Thinking of Making a “Z” Sale? Yesterday Was Your Last Day to Skirt The New MLS Sales Disclosure Rules

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Homes like Mount Vernon would be prime candidates for “Z sales.” That practice is a thing of the past as of yesterday.

I spoke to MetroTex Association of Realtors MLS Director Cathy Faulkner yesterday about “Z sales” coming to an end. In the luxury market, “Z sales” gave lofty sales prices a sense of anonymity.

I won’t bore you with the technical details of what a “Z sale” is exactly. Check out this site for a primer on the practice. The gist is this: sellers who were gun shy about disclosing what they paid for a home listed on MLS put a “Z” instead of a big number followed by a lot of zeroes.

Dallas Realtor Jeff Duffey says the death of the practice “will never affect approximately 99% of the real estate market areas throughout North Texas.” However, he estimates roughly 20 percent of the sales in high-end neighborhoods such as the Park Cities, Preston Hollow, and Turtle Creek are “Z sales.”

Not anymore, though. Faulkner said the exception to the rule became problematic as “more and more people” were using “Z sales” instead of disclosing prices. This makes it difficult for sellers, appraisers, and agents, she said. “When people go to sell their home they’re going to need comparables.”

I asked Faulkner if she thought making “Z sales” verboten would just bring about more hip pocket listings and keep high-priced properties from hitting MLS all together. Part of the psychology behind “Z” sales was keeping your sales price from the Dallas County Appraisal District. But appraisers like D.W. Skelton say that doesn’t work, either: DCAD just takes last listed price.

“I certainly hope not,” said Faulkner, about hip pockets. “You are going to get more exposure … when you list a property using the Multiple Listing Service. This is for sellers to use to help buyers.”

But will it work? Will people who were previously skittish about sharing how much they spent on their home give in to the new MLS rule, or will they avoid the MLS completely? We are waiting for your comments…

Joanna England is the Executive Editor at CandysDirt.com and covers the North Texas housing market.

No Comments

  1. Neal L on October 16, 2012 at 1:30 pm

    There are numerous problems with getting rid of Z sales – some legal, and some just plain old practical. Let's take one example:

    When a seller signs a listing agreement, a fiduciary relationship is created between the seller as the principal, and the broker as the agent. Among the various fiduciary duties owed are those of performance and loyalty; that is, as the seller's agent, the broker must obey the seller's instructions regarding a wide variety of topics.

    Now suppose that along comes a buyer, and that the buyer and seller sign a contract for sale of the property that includes a nondisclosure clause. The buyer and seller have thus issued explicit instructions to their brokers not to disclose the sales price. At this point, neither broker, as agents of their respective principals, may act outside the scope of their authorization and disclose the sales price on the MLS. This would be a breach of their fiduciary duties, and as such they would likely lose their ability to enforce commission payments and be subject to civil liability for damages. The buyer and seller may also file breach of fiduciary duty complaints with TREC, and the brokers may be subject to de-licensing and disciplinary action as well.

    Practically, this is just bad business. Texas, unlike other states, is a nondisclosure state. While the policy has often been criticized for perfectly good reasons, we have decided as a constituency that individuals' right to privacy trumps the public interest in knowing what our neighbors' houses sold for.

    What's a real estate broker to do if placed in the impossible position described above? If she discloses the sales price in express disobedience of her principal, she is violating the terms of her contract with her client. If she does not disclose the sales price, then she is violating the terms of her contract with the MLS. My prediction is that we will see a whole lot of cancelled listings in the MLS until the realtors are forced to reinstate the Z sale.

  2. Neal L on October 16, 2012 at 1:30 pm

    There are numerous problems with getting rid of Z sales – some legal, and some just plain old practical. Let's take one example:

    When a seller signs a listing agreement, a fiduciary relationship is created between the seller as the principal, and the broker as the agent. Among the various fiduciary duties owed are those of performance and loyalty; that is, as the seller's agent, the broker must obey the seller's instructions regarding a wide variety of topics.

