Multiple listing service

Key Takeaways

• A multiple listing service is private infrastructure built and funded by the member firms that participate in it, not a government agency and not a public record.
• The MLS publishes listing data from participating firms both to its members and to the public.
• Since the National Association of Realtors settlement practice changes took effect on August 17, 2024, an offer of compensation may not be communicated through a multiple listing service.
• In Washington, residential property may not be marketed to a limited or exclusive group of buyers or brokers unless it is concurrently marketed to the general public and all other brokers (RCW 18.86.130).

What It Means

A multiple listing service is a shared database that competing real estate firms build and pay for together. Member firms post their listings to it, agree to its rules, and in return get to see and show every other member's inventory. The MLS publishes that data to its members and to the public, which is how listings reach the consumer websites buyers browse.

The MLS is private infrastructure rather than a government register. No state agency operates it, the data in it is not a public record, and membership is a contract between the firm and the service. Its rules are membership rules, enforced by the service through its own process, which is separate from the license law a state regulator enforces.

What the MLS sells is cooperation. Before it existed, a buyer had to call on firm after firm to see what each one held. Pooling the inventory lets one broker show a buyer everything on the market, and lets a seller reach every buyer working with every member firm at once. A listing deliberately kept out of that pool and shown only to a chosen few is known as a Pocket Listing.

How It Works in Washington

Membership in a multiple listing service is private, but how a listing gets exposed to the market is not always left to the firm. In Washington, RCW 18.86.130 provides that a broker may not market the sale or lease of residential real estate to a limited or exclusive group of prospective buyers or brokers unless the real estate is concurrently marketed to the general public and all other brokers, except as reasonably necessary to protect the health or safety of the owner or occupant. Entering the listing in the MLS is how firms normally satisfy that, and the same section adds that marketing to the general public does not require an owner to allow access onto the property.

Compensation is the other half of the picture. Following the Nar Settlement practice changes that took effect on August 17, 2024, an Offer Of Compensation may not be communicated through a multiple listing service, and the broker compensation fields came out of MLSs that adopted the changes, so cooperating firms negotiate compensation directly instead. In Washington that negotiation lands in the services agreement and in a written disclosure. RCW 18.86.080 requires the services agreement to state the terms of compensation and the principal's consent, if any, to compensation sharing between firms, and RCW 18.86.030 requires written disclosure of any terms of compensation offered by a party or a real estate firm to a real estate firm representing another party before the parties reach mutual agreement.

Example

Cascade Realty signs Dana's listing on Tuesday and enters it in the regional MLS on Wednesday at $549,000, before showing it to anyone, so the property reaches the general public and every other member firm at the same time. The MLS record carries the price, the photos, the square footage, and the showing instructions. It carries no offer of compensation, because MLSs that adopted the 2024 settlement practice changes removed the broker compensation fields.

Selkirk Real Estate, working with a buyer, sees the listing and asks Cascade in writing what the seller is willing to share. Dana's services agreement already authorizes Cascade to share half of the 5 percent she pays. The buyer offers $540,000, the compensation terms go in writing before the parties reach mutual agreement, and at closing Cascade's $27,000 is split, with $13,500 going to Selkirk.

Common Mistakes and Exam Traps

• An MLS is run by its member firms, so its rules are private membership rules. The service enforces those through its own process, while a state regulator enforces the license law.
• Compensation did not become illegal on August 17, 2024. It moved off the MLS, where firms now negotiate it directly and put the terms in writing.
• In Washington, quietly marketing a residential listing to a select group of brokers runs into RCW 18.86.130 unless the property is concurrently marketed to the general public and all other brokers.
• Paying or sharing compensation does not create an agency relationship with the party who paid it (RCW 18.86.080).