July 31, 2014

Does advertising a home “For Sale By Owner” make you a real estate agent?

By Does advertising a home “For Sale By Owner” make you a real estate agent?

That’s what Nebraska bureaucrats think.

Meet California entrepreneur Leslie Young. From her home in Northern California, Leslie runs a business called elist.me, which helps people to advertise their homes for sale on a For Sale By Owner basis. If you want to sell your home, you pay a fee and provide her with information about your home, and she puts it into a database that feeds to websites like Forsalebyowner.com. Then people looking for houses can search the website and find what they’re looking for.

Of course, Leslie doesn’t show homes, or negotiate deals, or represent people or anything—because she’s not a real estate broker, just an advertiser. But that didn’t stop Nebraska officials from declaring that she was practicing real estate brokerage without a license, and ordering her to stop advertising any property located in the Cornhusker State. If you want to advertise, they said, you have to get a license. And to get a broker’s license requires extensive education and testing—education which has nothing to do with advertising for-sale-by-owner homes, of course. It’s like requiring an architect to get a law license.

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Today, we filed this motion with the federal district court in Nebraska asking it to declare the Commission’s acts unconstitutional. For the state to require someone to get a real estate agent license just to advertise violates the First Amendment—and the right to earn a living.

Nebraska law defines a real estate broker as a person who “procures prospects” for the sale of real estate, or who “attempts to negotiate a listing,” or who “holds herself out” as a real estate broker. None of these terms is defined in any statute, regulation, or court decision, and the state’s Real Estate Commission admitted in deposition testimony that they basically make it up as they go along—deciding by majority vote, and without any guidelines, what qualifies as “brokerage.”

Even more disturbingly, the Commission interprets these terms as all referring to free speech. That is, it interprets “procuring prospects” as informing the public that there’s a house for sale. And “negotiating a listing,” it says, means arranging a contract to advertise someone’s property. But the First Amendment protects the right to advertise. Although advertisements are often treated as less important than other kinds of speech, in fact the Constitution makes no distinction—and as the Supreme Court has acknowledged, commercial ads are often more important to people’s daily lives than any other kind of free speech. It’s shameful that government—and the cronies who benefit from censorship—so often use licensing laws to prevent people from a harmless occupation like helping people advertise real estate.

It’s arbitrary, too. Nebraska officials don’t punish newspapers, for example, that run classified ads. And the law includes exemptions that prove it’s not about protecting consumers. For instance, you’re allowed to advertise your own home for sale on a by-owner basis. The Commission says the reason it wants to force Leslie to take a bunch of classes and pass an examination about real estate brokerage is to protect consumers against errors or fraud in advertisements—yet the Commission does not require a person to get a license before advertising his own home for sale, even though a seller has a much greater incentive to mislead the public about a home for sale. And trustees and relatives of a property owner are also exempt.

The reason is that this law isn’t about protecting the public. It’s about protecting Nebraska real estate agents against legitimate competition. As the Justice Department reported not long ago, the real estate industry has often tried to use the law to protect their turf against the free market. “Overly broad licensing requirements, particularly those applicable to firms that advertise FSBO homes,” reported the Department, are a “type of restraint that is likely to reduce competition and consumer choice.”

Now that our motion is filed, the state has three weeks to respond, and then we get another two weeks to reply. Then it’s up to the court to decide whether to hold a hearing. We anticipate a ruling by early winter. For more on Leslie Young’s fight for free speech and economic liberty, click here.

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