The MLS Rules and Regulations require that listing Brokers disclose potential short sales and related compensation details “when reasonably known to the Listing Brokers, unless precluded by law.” Moreover, the MLS Rules and Regulations state that the offer of compensation shall be specified in the system. It goes on to state that the MLS system will only accept listings (three types are identified as acceptable) where the Seller has authorized the listing broker to offer cooperation and compensation to other competing brokers.

In response to the increase in short sales, our regional MLS added two pick list items to assist both listing and selling agents, disclosing to other agents that the property is subject to a short sale and therefore any contract will require lender approval. Additionally, MLS has added a field which allows listing agents to inform others that the offer for cooperative compensation is also subject to third party approval.

However, before you select either option, consider your client’s privacy and the confidential nature of the information you would be disclosing. Article 1 of the Code of Ethics states that REALTORS® pledge themselves to protect and promote the interests of their clients. If you select an option in your listing which indicates that it is a short sale, or is subject to lender approval, you could be communicating that you have a distressed seller which may, in turn, affect the offers your client will receive. However, if you do not disclose that the offer of compensation is subject to lender approval, Article 3 of the Code of Ethics may be implicated. Before you put a listing on MLS, discuss these factors with your client and obtain from your client approval to select options from the pick lists which reflects that not only the contract but also the offer of compensation is conditioned upon third party approval.

For further information on the use of MLS in short sales, please refer the MLS website.