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The Crusaders... John Reilly, Saul Klein, Mike Barnett
Internet Advertising


One of the Internet Crusades's most popular programs is entitled "Internet Marketing: The Do's and the Don'ts". There's always a right way, a wrong way, and a gray way. Internet advertising falls into the gray way: What is advertising vs. information? Which state law controls? Who can advertise other broker's listings? Is broker identification information required on each page of a web site?

In an attempt to establish some guidelines for its member jurisdictions, the Association of Real Estate License Law Officials (ARELLO) has drafted in Committee a Proposed Model Rule. This is a discussion draft only. No action will be taken, if any, until the fall ARELLO meetings. NAR has also studied the possible Proposed Model Rule. What follows are copies of some of the preliminary discussions.

NATIONAL ASSOCIATION OF REALTORS

Proposed Model Rule on Internet Advertising Regulation

Submitted for ARELLO Information Technology Committee

April 9, 1999

Victoria, British Columbia

Proposed Model Rule

Proposed definition

Advertising or marketing real property - An Internet site which consists of information regarding properties which have been listed with a real estate brokerage, the identity of that real estate brokerage or licensee for each property and information related to those properties.

Advertising or marketing of real estate brokerage services - An Internet site which includes an offer or solicitation to provide services related to marketing or identifying real property for sale or lease.

1. A licensed firm which has authorized advertising or marketing real property on a site on the Internet must include on the page on which the firm’s advertisement or marketing appears the following data: .

..a. the city in which the property being advertised or marketed is located; .

..b. the firm’s name as registered with (name of real estate regulatory body, commission, board, etc.) or the d/b/a (doing business as) name it has registered with the appropriate state/province agency, commonly recognized abbreviations are permitted; and ..

.c. if the firm does not hold a real estate brokerage license for the jurisdiction in which the property is located, the regulatory jurisdiction(s) in which the firm does hold a real estate brokerage license.

2. A licensed firm advertising or marketing real estate brokerage services on a site on the Internet must include on the firm’s home page or on a clearly identified link appearing on that page, the following:

...a. the firm’s name as registered with (name of real estate regulatory body, commission, board, etc.) or the d/b/a (doing business as) name it has registered with the appropriate state/province agency, commonly recognized abbreviations are permitted; ..

.b. the city and state/province in which the firm’s office is located; and ...

c. the regulatory jurisdictions in which the firm holds a real estate brokerage license.

3. A licensee who has authorized advertising or marketing real property on a site on the Internet must include on the page of the site on which the licensee’s advertisement or information appears the following data: .

..a. the licensee’s name; ...

b. the city in which the property being advertised or marketed is located; ...

c. the name of the firm with which the licensee is affiliated as that firm name is registered with (name of real estate regulatory body, commission, board, etc.) or the d/b/a (doing business as)name it has registered with the appropriate state/province agency, commonly recognized abbreviations are permitted; and .

..d. if the licensee does not hold a real estate broker or salesperson license for the jurisdiction in which the property is located, the regulatory jurisdiction(s) in which the licensee does hold a real estate broker or salesperson license.

4. A licensee advertising or marketing real estate brokerage services on a site on the Internet must include on the firm’s home page or on a clearly identified link appearing on that page, the following data:

...a. the licensee’s name;

...b. the name of the firm with which the licensee is affiliated as that firm name is registered with (name of real estate regulatory body, commission, board, etc.) or the d/b/a (doing business as) name it has registered with the appropriate state/province agency, commonly recognized abbreviations are permitted. ..

.c. the city and state/province in which the licensee’s office is located; and .

..d. the regulatory jurisdiction(s) in which the licensee holds a real estate broker or salesperson license.

5. A licensee firm using Internet electronic communications, such as eMail, eMail discussion groups, and bulletin boards, for advertising or marketing purposes, must include on the first or last page of all communications the following data: .

