The outcome of a recent legal dispute between a for-sale-by-owner Web site and the California Department of Real Estate was a major victory for existing FSBO Web sites and could spur larger competitors to commit more resources to the online FSBO opportunity.

The dispute arose when the state agency attempted to enforce a state law that required outlets other than newspapers to obtain a brokerage license to advertise property for sale.

The outcome of a recent legal dispute between a for-sale-by-owner Web site and the California Department of Real Estate was a major victory for existing FSBO Web sites and could spur larger competitors to commit more resources to the online FSBO opportunity.

The dispute arose when the state agency attempted to enforce a state law that required outlets other than newspapers to obtain a brokerage license to advertise property for sale. The Web site, which sells online ad spots to for-sale-by-owner home sellers for a flat fee, challenged the agency’s order to cease advertising California properties for sale without a brokerage license. But a federal judge found the agency hadn’t established why the Web site should be required to obtain a license while newspaper-operated Web sites weren’t subject to the same requirement.

The ruling, which the state agency has said it will not appeal, suggests that Web sites not operated by newspapers don’t need to obtain a real estate brokerage license to sell FSBO advertising space online, at least in jurisdictions where the ruling applies. Prominent Web sites like Craigslist and eBay, to name just two, along with apartment rental Web sites, among others, could read it as an invitation to allow FSBOs to advertise their own property for sale online in a bigger way than has been the case thus far.

EBay already contains a small inventory of FSBO properties and its intention to acquire the Rent.com Web site in a deal valued at $415 million indicates its willingness to bet big on the real estate space. Rent.com is a high-traffic apartment rental Web site that operates in 1,500 metro markets.

Craigslist, a true force majeure in online classified advertising, also already contains FSBO advertisements, along with room, apartment and vacation rentals, house swapping opportunities and other real estate-related notices. The community Web site is a formidable competitor that has cost San Francisco area newspapers some $50-$65 million in employment advertising revenue, according to a report by Classified Intelligence, an independent newsletter that researches classified advertising trends.

Apartment rental Web sites also present intriguing opportunities for FSBO advertising because they’re a natural and popular resource for apartment hunters, who oftentimes are future home buyers. When today’s Web-savvy apartment renters decide to purchase a home of their own, will they call a real estate broker or will they return to the Web site where they found their rental apartment?

National apartment rental Web sites like ForRent.com and ApartmentGuide.com and the dozens or perhaps hundreds of local-level Web sites could be among those that might read the California ruling as an incentive to add or expand FSBO advertising. Could one of them become the FSBO MLS of the future?

The Apartments.com Web site is owned by Classified Ventures, a joint venture of six major newspaper companies. Classified Ventures also owns HomeScape, which provides online access to newspaper real estate classifieds. The argument that the state had a compelling interest to exempt newspaper-controlled Web sites from brokerage licensure while competitors that were not operated by newspapers were required to obtain a license simply did not hold water.

The Rent.net Web site is owned by Homestore, which also operates the Realtor.com Web site for the National Association of Realtors. Homestore’s agreement with NAR prohibits the display of FSBO advertising on Realtor.com.

The fact that FSBO sellers cannot access broker-controlled multiple listing services has stood as a reasonable and yet considerable roadblock to successful advertising of FSBO properties. A boom in FSBOs may be unlikely, given the complexities of real estate sales, yet the likes of eBay or Craigslist, a major apartment rental Web site, an existing FSBO Web site or even another as yet unanticipated entrant into the space could become the FSBO MLS of the future. Brokers shouldn’t discount the possibility, particularly now that the California ruling has removed the need for a brokerage license. Online listings-and-leads Web sites might want to pay attention because a large-scale FSBO Web site could be a magnet for the home buyers they wish to refer to realty brokers.

Finally, the California ruling may make existing FSBO Web sites more attractive as potential acquisition candidates for larger Web sites that want an entry point into the FSBO space. It’s not unreasonable to expect some consolidation soon. Nor is it unreasonable to anticipate that a major FSBO Web site could be in the cards.

Marcie Geffner is a real estate reporter in Los Angeles.

***

What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Success!
Thank you for subscribing to Morning Headlines.
Back to top