Advertising a Home Sale Requires a Broker’s License, California Claimed

California regulators nearly shut down a company for offering homeowners the opportunity to advertise their own homes for sale on the Internet.

California Tries to Require Broker’s Licenses for Web Sites Carrying Real Estate Ads

Some homeowners choose to forgo the high cost of real estate sales commissions by selling their homes themselves.

In 1997, Damon Giglio opened up a whole new world for independent sellers with the creation of the website. For up to $700 a listing, sellers can make their homes available to a nationwide market of prospective buyers. Regulators in California, however, tried to force Giglio and the owners of similar sites to become licensed brokers. This would have ruined Giglio’s business in California and may have led to new restrictions in other states.

In 2001, Giglio received notice from the California Department of Real Estate advising him that anyone advertising property listings in the state must be a licensed broker. In collecting a fee to “list,” “advertise” or “offer” properties for sale without state certification, one runs the risk of individual penalties of up to a $10,000 in fines and six months in jail and up to $50,000 in fines for businesses.

Getting a broker’s license is a costly endeavor. Giglio contends the two-year, college- level process is unnecessary for his service – essentially posting on-line classified ads. Even though for-sale-by-owner classified ads have appeared in California newspapers for years without newspapers being penalized, state regulators have forced at least one of Giglio’s Internet competitors out of the California market.

With the assistance of the Institute for Justice, Giglio won a lawsuit against California regulators in the U.S. District Court for the Eastern District of California in Sacramento. Federal District Judge Morrison England found the distinction that requires independent websites to obtain a broker’s license while exempting newspapers that print real estate advertisements was “wholly arbitrary” on First Amendment grounds. The court ruled that “there appears to be no justification whatsoever for any distinction between the two mediums.”

In 2004, the State of California decided not to appeal the decision.

Sources: Institute for Justice, USA Today (May 19, 2003)

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