    Now suppose that along comes a buyer, and that the buyer and seller sign a contract for sale of the property that includes a nondisclosure clause. The buyer and seller have thus issued explicit instructions to their brokers not to disclose the sales price. At this point, neither broker, as agents of their respective principals, may act outside the scope of their authorization and disclose the sales price on the MLS. This would be a breach of their fiduciary duties, and as such they would likely lose their ability to enforce commission payments and be subject to civil liability for damages. The buyer and seller may also file breach of fiduciary duty complaints with TREC, and the brokers may be subject to de-licensing and disciplinary action as well.

    Practically, this is just bad business. Texas, unlike other states, is a nondisclosure state. While the policy has often been criticized for perfectly good reasons, we have decided as a constituency that individuals' right to privacy trumps the public interest in knowing what our neighbors' houses sold for.

    What's a real estate broker to do if placed in the impossible position described above? If she discloses the sales price in express disobedience of her principal, she is violating the terms of her contract with her client. If she does not disclose the sales price, then she is violating the terms of her contract with the MLS. My prediction is that we will see a whole lot of cancelled listings in the MLS until the realtors are forced to reinstate the Z sale.

  3. Lori LaParche on October 16, 2012 at 3:18 pm

    I believe that those buyers and sellers who wish to take advantage of all the benefits of our MLS service need to understand the system only works if we all adhere to our obligation to report the sales activity. If they are not given a choice to disclose by the broker's suggestion to "Z" the sale many would not have been adverse to the information being reported.

    • Neal L on October 16, 2012 at 11:22 pm

      @Lori, consider this. When you go to a Rangers game, you are in a sense participating in the game. You buy the ticket, and in return you agree that you can be shown on the televised broadcast of the game. You get to enjoy the action and your attendance and participation enhances the game for everyone.

      But say halfway through the game you no longer want to be there. You don't like that the cameras are pointed at you, and you want to exercise your right to privacy.

      As long as you choose to remain at the game, your right to privacy is voluntarily relinquished. But at any time you have the unconstrained right to leave. So too do you have the right to withdraw your participation from the MLS system.

      No matter how much others would enjoy it if you stayed at the Rangers game or continued to feed more information about the progress of your property sale into the MLS, your right to privacy by withdrawing is superior to their enjoyment.

      If you feel that our right to privacy with home sales should be taken away, then the place to change that is in the Texas Constitution. But where do you stop? Applying your argument, everyone would also benefit from knowing what salaries others make, what people pay for their cars, and what interest rates they pay for their loans. Taken to its logical conclusion, the argument that information must be shared where everyone benefits from its disclosure would end virtually all privacy rights, and that's just plain old un-American.

  4. Lori LaParche on October 16, 2012 at 3:18 pm

    I believe that those buyers and sellers who wish to take advantage of all the benefits of our MLS service need to understand the system only works if we all adhere to our obligation to report the sales activity. If they are not given a choice to disclose by the broker's suggestion to "Z" the sale many would not have been adverse to the information being reported.

    • Neal L on October 16, 2012 at 11:22 pm

      @Lori, consider this. When you go to a Rangers game, you are in a sense participating in the game. You buy the ticket, and in return you agree that you can be shown on the televised broadcast of the game. You get to enjoy the action and your attendance and participation enhances the game for everyone.

      But say halfway through the game you no longer want to be there. You don't like that the cameras are pointed at you, and you want to exercise your right to privacy.

      As long as you choose to remain at the game, your right to privacy is voluntarily relinquished. But at any time you have the unconstrained right to leave. So too do you have the right to withdraw your participation from the MLS system.

      No matter how much others would enjoy it if you stayed at the Rangers game or continued to feed more information about the progress of your property sale into the MLS, your right to privacy by withdrawing is superior to their enjoyment.