..a. the firm’s name as registered with (name of real estate regulatory body, commission, board, etc.) or the d/b/a (doing business as) name it has registered with the appropriate state/province agency, commonly recognized abbreviations are permitted; ..

.b. the city and state/province in which the firm’s main office is located; and ..

.c. the regulatory jurisdiction in which the firm holds a real estate brokerage license.

This rule shall not apply to communications between a licensed firm and a member of the public provided that: (i) the member of the public has sent a communication to the licensed firm; and (ii) that the licensed firm’s initial communication contained the information required above.

6. A licensee using Internet electronic communications, such as eMail, eMail discussion groups, and bulletin boards, for advertising or marketing purposes, must include on the first or last page of all communications the following data:

...a. the licensee’s name;

...b. the name of the firm with which the licensee is affiliated as that firm is registered with (name of real estate regulatory body, commission, board, etc.), commonly recognized abbreviations are permitted.

...c. the city and state/province in which the licensee’s main office is located; and

...d. the regulatory jurisdiction(s) in which the licensee holds a real estate broker or salesperson license.

This rule shall not apply to communications between a licensed firm and a member of the public provided that: (i) the member of the public has sent a communication to the licensee firm; and (ii) that the licensed firm’s initial communication contained the information required above.

7. A licensed firm advertising or marketing real property on a site on the Internet that is either owned or controlled by the licensed firm shall periodically, but not less than every thirty-one (31) days, review the advertising and marketing information concerning real property on the site to assure it is current and not misleading.

[Letter from National Association of Realtors, Legal Affairs]

May 5, 1999

Roger Hansen

Information Technology Chair

1918 SE Hulsizer Avenue

Ankeny, LA 50021-3941

Re: Proposed Rules Regarding Internet Advertising

Dear Chairman Hansen:

During the Mid-Winder meeting of the NATIONAL ASSOCIATION OF REALTORS the Risk Management Committee conducted an extensive discussion of the proposed regulation of Internet advertising. A portion of those discussions included a presentation and question and answer session with 1999 ARELLO President Michael Gorham at the Risk Management Forum.

The Committee’s members sincerely appreciated the time

Mr. Gorham was able to spend with us at the Forum. His comments, along with the Committee’s review of existing provisions in Georgia and California proposals pending in both Georgia and Alabama led to the identification of issues related to the adoption of regulations in this area. What follows is a listing of those issues the Committee identified as important for consideration in connection with any proposed regulation along with some suggestions offered by Committee members for use in preparing any regulation. The Committee did not have sufficient time to develop any policy recommendations for the National Association, so these comments represent only a summary of the points which emerged from the Committee’s discussions.

Considerations in developing a rule:

1. The current proposal places new burdens and increased costs on REALTORS and MLS and inconveniences consumers who would be forced to receive this information at a time when it may not be relevant to them. .

..a. Many of the Internet property aggregators (Realtor.com, Homeadvisor, Cyberhome), take the information directly from an MLS database and these sites do not contain the information being required in the new rules. To comply with the new rules, the MLSs would have to modify their systems to collect and track this information. Systems modifications present an additional expense which would ultimately have to be passed on to the consumers.

...b. The property aggregator sites would also incur an additional cost in reformatting their sites to display this information. Realtor.com is currently trying to determine how much additional expense will be placed upon MLSs and itself to add and/or reconfigure data fields, but the amount will be substantial.

...c. Consumers using the site would also be forced to incur an additional cost due to the increased time involved in downloading and scrolling through the required information. If information identifying the broker or firm was readily available while the consumer was using the site (e.g., through a link to the broker or firm’s home page or some other page where the identifying information is displayed), the need of those consumers who want the information will be met without burdening every consumer with the additional time and cost when viewing properties on-line.

2. The license law should address information sites that are not controlled by the broker, but which contain property information of the broker’s. Brokers are concerned that content they have provided to one site is appearing at additional sites without the permission and, in many cases, the knowledge of the broker. These additional sites may have taken the information without permission of either the broker or the original site’s operator and are using it to drive traffic to their sites. Because the broker may not know about the use of his content, the information cannot be updated or removed. The broker should not be responsible for violations which occur at these sites.

