The Iowa Association of Realtors is trying to shut down a local for-sale-by-owner real estate advertiser for allegedly operating a real estate business without a broker’s license. The association last week filed a lawsuit for an injunction against AgentsBeware.com and its operator Jeremy Smith.
The association alleges the Web site is illegally acting as a real estate broker. But Smith argues the company acts only as an advertising service, much like sites like eBay that connect buyers with sellers via the Internet.
“We’re not a broker–we’re an advertising outlet,” Smith said.
Despite the company’s cheeky name and aggressive “Taking a bite out of commission” motto, Smith doesn’t believe the company directly competes with real estate agents for clients because it targets sellers who want to sell their homes themselves. He said the name is “risqué so people will remember it.”
Home sellers purchase a $150 or $350 advertising package from AgentsBeware and the company posts the home on the Web site along with details, photographs and home seller contact information. The company also provides a yard sign for home sellers.
According to the seller’s contract posted on the AgentsBeware.com, the company does not offer pricing, tax or legal advice to home sellers. Smith said the operation does nothing beyond taking photographs, collecting property details, posting the ad on the Web site and providing the sign. The company doesn’t help sellers show the property to prospective buyers.
Paul McLaughlin, legal counsel for the Iowa Association, said AgentsBeware.com goes beyond the type of advertising typically provided by newspapers because it accepts listings, provides yard signs and procures buyer prospects.
“They’re easily distinguished (from) a normal newspaper real estate listing,” McLaughlin said.
The complaint outlines nine acts that define a real estate broker in Iowa. Among the law’s definition of a real estate broker is one who “assists or directs in the procuring of prospects, intended to result in the sale, exchange, purchase, rental or leasing of real estate.”
McLaughlin also pointed out the action that defines a real estate broker as one who “advertises or holds oneself out as being engaged in the business of selling, exchanging, purchasing, renting, leasing or managing real estate.”
AgentsBeware advertises its services locally in the Des Moines area. The debate is over how to define those services.
Since the company launched in April, approximately 150 to 200 homeowners have advertised their homes for sale via the Web site, Smith said.
Smith has no experience in the real estate business. His background is in sales and marketing. He started AgentsBeware as a way to give homeowners more resources to be able to sell their homes on their own.
“Like most people out there, I’ve got a handful of friends and family trying to sell a home on their own,” he said.
The Iowa Association sent Smith a notice in August, advising him that he needed to obtain a broker’s license. The company wrote back to the association, saying it would continue to do business without a license because it didn’t believe it was violating any laws, Smith said.
The action taken in Iowa follows similar incidences in New Hampshire and California.
In August, the New Hampshire Association of Realtors filed a complaint against ISoldMyHouse.com, asking that the for-sale-by-owner Web site be sanctioned for allegedly acting as a broker without a license. Like AgentsBeware, ISoldMyHouse.com argued that it is a classified advertising service, not a real estate brokerage. The ISoldMyHouse.com Web site is still in operation.
In addition, the California Department of Real Estate in 2001 began issuing warnings to operators of Web sites that sell classified advertising of for-sale-by-owner houses, saying they needed to obtain a real estate broker’s license to continue doing business in the state. In 2003, ForSaleByOwner.com, a Web-based real estate advertising company, refused to go along with the state’s demand and filed a lawsuit against the California DRE.
The California case is pending. A federal court in Sacramento is expected to issue a ruling in the next few months after hearing motions for summary judgment a few weeks ago.
The Institute for Justice, a non-profit, self-described “libertarian public interest law firm,” filed the suit on behalf of ForSaleByOwner.com. The Institute claims California’s real estate law represents an unconstitutional prior restraint on speech and alleges the practice is invalid regulation of commercial speech that discriminates against certain companies based on the type of media they use–in this case, the Internet.
The California suit is “an important test case with broad implications for e-commerce,” according to the Institute for Justice.
“Information is more important to the economy than ever before, yet government remains a serious impediment to its free flow and the economic benefits it promises,” the Institute said in a statement released in September. “These laws harm businesses and consumers, stifle innovation, and perpetuate wasteful and antiquated business practices.”
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