      If you feel that our right to privacy with home sales should be taken away, then the place to change that is in the Texas Constitution. But where do you stop? Applying your argument, everyone would also benefit from knowing what salaries others make, what people pay for their cars, and what interest rates they pay for their loans. Taken to its logical conclusion, the argument that information must be shared where everyone benefits from its disclosure would end virtually all privacy rights, and that's just plain old un-American.

  5. LH Resident on October 16, 2012 at 5:01 pm

    I "Z scored" the purchase of my residence and I can assure you that DCAD did NOT appraise it at the last "list price" as the appraiser suggests. It was appraised significantly lower which was part of my strategy and the main reason I requested, as the buyer, a "Z scored" price. By disclosing the sales price, you do DCAD's job for them. I say let them figure out. Obviously now that will not be an option.

  6. LH Resident on October 16, 2012 at 5:01 pm

    I "Z scored" the purchase of my residence and I can assure you that DCAD did NOT appraise it at the last "list price" as the appraiser suggests. It was appraised significantly lower which was part of my strategy and the main reason I requested, as the buyer, a "Z scored" price. By disclosing the sales price, you do DCAD's job for them. I say let them figure out. Obviously now that will not be an option.

  7. Dawn on October 16, 2012 at 5:40 pm

    @Neal, when a Seller signs with an agent and puts the house on the MLS, they too must follow the rules of the MLS. I believe the agent should explain this to the client upfront.
    @Lori, I agree with you.

    • Neal L on October 16, 2012 at 10:58 pm

      @Dawn, when listing a property, the seller authorizes her broker to file the listing with the MLS. In so doing, the seller agrees that "Any information filed with the MLS becomes the property of the MLS for all purposes." This authorization, however, is not irrevocable and is subject to withdrawal at any time.

      The terms of the listing agreement do make clear that the seller cannot withdraw information already provided. This means that the initial listing of the property and any subsequent authorized updates cannot be removed once filed in the system. But the seller may – at any time – revoke the broker's authorization to list the property in the MLS and require the broker to withdraw the property from the system. This is the basis for my prediction that there will be a great many cancelled/withdrawn listings where buyers and sellers do not wish to disclose sales prices.

      Another thought you may consider is that such a provision appears nowhere in the buyer's representation agreement, and it is typically buyers who request sale price confidentiality.

  8. Dawn on October 16, 2012 at 5:40 pm

    @Neal, when a Seller signs with an agent and puts the house on the MLS, they too must follow the rules of the MLS. I believe the agent should explain this to the client upfront.
    @Lori, I agree with you.

    • Neal L on October 16, 2012 at 10:58 pm

      @Dawn, when listing a property, the seller authorizes her broker to file the listing with the MLS. In so doing, the seller agrees that "Any information filed with the MLS becomes the property of the MLS for all purposes." This authorization, however, is not irrevocable and is subject to withdrawal at any time.

      The terms of the listing agreement do make clear that the seller cannot withdraw information already provided. This means that the initial listing of the property and any subsequent authorized updates cannot be removed once filed in the system. But the seller may – at any time – revoke the broker's authorization to list the property in the MLS and require the broker to withdraw the property from the system. This is the basis for my prediction that there will be a great many cancelled/withdrawn listings where buyers and sellers do not wish to disclose sales prices.

      Another thought you may consider is that such a provision appears nowhere in the buyer's representation agreement, and it is typically buyers who request sale price confidentiality.

  9. Jeff Duffey on October 17, 2012 at 10:47 am

    Dawn is correct. A Realtor cannot breach their fiduciary duty to a client while upholding MLS rules, which we all must abide by. For example, if a Landlord client tells you they don't want to lease their home to a person that falls into one of the legally protected classes, we are obligated to perform per their instructions, nor does this mean we are breaching our fiduciary duty to our Landlord client. Fiduciary duty does not mean "do whatever the clients tells us to do."