3. The states should not regulate licensees beyond their borders, even if its citizens may view a web site of an out-of-state broker. The regulations should be limited using traditional principles governing due process as guided by the extensive body of judicial precedent created in the last five years related to personal jurisdiction and the Internet.

4. Regulating all electronic communications by licensees seems onerous. Regulation of electronic communications should apply to mass marketing and mass eMailings only. This regulation should also be coordinated with any general legislation related to commercial eMail.

5. Many terms are either new or were not previously used in the proposed context and need clear definitions. For example, there is a need to define "advertising" and "marketing." Is the "Internet" the World Wide Web? Internet II? What about LANs? WANS? Is disclosing the required information on the web page but in a manner that is barely perceptible to the naked eye adequate?

6. If the rule specifies manner in which the company's name is to be disclosed on the site, the business' d/b/a as registered with the appropriate state agency should be one of the permitted alternatives.

7. A more limited disclosure rule would still accomplish the purpose of the rule when advertising specific properties. If the location of the property (at least city and state) is clearly known, consumers will readily assume that the property is listed by a broker licensed in that state. Disclosing that the broker is licensed in that state is redundant information.

8. Additional disclosure to the consumer should be mandated only if a broker is advertising specific property located within a state in which the broker is not licensed because that information would be inconsistent with the normal presumption of the consumer.

9. The license law should require disclosure of the jurisdictions within which the broker/agent is licensed and/or office location if the Internet advertising is an offer of service (as opposed to property). This would discourage a licensee concealing the fact he is located in one part of the country for the purpose of generating referrals in another market area where that licensee has no knowledge, presence, or business (other than that which can be generated off the Internet).

10. License law (and not just the REALTOR Code of Ethics) should prohibit one broker from having another broker's listings visible from his web site without the listing broker's prior written consent.

11. A clear expectation should be established as to the requirement that web sites be kept up to date. Guidance should be provided on issues such as how quickly after the expiration or termination of the listing must the web site be updated and the property removed to avoid violation of the rules.

12. Advertising should not be regulated based upon the media in which it is found. To the extent different requirements are placed upon different media, the basis of the distinction should be disclosed. For example, is there a difference between Internet advertising and print advertising? Do the same regulations apply, and why or why not?

13. Any regulation should provide for a phase-in period which will allow time for necessary modification to hardware and software to be completed to achieve compliance.

14. Any labeling requirement should include an exception for pages at a site which consists solely of ornamental elements.

15. As an alternative to any labeling requirement on each page, the use of a link to the required information should be acceptable.

16. A plan for equitable enforcement of any rule through the whole industry should be a part of the rule's adoption to avoid its arbitrary application.

It is the Committee's hope that these thoughts will serve to assist your group as you consider the possible avenues to address the issues raised by the use of the Internet to market real estate and real estate brokerage services.

Sincerly,

John Dye, Vice Chairman

Risk Management Committee

NATIONAL ASSOCIATION OF REALTORS

[Letter from Roger L. Hansen, Iowa Real Estate Commission, Professional Licensing & Regulation, State of Iowa]

March 30, 1999

National Association of Realtors

Jim Dye, Vice Chairman

Risk Management Committee

430 North Michigan Avenue

Chicago, Illinois 60611-4087

Dear Mr. Dye:

This letter is to acknowledge receipt of your committee's summary of points relating to Internet advertising. As Co-Chairman of the ARELLO Information Technology Committee, I will provide this information to the committee members and other interested parties, as we develop a model Internet advertising regulations. We have also had contact and input from Realtor Internet property aggregators.

I believe it would be very useful to our committee and other interested members to see your summary points presented as written proposed law or rules. If you and your committee could do this, it would clearly present your suggestions in a readily useable format.

