A Texas real estate regulator is investigating a flat-fee, for-sale-by-owner site for alleged unlicensed brokerage activities in the state and has issued a cease and desist order against the company.
The Texas Real Estate Commission (TREC) alleges San Francisco-based Owners Advantage LLC, which does business as Owners.com, has violated statutes that prohibit companies from acting as or representing themselves as a broker or salesperson if they are not licensed.
"We are requesting that Owners Advantage LLC — DBA Owners.com — immediately CEASE AND DESIST all activities considered to be the business of real estate brokerage," the commission said its Jan. 6 notice to Owners.com.
"Specifically, Subsection 1101.002(1)(A) defines a broker as "a person who, in exchange for a commission or other valuable consideration or with the expectation of receiving a commission or valuable consideration, performs for another person one of the following acts: (iii) negotiates or attempts to negotiate the listing, sales, exchange, purchase, or lease of real estate, or (iv) lists or offers, attempts, or agrees to list real estate for sale, lease, or exchange."
The commission also sent separate orders to two Texas brokers to cease associating with Owners.com "and all other businesses and/or persons similarly conducting unlicensed activity as described above."
In a Feb. 1 response to the complaint, Steve Udelson, CEO of Owners Advantage, said the company "does not hold itself out as a licensed real estate broker in Texas and does not conduct activities that require a real estate brokerage license in Texas."
"In Texas, we provide homeowners with Web pages for advertising their properties, and we provide licensed real estate agents who offer discounted listing services with an advertising and marketing venue to reach sellers."
"Aside from facilitating advertising and communication … our service does not facilitate real estate transactions," Udelson added.
According to the commission’s cease and desist order, penalties for unlicensed brokerage activity can include: a fine of up to $5,000 per day; prosecution for a Class A misdemeanor punishable by up to a year in jail and/or a fine up to $4,000; and an injunction to temporarily or permanently prohibit the unlicensed activity.
Though the commission did not name other companies in its written notices to the two brokers, Kerri Galvin, the commission’s director of standards and enforcement services, did not rule out actions against other sites.
"If we receive evidence that other companies operate sites in a manner that we feel constitutes unlicensed brokerage activity under our laws, we could open complaints against them as well in the future," Galvin said.
According to Galvin, the commission opened an investigation of Owners.com after a Texas real estate licensee complained about two brokerages offering their services through the site: Housepad LLC and Cutting Edge Realty. In its notices to the brokerages, the commission called attention to the listing packages offered for a fee by Owners.com.
"(Owners.com) offers sellers various services that include listing packages. The listing package in this case is chosen by a seller who pays the company directly and the company refers the seller to you for the listing," the commission said in its Jan. 6 notice to Ryan Gehris, broker of record for flat-fee real estate company Housepad.
"Although there is a listing agreement between you and a seller, your fee is paid by the company who collected this fee as part of a larger fee charged to the seller by the company."
Galvin told Inman News that, according to the information received during the complaint process, sellers who choose one of Owners.com’s listing packages, such as the "Agent Assisted" package — which is offered for a flat fee of $695 and includes professional agent support with paperwork, pricing and closing — pay Owners.com the full fee; the site then pays the agent after taking a cut for itself.
"It’s not a straight advertising situation like a newspaper, where consumers can see brokerage information and deal with them separately," Galvin said.
"The charge to the consumer includes a portion that Owners.com pays an agent for listing the property. That money is considered (a) commission. It may not be a percentage commission, but it is a flat-fee commission.
"It would be a different situation if the commission portion was paid to and negotiated with the agent directly by the consumer … but the full commission is paid to Owners.com, so (that company is), in effect, receiving part of the commission. Therefore, Owners.com is negotiating a listing for a commission or other valuable consideration, which is an activity that requires a license in Texas."
She added, "We are not saying that the existence of the site constitutes unlicensed activity."
Owners.com did not respond to a request for confirmation of this payment model by publication time.
In its response to the commission, Udelson said, "We are a marketing and advertising company; we never act as agents of buyers or sellers in real estate transactions in Texas. We never represent our company as a licensed brokerage and always inform consumers who want brokerage services that we will match them with a licensed third-party for such services.
"We never provide any kind of closing services. We never receive fees that are contingent on closing or calculated as a function of real estate sales or offering prices."
Galvin said the commission had received the company’s response and would "review the arguments raised in their response to see if they alleviate our concerns regarding unlicensed brokerage activity. If not, the complaint will remain open and follow our normal process until resolved."
Housepad’s Gehris said he has complied with the commission’s order to cease association with Owners.com. Cutting Edge Realty did not respond to requests for comment, though the commission noted that the brokerage had already stopped its association with Owners.com.