C.A.R. MLS/Computer and Business Technology Committee
Auction Listings
This Issues Briefing Paper is for Study only and has not been approved by the MLS/Computer and Business Technology Committee, Executive Committee, or the Board of Directors.
AUCTION LISTINGS WORK GROUP MEMBERS:
Richard Stone, MLS Committee Chair
Pam Winterbauer
Janet Dorsey
Matt Ogden
Tia Hunnicutt
Kaye Best
Randall Traw
C.A.R. STAFF:
Elizabeth Miller-Bougdanos
BACKGROUND AND RECOMMENDATIONS:
Following the last MLS Committee meeting, C.A.R. sought input from a small group of MLS Committee members about whether any changes were advised for C.A.R.’s Model MLS Rule on Auction Listings. This group participated in a conference call to discuss the real estate auction landscape. It recommended (1) that a clarifying sentence be added to the MLS Auction Listing Rule, and (2) that C.A.R. staff provide REALTORS® with an education piece about auctions. Accordingly, both recommendations are set forth below.
DISCUSSION:
(1) Work Group Recommendation re MLS Rules
C.A.R.’s Model MLS Rule on Auction Listings reads as follows:
7.24 Auction Listings. Auction listings entered into the MLS system shall have listing contracts as required under these rules and be clearly labeled as auction listings. Auction listings shall further specify the following:
(a) The seller’s minimum acceptable bid price;
(b) Whether the auction is being conducted with or without the seller’s right of reservation;
(c) The date, time and place of the auction;
(d) All required procedures for Participants/Subscribers to register their representation of a potential bidder;
(e) The compensation to be paid to the Participant representing the successful bidder;
(f) The time or manner in which potential bidders may inspect the listed property;
(g) Whether or not the seller will accept a purchase offer prior to the scheduled auction and if so, the compensation to be paid to the cooperating Participant in the event of such a pre-auction sale as well as any other necessary pre-auction details; and
(h) Any other material rules or procedures for the auction.
While not explicitly included in the language of the auction rule itself, the MLS Rules will otherwise require from auction listings what is required in all listings submitted to the MLS. These basic requirements for MLS submission are that a valid written listing agreement exists; a list price is entered (starting bid price or bid range that the seller will accept is okay, but using an opening bid price below what the seller will accept is misleading); unconditional compensation is offered; and some degree of agency is in place for the duration of time the listing will be on the MLS.
Some who have experienced difficulty with aspects of auctions listings have indicated that when conflicts with MLS Rules arise, they usually entail conditions being placed on auction commissions or that the offer of compensation may not be unilateral or that the listing broker’s commitment to compensate upon closing has come into question. On these dynamics, Model MLS Rule Sections 7.12 and 7.13 are instructive.
Section 7.12 and 7.13 provide as follows:
7.12 Unilateral Contractual Offer; Subagency Optional. In filing a property with the MLS, the Broker Participant makes a blanket unilateral contractual offer of compensation to the other MLS Broker Participants for their services in selling the property. Except as set forth in Rule 7.15 below or pursuant to California Civil Code Section 1087, a Broker Participant must specify some compensation to be paid to either a buyer's agent or a subagent and the offer of compensation must be stated in one, or a combination of, the following forms (1) a percentage of the gross selling price; or (2) a definite dollar amount. The amount of compensation offered through the MLS may not contain any provision that varies the amount of compensation offered based on conditions precedent or subsequent or on any performance, activity or event. Furthermore, the MLS reserves the right to remove a listing from the MLS database that does not conform to the requirements of this section. At the Broker Participant's option, a Broker Participant may limit his or her offer of compensation to buyer's agents only, to subagents only, or make the offer of compensation to both. Any such limitations must be specified on the property data form and in the MLS. The amount of compensation offered to buyers' agents or subagents may be the same or different but must be clearly specified on the property data profile sheet. Broker Participants wishing to offer subagency to the other MLS Broker Participants must so specify on the property data profile sheet and on the MLS, otherwise, the offer of compensation does not constitute an offer of subagency.
7.13 Acceptance of Contractual Offer. The Broker Participant's contractual offer (with or without subagency) is accepted by the Participant/selling broker by procuring a buyer which ultimately results in the creation of a sales or lease contract. Payment of compensation by the Participant/listing broker to the Participant/cooperating broker under this section is contingent upon either (1) the final closing or (2) the Participant/listing broker's receipt of monies resulting from the seller's or buyer's default of the underlying sales or lease contract. Notwithstanding this section, the listing broker and/or cooperating broker shall still retain any remedies they may have against either the buyer or seller due to a default under the terms of the purchase agreement, listing agreement or other specific contract. Any dispute between Participants arising out of this section shall be arbitrated under Section 16 of these rules and shall not be considered a MLS rules violation.
In light of the rules set forth above, as well as other requirements addressed elsewhere in the MLS rules, the Work Group believes it would be helpful to clarify that auction listings do not receive any exceptional treatment from existing MLS rules, and in particular, that 7.12 and 7.13 govern auction listings as well. As such, the Work Group recommends adding the following as a first sentence to Model MLS Rule 7.24:
“Only Auction Listings which comply with these MLS rules and regulations, including but not limited to sections 7.12 and 7.13, may be submitted to the Service.”
PROPOSED MOTION FOR RECOMMENDED MLS RULE REVISION:
That, upon final approval by NAR, the C.A.R. Model MLS Auction Listing Rule be revised to better highlight applicable MLS requirements governing auction listings by adding the underlined clarifying sentence set forth below:
7.24 Auction Listings. Only Auction Listings which comply with these MLS rules and regulations, including but not limited to sections 7.12 and 7.13, may be submitted to the Service. Auction listings entered into the MLS system shall have listing contracts as required under these rules and be clearly labeled as auction listings. Auction listings shall further specify the following:
(a) The seller’s minimum acceptable bid price;
(b) Whether the auction is being conducted with or without the seller’s right of reservation;
(c) The date, time and place of the auction;
(d) All required procedures for Participants/Subscribers to register their representation of a potential bidder;
(e) The compensation to be paid to the Participant representing the successful bidder;
(f) The time or manner in which potential bidders may inspect the listed property;
(g) Whether or not the seller will accept a purchase offer prior to the scheduled auction and if so, the compensation to be paid to the cooperating Participant in the event of such a pre-auction sale as well as any other necessary pre-auction details; and
(h) Any other material rules or procedures for the auction.
(2) Work Group Recommendation re Providing Information about Auctions
A separate Legal Brief has been prepared on Auction Listings and is posted along with these MLS Committee materials.
