Turn up the volume on your real estate success at Inman On Tour: Nashville! Connect with industry trailblazers and top-tier speakers to gain insights, cutting-edge strategies, and invaluable connections. Elevate your business and achieve your boldest goals — all with Music City magic. Register now.
Online discount broker Derek Eisenberg has filed lawsuits in two states alleging their requirements that brokers have an in-state brick-and-mortar office to do business are unconstitutional.
Eisenberg first sued officials from the West Virginia Real Estate Commission, the Nevada Real Estate Commission, and Nevada’s Department of Business and Industry in December. West Virginia filed a motion to dismiss Eisenberg’s suit on Monday, March 3.
Derek Eisenberg
“[West Virginia] instituted the physical office policy 2 years ago,” Eisenberg told Inman via email.
“Nevada has had it for years. There are 9 states (7 others) with similar policies requiring a physical office: [Alaska, California, Kentucky, Hawaii, Missouri, Ohio and Washington].”
Eisenberg is president of Continental Real Estate Group, which operates entirely online under a fee-for-services business model in 45 states and Washington D.C. He himself holds a broker’s license in 26 states, including West Virginia and Nevada.
His goal is to expand nationwide to all 50 states by the end of 2025, but contends that the thousands of dollars to comply with states’ brick-and-mortar requirements threaten those plans.
“States shouldn’t stifle innovative business models that make everyone better off,” said Anastasia Boden, senior attorney at Pacific Legal Foundation, which is representing Eisenberg, in a statement.
“In-state office requirements are antiquated and anti-competitive. Because they no longer serve any legitimate purpose, they deprive people of their constitutional right to earn a living.”
According to an amended complaint filed by Eisenberg in January, the West Virginia Real Estate Licensing Act was amended in 2023 to require anyone with a West Virginia broker’s license to maintain a brick-and-mortar office in the state and to conduct their business there. Violations of the law can result in fines in the thousands of dollars and up to 90 days in jail.
“Those demands are not rationally related to ensuring broker competency, maintaining access to records, or otherwise protecting West Virginians,” the amended complaint says.
“Instead, the only apparent purpose is to protect in-state real estate brokers from legitimate out-of-state competition. And the effect is to burden the interstate market for real estate services and to deprive innovative companies like Plaintiff’s from thriving.”
The complaint notes that Eisenberg would not maintain an office in West Virginia if not for the legal requirement due to the expenses associated with paying for “rent, administration, delivery, inspections, … staffing, travel, and logistical expenses.”
The filing adds that Eisenberg can do everything required of a broker without a physical office.
“That is, he can send forms, secure signatures, offer regulators access to his records, and communicate with clients virtually,” the complaint says.
“In fact, before the law was passed last year, he operated in the state for 13 years without an office. The in-state office requirements therefore impose costs solely for anti-competitive purposes without offering any real benefit to West Virginians.”
The complaint alleges the law is violating the Interstate Commerce Clause of the U.S. Constitution because it discriminates against out-of-state brokers wishing to do business in West Virginia.
“Resident brokers may designate their home or first office as their definite place of business, while non-resident brokers must incur additional costs to establish an in-state office to do business in the state,” the filing says.
The complaint also alleges the law violates the U.S. Constitution’s Privileges and Immunities Clause because “states may not discriminate against citizens from another state in their ability to exercise their privileges or immunities, including their right to pursue a common calling within the state” as well as the Constitution’s Equal Protection Clause and Due Process Clause.
“The Fourteenth Amendment protects the right to pursue a lawful calling without arbitrary government interference,” the filing says.
The complaint asks the court for a permanent injunction prohibiting the defendants from enforcing the in-state office mandate and for an award reimbursing the costs of filing the suit.
Eisenberg’s complaint against Nevada officials is nearly identical to the West Virginia complaint. Nevada officials have yet to respond to Eisenberg’s suit in that state.
But on March 3, the West Virginia Real Estate Commission filed a motion to dismiss the former suit, maintaining that the in-state office requirement is not discriminatory because it is applied “evenhandedly to residents and nonresidents alike.”
The commission emphasized that the mandate was enacted for a legitimate state interest: broker accountability.
According to the filing, the law requires that licensed brokers’ “records shall be open to inspection … at all times during regular business hours at the broker’s place of business” and that the commission is authorized to examine a broker’s records when there is a complaint alleging violations of the law or the commission’s rules.
“These provisions all contemplate in-person inspections at the broker’s instate office as a means of holding brokers accountable,” the motion says.
“In-person, all-times inspections provide a measure of accountability that can’t be obtained from a requirement to provide records ‘upon request.'”
The filing asserts that it is unreasonable for nonresident brokers to be exempt from in-person inspections or for the commission to be expected to send investigators to other states for in-person inspections.
“Cash-strapped States and time-constrained inspectors could not take on those additional tasks,” the filing says.
“And even if they could, they might struggle to establish jurisdiction over offenders in far-flung places; courts well know the pains that long-arm jurisdiction can present.”
The commission also said the in-state office requirement served to ensure broker competence.
“Because real estate is about location, location, location, people who hold a State-issued license to ‘assist[] in the procuring of [real estate sales] prospect[s]” need a basic, on-the-ground familiarity with West Virginia properties,” the filing says.
“The same goes for people who hold themselves out as professionals who ‘negotiate’ real estate listings, sales, or purchases.
“And some degree of integration into the community can help keep these brokers accountable; with a presence in the State, brokers may feel local social pressure to conduct themselves professionally and competently.”
According to the commission, Eisenberg is exaggerating the alleged burdens of complying with the requirement, noting that the law requires brokers to have a room or rooms in the state but does not dictate the size of the room or how it must be used to conduct business.
“Given Plaintiff’s business model, having a room where clients pick up or drop off ‘rent[ed] lockboxes’ fits the bill,” the filing says.
The commission downplayed Eisenberg’s contention that resident brokers can work from their homes to satisfy the requirement.
“[U]nless ‘more than a few’ brokers work ‘from their homes,’ ‘any [hypothetical] advantage [that] inures to resident [brokers] in this regard is minimal,'” the filing says.
Lastly, the commission’s motion noted that Eisenberg shares a 3,468 square-foot building in West Virginia valued at less than $260,000 with 19 other real estate businesses.
“Tellingly, 15 of those other real estate businesses hail from other states,” the filing says,
“So the in-state office requirement isn’t imposing much cost on Plaintiff—or keeping nonresident brokers out of the West Virginia market.”
Eisenberg told Inman his attorneys at Pacific Legal have until March 17 to file a response and will do so.
“I doubt it will get dismissed,” Eisenberg said.
“There is also lots of case law in parallel industries where their mandatory office activity has been curtailed by the courts.”
Editor’s note: This story has been updated to note that Continental Real Estate Group operates in 45 states and plans to expand to all 50 states by the end of 2025.
