Letting brokers speak: real estate and free speech

Reason, March, 2005 by Jacob Sullum

USUALLY WHEN A court refuses to recognize a privilege for professional journalists, it's seen as a defeat for the First Amendment. In one recent case, it was an unambiguous victory. In November a federal judge overturned a California law requiring any business that earns money by listing homes for sale to obtain a real estate broker's license--unless the business happens to be a newspaper.

The distinction, presumably motivated by a desire to avoid the appearance of infringing on freedom of the press, never really made sense, and with the advent of the Internet its absurdity became glaringly obvious. In response to a lawsuit filed by the Institute for Justice on behalf of ForSaleByOwner.com, U.S. District Judge Morrison C. England noted that "many newspapers now maintain websites operating in much the same manner as the site generated by FSBO"--charging property owners for listings and offering information and advice for buyers and sellers. Noting that "the distinction drawn between the two publishing mediums appears wholly arbitratry," England concluded that "California's real estate licensing scheme impermissibly differentiates between certain types of publications canting the same basic content."

In finding that the content of ForSaleByOwner.com was fully protected by the First Amendment, England cited a 1999 decision (also the result of an Institute for Justice suit) in which the U.S. District Court in D.C. rejected a federal licensing requirement for people who publish advice about commodity trading. Both cases involved the regulation of speech under the pretext of regulating professional services.

In addition to protecting freedom of speech, eliminating California's onerous licensing requirement--which involved up to two years of courses and/or apprenticeship, followed by a broker's exam--benefits home sellers, since Web-based listing services can save them money by eliminating broker's commissions and other fees.