By it's nature real estate is a localized commodity. If you've ever heard someone say, "my home would be worth $200,000 more if only it was located elsewhere" you can see the issue: Location is crucial. The home isn't located elsewhere, it's located where it is and that's one reason it's not worth an additional $200,000.

Real estate regulation was developed long before the advent of the Internet and traditional licensure rules reflected the reality that real estate was localized and so were realty brokers. Today the reality is the same but marketing has changed.

In the old days state-wide licensure was not an issue because Smith was a property expert in his own community and not the entire state of, say, North Snurbia. But with the Internet Smith may effectively claim to market properties and represent buyers statewide by simply using the keyword term North Snurbia on his Web site. Smith will then be listed whenever someone searches for a broker anywhere in North Snurbia, including places where Smith is both lawfully- licensed and totally unfamiliar with local property trends.

State-wide licensure may be good for Smith, but is it good for the public? Does the public benefit when Smith effectively offers to sell homes or represent purchasers in communities where he has no local connection, no understanding of local news (the road opening or the old factory that's closing) and no familiarity with the local housing stock?

The time has come to seriously consider the idea of localized licensure, realty licenses restricted to communities where brokers and salespeople are fully aware of local property trends, say a given city, county or group of counties rather than an entire state.

Localized licensure would merely reflect the obvious truth that real estate is a commodity influenced by geography -- and the geography that influences property values is not statewide. The fact that broker Smith is the world's leading authority on property transactions in Comquat County does not mean he knows anything about property values or trends elsewhere. The public interest is not served by allowing Smith to suggest, imply or state that he has any expertise outside the geographic domain where he is actually informed about local issues and property trends -- a domain unlikely to include an entire state with its cities, suburbs, towns, farms, forests, fields, lakes and shores.

Consider driver's licenses. That you have a license to drive a car does not mean you're qualified -- or allowed -- to drive a motorcycle, semi-trailer, ambulance, fuel truck, wide-load, hazardous materials carrier, mobile crane, military tank, bus or limousine. We understand that different vehicles require different skills and training -- and the same is true with real estate.

If the states move to localized licenses there would be several marketplace changes:

• Brokers would be required to advertise the specific locality where they are licensed and not just the state. This would help the public identify which brokers to contact when looking for property or representation in a given area.

• Real estate brokerage would return to the concept which is central to property transactions: location.

• The value of local expertise would be reinforced in the public mind.

Where could broker Smith practice if neighborhood licensing when into effect? The community where he lives and, if different, the community where his office is located. What if he has a home in one place and a second home elsewhere in the state? Not a problem, he can practice in both communities. Same if he works from two offices.

What about three homes? Forget it.

What if broker Smith lives one block over the line in one county but is familiar with property trends in the adjoining county? Real estate commissions would need to consider such claims on a case-by-case basis -- perhaps they could appoint a mediator to determine such pleas. As well, there is nothing which says that licenses could not be issued on a regional basis, providing the regions were sufficiently localized, contiguous and comparable in terms of their property offerings.

Is localized licensure a reasonable idea? We already have a broad version of localized licensure -- the broker licensed in one state cannot represent clients in the state next door, even if the "state next door" is just a mile down the road.

Think about it the next time a broker claims to be active throughout your entire state -- and has never seen your home, your street or your community.

For more articles by Peter G. Miller, please press here.

Published: June 3, 2003

Use of this article without permission is a violation of federal copyright laws.

Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .