NWMLS Levys Big Fine for Using Zillow’s “Coming Soon”

Back in June when Zillow launched their “Coming Soon” listing feature, we pointed out here that you wouldn’t be likely to see “Coming Soon” listings in the Seattle area due to an explicit NWMLS rule forbidding member agents from “promoting or advertising any property in any manner whatsoever” before entering the home’s listing into the NWMLS.

Despite this, a few week later when we shared some early adoption numbers on the feature, there were two Seattle-area “Coming Soon” listings on Zillow (both were removed later in the day).

I commented at the time that I was “a bit surprised to see [agents] openly flout the rules like this, given how fine-happy the NWMLS has been in the past.”

While I find it somewhat odd that a blogger who has never been a member of the NWMLS (or even a real estate agent at all) would know more about NWMLS rules than member agents, apparently ignorance of the rules is exactly what’s going on. I received this email last week from a local real estate agent who shared their experience with “Coming Soon” and the NWMLS:

Within a matter of days of the “Coming Soon” feature having come online with Zillow, I posted a listing that I would soon be actively marketing on the NWMLS (within 5-7 days or so). As I am an active user for certain market territories, I wanted to try it out.

To make a long story short, someone red flagged the property I posted as coming soon, reported me to the NWMLS. At the request of our Managing Broker, even before having received the complaint from the NWMLS, I removed the property from Zillow altogether and thought that was the end of it. Within a matter of hours of removing it from Zillow, our office received notice of the infraction along with a request for an immediate explanation of my wrongdoing.

Our office responded, including a response from me, and we waited. Waited and waited… until last week. $5,000 fine! Half of which was suspended on the assumption that I made no further wrongdoing of any kind for one year.

I got my hand caught in the cookie jar. That’s fine, and certainly not something that I’m arguing. My issue at hand is that the NWMLS is on a “money grab”, if you will. That fine is massive in comparison to just about any other infraction in the traditional legal system (e.g. traffic infractions, DUI’s, assault, etc.).

I’m actively proceeding with an appeal to the MLS, even after having been warned that by simply appealing my penalty – and that costs another $500 to do that – could in fact increase the $5,000 figure that was levied.

The agent asked to remain anonymous since their appeal is yet to be heard by the NWMLS board, but I will say that they are not one of the agents that I called out in my July post.

According to the Bureau of Labor Statistics, the median earnings of a real estate agent is only $42,000. I’m sure it’s higher here in the Seattle area with our higher home prices, but I suspect $5,000 (or even $2,500) is a non-trivial sum relative to what most agents’ earn in a year.

The NWMLS is a private organization, and obviously they can enforce whatever rules and fines they choose, but given that they essentially have a local monopoly, it seems valid to question whether their fines are reasonable and fair. I think agents using Zillow’s “Coming Soon” feature are doing their customers a disservice, but what exactly does the NWMLS accomplish by levying $5,000 fines against agents who are ignorant of the NWMLS rules forbidding its use?

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

17 comments:

  1. 1
    AJ says:

    Sounds like they have just opened themselves up to being sued as a monopoly. It will be interesting if Zillow or even Redfin look to pursue this. Private club or not, they essentially hold any broker doing home sales in their region hostage to their rules. I have found your mentions of higher end homes going at it without the MLS, and I wonder if that will trickle down. In today’s Internet age, having multiple listing services should not make things that much more difficult for finding the home, though it might make it harder to keep unscrupulous agents in line.

  2. 2

    Wow, probably 6-8 agents owe me a dinner. I had been checking Zillow’s Coming Soon when it first came out and when I saw violators I’d send them an email warning them that CS violated NWMLS rules. Most were very appreciative of the warning and none responded negatively.

    I’ll say again what I’ve said in the past. I’m shocked that the NWMLS hasn’t posted more warnings about CS. They did have a legal bulletin which hit on the topic about the time CS debuted, but I don’t think it mentioned CS specifically. As to the type of warning I’m envisioning, when you log into the system there is a home page which has current things of interest to agents, such as right now the lock box exchange and agent security. Maybe I missed it, but I don’t think I ever saw a single mention of CS.

    But I don’t find it at all surprising that Tim is more familiar with NWMLS rules than some agents. Ignoring the fact that the rules are hardly a model of clarity, agents tend to just accept things that they are told without thinking about it. That’s something I’ve hit on in the past with my “beware the clockhour course” theme. Agents are taught to do bad things. The worst example of that was the idea of setting up a schedule to periodically reduce the list price of short sales–something the Hellicksons (sp?) had their license suspended for 10 years for! Some continuing education clock hour courses taught agents to do that!

    Finally, as to the amount of the fine, yes they can be steep! That struck me when I first became an agent. I think before the peak they used to be even higher than they are now. And I suspect that median income figure is way too high, FWIW.

    Edit: As to AJ’s post, I’m pretty sure MLS issues have already been litigated to death, but the NWMLS pocket listing rule is one of the more extreme in the country. But even without the NWMLS the agent might need to worry about the Department of Licensing. I’ve heard that they were not too happy about agents who repeatedly had listings with accepted offers on properties within a day or two of listing, thinking that didn’t give the clients’ listings sufficient exposure. Imagine what they’d think of an offer being accepted before listing (assuming they somehow found out about it).