    Oh, and thanks for the shout out, Joanna!

    • Jeff Duffey on October 17, 2012 at 10:48 am

      *we are NOT obligated to perform per their instructions* whoops!

      • Neal L on October 17, 2012 at 7:21 pm

        @Jeff your illustration is inapposite. If a landlord instructs his broker violate the law and not show property to a members of a protected class, you are correct that the broker must withdraw as the landlord's agent. That is, if a principal instructs his agent to violate federal law, then the agent must not do so.

        The MLS, however, is a private system and is governed by contract. Agency duties are imposed by state law. If a principal instructs his broker to withdraw his property from a private listing system, the instruction is not in violation of any law and is binding on the agent. This is the complete opposite of the illustration that you pose.

  10. Jeff Duffey on October 17, 2012 at 10:47 am

    Dawn is correct. A Realtor cannot breach their fiduciary duty to a client while upholding MLS rules, which we all must abide by. For example, if a Landlord client tells you they don't want to lease their home to a person that falls into one of the legally protected classes, we are obligated to perform per their instructions, nor does this mean we are breaching our fiduciary duty to our Landlord client. Fiduciary duty does not mean "do whatever the clients tells us to do."

    Oh, and thanks for the shout out, Joanna!

    • Jeff Duffey on October 17, 2012 at 10:48 am

      *we are NOT obligated to perform per their instructions* whoops!

      • Neal L on October 17, 2012 at 7:21 pm

        @Jeff your illustration is inapposite. If a landlord instructs his broker violate the law and not show property to a members of a protected class, you are correct that the broker must withdraw as the landlord's agent. That is, if a principal instructs his agent to violate federal law, then the agent must not do so.

        The MLS, however, is a private system and is governed by contract. Agency duties are imposed by state law. If a principal instructs his broker to withdraw his property from a private listing system, the instruction is not in violation of any law and is binding on the agent. This is the complete opposite of the illustration that you pose.

  11. David M on October 17, 2012 at 1:15 pm

    Realtors, sellers and buyers and other tax evaders simply dont have to use MLS to sell or buy it they dont want to disclose the sales price. See how that works out for all you tax evaders. Just pay the taxes you owe. The real problem is Realtors already are getting around this by listing a property on MLS and when they get a buyer canceling the listing so they dont have to disclose sales prices. I want to know how Metrotex will handle these Realtors? Ask Metrotex that question Candy

  12. David M on October 17, 2012 at 1:15 pm

    Realtors, sellers and buyers and other tax evaders simply dont have to use MLS to sell or buy it they dont want to disclose the sales price. See how that works out for all you tax evaders. Just pay the taxes you owe. The real problem is Realtors already are getting around this by listing a property on MLS and when they get a buyer canceling the listing so they dont have to disclose sales prices. I want to know how Metrotex will handle these Realtors? Ask Metrotex that question Candy

  13. Mark Millikan on October 17, 2012 at 2:20 pm

    We understand that TX is a non-disclosure state, but there is also a case to be made for
    a fair and level playing field for doing business. When (hypothetically) a certain brokerage–who might handle more transactions in a certain high end neighborhood than other brokerages–then has the potential for inside knowledge of more Z sale prices, even by word of mouth, it could certainly result in an unlevel playing field. If you were interviewing agents to list your home but only one could find out the Z sale prices of two other homes on your street, that might influence your decision, but thats not how MLS is set up.
    MLS is a "club" that all Realtors pay dues to belong to and club rules state that sale prices be available to those of us in the MLS club.

    • Neal L on October 17, 2012 at 7:26 pm

      @Mark you are absolutely right, the MLS is indeed a club that realtors pay dues to belong to. The buyers and sellers, however, are not in the club and are not bound by club rules. If they employ a member of the club and that member's club obligations come into conflict with the buyers' or sellers' objectives, then they have the right not to deal with the agent's "club" any more. It's really as simple as that.

