Answers from the legal hotline

TAR's attorneys provide answers to questions about MLS rules.

by Ron Walker   

Q The listing agent inserted "$500 bonus to selling agent" in the remarks. A contract was signed and is binding. The listing agent does not want to pay the bonus because the property did not sell at full price. Is the listing agent obligated to pay the bonus?

A If the brokers cannot resolve the dispute, they should agree to disagree, close the transaction, and either mediate or arbitrate the dispute after closing. A decision by a hearing panel on whether the listing broker is obligated to pay the fee will depend on what the panel determines occurred.

Given the limited facts provided in this question, it appears that the listing broker may be obligated to pay the bonus, because no condition concerning a full-price offer was expressed in the offer to pay the bonus. Absent such conditional language, it is likely that a panel may determine that the offer to pay the bonus was conditioned only upon a successful closing. Any conditions for a bonus should be expressly stated in any offering of the bonus.

Q An offer was made on a property, and the transaction closed. The buyer expressed to his agent, who notified the listing agent, that he did not want the sales price reported in the MLS. Will the listing agent violate MLS rules by not reporting the sales price?

A The answer to the question depends on the precise language of the local MLS rules. Most MLS rules require the listing broker to report the sales price. Failure to do so may subject the listing broker to a penalty, such as a fine or other action. Any exceptions to this general rule will be stated in the local MLS rules.

Some MLS rules provide that if the listing broker does not report the sales price or reports a nominal sales price, the listing price will be reported as the sales price.

Q Does the response to the previous question change if the offer from the buyer contained a provision that the listing broker would not report the sales price to the MLS?

A Knowing that the contract for sale is an agreement between the seller and buyer, a clause in the contract that attempts to bind a listing agent (who is not a party to the contract) to perform or not perform a certain function is probably misplaced. Instead, a condition precedent with definable rights by the buyer against the seller if the condition does not occur may be more appropriate. Yet the insertion of such a clause drafted by a broker may go beyond a factual statement or business detail and move the broker into the unauthorized practice of law. The listing agent that receives an offer with such a condition must explain to the seller that, under the listing agreement, the seller previously authorized the broker to submit the information to the MLS, and that such a condition may place the listing broker in violation of the MLS rules. It would then be appropriate for the listing broker to discuss who would indemnify the listing broker against any rule violation or penalty. Again, one must refer to specific local MLS rules to determine if any exception to the general rule applies.

Q An offer is pending. The listing broker does not want to report the listing as "pending," "pending/continue to show," or "pending under option," because the listing broker believes that other brokers will be more likely to show the property if it remains active. Is this an MLS rule violation?

A Most MLS rules require the listing broker to accurately report the status of the listing. Unless the MLS rules provide otherwise, it is likely that the listing broker would violate the MLS rules under the facts given.

Q The listing broker offered a certain percentage in the MLS to the cooperating broker. An offer below the listing price was made and negotiations followed. The buyer and seller were close to reaching a deal but remained slightly apart. The seller informed the listing agent that if the listing agent and/or the buyer’s agent would slightly reduce their commission(s), the seller would accept the buyer’s last offer. May the listing agent propose a reduction in the cooperating fee to the cooperating broker without violating the Code of Ethics?

A Yes. Under Standard of Practice 3-2, a REALTOR® who wishes to change the compensation offered to another broker must timely communicate that change before the cooperating broker produces an offer. Standard of Practice 3-3 provides that Standard of Practice 3-2 does not prohibit the brokers from agreeing to change the compensation. Under the facts presented, the listing broker is communicating information from the listing broker’s client. The cooperating broker is not obligated to but may agree to accept a reduced commission.

Ron Walker is director of legal affairs for TAR.

Photo © Corbis Images.

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Even if a homebuyer wants the sales price to remain confidential, most MLS rules require the listing broker to report the price to the MLS. Failure to do so may subject the listing broker to a penalty.