Current legal issues with VOWs? (Potential CMLS topic 1)

(Note: Shelley Specchio is CEO of the Northern Nevada Regional MLS, Inc., a host of the CMLS Conference in Lake Tahoe, September 30 – October 2. She and I have been discussing topics for the legal panel there. Shelley wants input and feedback from those likely to attend: Which legal topics are of greatest interest and what aspects of them are most important for MLSs? I agreed to do a series of blog posts on some of the candidate topics, cross-posting links to them in other forums and asking folks for their input. This is the first. If you have other topics to suggest, email me or comment on any of these posts.)

NAR has received its first written complaint from a broker regarding an MLS’s implementation of the VOW policy. My law firm represents the MLS about which the complaint was made; and we believe the matter is under control and that the MLS has complied with the policy at all times.

Nevertheless, we expect a few more problems may crop up with MLSs and the VOW policy before the CMLS meetings, so we will be prepared to discuss them then.

My suspicion is that problems will develop for a number of reasons.

“Confidential” fields and statuses

There still seems to be quite a bit of confusion about what it means for an MLS to designate a field or status as confidential under the VOW policy. I’ve posted on the issue here and here. Some MLSs are assuming that anything that does not appear on a “customer handout” format in the MLS is confidential. Others have adopted NAR’s model rule Section 19.15 (or one of the other ‘parity options’), but have not adopted parallel language elsewhere in their rules restricting the disclosure of those fields/statuses in all other media, including orally, which is what the VOW policy requires.

Technical implementation

To implement the VOW policy, MLSs really probably need to have four fields on the listing database to capture the seller’s options under the VOW policy (relating to listing and address display on the Internet and relating to automated valuation and third-party commentary). Unfortunately, some MLSs have given confusing names to these fields, and listing input staff and agents doing input at brokerage firms may not understand their implications or even know about the new VOW rules. MLS staff also need to be sure that the seller selection for “no-display-on-Internet” prevents applicable listings from being displayed on Realtor.com, aggregators sites, and in IDX if the MLS will be excluding such listings from their VOW data feeds, which is what the VOW policy requires.

Listing brokers not understanding the new policies

In the near term, most brokers likely will not operate VOWs. Their agents nevertheless need to be aware of the policy so they can advise sellers about their options and provide a heads-up about how the seller’s listing will be treated on other brokers’ web sites. We’ve given “Virtual Brokerage Now” presentations for a number of MLSs to help with this education. Though the programs are well-attended and well-received, we really are just scratching the surface of the pool of folks who need to be educated.

Forms problems

I did not anticipate this, but forms have been a problem. Many state associations and some local associations and MLSs develop their own listing contract forms. Unfortunately, a number have not properly understood the policy and have created forms that do not accurately represent the seller’s options.

The seller has four options:

1. withhold her listing entirely from the Internet (including VOWs, IDX, Realtor.com, and aggregator sites);
2. withhold her listing’s address entirely from the Internet;
3. prohibit displays of automated valuations of her property adjacent to it on VOWs (this option only affects VOWs, though I expect the IDX policy will be changed to cover this at NAR’s meetings in November);
4. prohibit displays of third-party commentary about her property adjacent to it on VOWs (again, I expect this will apply to IDX soon).

(One issue is whether these options should appear in the listing agreement, where the seller normally authorizes marketing in broad terms, or if they should be in a separate form. We think that both can work, but we have recommended the separate form for reasons I can explain in another post if anyone expresses interest.)

Among the problems with forms that we have seen, for example:

• One association’s form gives the seller options (i), (ii), and (iv), above, but inexplicably omits option (iii).
• One association’s form informs the seller with regard to options (iii) and (iv) that she can opt out of displays of automated valuations and third-party commentary “on the Internet.” But those seller’s options currently only extend to VOWs, not to IDX and certainly not to the many other web sites her listing will likely end up.
• One association’s form tells the seller she can opt out of “blogging.” I presume this is meant to refer to third-party commentary. But the term “blogging” is both under-inclusive (because third-party commentary can take forms other than blogging) and over-inclusive (because blogging by the broker displaying the listing is permitted despite the seller’s request, if the blog post expresses the displaying broker’s professional judgment).

There are many others. Unfortunately, many listing agents do not understand the policy well enough to explain the options even when the forms are correct; the result is that sellers’ expectations are likely to be frustrated – never a good outcome for the listing broker.

What other parts of the VOW policy do you think are likely to create problems? Have you had any issues with it you would like to see discussed?

(Tomorrow, I expect to do the final planned post regarding IDX sites being indexed by web search engines.)

-Brian