With a federal court ruling in its favor, ForSaleByOwner.com likely will pursue a more aggressive marketing strategy in California, according to Colby Sambrotto, chief operating officer for the company.

A federal judge ruled Nov. 19 in a U.S. District Court in Sacramento, Calif., that the state of California violated First Amendment rights in requiring Web sites to obtain a real estate broker’s license in order to display property listings.

With a federal court ruling in its favor, ForSaleByOwner.com likely will pursue a more aggressive marketing strategy in California, according to Colby Sambrotto, chief operating officer for the company.

A federal judge ruled Nov. 19 in a U.S. District Court in Sacramento, Calif., that the state of California violated First Amendment rights in requiring Web sites to obtain a real estate broker’s license in order to display property listings. The state in 2001 began to enforce a 1950s law that exempted newspapers from obtaining a license to show real estate listings while requiring other companies to obtain a license.

The state has 30 days to consider whether it will appeal the decision.

ForSaleByOwner.com filed the lawsuit in 2003 charging that the state law was unjust. Sambrotto said this week that he doesn’t expect the ruling to have an immediate impact on his company’s business. “The only impact it will have on us will be a little bit longer term. We will start to enact some larger marketing strategies (in California),” he said, and he expects the company to have a bigger push in the state.

“We’re definitely on surer footing in California. We’re not going to try to push the envelope – we just want to be able to do what we’ve been doing in other states.” The lawsuit did not disrupt business, Sambrotto said, as ForSaleByOwner.com was allowed to continue doing business in California throughout the course of the litigation. He said California “is our most important state,” given its population.

Sambrotto said his company received phone calls of support from other companies after the ruling.

New York City-based ForSaleByOwner.com, founded in 1997, is a national real estate services company that allows home buyers and sellers to connect online without the need for a real estate agent. The company accepts home listings for a flat fee, in exchange for marketing the properties online. ForSaleByOwner.com also offers links to mortgage providers, title companies, lawyers, home inspectors and appraisers, home improvement services, relocation services, credit reports, property valuation tools, and real estate contracts and forms. The company has 19 employees.

Steve Udelson, president of San Francisco-based Owners.com, a national for-sale-by-owner Web site that charges a flat fee for online property listings, said the ruling on the lawsuit could prompt changes in real estate law. “I don’t think many things in commerce can be regulated based on 50-year-old laws. By taking a fresh look at it, they may find that (the lawsuit) was a blessing in disguise and come up with a better fit for today’s reality,” he said.

“In doing so they should definitely keep in mind that homeowners have a right to sell houses without paying for any services.” Udelson said that any law that serves to restrict homeowners’ rights to sell a home themselves may appear protectionist. “You can’t strong-arm consumers, limit their choice and create a monopoly for an industry,” he said.

The judge’s ruling was “pretty intelligent in seeing that there’s no benefit to consumers in discriminating against one type of media versus another” in real estate property listings, Udelson said.

The California Department of Real Estate certainly has a role in protecting consumers and regulating the industry, and the line between real estate companies and companies that provide a medium for real estate advertising is blurry in some cases, he added.

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“I suspect the Department of Real Estate became more concerned with companies that are providing more substantial services, and having those lines of business in-house that are closer to the services that are traditionally provided by real estate companies,” he said.

Those Web-based companies that serve as “electronic billboards” in advertising property listings should not be subject to the same regulations as full-fledged real estate brokerages, he said. Otherwise, he said, it could be argued that Home Depot is offering real estate services by selling for-sale signs, or that FedEx Kinko’s is offering real estate services by supplying paper and ink for home-sale fliers. Most of Owners.com revenue comes from marketing relationships with mortgage and real estate service providers, Udelson said, and not from fees for listings.

Taking a fee for marketing properties on the Internet is arguably the same thing as paying for a classified ad in a newspaper, and it is difficult to distinguish between a payment for real estate services versus a payment for advertising in the case of some listing-only business models, he said. Just as the online music-sharing industry evolved over time to synch with existing laws and consumer demands, alternative real estate business models can also evolve, he said.

“If you want the world to move forward and commerce to continue to flow, you’ve got to make compromises on both sides to keep things online,” Udelson said.

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Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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