Complaint Review: Multiple Listing Service - MLS

Interesting, isn’t it? The typical American has $1k invested in a Merrill or Schwab securities account and $200k invested in a home. Yet the Securities & Exchange Commission will sanction a Manhattan stockbroker for taking a 2-hour lunch while nobody bothers to scrutinize the MLS. Some industries do in fact need regulation.

Have a look at this excerpt from an exclusive right to sell listing agreement printed in 2016.

MULTIPLE LISTING SERVICE (MLS). MLS rules require Sponsoring Broker to input Property into the MLS within 72 hours of the execution of this Agreement. If Seller does not want the Property inputted into the MLS within 72 hours, Seller must set forth the date to have the Property inputted into the MLS by adding a date and initialing below. If Seller would like the listing to be exempt from the MLS during the entire listing period provided for in this Agreement, Seller must complete and sign the form provided by —redacted—, "Seller’s Listing Exemption Addendum.” Unless noted otherwise below, Sponsoring Broker will publish the MLS listing of the Property within 72 hours of the full execution of this Agreement in accordance to MLS guidelines.

In general. The typical consumer (seller) is led to believe that the MLS has some governance role in the marketplace. In his mind, he would do well to follow the rules, i.e. consent without opt-out. Otherwise, his home sale might be put in jeopardy. This is in fact an exclusive dealing arrangement a trade association imposes on both the Broker and the consumer. It serves to foreclose upon all competing advertisers of real estate. In U.S. antitrust law, it’s generally unlawful to use a contract to deny a competitor access to a customer.

Sentence 1. The typical consumer interprets "MLS rules” to mean rules enforceable against him. After all, if the Broker is regulated by the MLS, the MLS must have government powers. 18 U.S. Code § 912 doesn’t apply because this is a state matter. Still, it’s the exact same area of law.

Last sentence. Pointing to the words and phrases contained in this sentence, the MLS takes a 99-year license to use, for its own commercial interests, the consumer’s property control and disposition rights guaranteed by his state constitution and 3,000 years of accepted law. Does "in accordance to MLS guidelines” evidence the consumer’s understanding and intent to irrevocably and forever surrender his rights? Was there any consideration paid for this taking of rights? Of course not. Consumers that executed such a contract may have recourse.

Throughout the Internet, you see examples of U.S. real estate professionals asserting with conviction that they own the consumer’s listing data. Not true at all. In the U.S. Code, facts are not copyrightable. In 1991, the U.S. Supreme Court ruled eleven-to-one that "100 un- copyrightable facts gathered in one place do not magically change their status.” Unpack this. You can’t copyright phone numbers, addresses, home facts, marketing facts, pricing facts, relationship facts, and so on in any quantity in any arrangement.

Given what we know about listing contracts—specifically, the permissions they do not give, and copyright law, and the troubling actions and public statements of real estate professionals, there’s work to be done on the part of regulators. If every property owner must go to court to obtain the rights he is entitled to receive, and every service provider must go to court to gain market entry, ultimately, the stakeholders the marketplace desperately needs to thrive will skedaddle. Who wants this non-sense? Better to invest in municipal bonds. Better to start a business in some other industry.

As the real estate industry tries to make U.S. property owners subject to Switzerland law—this one is priceless, the Securities & Exchange Commission continues to exemplify best practices in market regulation. Equal application and enforcement. Swift action. As a result, U.S. financial markets continue on the path of "trustworthy”. Status quo, this cannot be said about real estate markets.