On May 23, 2024, Information Technology Systems Ontario (ITSO) provided a memo to the boards of its member associations about new exclusive listing functionality it planned to implement as early as this month within its Matrix system.

ITSO sought feedback from its CEO Advisory Group on whether the functionality should be made available system-wide or on an opt-in basis as a non-basic service. However, the organization halted its efforts less than two weeks later.

 

Issues with adding exclusives to an MLS system

 

REM obtained ITSO’s memo, which discusses the issues of adding exclusive listings to the Matrix system after those listings have sold (which is often done for tracking statistics, financing purposes or use in comparative market analyses).

It notes, “The practice raises concerns under Rule 2.08, which provides that a listing is not acceptable if it is not available for showings and the registration of offers. If a listing is already sold before it is entered into the ITSO system, then it is not available for other realtors to cooperate on and therefore is a violation of Rule 2.08.

It is extremely frustrating for realtors to see a new listing, or have their clients see one in an auto-email, only to find out that the property is already sold when they contact the listing realtor for a showing. Adding these listings as MLS listings diminishes confidence in what is supposed to be a cooperative system. Further, the sale price for an exclusive listing is not necessarily reflective of what would be obtained for an MLS listing, so entering these listings into the ITSO system can skew statistics.”

 

How the functionality would help the industry

 

The memo goes on to note there are legitimate reasons for entering these listings into ITSO’s system: “Historically there was no easy way to capture this data for sales records or for financing purposes. The ITSO board of directors wants to respond to the needs of our users so that they will not be forced to breach the MLS rules or, alternatively, find a workaround to avoid compliance issues.”

It then explains this is why ITSO created the Alternative Listing Task Force (ALTF) in 2022, which determined the following, and unanimously agreed to recommend proceeding with the closed exclusive listing functionality:

1. “Augmenting the ITSO system with exclusive listings would be beneficial for statistical and financing purposes.
2. Enabling realtors to put exclusive listings into the ITSO system directly to a pending or closed status will likely increase compliance with Rule 2.08 for MLS listings, as there will no longer be a need to add exclusive listings to system inaccurately as MLS listings.
3. Adding this functionality to the ITSO system could also potentially entice more commercial realtors to put listings into the ITSO system, as MLS rules are often seen as a constraint for commercial listings.
4. Augmenting the ITSO system with exclusive listings could also provide an avenue for assignment listings to get exposure to realtors without being publicly advertised.”

 

The process and journey

 

The memo continues to describe the process and journey ITSO took in developing the exclusive listing functionality.

ITSO’s board of directors approved the ALTF’s recommendation in September 2022 along with its finalized rules for sold exclusive listings in March 2023, which the CEO Advisory Group discussed in April 2023. After some delays in development work and the Trust in Real Estate Services Act (TRESA) coming into effect on December 1, 2023, ITSO changed the rules for exclusive listings to include TRESA terminology changes before meeting with the CEO Advisory Group in December 2023. The intent was to consult about active exclusive listings, but this was put on hold (due to member associations’ work being done with the Ontario Realtor Wellness Plan).

The ALTF met this year to discuss and finalize changes to the exclusive listing rules to accommodate active listings. This caused a delay in launching the functionality for sold exclusives.

In the end, ITSO’s board approved the exclusive listing rules at its May 2024 meeting. The board found the proposed system enhancement would be welcomed by realtors “to fill a void they have been working around” along with association staff “who should see a reduction in listings violating the MLS rules as a result of providing a legitimate method of adding sold exclusive listings to the system for internal use.”

The memo encourages member associations and realtors to familiarize themselves with the exclusive listing rules and notes that Rule 9.01 requires realtors to obtain consent from their clients to collect, use and disclose the exclusive listing in the ITSO system (with sample language provided).

 

Response from CREA

 

After the memo was sent, ITSO had planned to consult with its members on the new functionality and determine how the service could be implemented. However, this was stopped on June 4, when the organization received an email from James Mabey, chair of the Canadian Real Estate Association (CREA).

Mabey tells REM that CREA became aware of the new functionality towards the end of May. “When it came to our attention, we took the opportunity to meet with them and make sure we had a really good sense of what they were trying to accomplish and why. Once we started looking at it, we came to the conclusion quite quickly that it was fundamentally, in our opinion, offside with Article 30 of the Realtor Code and also the Cooperation Policy.”