  14. Mark Millikan on October 17, 2012 at 2:20 pm

    We understand that TX is a non-disclosure state, but there is also a case to be made for
    a fair and level playing field for doing business. When (hypothetically) a certain brokerage–who might handle more transactions in a certain high end neighborhood than other brokerages–then has the potential for inside knowledge of more Z sale prices, even by word of mouth, it could certainly result in an unlevel playing field. If you were interviewing agents to list your home but only one could find out the Z sale prices of two other homes on your street, that might influence your decision, but thats not how MLS is set up.
    MLS is a "club" that all Realtors pay dues to belong to and club rules state that sale prices be available to those of us in the MLS club.

    • Neal L on October 17, 2012 at 7:26 pm

      @Mark you are absolutely right, the MLS is indeed a club that realtors pay dues to belong to. The buyers and sellers, however, are not in the club and are not bound by club rules. If they employ a member of the club and that member's club obligations come into conflict with the buyers' or sellers' objectives, then they have the right not to deal with the agent's "club" any more. It's really as simple as that.

  15. Zap the Z's on October 17, 2012 at 3:07 pm

    Sellers and their agents need to understand that having their homes listed in MLS is not a "right" or and "entitlement". If they do not want to have the sales price disclosed than don't have the home listed in MLS at all. The same thing is true for Buyers… if you do not want the price disclosed, then they have the option of not buying a home that is listed in (and that they probably located using an internet syndication from) MLS. Sadly, the buyers/sellers and their agents want all the benefits of MLS without respect for the obligations that come with utilizing such a system. Getting rid of "Z" sales makes it a level playing field for everyone.

  16. Zap the Z's on October 17, 2012 at 3:07 pm

    Sellers and their agents need to understand that having their homes listed in MLS is not a "right" or and "entitlement". If they do not want to have the sales price disclosed than don't have the home listed in MLS at all. The same thing is true for Buyers… if you do not want the price disclosed, then they have the option of not buying a home that is listed in (and that they probably located using an internet syndication from) MLS. Sadly, the buyers/sellers and their agents want all the benefits of MLS without respect for the obligations that come with utilizing such a system. Getting rid of "Z" sales makes it a level playing field for everyone.

  17. Jeff Duffey on October 17, 2012 at 10:17 pm

    Violation of law vs. violation of NTREIS rules, MetroTex rules, ethics..the behavior at issue-canceling a listing at a client’s request while the home is under contract in order to circumvent the “Z” rule-is a violation, and my example still stands.

  18. Jeff Duffey on October 17, 2012 at 10:17 pm

    Violation of law vs. violation of NTREIS rules, MetroTex rules, ethics..the behavior at issue-canceling a listing at a client’s request while the home is under contract in order to circumvent the “Z” rule-is a violation, and my example still stands.

  19. Jeff Duffey on October 17, 2012 at 10:35 pm

    Neal – why do you assume that listing agreements between a seller and a broker are unilaterally revocable? Because they are not. A broker is free to release a seller from such an agreement, but a seller cannot unilaterally remove themselves from the agreement without the broker’s approval. Why would a broker agree to release a seller from a listing agreement when the home is Pending? They wouldn’t, except to circumvent the “Z” rule. If I, as a broker, agree to release a seller from the listing agreement knowing their intent is to circumvent the “Z” rule, I (believe) I’m in violation of NTREIS rules, and possibly some NAR ethical rules.

    • Neal L on October 18, 2012 at 10:15 am

      @Jeff, the listing agreement need not be revoked – just the seller's authorization for the broker to advertise in the MLS. Section 6A of the listing agreement says "Broker will file this Listing with one or more Multiple Listing Services (MLS) . . . Seller authorizes Broker to submit information about this Listing and the sale of the Property to the MLS." This authorization is followed by a note informing the seller that the listing is available to practically everyone and that by sharing their information they are making the MLS system more valuable for all.

