Fine Times: MLS Execs Ponder Penalties for Compliance Culprits
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Now that the now-famous date of Aug. 17, when complying with the National Association of REALTORS®’ (NAR) settlement became mandatory, has come and gone, the newest question is what happens if and when real estate renegades operate outside the box? What penalties might there be for those who ignore, bend or outright flout the rules, putting themselves and potentially their brokerages at risk?
Michael Ketchmark, the lead attorney for the Burnett plaintiffs, has vowed that there will be eyes everywhere, and any funny business will be met with new, stone-cold serious litigation.
It’s shaping up to potentially be a fine mess, literally.
Sajag Patel is a real estate industry analyst and chief revenue officer of Move Concierge and the former COO of Keller Williams. His advice pre-Burnett differs from post-Burnett, making sure real estate professionals understand what has happened and how things have changed, with much closer scrutiny on buyer agents especially.
“The new rules are intended to create transparency for both homebuyers and homesellers so that it’s clear how much compensation is being provided to each respective agent,” he says. “They reaffirm that all agents are allowing the seller to determine how much compensation, if any, they are willing to pay the buyer’s agent. It also reasserts that buyers’ agents are not telling their buyers that their services are free, but that their services are for a cost, and now that cost must be communicated.
“This means that agents today must now look for ways to add value to the transaction in order to justify the fee for their expert services, and those who succeed will be the ones who get creative about how they do this. There is some speculation that this ruling may spur some agents to leave the industry, but the past has shown that real estate agents are surprisingly adaptable and often embrace change, and I think this time things will be no different.”
For those who decide to try and outsmart the system, there will be penalties if caught. RISMedia spoke with major MLSs about plans they have for offenders, finding that fines are the common punishment.
“We are readying fines, but taking a much more benevolent approach with our members,” says Anne Marie DeCatsye, CEO of Canopy REALTOR® Association/Canopy MLS, which encompasses North and South Carolina. “I have said this when I speak, that ‘We’re in this with you.’ We didn’t ask for this any more than they did, but it’s on us to enforce now. We may have already started violation notices, to let our members know that ‘Hey, this is a violation. You need to change it, fix it.’ We’re not going to fine, though, until after the first of the year.
“We’re hoping that we can really use from now until the end of the year as an education opportunity. I believe the only thing we’re forcing immediately is if we discover that data from the MLS is in any way used to set up a platform for sharing compensation. And if that’s the case, we’ll shut you down immediately until that issue is resolved. Otherwise we’re trying to all learn it at the same time.”
Richard Haggerty is CEO of OneKey® MLS, New York’s largest such organization. He doubles down on those trying for an unfair advantage.
“The enforcement of the new rule prohibiting any mention of compensation in the MLS is structured around two key components,” he says. “First, we are heavily investing in the education of OneKey® MLS participants and subscribers, ensuring they are fully informed of the new rules and requirements, including the mandate for written buyer agreements. Second, enforcement through fines will be implemented when necessary to address willful non-compliance.
“As a REALTOR® association-owned MLS, we are obligated by the terms of the settlement agreement to enforce these rules, and we are committed to doing so with the utmost fairness and transparency. Brokers who seek to circumvent these rules not only put themselves at risk but also endanger the interests of their peers. Therefore, ongoing education, coupled with rigorous enforcement, remains essential.”
The same “get educated and follow the rules” mindset is stressed by Bright MLS EVP of Customer Advocacy Rene Galicia. His is the second-largest MLS in the country, representing mid-Atlantic states.
“Bright, like other MLSs, is tasked with enforcing the terms of the NAR settlement, which prohibits any mention of compensation in the MLS,” he says. “Bright has worked since the settlement all summer to educate our thousands of subscribers and meet them where they are with both virtual and in-person training, live and recorded webinars, weekly communications and a thorough library of information on our website.
“We have a new tool in our system to help flag any words that would be considered an attempt to convey compensation, giving the subscriber a chance to fix the issue before the listing is completed. If a listing is found to have compensation information included, either directly or by an attempt at a work-around, the information will be pulled, and the subscriber will be issued a fine.”
On the Stellar MLS website, CEO Merri Jo Cowen speaks on several topics via video, including compliance. Stellar is owned by 19 REALTOR® associations and boards representing over 80,000 real estate professionals in Florida and Puerto Rico, and is the third-largest MLS in the U.S. and the largest in Florida.
“The big question is who’s going to enforce this?” she says in the video. “Well, unfortunately, or either way, however you look at it, it is Stellar. We will be enforcing as it relates to the MLS rules and regulations that the buyer broker agreement (BBA) was executed before touring or showing a property. And then we also must enforce that all of those required components are included in the document.
“So how are we going to enforce this? That’s the biggest question we’re getting. If we receive a notification of a possible non-compliance or violation through one of our reporting systems through metrics or through an email, our compliance team will follow up, contact the showing agent, request a copy of the BBA, and that needs to be submitted into Stellar within one business day. When we get that copy we’ll look at it and make sure it’s compliant.
“Not only must it be complete and meet the requirements of the not open-ended compensation and all of those pieces, but we’ll also be reviewing the form itself. And along those lines we’ll want to be sure that the brokers are being diligent about making sure the form itself is compliant, and that’s how you’ll avoid any penalties.”
Cowen went on to say that Stellar was enforcing the new rule for BBA before showings starting Aug. 6. “We will have a 60-day grace period to give you a chance to get used to it,” she concluded. “We’ll be sending corrections or notices, but there will be no penalties assessed.”
CRMLS is the nation’s largest subscriber-based multiple listing service. It serves more than 110,000 real estate professionals from 41 associations, boards and MLS organizations. On Aug. 13, CRMLS enacted new rules and policies to remain compliant with the regulations set by the commission lawsuit settlement. Most notable of these changes is the removal of Buyer’s Agency Compensation fields. Along with their removal, it is now against CRMLS rules to note offers of compensation in the MLS and doing so will result in a $2,500 fine.
“CRMLS has taken substantive measures to educate our users on the new rules and associated fines,” says CEO Art Carter. “The goal is to ensure compliance and help reduce potential broker liability.
“The CRMLS executive team has attended numerous in-person brokerage and AOR meetings to present the changes that have resulted from the NAR settlement. The Marketing & Communications department also created a robust communication plan consisting of frequent emails, REcenterhub dashboard articles, MLS system pop-ups and social media to help prepare users prior to the changes’ enactment.
Additionally, while in the listing input process, warning messages in bold, red text appear on Private Remarks, Public Remarks and Showing Instructions text fields. Private Remarks may also display a pop-up message titled ‘Private Remark Warnings and Errors,’ which indicates that a prohibited word was entered and the listing may result in a violation. CRMLS has also partnered with ShowingTime to provide prominent alerts to explain that buyer representation agreements are required before showing or touring a home.”
