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Release and Cancellation of Contract: What does the MLS say?

Dear Anne: After two weeks of concession negotiations, a seller’s agent changed the property’s MLS listing from pending back to active, and I see an escrow dispute on the horizon. It’s unethical and wrong to change the MLS without a Release and Cancellation of Contract – right?

ORLANDO, Fla. – Dear Anne: Well, this one takes the cake! The seller and my buyer had been going toe-to-toe for two weeks over a concession. My buyer would have conceded to save the deal, but before that could happen, the listing agent changed its MLS status from pending to active without a signed Release and Cancellation of contract.

My buyer has a deposit on the property for goodness sake, so I anticipate an escrow dispute in the offing. What was she thinking?

When I called her and told her to change it back to pending, she said, “You’re not the boss of me, my seller is, and he was tired of going round and round over a silly concession. There are plenty of fish in the sea and he is moving on.” She intimated that the seller has several backup offers.

Changing the status before a Release and Cancellation is forbidden and unethical. I believe a violation of a board rule somewhere, ethics or MLS – something! – Grasping at Straws
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Dear Grasping at Straws: There are two components to this issue, the MLS component and a legal one. I’ll dive into the MLS component but defer to the companion article (see “Release and Cancellation of Contract: What Does the Law Say?”)  in this edition of the Legal News to address legalities.

Policy Statement 7.77 of NAR’s Handbook on Multiple Listing Policy states: “MLS participants shall promptly report to MLS that a pending sale has been cancelled and the listing, if still in effect, will be reinstated in the MLS Compilation.” This mandatory policy does not require the MLS participant to obtain a release in writing from the parties to the transaction.

When you read the companion article, you’ll discover not all failed transactions wind up with a fully executed Release and Cancellation form to go with them.

Does your MLS require a signed Release & Cancellation?

Now let’s get to the heart of the issue: Did the listing agent violate the MLS rules by changing the status back to active without a signed release and cancellation from the parties to the transaction? The answer: It depends.

Your MLS may require a signed release and cancellation before the listing can return to active status while a neighboring MLS does not. If you belong to more than one MLS, never assume their rules are the same because each local MLS may augment NAR’s mandatory policies with their own.

In your scenario, the listing agent may be in violation of local MLS rules if her MLS requires a release a cancellation before the status can be changed active.

But, if her local MLS does not require the cancellation to be in writing, is she in the clear? Probably, because if the MLS rules are solely based on Policy Statement 7.77, she can make the change at the behest of her seller.

You mentioned you anticipate an escrow dispute was in the offing? Does this wrinkle change anything? The answer is no, the seller can proceed with marketing his property because the dispute of the deposit becomes a separate matter between the seller and the buyer.

The best place to get answers about what is required – and what isn’t – is your local MLS. Our Legal Hotline Attorneys do not have access to local MLS rules, nor are they privy to the rationale behind the decision to adopt local MLS policies. They can only talk to you about policy contained in NAR’s Handbook of Multiple Listing Policy, which is the foundation for your MLS’s governing documents.

For those MLS’s that require a signed document, the Legal Hotline attorney may suggest that you call the MLS and ask this question: What happens if the parties to the transaction refuse to sign? My seller wants the property back on the market. Only they can answer this question.

The best takeaway I can offer is never assume the listing agent or another MLS participant has violated MLS rules until you verify what the local MLS rules say. And remember: If you belong to more than one MLS, be aware that the rules may vary from one MLS to another.

Anne Cockayne is Director of Local Association Services for Florida Realtors

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