Risky Off-Market Scenarios
This is how the industry enforces the rules – run an article like this every once in a while that gives tips how to CYA. We do have a form that absolves agents from wrong-doing, which just begs agents to ignore the rules:
If you or your client is interested in proceeding with an off-market listing, be aware of the potential peril of compromising your fiduciary and ethical responsibilities. Here are five scenarios to avoid, along with ways to reduce your risk.
- The real estate agent or broker, not the seller, is the one pushing for an off-MLS listing. Ensure the decision is made voluntarily, solely by an informed seller. Have a signed listing agreement that spells out to clients the limitations of not listing on the MLS (such as that it may reduce their chances of getting the highest and best price for their home by reducing its exposure more widely to the public).
- “Coming soon” marketing that limits the listing’s availability to a specified group of brokers during the premarketing period. Be certain all brokers and buyers have equal access to the listing.
- An agent fails to notify their member MLS when a client opts to keep the listing private. Most MLSs require that after a listing agreement is signed, the agent must file a certification—signed by the seller—noting the listing is not to be disseminated to other brokers using MLS. Typically the notification must be filed within two to three business days after a listing agreement is signed. Agents can be fined for failing to do so.
- An agent faces accusations of breaching fiduciary duty in order to earn a double commission. Off-market listings can lead to more dual agency transactions, as the agent may actively advertise the property only to his or her clients. While not illegal, the practice can be problematic if the prospect of a double commission is the reason an agent suggested an off-MLS listing. Agents risk being sued by a buyer client, for example, who might believe you didn’t seek the best price since you also represented the seller.
- Agents are accused of antitrust or fair housing violations by limiting listing exposure to a narrow buyer segment. Be sure you are fulfilling your duty to “cooperate with other brokers except when cooperation is not in the client’s best interest,” as stated in Article 3 of the REALTORS® Code of Ethics.