FSBOs, FSBO Site Win California Court Victory
by Broderick Perkins
ForSaleByOwner.com doesn't need a broker's license to publish paid ads listing properties for sale any more than a newspaper or other print publication does in California. That was the ruling recently handed down by Sacramento U.S. District Court Judge Morrison C. England Jr. after California's Department of Real Estate filed a cease and desist order against the New York City company. The company, in turn, sued California. Under a four-and-a-half-decades-old state law, only licensed real estate brokers can collect advance fees for publishing listing data. Newspapers, which only carried ads in print when the law was first enacted, now also run the ads online, but are exempt from the law. Technological advances that easily allow a company to place homes for sale online was the plaintiff's primary argument against the cease and desist order. The judge apparently agreed. In his ruling England said the exemption "appears wholly arbitrary." "Even if a distinction was warranted in 1959 ... that does not mean that the same rationale for exempting newspapers remains viable in 2004, given the vast advances in technology that have occurred in the meantime," the judge wrote in his opinion. ForSaleByOwner.com operates in 50 states with online and print services. The company charges home sellers a flat fee of up to $699 to display their property for sale on its website where buyers and sellers can meet without a real estate agent. Sales can proceed commission-fee, provided the buyer also does not use a real estate agent. The website also offers phone consultations about the ads sellers post, yard signs, listings in multiple listing services, home selling advice, coupon giveaways and other services. Sellers and buyers primarily go the FSBO (for sale by owner) route, not for those services, but to save money on the commission, which averages 6 percent of the price of a home sold (half to the agent representing the buyer and half to the seller's) in California. The real estate industry says that's being penny wise and pound foolish. A real estate transaction is a highly detailed and specialized transaction with numerous components not easily grasped in the time it takes to sell a home. Real estate agents who spend a career gaining experience specific to the transaction are much better equipped to represent consumers -- much as stock brokers, mutual fund managers, and certified public accountants assist consumer with personal finance and investment matters, the industry says. FSBO proponents don't agree. They say many real estate transactions don't require an agent, say if a real estate attorney is used to approve the contract. Transactions between friends, family members and other cooperating parties also don't always need real estate agents, proponents say. Both sides agree the Internet has helped increase consumer knowledge about the real estate transaction while boosting the FSBO-like industry segment of discount brokers and Internet-based real estate companies that charge smaller commissions or offer rebates or both, often without full-service real estate assistance. In some quasi-FSBO transactions the seller and/or buyer work less with a real estate agent and do some of the leg work themselves to make the transaction gel. In any event, for now, websites can give FSBOs in California an MLS-like forum to sell their homes. Supporters of the ruling say it sends a message to the real estate industry to avoid anti-competitive practices. Critics of the ruling say online real estate services nevertheless need some level of regulation just as the general real estate industry faces. Both sides say real estate consumer protection online is the paramount issue as the vast majority of consumers use the Internet to shop for homes. California's Department of Real Estate is reviewing its options to either appeal the decision or review the state statute. | 