      Nowhere in the listing agreement does it say that this authorization to participate is irrevocable. The seller can – at any time and for any reason – withdraw this authorization. And without authorization, the broker (as the seller's agent) is in violation of his fiduciary duties if he discloses any further information to the MLS. It would in fact be an ethical violation for a broker (read: agent) to disclose information to a third party after being expressly instructed not to by a seller (read: that agent's principal).

      You also raise the argument that the broker is contractually obligated to the MLS to play by MLS rules. The broker's ability to participate, however, is premised upon having authorization from a seller to disclose that information. Once the principal's authorization for her agent to advertise in the MLS is withdrawn, the agent can no longer do so. And as I'm sure you are aware, an agent can never, ever, ever put his or her interests ahead of a principal's.

      Further, state laws of agency trump any contract obligations that the broker may be under with third parties like an MLS. So to the extent that the MLS attempts to impose any contractual obligation on a broker the performance of which would place that broker in violation of state law, those requirements are unenforceable.

  20. Jeff Duffey on October 17, 2012 at 10:35 pm

    Neal – why do you assume that listing agreements between a seller and a broker are unilaterally revocable? Because they are not. A broker is free to release a seller from such an agreement, but a seller cannot unilaterally remove themselves from the agreement without the broker’s approval. Why would a broker agree to release a seller from a listing agreement when the home is Pending? They wouldn’t, except to circumvent the “Z” rule. If I, as a broker, agree to release a seller from the listing agreement knowing their intent is to circumvent the “Z” rule, I (believe) I’m in violation of NTREIS rules, and possibly some NAR ethical rules.

    • Neal L on October 18, 2012 at 10:15 am

      @Jeff, the listing agreement need not be revoked – just the seller's authorization for the broker to advertise in the MLS. Section 6A of the listing agreement says "Broker will file this Listing with one or more Multiple Listing Services (MLS) . . . Seller authorizes Broker to submit information about this Listing and the sale of the Property to the MLS." This authorization is followed by a note informing the seller that the listing is available to practically everyone and that by sharing their information they are making the MLS system more valuable for all.

      Nowhere in the listing agreement does it say that this authorization to participate is irrevocable. The seller can – at any time and for any reason – withdraw this authorization. And without authorization, the broker (as the seller's agent) is in violation of his fiduciary duties if he discloses any further information to the MLS. It would in fact be an ethical violation for a broker (read: agent) to disclose information to a third party after being expressly instructed not to by a seller (read: that agent's principal).

      You also raise the argument that the broker is contractually obligated to the MLS to play by MLS rules. The broker's ability to participate, however, is premised upon having authorization from a seller to disclose that information. Once the principal's authorization for her agent to advertise in the MLS is withdrawn, the agent can no longer do so. And as I'm sure you are aware, an agent can never, ever, ever put his or her interests ahead of a principal's.

      Further, state laws of agency trump any contract obligations that the broker may be under with third parties like an MLS. So to the extent that the MLS attempts to impose any contractual obligation on a broker the performance of which would place that broker in violation of state law, those requirements are unenforceable.

  21. Mark Millikan on October 18, 2012 at 10:56 am

    So a seller or buyer, will still have the same option they have always had, to purchase a property at an undisclosed price–just not one that is listed in MLS. This has certainly happened not infrequently in
    certain neighborhoods and will continue, which is fine, but for sellers who want worldwide exposure, and buyers who want to search on their own, the easiest vehicle is through MLS and related sites where properties shown are current listings with history. Neal, you might want to start a non-NTREIS listing service, and form your own club with your own rules, I'm sure someone will or probably already has. I will take the level playing field.