His email notes that CREA learned of ITSO’s proposal on May 27 in a memo entitled New Matrix Functionality. It says that the functionality appears to be non-compliant with the requirements of Article 30 of the Realtor Code (Duty of Cooperation) and the Realtor Cooperation Policy (the “Policy”) because the proposed functionality “appears to segregate “exclusive listings” from MLS listings “when a client is looking to limit marketing of the property” (as stated in (ITSO’s) memo).”

Mabey writes that placing listings in ITSO’s system this way falls under the definition of “public marketing” under the Realtor Cooperation Policy, as follows:

““Public marketing” means the representation or marketing of a listing to the public or anyone not directly affiliated with the listing brokerage/office in a business capacity. For clarity, public marketing does not include one-to-one direct communication with a realtor unaffiliated with the listing brokerage/office. Public marketing includes any representation regarding the sale of a property, including but not limited to, flyers, yard signs, digital marketing on public-facing websites, brokerage website displays (including IDX and VOW) and onsite brokerage promotion, digital communications marketing (i.e. email blasts, newsletters, social media posts), multi-brokerage listing sharing networks and applications available to the general public.”

So, he concludes, a listing appearing as an “exclusive listing” would trigger the requirement to also place that listing on an MLS system within three days as set out in paragraph 2 of the Policy: “Within three (3) days of public marketing, realtors must place the listing on an MLS system for cooperation with other realtors.”

Mabey highlights that a listing appearing only in the “exclusive listing” portion of ITSO’s system and not on the MLS system doesn’t satisfy the Policy (regardless of the fact that MLS listings are searchable in Matrix).

 

Request to immediately suspend functionality implementation

 

He then makes some other related points and states it’s CREA’s view that ITSO’s proposal “may expose ITSO member boards, associations and realtors to disciplinary action under CREA’s bylaws and rules for failing to comply with CREA’s policies and the Realtor Code.”

The email concludes with CREA’s request that ITSO “immediately suspend all implementation of its proposal and notify CREA member boards and associations that are members of ITSO that it has done so,” along with, “We respect ITSO’s attempts to provide innovative solutions for its members and if ITSO Boards and Associations believe there is an opportunity for improvements to the Realtor Cooperation Policy our door remains open to that feedback.”

During his interview with REM, Mabey points out that the Realtor Cooperation Policy was put together with a lot of consultation from CREA members, and it was passed with a very large majority. “Anytime a policy comes into place, we look to make sure our members are well served. We have a Realtor Code committee that reviews policies on a regular basis. We’re always happy to collaborate. We value our relationship with ITSO and our collaborative efforts to work well with them,” he explains.

Mabey suggests that anytime a board or association is working on something like this, the sooner they reach out and engage with CREA to confirm everyone’s on the same page and that any barriers or differences in interpretation are established, the easier it will be to collaborate and ensure that joint members are served as well as possible.

 

ITSO’s response

 

On June 6, Blair Campbell, president of ITSO, responded to Mabey’s email, confirming that ITSO agrees to suspend the new exclusive listing functionality implementation in Matrix. 

 

Authority to interpret and apply Realtor Code as deemed appropriate

 

Campbell goes on to explain why ITSO is disappointed that CREA feels the new functionality breaches the Realtor Cooperation Policy, particularly since CREA’s rules state that boards and associations have exclusive authority to interpret and apply the Realtor Code as they deem appropriate. He points out that ITSO enforces the Realtor Code for 11 real estate boards, pursuant to CREA’s bylaws and rules, and therefore feels ITSO should have this same authority.

He then explains that ITSO has been actively enforcing Article 30 of the Realtor Code since it came into force and is well versed in the requirements of the Realtor Cooperation Policy, plus the organization’s staff have talked to every realtor named as a respondent in these “PSC (professional standards committee) incidents” — which is how they know that realtors want the functionality.

In response, Mabey tells REM, “Our boards and associations have some latitude in interpreting the code. In this case, we believe the interpretation is fundamentally different. It’s not just a grey area. (The code) was evaluated by our legal team and the people who had developed the policies with us and (the interpretation) is just fundamentally inconsistent — it’s not a degree of latitude difference.“

 

Realtors can’t always meet MLS listing standards only with additional effort

 

Campbell also writes, “Our end users want a way to comply with the Realtor Cooperation Policy while still respecting their clients’ wishes and the nature of exclusive listings. At the same time, ITSO wants to maintain the integrity of the MLS data in our system. We respectfully disagree with your assertion that realtors are always able to meet the standards of MLS listings simply by incurring additional effort.”

