Earlier this year, the National Assn. of Realtors came out against publishing racial and ethnic demographic information on real estate Web sites--fearing that the data might contribute to racial steering and run afoul of fair housing laws.
Federal antidiscrimination laws prevent real estate agents from selectively peddling neighborhoods to home buyers based on their race.
The Realtors' fear that factual government data could be tantamount to racial steering seems to be an overreaction, but it sheds light on the conflict the Web may have with a series of existing real estate laws.
There is also a danger that narrow interpretation of these statutes may limit innovation on the Net.
Real estate is regulated by a morass of local, state and federal rules that police everything from kickbacks between title companies and real estate agents to requirements that home loan borrowers receive a small mountain of printed disclosure forms from their lenders.
Enter the Web, which promises more consumer choice, less paper and more information about the home buying process, neighborhoods and real estate services.
But here is the rub: the laws that govern real estate don't necessarily support the increased efficiency and additional information supplied by the Web.
Take Countrywide Funding, which has digitized the entire loan package that borrowers must review, initial and sign before closing on a mortgage. Imagine viewing these forms online with detailed explanations of legalese.
Not so fast, say disclosure laws. These documents must be printed in multiple copies and delivered in person to each and every borrower, pushing up the cost of the loan.
For the most part, real estate regulators have not kept pace with e-commerce, looking instead for guidance from the industry.
NAR, for example, has asked the U.S. Department of Housing and Urban Development and the Department of Justice for clarification on whether real estate Web sites or agents who list properties on them could be liable under the Fair Housing Act because such activities may be construed as racial steering.
Without clearance from regulators, Web sites that allow neighborhood searches by racial or ethnic data and agents who list homes on such sites could face the possibility of a fair housing complaint or lawsuit, according to NAR.
Regrettably, the gap between innovation on the Internet and government action is widening, creating land mines for firms that move ahead of the regulatory curve.
