Nancy Petitti is an Mobile, Alabama RE/MAX broker with a web site soliciting business in Vancouver, Washington. She offers no homes for viewing except by reader request. Under the biography page, there is nothing listed about Petitti, or any other associate. There is only the following:

We have the team that will treat you with the utmost professionalism and that has the experience and knowledge necessary to give you the very best. Give me a call today or fill out the free Request for Information form and I will have a real estate professional help you with your real estate needs.

Although, Petitti clearly states her home address in Alabama, it isn't apparent anywhere on her web site that she might not be licensed to do business in the state of Washington. The only clue that she might be fishing for business in waters where she isn't licensed is in her email- washington@realestatehq.com.

Petitti did not make herself available for comment on this story, but it is apparent that she is soliciting business in other states than the one in which she resides and is licensed. Is that a good thing or a bad thing? Is Petitti breaking the law, or is she the most clever real estate marketer around?

Soliciting for referrals is lucrative. If Petitti gets four referrals at 25% each, that is the same as selling one side of a house. Not bad - especially for never having to leave the computer. The beauty of it is the buyer does all the work by filling out the "Request for Information" which can easily be forwarded to a licensed Washington agent as basis for the referral.

But in some states such as Arizona or Florida, Petitti wouldn't be awarded with a nice referral fee, she would be charged with a class 6 felony or fined by the state regulatory board. Some agents are starting to complain about out-of-state Realtors trolling for leads in their area.

This is a burgeoning problem that the Association of Real Estate Licensing Law Officials (ARELLO) is attempting to address in its "Best Practices" Internet Guidelines.

Through its section on "Jurisdictional Intent," ARELLO recommends that intentional activity on the part of a legal entity or individual to perform or offer to perform services within a jurisdiction should require a real estate license. Although ARELLO is empowered to suggest guidelines, they are not an law-initiating organization. It is up to individual jurisdictions to agree or disagree with ARELLO's recommendation.

This clearly draws the line between interstate referrals between brokers who pay and collect referral fees, and those attempting to use the Internet to solicit relocation customers to refer them to licensed entities for a fee. Apparently, soliciting for referrals on the Internet is clearly different from soliciting referrals in person or through other known contacts. But should it be?

California Realtor Ardell Coulter doesn't think so. "I don't see the basis for the complaints," says Coulter. "If I can go to another state and refer business in person, why can't I do it on the Internet?"

Coulter claims that she was taught from the day she became an agent to work for referrals. Paying referral fees is part of the business, she says.

"Everyone else has done it for years. You want to sell your house, some company like B.J.'s says we will refer you and save you $1,000. I just got a solicitation the other day from Farmer's Insurance - that we'll refer you to a Realtor," says Coulter. "Why is it that everyone can refer business except REALTORS®?"

"An agent could always send a referral regardless of where their license was," she says. "I go to Pennsylvania four weeks a year. If I'm standing in the grocery store line, and someone mentions they are selling their house, I can refer them to an agent. That has always been legal, but all of a sudden somebody got a good idea to put these sites up, and now the agents don't want to pay the referral fee, so they are complaining."

"If it isn't wrong to solicit referral business in person, then it shouldn't be wrong on the Web," Coulter says.

The reason interstate referrals are becoming a regulatory issue is not that REALTORS are complaining. ARELLO is an organization designed to protect consumers. The issue is that the consumer may be paying higher prices for agent services, perhaps without even realizing that they have been referred to another agent. The fact that a referral fee is being paid should be disclosed to the consumer, particularly if it results in higher fees.

It is an issue that will only get larger, because the real estate industry depends on the mobility of consumers. How great would business be if people stayed in their homes the full terms of their loans - 30 years or longer?

Today's real estate consumer is nomadic, changing residences as often as every four to eleven years. That means in order to keep up with past customers for the sake of repeat business and referrals, agents need to expand their reach from the local to the international level.

The Internet has broadened the reach of all real estate related businesses in order to serve the home buyer and seller. To accommodate the frequently moving borrower, the mortgage industry has created a number of loan products based more favorably on shorter terms in order to provide lower risk to themselves and higher value plus lower cost for the borrower.

The real estate industry has responded to consumer mobility with national databases of listings and moving related services, so that a transferee in one end of the country or the world, can find out all about their new city, neighborhood and home via the Internet and technologies such as digital photography, virtual tours, community and school databases, and more.

Agents are finding that they have customers all over the world. People they have served move away, but via the Internet, it is easy to stay in touch and continue to provide services to old clients. Referrals to other agents are commonplace, and brokers often pay referral fees to brokers and agents in other jurisdictions. Through chat rooms and listserves, brokers solicit referrals to and from other brokers. But where should the line be drawn between referrals and solicitation? When does using the Internet to get referrals cross the line into illegal activity?

Each real estate jurisdiction, regulated by either state or provincial law, concerns itself with laws governing the proper solicitation of business from its licensed agents. Most states require that agents be licensed in order to participate in transactions within the state boundaries. Referral fees sidestep this requirement, which opens the door for some agents to solicit business in states where they are not licensed.

The Internet makes this activity easy. Agents can build a professional-looking Web site, complete with free community information, school reports and other content that gives the appearance that the agent is expert in that area. What the consumer doesn't know, is that the agent may not live, work or even be licensed in the area where they advertise their services.

With a well-placed attractive Web site on the search engines and local community sites, the agent can just kick back and watch the leads come in. Then they can refer the leads to the agents who actually are licensed to work the community, and collect referral fees of 25% or more.

The question is, should they be allowed to?

What do you think? Should agents be able to solicit business in states where they aren't licensed via the Internet?

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Published: November 23, 1999

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