The examples Campbell cites include properties that can’t be shown because there’s no access during the winter or where tenants will not allow anyone to enter the property, including properties the listing realtor can’t enter to verify basic details like the number of bedrooms or measurements, whether due to a power of sale or uncooperative tenants.

“These listings cannot meet the standards of an MLS listing and must be taken exclusively,” he writes. “Permitting these listings to be entered on our system as MLS listings with remarks saying ‘no showings’, that ‘the listing brokerage takes no responsibility for the accuracy of the information’ or ‘buyer to verify all details’ goes against CREA’s three pillars and interpretations of the MLS marks and will deteriorate the quality of the MLS data on ITSO’s MLS system.”

Mabey tells REM that MLS systems across the country have different rules and different barriers to entry into the system in terms of the number of fields, the amount of data that must be put in, restrictions on showings, etc.

“If those pieces of MLS rules need to be reevaluated in context of the Realtor Cooperation Policy, then those boards and associations could definitely review the rules in that context to ensure they’re still best serving their members (and) maybe prohibit some of those listings going into the MLS,” he suggests. “I would encourage (them) to review the MLS policies they feel might not be working well with the new cooperation policy and figure out what’s best for them.”

While Mabey notes that if a realtor can’t provide the sufficient level of detail, maybe public marketing the property isn’t the best choice, he points out that CREA isn’t aware of any situation where the barrier is so high that the decision shouldn’t be made to publicly market a listing. “In (that) case, they have other opportunities because the policy doesn’t (forbid) taking an exclusive listing.”

 

A matter of enforcement

 

Campbell also points out that CREA’s stance assumes all listings entered into ITSO’s MLS system as active exclusives would fall under the Realtor Cooperation Policy, but how listings are entered (as MLS or exclusive) is actually a matter of enforcement.

“ITSO and its member associations could still require all listings falling under the Realtor Cooperation Policy to go on the system as MLS listings. Then, the exclusive functionality could be used for the legitimate purposes it was created for — capturing sold exclusives, commercial listings, new builds, assignment sales with clauses that disallow advertising as an MLS listing, etc.”

 

‘Enforcing (the) Realtor Cooperation Policy within current MLS system limitations puts ITSO and its members at risk’

 

Campbell notes that ITSO feels enforcing CREA’s Realtor Cooperation Policy within the current MLS system limitations put both ITSO and its members at risk in light of:

• the United States Department of Justice’s position on the National Association of Realtors’ Clear Cooperation Policy,
• recent press suggesting CREA’s policy may be anti-competitive and
• the Ontario TRESA regulations that require registrants to abide by the lawful instructions of their clients.

He concludes by urging CREA to reconsider its position, stating: “The Realtor Cooperation Policy does not specify that listings must be entered on an MLS system as MLS listings — it says the listings must be placed on an MLS system for cooperation with other realtors.

It is open to CREA to interpret the policy to allow listings on the MLS system as exclusive listings provided the listing realtor is willing to cooperate with other realtors. This would achieve the purpose of the Realtor Cooperation Policy while maintaining the exclusive nature of the listing, respecting sellers’ wishes, enabling Ontario realtors to comply with their regulatory obligations and allowing ITSO to maintain the integrity of the MLS system data that we have worked so hard to achieve.”

 

‘We do not want any of our members to be in breach of their obligations in organized real estate’

 

Campbell shares this statement about the situation and ITSO’s reason for suspending the functionality’s implementation:

“It is ITSO’s position alone that listings falling under the Realtor Cooperation Policy should be able to go on the MLS system as exclusive listings with cooperation. We did not have a chance to discuss all aspects of this functionality with our members prior to CREA sending us a letter requesting that we suspend its implementation.  

We are disappointed that CREA has reached this conclusion and prevented us from implementing functionality that would be of great benefit to the realtor users of our system.

ITSO views MLS listings as the preferred method for selling and buying properties. However, the value of an MLS system is determined not only by the integrity and accuracy of the data but also by the completeness of the database. We’ve all been in a meeting where a client asked about an exclusive listing, and we didn’t have access to the information the client wanted. Being able to capture exclusive listing data would increase the value of the MLS system while maintaining the integrity of MLS listing data. At the same time, capturing exclusive listings would enable realtors to appear more professional and to better serve their clients.

That said, the interests of our members are ITSO’s priority and we do not want any of our members to be in breach of their obligations in organized real estate. That is why we agreed to suspend the implementation of this functionality.”