MLS Errors

James L. Goldsmith, Esquire

I've seen a considerable number of law suits that have arisen from errors in Multi-List System descriptions of property (in either those pages available to agents only or those available to the public). Examples of these mistakes include errors in the square footage or quantum of land to be conveyed, inaccurate statements of the property's income-producing potential (as in renting the "in-law quarters" that are part of the property when the property is zoned for single-family residents only), and misstatements as to the annual real estate taxes. Undoubtedly you can add to this list from your own experience!

With agents in-putting data directly into the system, the MLS is rarely to blame. Likely, the listing salesperson made an error or relied on inaccurate records from another source. Regardless, all MLS systems incorporate that familiar language we see on the bottom of each page stating that the information was "deemed reliable" but "not guaranteed." Clearly, from the number of suits I have seen, this language is not sufficiently exculpatory to preclude a law suit. What simple steps are available to limit the likelihood of an error in a multi-list description from becoming a law suit?

As listing agents, do you have sellers sign a copy of the MLS input data form? A broker I know was saved because his file contained a seller-signed copy of the MLS data form identifying the items that were being sold with the property. When all of the items could not be accounted for after settlement (and some were rather expensive pieces of equipment) the buyer sued the seller and the listing broker. The seller blamed the listing broker for promising items that the seller never intended to sell. A copy of the MLS data form bearing the seller's signature was evidence that the seller had reviewed the information to be inserted into the MLS, including the list of equipment promised.

MLS input formats vary from place to place, but many have a location for the seller's signature, and all can be printed for purposes of having the seller sign a hard copy of what is transmitted to the system. Even if you obtain the seller's signature after the data form has been submitted and the information published on the system, securing the seller's signature may be the proof that later extricates you from a difficult jam. For this reason it would be wise to make this a universal practice.

The use of qualifying terms like "approximately", "more or less", and "unverified" go a long way in reducing an author's liability for errors and inaccuracies. Further, every effort should be made to represent, as fact, only what has been verified personally, or obtained from extremely accurate sources. For example, you wouldn't want to state that the first floor of the home has been zoned to permit a retail business without determining how such a use would be permitted in an area otherwise zoned for single-family residences. I know of an agent who made such a representation when the business use was permitted by way of special exception that was extremely limited. Only after purchasing the property did the buyers learn that the property was not zoned for business use, but granted a special exception for use other than what the buyers intended for that first floor. The result . . . a successful suit against the listing salesperson who could have easily obtained from the borough's secretary a copy of the order granting the special exception with all of its limitations.

Do not believe that the liability for inaccuracies in the MLS system rests solely with the listing agent and/or seller. Buyer agents understand far better than the general public that information contained in the MLS is fraught with inadvertent inaccuracies. Make sure that the buyer understands that the MLS is a secondary source of information that is pulled from public records and other sources. Transcription errors are not infrequent and it is also possible that the public records are inaccurate!

A buyer who relies on MLS information should be advised to add a provision to the Agreement of Sale stating that buyer's decision to purchase the property is based on seller's representations (state with specificity the representations relied upon), which the seller represents and warrants to be accurate. It won't hurt to add "This warranty to survive settlement." Including MLS published representations as a term of the Agreement shifts the risk of accuracy squarely on to the seller's shoulders. A buyer agent who fails to underscore and explain that MLS information is general in nature and indeed not a guarantee that the information is 100% accurate, may find himself the defendant. It is not necessarily the duty of the buyer agent to know precisely all details of the property that are normally set forth in the MLS print-outs. It is sufficient for the buyer agent to advise that the information contained in the multi-list is generally not guaranteed and if the buyer needs to have accurate information, additional verification may be required. That additional verification may be as simple as determining the source of the seller's information or asking for photocopies of taxes or other documentation. "I don't know" is a reasonable answer; of course, it usually leads to "Well, please find out."

One law suit can be such an expensive and deflating experience. The additional effort to verify the accuracy of MLS information and incorporate additional provisions in the Agreement of Sale are well worth the time and effort.