The Consequences

The real danger, as far as legal repercussions, is when an agent or brokerage makes an undisputable claim of being No. 1 in something quantifiable, like successful sales or business size.

In 1994, Milt Agins, a broker operating out of Aventura, Fla., ran a small, $45 ad claiming that RE/MAX, his brokerage at the time, was the leader in North America in transactions, customer satisfaction, average years of agents’ experience and percentage of brokers and agents with professional designations, according to the Chicago Tribune. It was a one-time advertisement in a local real estate publication, and although the exposure was likely limited, it took virtually no time at all for Century 21 to file a false advertising suit against Agins and his firm, RE/MAX Ultra Realty Group.

In the same year, in Denver, a nearly identical case went to court when RE/MAX Intern was accused by Century 21 of making “false statements about its sales volume, number of transactions, customer satisfaction and the size of the industry.”

The feud between the brokerages eventually culminated with Century 21 and RE/MAX International exchanging legal blows in a California district courtroom during December 1994. Century 21 argued that since the beginning of 1993, RE/MAX had begun circulation of a widespread advertising campaign claiming superiority over Century 21, specifically in regards to becoming the No. 1 real estate organization in terms of overall transactions for the years of 1992 and 1993.

RE/MAX faced serious consequences if found guilty. Not only would they have been forced to remove the ads and publically correct the errors, but the company would have also faced heavy fines.

According to records, however, the court ruled in favor of a summary judgment filed by Gary O. Thomas, Inc., a corporation doing business with RE/MAX South County at the time. Thomas argued, successfully, that Century 21 failed to provide enough evidence to adequately demonstrate the detrimental impact and inaccuracies of the RE/MAX ads. As a result, the case was dropped.

Even if the affected customers fail to file suit themselves, brokerages and agents can still face consequences for misleading buyers and sellers. According to Texas legislation, the attorney general, consumers, a consumer protection division or a district attorney all the right and power to take legal action. If successful, agents and brokerages face a litany of penalizations that include but are not limited to: actual and treble damages; injunctive relief; restitution; attorney’s fees and costs; remedies available in other laws; a restraining order, if applicable; cival penalty not more than $2,00 per violation, not to exceed $10,000; and if against consumer 65 or older, not more than $10,000 per violation, not to exceed $100,000.

Because Realtors also operate under associations, they face additional repercussions that may not have held up to the murky standards of what constitutes illegality. NAR Managing Director of Media Communications Sara Wiskerchen confirmed that punishments vary from case to case.

“Should a member be found in violation of the Code of Ethics, the local association has procedures in place to determine the appropriate sanction, which will vary by the facts,” she said. “Among them could be a fine, education class or suspension or termination of membership.”

In the event of termination, Wiskerchen pointed out, membership would be revoked at the both state/territorial and national levels.

The policing of false advertising in real estate is admittedly lacking, as there seems to be no official body dedicated to actively identifying and pursuing perpetrators, but that does not negate the fact that there are systems in place to deal with it, should it be brought to the right peoples’ attention. In the event an agent or brokerage is found guilty, they face serious and severe consequences that threaten more than just their reputation, but also their livelihood.

Apart from the tangible consequences, however, misleading advertisements and contradictory claims of being No. 1 in this or that come with additional implications that affect the industry as a whole. Having a multitude of real estate agents and companies simultaneously celebrating themselves as the “best” or “No. 1” can only work to confuse the public and tarnish the industry’s reputation.

Considering the monetary and reputational dangers of false advertising, agents and brokerages alike have only to asks themselves whether the risk of consequence is worth the fleeting prominence of being seen as an unsubstantiated No. 1.