Inman News Innovator Awards - Most Innovative Blog Finalist

I know that few of you know me personally, but I hope you will accept my claim that, generally speaking, I am not one to boast, regarding professional acknowledgments or otherwise.

That said, I was pleased to see - and encouraged by others to share the fact - that Inman News, which annually bestows various "Innovator Awards" upon real estate industry participants, has named this blog as a Finalist for "Most Innovative Blog." Check out the announcement here.

I just wanted to share the good news with you, and thank you for visiting the blog.

Update on Marcus & Millichap litigation against the Kentucky Real Estate Commission

I noticed this article in this morning's Courier-Journal, which highlights yesterday's oral arguments on a pretrial motion in the Kentucky litigation I introduced in an earlier post. While the suit mainly involves commercial brokers and commercial real estate, the underlying issue presented - the reach of a state real estate commission and its regulations - is applicable to all real estate brokers. And, according to Kentucky Assistant Attorney General Stuart W. Cobb, you had better watch what you say if you are an out of state broker talking about Kentucky real estate, because “[r]eal estate brokerage is talking.” Check out the article to see what I mean.

Given positions taken by the California, New Hampshire, and, most recently, Missouri Real Estate Commissions as they relate to the operations of several innovative real estate websites, the issue of regulatory reach should be on everyone's radar.

Kansas City Premier Apartments v. Missouri Real Estate Commission - Update

Here is a copy of defendants’ Answer and Motion to Dismiss, apparently filed on June 8, 2007, in Kansas City Premier Apartments, Inc. ("KCPA") v. Missouri Real Estate Commission (“MREC”), et al. In the pleading, MREC asks the Court to deny KCPA’s prayers for relief and rule that KCPA's business activities constitute the practice of a real estate broker and/or a real estate salesperson and is the basis for an order to enjoin KCPA from engaging in such conduct. Alternatively, MREC seeks dismissal for failure to state a cause of action.

Interestingly, in response to the allegations contained in Paragraph 55 of the Petition, MREC states that it “believes that KCPA’s business activities are not fully described in its Petition . . . MREC believes discovery will be required to determine the extent and nature of KCPA’s business operations.” Funny how MREC thought it knew enough about KCPA to - on two occasions - tender a cease and desist letter to KCPA commanding it to cease its operations, but now, after KCPA has filed suit, MREC states that it needs discovery to “determine the extent and nature of KCPA’s business operations.”

Federal Trade Commission v. Realcomp Joint Stipulation

Barring some last minute settlement, the Realcomp trial is scheduled to kick off tomorrow in D.C.

Just posted on the FTC's website is the parties' jointly-filed Stipulation as to Law and Facts. While the stipulation consists of ten pages, the exhibit list filed along with the stipulation covers sixty-three (63) pages. I suppose this explains Realcomp's estimate of the trial's duration (two weeks). Realcomp has already filed its pretrial brief with the ALJ.

I noticed that the stipulation refers to "Realcomp's merger talks with MiRealSource" at paragraph 37. That's the first I have heard of such discussions.

Kansas City Premier Apartments v. Missouri Real Estate Commission

As first reported by columnist Dan Margolies of the Kansas City Star on May 21, 2007, Kansas City Premier Apartments, Inc. (“KCPA”) filed a Petition in the 6^th Judicial Circuit (Platte County) of Missouri on April 16 against the Missouri Real Estate Commission (“MREC”) and its five commissioners. Why? Well, first it was ForSaleByOwner.com. Then ZeroBrokerFees.com. Now it's KCPremierApts.com that is being told that, unlike newspapers circulating throughout the state, it must first obtain a brokerage license to advertise properties online.

KCPA operates an Internet website that “provides information content about current apartment, loft and house rentals” in the Kansas City metropolitan area. The company “contracts with local rental proprietors to advertise information about available apartment, loft and house rentals on the KCPA website . . . [t]he rental information shown on the KCPA website about available rentals units is provided by [the] rental proprietors.” The resulting database compiled by KCPA “is searchable by the general public at no cost.” It is my impression that KCPA, understandably, has never held a real estate brokerage license.

KCPA’s compensation system is just as innovative as its online display of rentals. “[F]ees are only payable by a proprietor at the time an individual who used the KCPA website search portal to find a potential rental property, then contacts the proprietor and voluntarily communicates that his/her interest arose after using the KCPA website, then signs a lease or rental agreement and then actually moves-in. At this juncture an agreed to advertising fee as set forth in the advertising contract is owed to KCPA.”

But too innovative, apparently, for the MREC. KCPA has received two cease and desist letters to discontinue its service. The latter of the two, dated March 22, 2007, was sent by counsel for the Missouri Department of Economic Development, Division of Professional Registration, on behalf of the MREC. The letter makes no mention of any investigation other than MREC’s review of KCPA’s website, and commands KCPA to “immediately cease and desist from operating as a real estate broker or salesperson in the state of Missouri without the required Missouri real estate license.” For good measure, counsel adds that “operating as a real estate broker or salesperson without a license is a criminal offense . . . [f]ailure to abide by this request will result in this matter being officially directed to the Missouri Attorney General’s Office and all applicable prosecuting authorities for official immediate legal action against [KCPA].” (emphasis in original). Counsel advises that the applicable real estate brokerage law “is valid and must be enforced by the Commission.”