To assist you, I have enclosed the ARELLO Model Rules adopted last year (based on the Georgia law) and our Iowa rules (based on the ARELLO Model) for your review. These regulations may, or may not, be useful to you when drafting your proposed law or rules.

On behalf of the ARELLO Information Technology Committee I want to extend our appreciation to you for sharing your committee's expertise in this area. We are always interested in receiving input and assistance.

Sincerely,

Roger L. Hansen

Executive Secretary

Iowa Real Estate Commission

Telephone: 515-281-3183

Fax: 515-281-7411

eMail: rhansen@max.state.ia.us

Interjurisdiction Cooperation Committee

Model Language

INTERNET Advertising Rules

(1) A licensed firm advertising or marketing on a site on the Internet must include on each page of the site on which the firm's advertisement or information appears in the following data:

...(a) the firm's name as registered with (name of real estate regulatory body, commission, board, etc.), abbreviations are not permitted. .

..(b) the city, state/province, and country in which the firm's main office is located; and

...(c) the regulatory jurisdiction(s) in which the firm holds a real estate brokerage license.

(2) A licensee advertising or marketing on a site on the Internet must include on each page of the site on which the licensee's advertisement or information appears the following data: .

..(a) the licensee's name; .

..(b) the name of the firm with which the licensee is affiliated as that firm name is registered with (name of real estate regulatory body, commission, board, etc.), abbreviations are not permitted. .

..(c) the city, state/province, and country in which the licensee's office is located; and .

..(d) the regulatory jurisdiction(s) in which the licensee holds a real estate broker or salesperson license.

(3) A licensed firm using any Internet electronic communication for advertising or marketing, including but not limited to eMail discussion groups, and bulletin boards, must include on the first or last page of all communications the following data: .

..(a) the firm's name as registered with (name of real estate regulatory body, commission, board, etc.), abbreviations are not permitted. .

..(b) the city, state/province, and country in which the firm's main office is located; and .

..(c) the regulatory jurisdiction(s) in which the firm holds a real estate brokerage license.

Iowa Internet Advertising Rules

(effective 2-3-99)

193E1.24(543B) (New Subrules)

1.43(3) A licensed firm advertising or marketing on a site on the Internet, that is either owned by or controlled by the licensed firm, must include on each page of the site on which the firm's advertisement or information appears the following data: .

..a. The firm's name as registered with the commission (abbreviations are not permitted);

...b. The city and state in which the firm's main office is located; and ..

.c. The states in which the firm holds a real estate brokerage license.

1.24(4) A licensee advertising or marketing on a site on the Internet, that is either owned by or controlled by the licensee, must include on each page of the site on which the licensee's advertisement or information appears the following data:

...a. The licensee's name;

...b. The name of the firm with which the licensee is affiliated as that firm name is registered with the commission (abbreviations are not permitted); .

..c. The city and state in which the licensee's office is located; and .

..d. The states in which the licensee holds a real estate broker or salesperson license.

1.24(5) A firm using any Internet electronic communication for advertising or marketing, including but not limited to eMail, eMail discussion groups, and bulletin boards, must include on the first page or last page of all communications the following data: .

..a. The firm's name as registered with the commission (abbreviations not permitted);

...b. The city and state in which the firm's main office is located; and .

..c. The states in which the firm holds a real estate brokerage license.

1.24(6) A licensee using any Internet electronic communication

for advertising or marketing, including but not limited to eMail, eMail discussion groups, and bulletin boards, must include on the first or last page of all communications the following data:

...a. The licensee's name;

...b. The name of the firm with which the licensee is affiliated as that firm name is registered with the commission (abbreviations are not permitted); .

..c. The city and state in which the licensee's office is located; and

...d. The states in which the licensee holds a real estate broker or salesperson license.

1.24(7) Advertising shall include all forms of identification, representation, promotion and solicitation disseminated in any manner and by any means of communication to the public for any purpose related to licensed real estate activity.

