impact other states as their median home values rise above the exemption threshold. The old saying, “As goes California, so goes the nation” captures the dynamic well. The loss of homes being marketed and sold due to capital gains taxes in California will soon echo across the country.

Take a look at four of the top five counties (per Silicon Valley MLS statistics) in California for total single-family

home sales transactions in 2001 (the earliest year with comprehensive data), and you’ll see a precipitous drop of over 50% in the number of new listings that these counties offered in 2024.

Collectively, four of the top five counties in California saw a 57% decline in homes available for purchase compared to 2001 levels. The only top county I have

omitted is Los Angeles County, due to its imposition of a “Mansion Tax” that increased its tax liability and further depressed sales. This decline is even more shocking when you consider that all of these counties grew in population and experienced substantial appreciation in the value of their housing stock since 2001.

This tax code puts California in a negative feedback loop: greater appreciation causes greater tax liability, and increasingly sellers “cannot afford” to sell due to this high tax burden – which in some cases can reach over a million dollars in taxes. This, in turn, causes sellers not to sell, which lowers inventory, drives up prices, and increases tax liability even further. As I told Fortune, “You’re almost stuck, the family home becomes almost sort of a prison… Young families don’t have the supply of homes that they want, and then you have senior citizens who cannot enjoy the last chapter of their life because they are cash poor but house rich.”6

The fact that higher taxes impede sales is clearly evidenced by the well-intentioned, yet poorly executed, “Mansion Tax,” that the city of Los Angeles enacted. Los Angeles has added this additional tax, which is 4% for property sales above $5 million and 5.5% tax for sales above $10 million. An analysis by the Los Angeles Times found that home sales of $5 million or more, dropped

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a staggering 68%. In neighboring Beverly Hills, which has no Mansion Tax, sales only dropped 24% from peak volume.7

The reality is that a home sale is an elective choice, and whether a family decides to sell involves weighing several pros and cons. In this balance, excessive taxation encourages significantly fewer home sales and many negative consequences, including lower effective tax revenues for our municipalities due to this steep drop in transactions.

The Laffer Curve champions the idea that there is an optimal tax rate to maximize revenue. It recognizes that when tax rates become too high, fewer transactions occur. Conversely, tax revenues can paradoxically be higher with a lower tax rate that encourages more sales volume. While the Laffer Curve may not work well with income tax, as working is usually involuntary, it applies fluidly to elective choices, such as choosing whether to sell one’s home and trade up or simply to remain where you are.

The significant decline in California home sales not only means less capital gains for the sales that would otherwise have occurred at a lower tax rate, it also results in a loss of the many other tax benefits that trickle down when a sale occurs. Not only do counties and cities benefit from transfer tax revenue, the property tax is reset and significantly increased upon selling at the current property value at the time of sale as opposed to the lower tax rate that legacy owners enjoy.

Since property taxes are limited to only go up 2% per year in California (even if appreciation is over 10%), fewer transactions also mean lower property tax income. As a result, long-time owners usually pay a fraction of the property taxes that new owners pay, so more sales would result in much higher property taxes to fund local governments.

Many additional benefits would result from indexing the capital gains exemption, including not only more houses being available, but also would provide:

Housing Mobility – A higher exemption would promote healthier housing turnover and a better matching of people with appropriately sized homes. Many seniors live in large homes they no longer wish to maintain, but they stay to avoid the capital gains liability. Conversely, young families are often stuck in smaller homes and condos due to the high barrier to entry and extreme competition imposed by the lack of inventory. Just as New York’s rent control laws result in seniors staying in large apartments they no longer want, the same happens with homes. No one moves out when they should or want to, and housing mobility is stifled.

Relief for Long-Term Homeowners – Owners who have lived in their homes for decades often face large unrealized gains simply due to time and market growth. An increased exemption would reward stability and long-term ownership by raising the exemption threshold for long-term primary residences. Senior citizens often rely upon their home investment for their means to live a full, fulfilling life in their golden years, but many find themselves near poverty and cash-poor when high taxes prevent them from selling the family home. Seniors living alone are more prone to both loneliness and accidents, so moving to a retirement community would provide them with greater societal interaction and medical attentiveness, better aligning with their needs.

Societal Equity and Wealth Building - Greater well-being and societal equity would be achieved, as real estate is one of the primary ways middle-class Americans build wealth. Without a higher exemption, typical families— especially in high-cost cities—end up owing capital gains taxes on what is viewed as a “normal” house. Also, if inflation is driving up home values, but they are not increasing in real terms relative to inflation, it feels

“unfair” to pay taxes on “appreciation” that merely is at the rate of inflation.

Economic Stimulus – Economic stimulus would result as real estate is one of the most important contributors to the American economy, with real estate-related (including construction) services accounting for an estimated 15%-18% of our GDP.8

Furthermore, allowing homeowners to retain a greater share of the profit from their home sales could increase consumer spending and facilitate investment in new homes and local economies.

Thankfully, the problems that stem from the lack of an appropriate exemption may soon be rectified. In February 2025, Representative Jimmy Panetta (D-CA) introduced an act aptly entitled, “Bringing More Homes to the Market Act”, which aims to amend the Internal Revenue Code to double the exclusion of gain from the sale of a principal residence. While the bill’s passage is far from guaranteed, it illustrates politicians’ growing interest in adjusting the exemption thresholds.

If this bill is not passed, the declines in housing inventory, along with the consequences of greater housing costs and increased homelessness, will only get worse. Hopefully, Mr. Panetta’s final bill will continue to receive bipartisan support.

There is nothing more tangible to the American Dream than owning a home. Let us enact a policy that will make home ownership easier for everyone and allow the

societal benefits of greater homeownership to become a reality again. Please reach out to your Senator and House Representative to let them know that you support the “More Homes on the Market Act.”

Sources

1. US Existing home Median sales Price Yearly Trends: Existing-Home sales | YCharts. (n.d.). YCharts. https://ycharts.com/indicators/us_existing_home_ median_sales_price_yearly

2. Historical Capital Gains Rates (2023, January 4), https://www.wolterskluwer.com/en/expert-insights/ whole-ball-of-tax-historical-capital-gains-rates

3. Home market madness. (1997, March 19). https:// www.paloaltoonline.com/morgue/cover/1997_ Mar_19.COVER19.html

4. SiliconValleyMLS.com

5. Mary Prenon, “Nearly 30-Year-Old Capital Gains Tax Exemption Rules Blamed for US Housing Shortage,” The Epoch Times, June 8, 2025. https://www. theepochtimes.com/business/nearly-30-year-oldcapital-gains-tax-exemption-rules-blamed-for-ushousing-shortage-5869376

6. Alicia Adamczyk, “Young people are frozen out of the housing market—this outdated tax law is a big reason why,” Fortune, June 5, 2025. https:// fortune.com/2025/06/05/home-sale-capital-gainsexemption-500000/

7. The Year of the ‘Mansion Tax’: Hundreds of Millions Raised, but a Chill to L.A.’s Luxury Market (2024, April 1). https://www.latimes.com/california/story/202404-01/a-year-into-the-mansion-tax-l-a-s-luxurymarket-hasnt-quite-recovered

8. Housing’s Contribution to Gross Domestic Product. (n.d.). https://www.nahb.org/news-and-economics/ housing-economics/housings-economic-impact/ housings-contribution-to-gross-domestic-product