  22. Mark Millikan on October 18, 2012 at 10:56 am

    So a seller or buyer, will still have the same option they have always had, to purchase a property at an undisclosed price–just not one that is listed in MLS. This has certainly happened not infrequently in
    certain neighborhoods and will continue, which is fine, but for sellers who want worldwide exposure, and buyers who want to search on their own, the easiest vehicle is through MLS and related sites where properties shown are current listings with history. Neal, you might want to start a non-NTREIS listing service, and form your own club with your own rules, I'm sure someone will or probably already has. I will take the level playing field.

  23. Jeff Duffey on October 18, 2012 at 12:33 pm

    Neal – As you pointed out, “Section 6A of the listing agreement says ‘Broker will file this Listing with one or more Multiple Listing Services (MLS) . . . Seller authorizes Broker to submit information about this Listing and the sale of the Property to the MLS'”

    However, the seller cannot strike out this portion of the listing agreement without the mutual assent of the broker also signing the agreement. Therefore, if the broker agrees to the seller striking that portion of the listing agreement, then he is still aiding the seller in a practice that is prohibited by our MLS.

    • Neal L on October 18, 2012 at 2:17 pm

      Mike, I completely understand where you're coming from – that mandatory disclosure would create a "level playing field." The problem with that argument, as discussed above, is that applied to its conclusion it would destroy privacy rights in general. That very same argument can be made about insurance rates, salaries, and just about any other thing you want to know about everyone else's private lives. And there goes all privacy.

      Jeff – Your point is very well made. However, this contractual term is an authorization and may in fact be revoked. Authorization provisions are common in fiduciary agreements. For example, a typical legal services agreement includes an authorization clause whereby the client authorizes the attorney's firm to perform various acts on his or her behalf (i.e., filing documents with the court, sending documents to other parties, performing investigatory services). As a matter of agency law, authorizations such as these are revocable at any time.

      To you extent that you disagree with the above and view this as a contractual term that requires the assent of both the seller and the broker to modify, because such a contractual provision would be in conflict with agency laws, it would be unenforceable.

      Just think about it Jeff – if a seller and buyer agree on terms that include a confidentiality term, the seller's agent can't pipe up and say "Wait a minute there guys, I have a contract with the MLS and so I have to act against the seller's interests and report the sale price, so this sale can't happen." It would be absurd.

  24. Jeff Duffey on October 18, 2012 at 12:33 pm

    Neal – As you pointed out, “Section 6A of the listing agreement says ‘Broker will file this Listing with one or more Multiple Listing Services (MLS) . . . Seller authorizes Broker to submit information about this Listing and the sale of the Property to the MLS'”

    However, the seller cannot strike out this portion of the listing agreement without the mutual assent of the broker also signing the agreement. Therefore, if the broker agrees to the seller striking that portion of the listing agreement, then he is still aiding the seller in a practice that is prohibited by our MLS.

    • Neal L on October 18, 2012 at 2:17 pm

      Mike, I completely understand where you're coming from – that mandatory disclosure would create a "level playing field." The problem with that argument, as discussed above, is that applied to its conclusion it would destroy privacy rights in general. That very same argument can be made about insurance rates, salaries, and just about any other thing you want to know about everyone else's private lives. And there goes all privacy.

      Jeff – Your point is very well made. However, this contractual term is an authorization and may in fact be revoked. Authorization provisions are common in fiduciary agreements. For example, a typical legal services agreement includes an authorization clause whereby the client authorizes the attorney's firm to perform various acts on his or her behalf (i.e., filing documents with the court, sending documents to other parties, performing investigatory services). As a matter of agency law, authorizations such as these are revocable at any time.

      To you extent that you disagree with the above and view this as a contractual term that requires the assent of both the seller and the broker to modify, because such a contractual provision would be in conflict with agency laws, it would be unenforceable.

      Just think about it Jeff – if a seller and buyer agree on terms that include a confidentiality term, the seller's agent can't pipe up and say "Wait a minute there guys, I have a contract with the MLS and so I have to act against the seller's interests and report the sale price, so this sale can't happen." It would be absurd.