WORKSHEET ON ELECTRONIC ADVERTISING GUIDELINES

Ideas on activity that Internet regulation should restrict:

Unlicensed practice of real estate activities that require a license Using Internet tools to create the false impression of ownership of another licensee's listing and the right/privileges connected with ownership of that listing Advertising property for sale that is no longer for sale Soliciting real estate service clients and/or doing business with members of the public without proper representation of the identity of the licensee Using Internet tools to create the false impression of possession of legal authority to conduct real estate activity in a given jurisdiction Using Internet tools to create the false impression of a "local" presence to a consumer. ARELLO and/or local real estate regulatory bodies may wish to add to the above list or remove items that they wish not to create rules to restrict.

In then looking at ARELLO'S 9/98 guidelines, the following concerns rise about the ability of licensees to reasonably comply with the current model and with the degree to which they meet the goals in the first section:

1. Listing databases/summaries are not excluded from ARELLO'S current guidelines. It is very likely that such Internet sites would never facilitate any of the activities listed above, however, the current ARELLO guidelines do not exempt such sites. For licensees to comply with ARELLO guidelines, they would in most cases have to remove their listings from all such sites where data is uploaded directly from an MLS to an Internet listing database. Compliance could require MLS upgrades in the majority of North America that would be impractical, cost prohibitive and time intensive. The current guidelines would require information on every page of listing databases, which are built automatically from data uploaded from MLSs. Adding that data must occur either at the local MLS level or be done manually at the mega-site level. Either one is expensive, especially when the problem is not really with listing information, but with deception by licensees in promoting their services.

2. Communication "for advertising or marketing" could reasonably be interpreted as every eMail message and every partial listing of property data. It seems that the goal is to make sure that consumers need to get proper identification on the person(s) soliciting use of their real estate services. Like other disclosures (like agency?) this could be required to occur at some point in the process. In addition, such disclosure could be mandatory on any web page where a licensee's services are being promoted. Internet pages advertising property could be exempt from this requirement, as a consumer could reasonably assume that the listing broker for a residential property in a jurisdiction is actually licensed in that jurisdiction. Requiring this disclosure at some point in communication and on all personal and firm promotion pages takes care of the "fishers" Michael Russer spoke about in Orlando.

3. Internet tools can allow one licensee to create the impression that another broker's listing belongs to them instead. ARELLO's current guidelines do not specifically address this. Other portions of license law may take care of this, but not in looking at this model on its own.

4. License law may also cover advertisement of expired or sold listings as if they are still for sale. This area is not directly addressed in current guidelines.

These points may assist in future discussions by ARELLO in authorizing modifications to our current rules.

Arizona Commissioner's Rule R4-28-502 addresses advertising.

Key provisions are . . .

All advertising shall include either the name in which the employing broker's license is held or the fictitious name contained on the license certificate. The lettering used for the name of the employing broker shall appear in a clear and conspicuous manner. The designated broker ... shall supervise all advertising.

Because people may enter a Web site through a side door rather than the Home Page, we require that the designated or employing broker be identified on every page in a Web site.

Examples:

Entity license (employing broker)

Century 21 Best in the West

street address

Self-employed broker (designated broker)

Jack Sprat Real Estate

street address

Salespersons and associate brokers sometimes create Web sites without the knowledge of the employing or designated broker. The broker must review and approve all advertising.

We have seen a few sites where the licensee "created" a non-existant entity.

Jack Smith is employed as a salesperson by Harry Green, a designated broker for ABC Realty, Inc. Jack creates a Web site which bears the headline, on the first page, which

reads: "Jack's Really Good Relocation Services"

and does not display the name of ABC Realty.

Wrong. Jack's Really Good Relocation Services is not licensed; Jack is not a broker; Jack works for ABC and must display the ABC name. He cannot display Jack's Really Good Relocations Services unless he severs from ABC, gets a corporate license and hires a designated broker for JRGRS.


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