  3. 3
    The Tim says:

    By Kary L. Krismer @ 2:

    Wow, probably 6-8 agents owe me a dinner.

    Better be a 5-star restaurant after saving them from a fine that steep. ;)

  4. 4

    RE: Kary L. Krismer @ 2
    I am also not surprised that The Tim knows more about NWMLS rules than many agents. Because a lot of agents have trouble walking and chewing gum at the same time. Being a competent, accessible, and effective real estate agent is not an easy job. But to become a real estate agent doesn’t exactly require skills or brains. A pulse, yes.

  5. 5
    No Name Guy says:

    “…but what exactly does the NWMLS accomplish by levying $5,000 fines against agents who are ignorant of the NWMLS rules forbidding its use?”

    The NWMLS is $5,000 richer. The cynic in me says it’s a heck of a lot easier than raising rates on the members.

  6. 6
    Eastsider says:

    Do the agents take a test before becoming a member of the MLS? Is so, why not be explicit and include those restrictions in the test? Or are they worried about being sued by the DOJ?

    Agents have a fiduciary duty to act in the best interest of the homeowners/sellers. What’s so wrong about giving a home extra exposure outside of the MLS? Given that over 80% of the homes sold in the area are through the MLS, why are they not a monopoly?

  7. 7
    Rebecca says:

    Eastsider: Yes. Agents (now Brokers) are required to take a 3 hour clock hour course (if you need the hours, or not) before they gain access to the NWMLS database. Similar to our real laws, ignorance is not an excuse. Brokers do not have a fiduciary responsibility to their clients, fwiw, but they do have agency responsibilities required by the RCW.

    The MLS is not a monopoly because they don’t require membership. If you want to sell your homes outside of the MLS, you can. It’s called a for sale by owner. If you want to be a Realtor, or a Broker, then you probably need to agree to the rules of the NWMLS.

    As for the fine, there has been a lot of chatter and previous fines for breaking the NWMLS rules with regard to the new listing agreements, which stipulate the broker can have the contract signed with the seller, but they can’t market the property until it’s input into the MLS. There have been many fines prior to this, and a warning was issued regarding the Coming Soon feature. I suspect the NWMLS is firing a warming shot across the bow. Brokers are to cooperate with other members. If a broker were allowed to market a property as a pocket listing, chaos would ensue and seller’s would be damaged far more than this Wild, Wild West cowboy broker complaining in Tim’s letter. He knowingly violated the rules.. and tried to game the system.

    I could do the same thing, pick up buyers, represent the buyer and the seller on a transaction, and never expose it to the true marketplace… in doing such, I could also get 6% instead of 3%… and that’d be great until the seller sued me for inadequate exposure to the marketplace… now that is a lawsuit I am waiting to see filed!

    I hope his fine is much larger than what the MLS fined him after appealing! *shakes her head* (I do wonder where the money goes that people pay!)

  8. 8
    boater says:

    RE: Eastsider @ 6
    Kary will correct me if I’m wrong but it’s not illegal to be a monopoly. The illegal part is using the monopoly to harm the consumer. It could be argued that the MLS rules regarding this protect the consumer.

  9. 10

    Does Zillow’s Coming Soon Listings Include the Dwindling Bargain Listings in the West?

    “…The West, which has some of the largest metropolitan markets in the nation, has seen a huge drop in distressed sales, as fewer properties go to foreclosure. At their peak in 2009, just over half of all sales in the West were of distressed properties; today that share is just over 12 percent, according to Clear Capital. Investors, consequently, are moving on to other markets in the South and Midwest, where there are still bargains to be had. The West is therefore seeing sharper drops in home price appreciation….”

    https://homes.yahoo.com/news/home-prices-headed-triple-dip-124200714.html

    I’m an investor and without better access to bargain listings why would I want to buy Seattle real estate? Just because? I bought in the Midwest though, as the news story above alludes.

    Stay tuned the NW States to join the NE States soon as both liberals and conservatives agree on the reason to flee states with high taxes and poor schools [overpopulation]?

    http://washingtonexaminer.com/northeast-loses-40-of-house-seats-as-people-flee-high-tax-states/article/2554143#!

  10. 11

    I dunno, Tim, it’s not clear that this agent was actually ignorant of the rule. Just the opposite, he notes he was caught with his “hand in the cookie jar.” Sounds like he knew what he was doing.

  11. 12
    Julie says:

    Does anyone know how the NWMLS determines their fine amounts? The person above was fined $5000 for violating rule 2c, another Broker $2000 and someone else $1500…? For the same rule violation?

    Without warning, and having never violated rule 2c before, the NWMLS fined me for posting an informational ‘coming soon’ ad on a community board two days before a Property was listed in the NWMLS. The ad had no property address and the property wasn’t shown to anyone before it was listed on their site. Purpose was to update several residents and brokers in the building who inquired about the property as they saw painters come in and out. One of the Brokers, who lives in the building, reported it to the NWMLS, and I received a letter from the NWMLS about the rule violation.

