Real estate firms occasionally work together in marketing a listing of a seller. The term "co-listed" is often used to describe such listings, where more than one real estate brokerage firm can be described as the "listing broker." At least two issues crop up in these cases, one where both brokers are participants in the MLS and one where one is a participant and the other is not. (I won't trouble everyone with discussions of where there are three or more co-brokers.)

If both brokers are participants in MLS, one question is whether both may put the listing onto the service. I think the National Association of REALTORS's (NAR) policies are silent on this issue, for those of you in MLSs governed by NAR policy.

I have generally advised MLSs not to allow it. Here's why: Theoretically, at least, each listing broker who puts the listing into MLS is making an offer to compensate the broker who is the procuring cause of the sale. If I am the procuring cause, under the MLS rules, I might seek compensation from both listing brokers. Let's say the listing brokers anticipate this, each putting in about half the compensation cooperating brokers typically receive in the market. In that case, how is the cooperating broker to know how much she will be paid and by whom? An arbitration panel cannot rely on "average commission" levels or other numbers to establish what the cooperating broker should be paid; it will not know whether to require both listing brokers or only one of them to pay.

I usually advise the MLS to tell the co-listing brokers to decide which of them will put it in MLS and then require that broker to indicate in the public remarks the identity of the co-listing firm. I suggest public remarks, because the identity of the co-listing broker may be material to buyers and their brokers in a number of ways.

Where the co-broker is one who is not a participant in MLS, we have to be concerned about another problem: free-riding. A participant in MLS could essentially be acting as a conduit for non-participant brokers to get their listings exposed through MLS. There is a host of good business reasons for brokers not to want to do this, but brokers do not always make good business decisions. Thus the MLS will want to prevent a participant broker from "selling" MLS to non-participants.

I usually recommend that the MLS require the participant broker on a co-listing to identify the co-broker in the public remarks (as above) and that the MLS require the participant listing broker to provide to MLS a copy of the listing agreement, showing both the participant and non-participant as listing brokers. In this way, we ensure that the only listings getting into MLS are those where at least one of the listing brokers involved is actually identified as a listing broker on the listing agreement. The possibility of certain forms of free riding remains, but it is much reduced.

Some MLSs prohibit listings that are co-listed with non-participants, because accepting them is more complicated than not accepting them. Until now, I have not seen a problem with my clients choosing to do that. On the other hand, accepting them makes the MLS database more complete and arguably more valuable.

Have you witnessed any problems with this sort of thing in your market? Do you see agency law or other implications of permitting this? Would you do it differently?

-Brian

(To the extent this sounds like legal advice, it ain't. Retain your own legal and business advisors before acting on the information in this post.)