Online listing service not a broker, but REALTORS® holding out for RE commission investigation

In this business, you expect to face plenty of competition from other agents every day. And while you may be competing for that client, you both tend to agree on one thing: that the client needs an expert in the real estate business to guide them through the selling process. But what do you do when FSBO Internet sites try to lure your potential listing clients away by telling them that their service eliminates the need for an agent? Or they say that most real estate agents are usually just out for the commission money anyway?

That scenario has been playing out in New Hampshire over the past few months since the New Hampshire Association of REALTORS® (NHAR) filed a complaint with the state real estate commission against FSBO listings service ISoldMyHouse.com (ISMH) for allegedly acting as an unlicensed broker.

The complaint alleged that ISMH, the sister company of 1-800 East/West Mortgage Co. (a unit of Worcester, Mass.-based Commerce Bank and Trust), conducts itself as a real estate brokerage because it charges fees ($95 to list a home), offers advice and matches home sellers to buyers – activities that fall within New Hampshire's definition of a real estate broker. NHAR decided to take action after hearing complaints from customers who said they had bad experiences with ISoldMyHouse.com.

ISMH compares itself to newspaper classifieds in stating that they're nothing more than a platform for people who don't want to pay a real estate agent's commission to sell their house. ISMH said the complaint was motivated by agents' fears of losing commissions as more Internet brokerages surface and offer consumers more choices.

Not true, says NHAR. The complaint was an attempt to get the company to comply with the law. Plus, NHAR alleged that ISMH tried to coerce homeowners to use its service, claiming that some real estate agents were purely out for money and could not be trusted. NHAR argued that ISMH caused confusion among consumers and discouraged them from getting competent advice on the real estate market.

Unfortunately, NHAR received a blow on Friday when New Hampshire Banking Commissioner Peter Hildreth rejected its claims and ruled that ISMH's activities do not constitute as real estate brokerage business.

In his declaratory ruling, Hildreth said the site was part of another firm and didn't need a separate license. "The initial complaint assumed erroneously that ISoldMyHouse.com was a distinct and separate entity when in fact, it is a part of 1-800 East/West Mortgage Company's sales and marketing operation."

Hildreth also said the banking department has exclusive jurisdiction over ISoldMyHouse.com and East/West Mortgage and has directed them not to respond to investigative requests from any other agency "that may cause information subject to this department's examination."

John M. Sullivan, General Counsel for NHAR, argues the group was advised that the New Hampshire Attorney General's Office issued an opinion that the state real estate commission has complete jurisdiction over the matter and has directed the commission to go forward with their investigation.

"Our understanding is that the banking commissioner had decided to ignore the attorney general's recommendation," he said in an article in the New Hampshire Union Leader. "This unfortunately sets up an unprecedented situation where it appears we will have the banking commissioner and the Real Estate Commission vying for jurisdictional turf in spite of the fact that the Attorney General's Office has concluded that the turf clearly belongs to the Real Estate Commission."

And the fight isn't over yet. Hildreth's declaratory ruling opens a 10-day window for NHRA or the state Real Estate Commission to file arguments to the contrary. We're hoping that the powers-that-be realize the dangers of discouraging people from getting competent, professional advice on one of the most complex transactions they'll ever engage themselves in and side with the experts in the business: real estate agents.