    I was aware of rule 2c, but hadn’t heard about the specific ‘coming soon’ restriction. I don’t recall seeing warnings about this on the NWMLS website. I was under the impression the rule meant not to advertise through outside channels before inputing the listing into the NWMLS (i.e. the entire listing with an address, photos, etc.). It didn’t even occur to me that a short coming soon informational write-up would be considered a violation.

    Would it be too much to ask for the NWMLS to issue a warning? Especially to someone who had never violated the rule before. Automatic fines are unreasonable. After all, we are paying customers! Agents and Brokers are their main source of revenue and without us they don’t have a business.

    I’m also a licensed Broker in California and have never been fined by an MLS board – EVER. I have been licensed since 2002. The few times I have witnessed Broker’s being fined in the thousands were for serious acts such as defamation. ‘Coming soon’ is a non-issue at the MLS boards I’m aware of in CA (there are typically multiple in each city). Pocket listings are also common in California.

    Generally speaking, California real estate contracts are far superior to the forms provided by the NWMLS. The MLS boards are all cooperative with each other and Agent’s/Broker’s work together. It’s uncommon to report another Agent to the MLS unless it’s a very severe reason or situation. The MLS’s in California don’t want to be in the business of policing. They are paid by their members to be a support center and for networking.

    Given the NWMLS’s behavior towards it’s members, I can’t imagine why an Agent or Broker would want to be a member except for the fact that the NWMLS has a monopoly and controls the majority of the real estate practices in the State of Washington; and is therefore forcing membership.

    This situation has made me nervous and distrustful of the NWMLS. I’m debating whether I want to remain a member. Would appreciate your thoughts!

  12. 13

    RE: Julie @ 12 – Okay, how the fines are determined, I have absolutely no idea. They do seem to vary significantly. Perhaps part of it is how the agent responds to the complaint.

    As to covering this rule, it did take them some time to do it, as I commented on elsewhere. But if you’re just writing about this now your violation was almost undoubtedly after the warning. Legal Bulletins 198 and 201 covered the topic in 2013 and 2014. They also had a reminder on their home page on April 10, 2014. One of my complaints though was that they didn’t mention Coming Soon by name until that April 10 reminder, but that doesn’t seem to be your problem because you did something else. And getting to that . . .

    I can’t see how you can say you knew about 2c but still did what you did. 2c reads in part: “Members shall not promote or advertise any property in any manner whatsoever, including, but not limited to yard or other signs, flyers, websites, e-mails, texts, mailers, magazines, newspapers, open houses, previews, showings, and tours, unless a listing for that property has been delivered to NWMLS or input by the member . . ..”

    Finally, as to California, if they allow pocket listings then there would be no issue, but the NWMLS doesn’t allow pocket listings because it is bad for sellers. The point of listing the property is to get maximum exposure for the client, and pocket listings don’t do that at all.

    As to an agent turning you in, that IMHO is below the belt. As mentioned above, this is something I’ve simply warned agents about because it is likely something they did without thinking about it. So if I had lived in that building I would have done it differently, and I hope most agents would have too.

  13. 14
    Julie says:

    Kary, Thanks for your response. I knew about 2c because I happened to notice another member was fined for advertising their rental listing on Craigslist before inputting it in the NWMLS. In retrospect, I wish I would have looked up the rule and read the entire verbiage. I didn’t see the bulletin boards posted by the NWMLS about the rule or if I did, I didn’t think about it when I posted the ad. I spent the majority of my real estate career practicing in California, so I’m not used to these rules. In California, Broker’s do not need to have extensive knowledge of their MLS’s rules (because they are not as restrictive), but apparently in Washington it is necessary and if I wish to remain a member I will need to make a more active effort to thoroughly understand and stay in the loop as they are updated. That said, in my opinion, fining a member without a warning in the thousands for breaking a rule is disproportionate to the act committed and is unreasonable.

  14. 15

    RE: Julie @ 14 – I would also suggest reading the monthly reports on agent discipline, just to see what they are up to, and also reading the Legal Bulletins. The latter will give you a lot of information on how they are interpreting the rules, which are far from well written.

  15. 16
    Julie says:

    Thanks, Kary!

  16. 17
    Julie says:

    Kary – hello again.

    I’m planning to appeal the fine. I’d like to have the opportunity to explain that I did not intend to cause any harm (although ignorance of the coming soon rule is no excuse).

    I was wondering your thoughts on whether a letter from my seller acknowledging that the coming soon ad was posted two days before listing in nwmls and confirming that seller wasn’t harmed by the act would be sufficient proof? I have evidence that the property wasn’t shown before it was listed on the nwmls. Also, we had several weeks of open houses and showings before it sold (45 days on market). You mentioned that the rule is intended to make sure the seller has full exposure. In this case, I broke the rule2c, however the seller did receive full exposure and no agent had more of an avantage because it wasn’t shown prior to listing.

    What are your thoughts?

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