A mortgage company that operates a for-sale-by-owner Web site doesn’t need a real estate brokerage license, the New Hampshire Bank Department commissioner has ruled.
The New Hampshire Association of Realtors in August filed a complaint against ISoldMyHouse.com, which offers Internet advertising of for-sale homes for a minimum fee of $95. An estimated 300-400 homes are sold each week through the site, “with no real estate broker involved,” according to information at the company’s Web site. ISoldMyHouse.com is operated by 1-800-East-West Mortgage Company, Inc., which is a subsidiary of a state-chartered bank in Massachusetts.
Though the Realtors association filed the complaint with the New Hampshire Real Estate Commission, East-West challenged the commission’s jurisdiction and the state’s Banking Commissioner found that the content of the complaint “is expressly subject to the banking department’s examination” and that the department has “full jurisdiction over East-West’s alleged conduct.”
Peter C. Hildreth, commissioner for the New Hampshire Bank Department, ruled that the mortgage company “is performing activity which is both permitted to banking subsidiaries in New Hampshire and is not real estate ‘brokerage’ as defined under banking law or under state law.”
Hildreth’s decision provided for a 10-day window in which the New Hampshire Association of Realtors or the New Hampshire Real Estate Commission may file arguments on the issue of whether the mortgage company is engaged in the brokerage business. If there are additional arguments, then East-West will be allowed up to 10 days to respond to this follow-up complaint.
While the mortgage company had requested a no-action statement to establish that its for-sale-by-owner conduct “is legal and permitted,” Hildreth’s decision states, “we find no need to publicly proceed at this time with such a no-action letter.”
ISoldMyHouse.com appears to function “much like a classified ad,” Hildreth also ruled, and its activities “fall squarely under ‘finder’ activities that are traditional banking activities.”
“(East-West) has not signed a brokerage agreement with anyone, has not represented anyone as an agent or a fiduciary for the sale, purchase or other disposition of real property and, by charging a flat fee for its advertising, has not had its compensation contingent on any event having to do with the eventual sale of an advertised property,” Hildreth’s order states.
Paul Griffin, executive vice president for the New Hampshire Association of Realtors, was not immediately available for comment today.
Reached by telephone today, Hildreth said that New Hampshire law clearly states that the bank commissioner has “exclusive jurisdiction” in matters related to allegations over unfair and deceptive practices for companies licensed by the department. “It is pretty clear to me what exclusive means,” he said.
Hildreth said the group that filed the initial complaint might not have been aware of the Banking Department jurisdiction in such matters.
Chris Gallagher, a lawyer who is representing ISoldMyHouse.com, said “there is in this matter a compelling irony” because the New Hampshire Association of Realtors has argued that this banking entity should obtain a real estate brokerage — meanwhile, the National Association of Realtors has been lobbying hard to keep banks out of the real estate brokerage business.
“I really don’t understand why they’re doing what they’re doing,” he said. If an entity such as an Internet-based property advertising service is required to obtain a brokerage license, then it could similarly be argued that multiple-listing services, as property advertising vehicles, should be required to obtain a real estate brokerage license.
In California, a federal court judge ruled last month that the state’s enforcement of a law to require Web sites to obtain a real estate brokerage license violated First Amendment protections. ForSaleByOwner.com, a company that offers Internet property listings for a flat fee, had issued the complaint about this state law, which exempts newspapers from obtaining a brokerage license.
Gallagher said that the California case related to constitutional issues, while the New Hampshire case had more to do with jurisdiction. But there are some commonalities in court cases that have been cropping up across the country over real estate property listings, he said. “There is, I think, a level of concern at all levels of judicial review and scrutiny as to how aggressively the real estate business model is going to be protected from competition or is going to be prolonged, allowed to continue.”
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