  25. Jeff Duffey on October 19, 2012 at 10:01 am

    The buyer and seller wouldn't come to an agreement on terms that included confidentiality because as the listing broker I would not have let it enter the negotiations. Don't get me wrong, I've had my share of "Z" sales in the past, but as the rule stands now, I would prefer not to be dragged up in front of the Professional Standards and Ethics committee.That's the reason why the situation you propose would never arise, for me anyway.

    • Neal L on October 19, 2012 at 10:15 am

      Jeff – as the listing broker, you're not in a position to prohibit the parties from forming an agreement. If the buyer includes the term in an offer, you have to present that offer to your seller unmodified. You can advise your seller any way you want, but you can not prohibit the parties from coming to an agreement because it places you in a bad spot.

      What I think we can all agree on is that this is an issue that will come up, and I empathize with the poor broker who is put in this position. My stance has simply been that most people would choose to break a contract before they violate state agency laws. And the chances are that because the contract places the broker in that position, it is not likely to be enforceable anyway.

      I'll cede the forum to you for the last word. 🙂

  26. Jeff Duffey on October 19, 2012 at 10:01 am

    The buyer and seller wouldn't come to an agreement on terms that included confidentiality because as the listing broker I would not have let it enter the negotiations. Don't get me wrong, I've had my share of "Z" sales in the past, but as the rule stands now, I would prefer not to be dragged up in front of the Professional Standards and Ethics committee.That's the reason why the situation you propose would never arise, for me anyway.

    • Neal L on October 19, 2012 at 10:15 am

      Jeff – as the listing broker, you're not in a position to prohibit the parties from forming an agreement. If the buyer includes the term in an offer, you have to present that offer to your seller unmodified. You can advise your seller any way you want, but you can not prohibit the parties from coming to an agreement because it places you in a bad spot.

      What I think we can all agree on is that this is an issue that will come up, and I empathize with the poor broker who is put in this position. My stance has simply been that most people would choose to break a contract before they violate state agency laws. And the chances are that because the contract places the broker in that position, it is not likely to be enforceable anyway.

      I'll cede the forum to you for the last word. 🙂

  27. Bill Willis on October 19, 2012 at 11:06 am

    Neal
    Thanks for your well stated writings on this government meddling and overriding subject.

  28. Bill Willis on October 19, 2012 at 11:06 am

    Neal
    Thanks for your well stated writings on this government meddling and overriding subject.

  29. Jeff Duffey on October 20, 2012 at 4:01 pm

    If a buyer's agent allowed a confidentiality clause to be included in the offer then the buyer's agent's actions are sanctionable per the new MLS rules long before the offer even gets to the listing broker. And the listing broker may very well have cause to report them in order to protect his/her own license.

    I do agree this is all untested waters and it will be interesting to see how it pans out. I also want to point out that, while I personally agree with this change, I understand why some don't like it. But when the MLS has made it clear that an agent can be disciplined for taking part in undisclosed sales (e.g. canceling the listing once the home goes under contract, etc.) it is up the individual broker and agent to decide if they want to incur that risk. After all, we are all adults here.

    Thanks for the debate, Neal!

    *takes bat, beats horse some more* 🙂

  30. Jeff Duffey on October 20, 2012 at 4:01 pm

    If a buyer's agent allowed a confidentiality clause to be included in the offer then the buyer's agent's actions are sanctionable per the new MLS rules long before the offer even gets to the listing broker. And the listing broker may very well have cause to report them in order to protect his/her own license.

    I do agree this is all untested waters and it will be interesting to see how it pans out. I also want to point out that, while I personally agree with this change, I understand why some don't like it. But when the MLS has made it clear that an agent can be disciplined for taking part in undisclosed sales (e.g. canceling the listing once the home goes under contract, etc.) it is up the individual broker and agent to decide if they want to incur that risk. After all, we are all adults here.

    Thanks for the debate, Neal!

    *takes bat, beats horse some more* 🙂

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