How to Avoid a Real Estate Lawsuit When MLS Gets Things Wrong

house plans with ruler square footage

Using a multiple listing service (MLS) has benefits for agents, but what if your MLS gets information wrong? Let’s look at how you can protect yourself from a real estate lawsuit and serve your client in this situation.

Recently, we spoke to a broker who uses the MLS in his area. The MLS automatically populates the listings with square footage. While this may sound like a convenient feature, unfortunately, the square footage populated by MLS can be wrong. MLS pulls from property tax rolls, but property tax rolls may not be up-to-date if there were additions that added to the total home square footage.

Providing inaccurate or conflicting square footage of a home can lead to a real estate lawsuit. Horiike v. Coldwell Banker is just one example. In this case, the selling agent overstated the home’s square footage in the listing and did not correct or disclose knowledge of the inaccuracy. The courts sided with the buyer.

Back to the broker who called us about the MLS . . . since the challenge in his case originates with the MLS, it has the potential to affect many agents and brokers who use the service to review the broker’s listings. As with the case cited above, not correcting or disclosing knowledge of inaccuracy can contribute to a court’s decision to rule against the real estate brokerage.

The broker realized this error after it may have affected his past and current listings and sales. He wondered about his liability for inaccurate MLS listings, because all agents are responsible for their real estate marketing materials, including MLS listings.

Wisely, the insured broker called CRES ClaimPrevent® Legal Advisory, and an attorney advised him to take two key steps:

  • Notify the local MLS of inaccuracies.
  • Advise his buyer clients in writing to obtain surveys and appraisal for lot size and square footage due to known discrepancies (the same advice is prudent for seller clients).

In addition, legal counsel provided a comprehensive overview of items of disclosures to minimize risk. The broker was directed to document everything in writing within the client’s transaction file: when he learned of the MLS issue, what action he took to correct the matter and notify his client, and what he specifically advised his client to do.

Even when an error occurs, you can take steps to limit your liability. CRES E&O + ClaimPrevent® can help. When you realize that MLS has incorrectly calculated square footage on your listings—or identify another error that keeps you up at night—CRES has a local expert legal team ready to advise you.

What problems have you had with MLS listings and how did you handle them?

This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.

Originally Published May 17, 2017

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