Several Association of REALTORS® (Associations) and their Multiple Listing Services (MLSs) have received requests from sales and mortgage brokers and listing agents to delete (“zap”) a listing entirely from the MLS as if it were never inputted or to change the true listing date or listing expiration date of a listing. We have counseled our Association clients not to engage in such activities. In this Special Report we explain the reasons why.
In the current market, many homeowners are trying to refinance out of increasingly unaffordable adjustable rate mortgages. We have received similar inquiries from Multiple Listing Services asking how to handle requests from agents that a listing be removed from the MLS entirely or that the listing date be changed or backdated to enable homeowners to qualify for refinancing to avoid losing their properties. Such practices are similar to relisting or “churning” a listing to create the appearance that a listing is new by “resetting” the days on the market. These practices may violate the MLS Rules and could in some circumstances constitute fraud. Associations must maintain the integrity of its MLS Rules and should refuse to comply with such requests.
The integrity of the MLS system is dependent to a great extent upon the accuracy and reliability of its information. Under the MLS Rules and the California Civil Code, it is a violation to knowingly place any information in the MLS that is inaccurate. Damages can be awarded for reckless or knowing errors. If the Association expects its members to comply with the MLS Rules, it too must comply with those rules. The MLS must not violate its own rules or civil law by cooperating in falsifying information that will be relied upon by others. This principle remains true even when the good intentions of the brokers and agents are to save the homeowner from foreclosure.
The requirements for placing a listing in the MLS include the following:
- The person must first be a licensed real estate broker or agent working with a broker.
- The person must be a participant or a subscriber in the MLS.
- The person must have a valid written listing agreement executed by all necessary parties.
- The person must, within two business days, accurately put into the MLS the information contained in the listing agreement, or file an exclusion with the Association.
- The person must be responsible for the accuracy of all information which must remain accurate, including the representation that the listing is valid.
It is an express violation of the MLS Rules to place a listing into the MLS without a valid written agreement. Once a listing agreement expires without extension, it is no longer valid, as a matter of law. Oral listing agreements are not enforceable in California, pursuant to the Statute of Frauds (Civil Code § 1624) and regulations of the Department of Real Estate. Without a valid listing agreement, the agent has no “standing” to direct the MLS regarding that listing.
Agents owe a duty to their clients of zealous and honest representation. However, changing the MLS listing information to create a misleading and inaccurate picture regarding the property is improper. Agents must be careful not to violate the Code of Ethics and MLS Rules by making misrepresentations. Agents are required to present a “true picture” in their real estate communications, advertising and representations. To change the accurate true listing date could also violate MLS Rule 7.5. If the listing has expired, that change should be noted as required under Rule 7.8. If the seller has cancelled the listing agreement, the change should be noted as required under Rule 7.8.
The MLS must maintain its neutrality, accept accurate information and enforce its rules. It is not the responsibility of the Association or its MLS to facilitate the resolution of the homeowners’ financial problems, no matter how sympathetic the homeowners’ circumstances are or how lucrative the result to the broker a seemingly small change would be.