Big Brother’s little brothers are watching you

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The new commission rules went into effect on Aug. 17, and the multiple listing services (MLSs) are watching closely for mistakes — and issuing fines. Here is what you need to know about how the MLSs are keeping tabs on the new rules, how some MLSs are structuring fines, and what AI tools they are using to discover violations.

Fines are already being assessed

If you had any expectation that you were going to be able to work around the new MLS rules on buyer-broker compensation, let go of that right now. Michael Ketchmark, in an Aug. 19, 2024, Inman interview, shared the following warning:  

“If anyone thinks they’re going to be able to avoid the application of this settlement agreement and the law by creating some new forms or hiding this cooperation on new websites, they’re wrong. If we get any sense that people or corporations are doing that out there as a way around this, we plan on taking swift legal action.”

The MLSs are dead serious about enforcing these new rules, and many have already started fining agents who violate them.

Some examples of the types of fines that are being assessed include:

ARMLS

ARMLS, which serves the Phoenix region of Arizona, has fines ranging from $500 to long-term suspension from the MLS.

• ARMLS created an “educational phase” that ran from “June 28–July 31, 2024.” Fines went live on Aug. 1, 2024.

CRMLS (California Regional Multiple Listing Service)

CRMLS has instituted a $2,500 fine for violating any of the following rules:

• Rule 7.15: Offering or Conveying Buyer’s Agent Compensation in the MLS
• Rule 7.16: Insufficient Disclosure of Compensation to Seller/Landlord
• Rule 7.19: Disclosure of Listing Broker’s Compensation
• Rule 9.1: Showing Listed Property w/o Written Compensation Agreement w/ Buyer; Insufficient Compensation Agreement w/ Buyer
• Rule 19.2.21: Display of Offer of Compensation – IDX
• Rule 19.3.26: Display of Offer of Compensation – VOW 

Dallas (MetroTex MLS)

MetroTex MLS fully implemented the changes in compliance with the NAR settlement on July 29, 2024. Fines for violations start at $1,000.  

San Diego MLS (SDMLS)

San Diego MLS has established a $1,500 fine “for including compensation, commission, bonuses, or broker/brokerage fees in an SDMLS listing.” This is how they explain it on their website:

The $1,500 fine for violations related to compensation information is not meant to be punitive, but rather to emphasize the importance of complying with the new NAR Settlement rules. These rules are in place to promote transparency and fair practices in the real estate industry. While we don’t intend to fine our members without warning, the severity of the fine reflects the seriousness of non-compliance and serves as a deterrent to ensure all members adhere to the new regulations. We are always open to listening to concerns from our members and providing guidance on compliance. There are antitrust issues, and Realtors have always errored on the side of caution when potential antitrust claims are a possibility.  

Stellar MLS

Stellar MLS, which serves Central and Southwest Florida, has a $500 fine for first time offenders. 

Effective Aug. 6, 2024, any violation of the rule requiring a Buyer Broker Agreement prior to touring a property will result in an automatic $500 fine for first-time offenders.

SWMLS

SWMLS (Greater Albuquerque Association of Realtors) has a tiered fine structure that went into effect on Aug. 17, 2024.

• • First fine within a 12-month period will be assessed at $250.
  • Second fine within a 12-month period will be assessed at $500
  • Third fine and all subsequent fines within a 12-month period will be assessed at $750
  • When the Participant or Subscriber receives a 3rd or subsequent administrative sanctions, the tribunal will hold a hearing in which the Subscriber and Participant will be required to attend.

Big Brother’s ‘little brothers’ 

Anyone who uses social media knows that certain types of posts can be removed or even get you kicked off a site if you violate the provider’s terms of use. The question is exactly how do these platforms identify this type of content?

Amazon Rekognition Content Moderation

This platform is widely used across multiple industries outside real estate to “detect explicit adult or suggestive content, violence, drugs, tobacco, alcohol, hate symbols, gambling, and disturbing content in images and videos.”

CoStar explains why they chose Amazon Rekognition to conduct their content moderation: 

CoStar uploads around 150,000 images and videos to its platform daily and must also confirm that they are appropriate. Because manual analysis is not feasible, CoStar now uses Amazon Rekognition Content Moderation API to build a solution that automatically analyzes uploaded images and videos and ensures the highest quality and compliance of its data. It provides mass scanning, imagery classification, and detects unwanted or toxic content in images with text—saving time, increasing productivity, and reducing infrastructure costs.

(If you would like to know more about how these content moderation tools work, there’s an excellent article from Spectrum Labs called, “AI-Based Moderation: Enhancing Trust and Safety Online Platforms.” These tools are now being employed across the social media to spot various types of violations including bullying, hate speech, profanity, drug and sexual solicitation, etc.)

Listing Data Checker (a CoreLogic product)

Many MLSs are already using Listing Data Checker including Dallas MetroTex, Connecticut’s SmartMLS, Massachusetts MLS Pin, and New Hampshire’s Paragon MLS. 

According the Listing Data Checker website, 

Listing Data Checker automatically checks the accuracy of your data and enforces the correction of violations. It’s the most powerful and widely adopted system of its kind—and the best way to assure the quality of your listing data, your most valuable asset.

This tool can be used as a stand-alone or in conjunction with human checkers. 

Bane or blessing? 

Michael Lissack, who is a licensed broker based in Massachusetts and is also licensed in multiple other states, bumped into Listing Data Checker on Connecticut’s SmartMLS, Massachusetts’ MLS Pin, and New Hampshire’s Paragon MLS.

Lissack shared two different listing screenshots that illustrate how Listing Data Checker is being employed by SmartMLS. In the first example below, you can see the words “buyer,” “fee” and “pay,” flagged in this listing description as a possible violation of the new compensation rules. 

Below, the site tells Lissack: “You can publish this listing on the MLS. However, it will be flagged for review by our Compliance Department.”   

Quite frankly, I think how SmartMLS is using this tool to spot problems before they are published on the MLS is an extremely smart move. If there is an issue, they ask the agent to contact a specific person at the MLS and provide the phone number. 

Lissack also shared that when there is an issue on MLS Pin, you are notified and asked, “Please call to discuss.” He also said that Paragon says, “We will call you.” 

Clearly, it’s much better to stop a listing with problematic language in it from being published as opposed to finding out after the fact, having to assess an agent fine, and/or being sued for violating the new rules. 

Are ‘transaction fees’ covered in the settlement agreements?

Lissack listed a different property and had more problems with the listing. (By the way, note how effectively he described the lifestyle for this luxury listing as opposed to only rattling off the features the way most agents do.) 

The offending words were again, “buyer,” “fee,” and “pay,” plus a new word, “offer.” According to Lissack, the person he spoke with at SmartMLS had a problem with him collecting a “transaction fee.”

Transaction fees have been used since at least the 1980s and are separate from commissions. They are especially important for brokerages who provide “limited services” or use a “menu of services.” Transaction fees are typically the vehicle that allows a buyer or seller to pick out the additional services they want (such as posting the listing to the MLS) and are willing to pay for. 

‘Little brother’ is watching you

As AI-driven content moderation tools continue to improve, one would hope they will catch issues long before they ever are published on the MLS. On the other hand, if your MLS is not using one of these tools that identifies errors before they are posted on the MLS, you must be especially vigilant, especially when using any of the “C” words (commissions, compensation, concessions) as well as “fees” and “offers” that can result in a hefty fine, getting kicked off the MLS, and even being sued.