There’s always something to howl about

Archive for June, 2006

Let’s go get sued . . .

In a comment below, Jon offers this:

What are you talking about? Lawsuits against emongoo, zillow and refin? None of them are doing anything wrong…sorry to say. I looked at emongoo, zillow and redfins sites and I don’t see anywhere where they say they give legal advice.

First, I only cited legal advice with respect to – and we’ll come back to that. We should exclude from this discussion, because, for now at least, they are doing nothing but running a look-up service with no legal consequences that I know of.

But has considerable legal exposure, as does and anyone emulating the general business model. The first and most obvious problem is the legal doctrine known as procuring cause. These sites are a procuring cause lawsuit – or perhaps a procuring cause class action suit – waiting to happen. They go out of their way to flout the rights of cooperating brokers, openly advising buyers to see homes at open houses or by contacting the listing broker directly. The NAR Code of Ethics forbids brokers from letting a procuring cause dispute impede a transaction, but there is nothing to prevent the aggrieved broker from pursuing damages after the fact. I’m not saying this will happen, but their noses are wide open.

(As a side note, the way I read’s web site, their real business is loan origination. My guess is that the real estate brokerage side of the business will be one or more separate operating entities, with the broker being hung out to dry in the event of a lawsuit.)

The entire discount sector of the real estate industry – on-line and brick ‘n’ mortar – faces huge risks on the subject of agency law. It is difficult to argue that you did everything possible to advance your client’s interests when you did everything possible to avoid knowing what your client’s interests actually are. From the outside, you might want to shout caveat emptor! But the law of agency in real estate is by now much closer to caveat venditor.

There is actually added risk for the discounters, as opposed to a more traditional business model. Since the net commission to the practitioner is so low, it seems reasonable to suppose that only the least-talented licensees will work for these outfits. With added volume as the only path to income, we get a frazzled turkey, rushed and incompetent. And deep, deep pockets full of venture capital. Who believes sharks can’t smell blood in the water?

If you click here, you will see promising legal advice. Presumably they disclaim agency in the fine print, but here is the actual law of agency as interpreted by real judges in real courts: If I think you’re my agent, then you’re my agent. Most of these web sites seem to me to be fools rushing in where angels fear to tread.

Also Realtors are not attorneys and if they give legal advice they are in the same danger as the guy off the street.

Precisely! Depending on the jurisdiction, real estate licensees are authorized by legislation to do a small subset of the things an attorney can do, and they are held to strict standards of accountability to make sure they are exercising due diligence and care in the performance of their duties. When they err, they risk lawsuits that can wipe them out.

Companies like and are engaged in real estate brokerage, and they face the same litigation risks as any other real estate broker. The folks as might want to argue that they are an advertising medium, like the newspaper’s classified section or But by offering to assist in the work incident to the transfer of real property – and taking compensation for it – I think they stand an excellent chance of being regarded by the courts as being real estate practitioners, engaged in the business of real estate brokerage.

Does this mean they will necessarily be bled white by lawsuits? No. But they really are asking for it…

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