Arlington, Va.—May the government restrict the speech of real estate advertising websites?
This is the question the Institute for Justice seeks to answer in a lawsuit filed today in U.S. District Court for the District of New Hampshire. The suit challenges New Hampshire’s onerous licensing regime on behalf of an Internet advertising company, ZeroBrokerFees.com. Current State law requires Internet advertising companies to become licensed real estate brokers in order to provide, in essence, an online classified ad service. Obtaining a broker’s license takes thousands of hours of training, a significant time and financial burden that jeopardizes ZeroBrokersFees.com’s ability to remain in business. Bizarrely, newspapers are free to publish the same information without a license that companies like ZeroBrokerFees.com must get a government license to publish.
“The Internet is revolutionizing home buying and selling, allowing consumers to save thousands of dollars,” said Valerie Bayham, a staff attorney with the Institute for Justice, which is representing ZeroBrokerFees.com for free. “The First Amendment guarantees that Americans may speak their minds and communicate information without the approval of government censors. Allowing licensing officials to make distinctions among publications cannot be permitted if speech is truly to be free.”
ZeroBrokerFees.com was started by Ed Williams and Frank Mackay-Smith, former mortgage lenders who quickly recognized the power of the Internet to transform real estate transactions. Their company uses the Internet to distribute listings to a large audience—providing consumers maximum choice and flexibility in selling or buying their home without paying high broker commissions. Sellers control their advertisements, deciding what information to include and how the ads are written. They can include descriptions of the neighborhood, pictures of their homes, virtual tours and can even access and update their ads at any time. Sellers also arrange their own home viewings, allowing them to schedule viewings at their own convenience. The database is fully searchable by location, price, size and other attributes.
“Individuals have the right to determine how best to advertise and sell their homes,” said Ed Williams, who believes that ZeroBrokerFees.com empowers consumers to buy or sell homes on their own terms at a cost far less than standard real estate commissions.
In the olden days of real estate, agents made their living as information brokers. Today, from researching neighborhoods and home prices, to getting appraisals, financing and title insurance, much of the information that used to be available only through real estate agents is now publicly available and easily accessible online.
Over the past decade, homebuyers have embraced these efficiencies. In 1995, only two percent of homebuyers used the Internet during their home search; a mere 10 years later, that number has ballooned to a whopping 77 percent. Today’s real estate professionals are brokers of services rather than information.
“The free flow of information empowers consumers and offers opportunities to make homeownership both easier and more affordable,” said Steve Simpson, a senior attorney with the Institute for Justice. The Progressive Policy Institute, for example, estimates that using information technology to its full potential could cut the transaction costs of home buying in half, saving home buyers nearly $40 billion a year.
Currently, New Hampshire doesn’t require everyone who sells a house to hold a real estate broker’s license. Individual homeowners are free to sell their homes themselves. They can even run advertisements in their local newspaper, since newspapers and other publications of “general circulation” are exempt from the licensing law.
“For-sale-by-owner website entrepreneurs have the same First Amendment rights as newspaper publishers. They should not be treated as second-class citizens,” said Bayham. “We don’t restrict the free flow of information about medicine to only doctors and we don’t let only politicians talk about politics. Real estate agents shouldn’t have a monopoly on providing information about real estate markets.”
The real estate licensing laws are enforced by the New Hampshire Real Estate Commission. Three of the Commission’s five members are also members of the New Hampshire Association of Realtors—an industry trade group which represents real estate agents.
“The State of New Hampshire represents all the people of the state—not just real estate agents,” said Simpson. “Allowing agents to use the law to protect their commissions and harass their competition is just plain un-American.”
In its court papers, the Institute for Justice contends that New Hampshire’s law is an unconstitutional prior restraint on speech, improper content and media-based discrimination and an invalid regulation of commercial speech.
“The Real Estate Commission should catch up with technology rather than shutting down competition and innovation,” added Bayham. “There is absolutely no reason—other than kowtowing to politically connected real estate agents—to prohibit websites from doing what newspapers do every day. New Hampshire consumers have managed for years to navigate classified ads without the government watching over them.”
Chip Mellor, Institute for Justice president and general counsel, concluded, “This case has broad implications for e-commerce and the First Amendment. At a time when information is more important to the economy than ever before, government remains a serious impediment to the free flow of information and the economic benefits it promises.”
Founded in 1991, The Institute for Justice has successfully defended First Amendment rights nationwide and is committed to reinforcing and expanding the U.S. Supreme Court’s recognition that “the free flow of commercial information is indispensable” to a free society. Among a number of victories for commercial speech, in 2004 IJ freed online advertisers from complying with California’s onerous real estate licensing regime.