Seeking guidance, KCPA filed suit, asking the Court to render declaratory judgments relating to MREC’s alleged violations of applicable statutory exemptions, due process, free speech, equal protection, and procedural failings. Defendants were granted an extension to file their Answer on or before today, June 8^th, and a preliminary hearing is scheduled for July 16, 2007.

I hope to follow this case closely. We know what happened in California, and my previous posts suggest how the New Hampshire case is going to be resolved. While I am not familiar with the Missouri statute at issue here, and have not seen the defendants' responsive pleading, this case would appear to present another strong basis for invalidating the subject statute on First Amendment grounds.

REALCOMP files pretrial brief with the Federal Trade Commission ALJ

As you may know, the FTC v. RealComp trial - scheduled to commence on June 19 in Washington D.C. - is just around the corner, the ALJ having dismissed RealComp's motion to dismiss. In a June 1, 2007 Inman News article, RealComp's CEO estimated the trial would last two weeks.

Earlier today the FTC posted on its website a pretrial brief filed on behalf of RealComp back on May 30. I've not yet read it, but presume it sets forth in significant detail RealComp's legal defenses to the FTC's allegations.

FTC/DOJ take position on new Michigan minimum service bill

“The FTC and DOJ continue to believe that no minimum-service legislation is necessary.”

-May 30, 2007 FTC/DOJ comments on Michigan HB 4416 at 5.

The Federal Trade Commission has approved the filing of joint FTC/U.S. Department of Justice comments with Michigan Governor Granholm regarding HB 4416, which relates to minimum service requirements for real estate brokers in Michigan.

The FTC’s press release notes that HB 4416 “is a revised version of 2005's HB 4849, which would have required Michigan real estate professionals to provide a specified array of services, requiring home sellers within the state to buy real estate brokerage services they may not want or need.”

While HB 4416 also requires real estate professionals to provide specified services, it allows consumers to waive the broker’s help in acceptance, presentation, development, and communication of offers and counteroffers; negotiations; and closings. However, the agencies advise “that there is still not evidence that any form of minimum-service law is needed to protect the state’s consumers.”

The comments also address a broker advertising provision contained in the bill, which provides that

A REAL ESTATE BROKER OR REAL ESTATE SALESPERSON REPRESENTING A SELLER UNDER A SERVICE PROVISION AGREEMENT SHALL NOT ADVERTISE THE PROPERTY TO THE PUBLIC AS "FOR SALE BY OWNER" OR OTHERWISE MISLEAD THE PUBLIC TO BELIEVE THAT THE SELLER IS NOT REPRESENTED BY A REAL ESTATE BROKER.

The comments include an interesting analysis of how this provision could affect yard signage. Bottom line, “[t]he FTC believes this provision could impose costs on certain non-traditional brokers, hindering their ability to compete.” As an aside, this provision reminds me some of recently enacted NAR MLS Policy Statement 7.87, which relates to potential restrictions that could be imposed by MLSs upon the upload of listings to websites like Realtor.com (e.g., certain listings where "the seller displays on the property a 'For Sale By Owner' sign or another sign or notice indicating that the seller is soliciting direct contact from buyers.")

The comments also address a concern relating to a provision that could require a broker acting under a service agreement to furnish, or cause to be furnished, a closing statement.

Tennessee governor signs anti-rebate bill into law

As a commenter on one of my prior posts has noted, and as reported on Tennessean.com, Governor Bredesen signed SB 1160, as amended, into law Wednesday evening, which immediately prohibits Tennessee real estate brokers from providing cash rebates, cash gifts or cash prizes to their customers. This law effectively overrules the judgment of the state's purported experts in the field - the TN Real Estate Commission - which was leaning toward the conclusion that such prohibition - embodied in a Commission regulation - was no longer desirable.

Specifically, Rule 1260-2-.33(2) of the Tennessee Real Estate Commission states that “[n]o cash rebates, cash gifts, or cash prizes may be paid to any person who does not hold a real estate license.” Yet the Commission was on the verge of repealing the rule. See page 2 of this Notice of Rulemaking Hearing pertaining to a May 2007 meeting of the Commission (“Rule 12602.33 Gifts and Prizes is amended by deleting paragraph (2).”). Thus with little if any meaningful debate before passing the bill (at the Tennessee Association of Realtors' urging), the legislature recently sent SB1160 as amended to the governor, who has made the bill law in Tennessee.

Not wanting to come across as opponents of price competition, it sounds like proponents of the bill, incredulously, are boasting of its purported pro-consumer justifications, none of which are cited in the law or, apparently, were meaningfully considered by either legislative body before passing the bill. Furthermore, both the state legislature and the governor chose to ignore the advice of the United States Department of Justice to reject the bill, the DOJ being one of the chief enforcers of the nation's antitrust laws that, along with the FTC, has no doubt heard similar "pro-consumer" justifications for such a prohibition from legislators and governors in other states.

Interestingly, I have come across an Arizona broker/blogger - apparently a traditional one mind you - that seems to acknowledge in a post that TAR's motives were anticompetitive and protectionist.

For what it is worth, I note that the law is limited to cash rebates, etc. I imagine that innovative Tennessee brokers will continue to find ways to effectively compete on price, much to the chagrin of those who fear to their core the idea of price competition.