When One Sotheby’s agent Kevin Tomlinson was charged with extorting Coldwell Banker star brokers “the Jills” over manipulating the Multiple Listing Service, it exposed what many agents claim is a common practice in the industry. This one, however, was particularly egregious, market pros said.
In the case of Jill Eber and Jill Hertzberg, Tomlinson found they had manipulated the data by hiding homes with listings older than six months. That inflated the Jills’ performance in Miami Beach’s ultra-competitive luxury home market. At Tomlinson’s trial in June, Eber and Hertzberg blamed an employee, saying they weren’t aware of what was happening. Tomlinson was ultimately convicted of trying to extort $800,000 from the Jills, and on Friday a judge sentenced him to extended probation and barred him from working in the real estate industry.
But in addition to boosting the stock of brokers, MLS manipulation can affect home appraisal amounts, mortgages and comparable sales, in addition to market-wide data.
“Every market report is based on those numbers,” Beth Butler, managing broker of Compass Florida told The Real Deal. “We have to have confidence in their accuracy. How can we do that?” Butler, who is a friend of Tomlinson, said the actual manipulation that Tomlinson uncovered has had a far-reaching effect on the industry. Thanks to the Jills, she said, “everybody knows how to do this.”
Aaron Farmer, a former president of the Austin Board of Realtors in Texas, called it a case of “extreme manipulation. It damages the data integrity,” he said. Farmer added, “it does affect pricing.”
David Kully, an antitrust attorney, said he has never seen anything like the Jills’ manipulation of the MLS before.
“This is an egregious form of cheating,” said Kully, at Holland & Knight’s Washington, D.C. office. Kully previously worked in the Department of Justice’s antitrust division, where he worked on an investigation into the National Association of Realtors. “People who do fraudulent things, where there is a deliberate intent to deceive can face fraud charges,” he added.
Despite that, no complaints have been filed against the Jills, and the state Attorney General’s Office said it isn’t investigating them. Juan Carlos Otoya, the employee who Eber and Hertzberg say carried out the manipulations, has not been punished. Industry experts say the Jills did not face charges because the practice of MLS manipulation is so widespread. At trial, Eber acknowledged as much. “We didn’t think it was wrong,” she said during her court testimony.
The case all started after Tomlinson, a competitor of the Jills, dug through their team’s listings. He found the Jills had manipulated dozens of listings hundreds of times. They had also erased more than 20,000 days on market from those listings, in theory making the homes more attractive to potential buyers. Though he filed a complaint with the Miami Association of Realtors, his allegations were overshadowed by his arrest on extortion charges.
Included in Tomlinson’s original 2015 complaint is a Golden Beach oceanfront estate owned by fashion mogul Tommy Hilfiger and his wife, Dee Ocleppo. The Jills were the brokers on both sides of that listing. Hilfiger and Ocleppo paid $17.25 million for the mansion in 2013, three years after it first went on the market. The home at 605 Ocean Boulevard was manipulated eight times, he found. Some of the those included making changes to the area, folio number, legal description, township/range, section, subdivision code and parcel number. The couple listed the six-bedroom home for sale in early 2017 for $27.5 million.
In Tomlinson’s complaint, he asked the association: “Do you think the manipulated listings, which erased 522 [days on market] prior to him purchasing the home, will give him a false sense of the home’s desirability considering that when he purchased the home it was only on the market for 175 days…?”
While the practice may be common, Butler compared it to price fixing.
“You make a different offer if you know a property is on the market for 30 days, not 400,” she added.
Keith Larsen contributed reporting.