ITSO halts implementation of new exclusive listing feature in light of CREA’s compliance concerns

Information Technology Systems Ontario (ITSO), on May 23, 2024, sent a memo to its member associations’ boards about a new exclusive listing feature it planned to implement within its Matrix System as early as this week.

ITSO asked its CEO Advisory Group for feedback on whether functionality should be available system-wide, or as a nonbasic service that can be opted-in. The organization, however, halted their efforts less than a month later.

Problems with adding exclusives in 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. It notes that if a listing has already been sold before it’s entered into the ITSO, it is not available to other realtors and is therefore a violation of Rule 2.08.

When realtors or their clients view a new listing in an email, they are often disappointed to learn that the property was already sold. Realtor for a showing. Adding these as MLS listings reduces confidence in a system that is supposed to be cooperative. 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 will 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.”

The ITSO then explains why it created the Alternative Listing Task Force in 2022. This group unanimously decided to recommend the closed exclusive listing functionality.

1. “Augmenting the ITSO system with exclusive listings would be beneficial for statistical and financing purposes.
2. It is likely that allowing realtors to upload exclusive listings directly to the ITSO system in a pending status or closed status, will increase compliance with Rule 2.08 for MLS listings. This will reduce the need to incorrectly add exclusive listings as MLS listing.
3. MLS rules for commercial listings are often viewed as a constraint. Adding this feature to the ITSO System could also encourage more commercial real estate agents to list their listings in the ITSO System.
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 journey and process

The memo continues the description of the journey and process ITSO took to develop 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 construction work and the Trust in Real Estate Services Act (TRESA) coming into effectITSO will change the rules for exclusive listing on December 1, 2023 to include TRESA changes in terminology before meeting with CEO Advisory Group 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 in this year to discuss, and finally finalize, changes to the exclusive listings rules to accommodate active listing. This resulted in a delay to the launch of functionality for sold exclusives.

In the end, ITSO’s board approved the exclusive listing rules at its May 2024 meeting. The board concluded that the proposed system improvement would be welcomed by Realtors “to fill a void they have been working around”Together 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 association and realtors familiarize themselves with exclusive listing rules. It also notes that Rule 9.01 mandates that realtors obtain consent from clients before collecting, using and disclosing the exclusive listing within the ITSO system. Sample language is provided.

Response from CREA

ITSO planned to consult its members after the memo had been sent about the new functionality, and determine the best way to implement the service. This was changed on June 4 when James Mabey, the chair of the Canadian Real Estate Association, sent an email to the organization.

Mabey tells REM CREA was aware of the new feature towards the end 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 states that this functionality appears to be in conflict with the requirements of the Realtor Code Article 30 (Duty of Cooperation), as well as the Realtor Cooperation Policy. “Policy”The proposed functionality is not a good fit for the intended functionality “appears to segregate “exclusive listings”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”As follows, the Realtor Cooperation Policy.

““Public marketing”The marketing or representation of a property to the general public or to those not directly associated with the listing brokerage/office, in a professional capacity. To be clear, public marketing does NOT include one-to-1 direct communication with a Realtor unaffiliated with listing brokerage/office. Public marketing includes all representations regarding the sale of property, including but without limitation, flyers, yard signage, digital marketing on public facing websites, brokerage website display (including IDX, VOW), and onsite brokerage promotions, 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 that a listing appears as an “exclusive listing”This would trigger the requirement that the listing be also placed on a MLS system in three days, as stated in paragraph 2: “Within three (3) days of public marketing, realtors must place the listing on an MLS system for cooperation with other realtors.”

Mabey emphasizes that a list 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

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.”

Mabey, in his interview with REM says that the Realtor Cooperation Policy has been drafted with a great deal of consultation by CREA members and passed with a 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. 

Interpretation and application of the Realtor Code is a matter for the authority.

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 instance, we think the interpretation is fundamentally a 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 told REM that MLS system across the country has different rules and barriers to entry in terms of number of fields, amount of data required, restrictions on shows, 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 question 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 ITSO members and the current MLS limitations are at risk.

• 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-competitiveThe following are some examples of how to get started:
• The Ontario TRESA Regulations that require registrants adhere to the lawful directions 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.

CREA may interpret the policy so that listings on the MLS are exclusive listings if the listing realtor agrees to cooperate with the 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 had not had a chance to discuss this functionality with all of our members before CREA sent us a request to suspend its implementation.  

We are disappointed by CREA’s decision and that it has prevented us from implementing features that would be a great benefit for the realtors who use our system.

ITSO views MLS listing as the preferred method to sell and buy properties. The value of a MLS system is not determined only by the accuracy and the integrity of the information, but also the completeness of its 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. The ability to capture exclusive listings would increase the value and integrity of the MLS while maintaining the integrity. MLS listings that are exclusive would make realtors appear more professional, and better serve their customers.

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.”