Tag Archives: legal issues

Could the Supreme Court put an end to open house signs?

This article was originally published on Inman News:

Key Takeaways
  • A recent Supreme Court ruling threatens agents’ ability to display open house signs.
  • Municipalities will be reviewing sign codes and may remove real estate exemptions for expediency.
  • The ruling allows exemptions for compelling state interests, and real estate signage has been cited as supporting Fair Housing laws.

Open house signs dot the sidewalks on a weekend morning — it’s a sight of familiarity for our clients and our businesses.

Based on a recent legal ruling, those signs might disappear in short order.

That’s unless Realtor associations nationwide step up quickly to help their local governments identify the language in the ruling that supports open house sign exemptions in sign codes.

The town of Gilbert, Arizona, recently took a sign code case all the way to the Supreme Court. The town’s ability to regulate the content and manner in which temporary directional signs are displayed is at issue.

The Supreme Court ruling

In short, the court ruled that any sign regulation must be content-neutral so as not to deny free speech. A city can impose restrictions on size, type and placement of a sign — but not the message.

If a city employee has to read the sign to determine whether it complies with municipal regulations, then the regulations are not content-neutral. Therefore, the regulations are unconstitutional.

What does this mean for municipalities?

For decades, Realtor organizations have worked with local communities to craft reasonable sign codes. These regulations allow for responsible placement of open house signs that support consumers, real estate practitioners and their communities.

The Supreme Court ruling will force every municipality with a sign code to re-evaluate their regulations and decide whether they’ve granted exemptions that don’t pass the content-neutral sniff test.

If they currently grant content-based exemptions, they’ll likely see two basic choices:

  • Grant the right to place directional signs to everyone, regardless of content. This means the hardware store, the adult novelty shop and the liquor store can all place A-boards wherever an open house sign can be displayed.
  • Throw out all of the sign exemptions. Don’t allow any businesses to display any directional signs, including open house signs.

The second choice will likely be viewed as the easier, cleaner solution. Legal advice is currently going out to towns across the country asking them to review their policies, and many will lean toward the fastest solution.

There’s one caveat in the ruling, though, and it applies directly to real estate signs. If the content regulation is being applied in pursuit of a compelling governmental interest — and narrowly tailored to that end — some content exemptions are allowed.

The Supreme Court and Federal Trade Commission have, in the past, cited real estate signage as an asset to federal fair housing. These signs create non-discriminating access to housing and are supportive of the Fair Housing Amendments to the federal Civil Rights Act.

Why sign codes for real estate?

Cities create sign codes to limit sign sprawl. If every shop on every street is allowed to drop A-board signs around the block, a city’s rights-of-way quickly become cluttered and unmanageable.

Sensible sign regulations allow for business advertising while still keeping to the community’s desire for an attractive image.

Most businesses don’t require directional signs. They’re in a static physical location, with a permanent address, and they can be found fairly easily by consumers searching them out.

Real estate open houses, on the other hand, are dynamic in location. Each weekend they change, and consumers are led by temporary directional signs to properties that might otherwise not be located on residential streets.

One could say that Internet advertising and GPS-enabled apps have all but removed the need for open house signs, and most consumers find the homes they’re searching for on their computer or phone.

That’s a bit of a myopic big-city view, however. There are still many people who find homes through traditional means, and there are also those who don’t have regular access to online resources.

What would real estate look like without open house signs?

Would the lack of these signs significantly affect the industry? The first and most obvious change would be the reduction of the marketing opportunity to agents.

Agents often base their businesses on the ability to meet new buyers at their listings as well as neighbors who will be future sellers. Without signs on the street, the casual open house visitor might never stop in.

Serious homebuyers will usually find a way to view the properties they are most interested in — open house or not.

But agents who’ve used open houses as a significant source of new clients via the lookie-loos who happen across a sign in the neighborhood would see a drop in business.

And there are still plenty of home sales that happen when buyers walk into a home that they had no idea they’d love until they stepped inside at an open house.

FSBOs vs. sign codes

There would also be a potential benefit to organized real estate. Licensed real estate agents who belong to an MLS might take a firmer grasp on the volume of listing inventory. The open house sign is currently a neutral marketing platform, open to homesellers — licensed or not.

With FSBOs unable to advertise their own open houses through neighborhood open house signs, market exposure of properties on the MLS might become a much bigger value proposition. The FSBO seller would have fewer ways to garner consumer attention and likely be more inclined to list property with a licensed real estate broker.

Safety and fair housing

Realtor safety and homeowner safety might increase with fewer unknown open house visitors. The idea of the open house itself is bizarre to most outside of the industry.

Professionals invite complete strangers into the home of a client who isn’t present. There is a multitude of opportunities in these situations for bad things to happen to the agents or their clients’ property. Fewer open houses might result in better security in general.

On the other hand, fair housing efforts are supported by open house signs. Protected classes and groups who might not have access to certain real estate marketing information cannot be discriminated against when a physical sign invites all comers in a geographic location into a home for sale.

There is still a sizable portion of the population that does not regularly engage in online activities or does not have regular access to the Internet. Physical signs can engage these consumers no matter their social and economic status.

Saving the signs

The fix for the real estate industry is straightforward, though it will require much legwork and expediency. Municipalities don’t like to open up their sign codes. It’s a tedious process.

Their inclination when faced with the SCOTUS ruling will be to throw their hands up and throw all of the signs out. Rather than let their communities be cluttered, they’ll toss out the exemptions.

Education now, before the decision-making processes come about, is necessary to let these municipalities understand their options. The key is to engage local officials before the fear of lawsuits arises.

City councils and their counsel need to know that there is a compelling interest in allowing exemptions for real estate signage:

  • Open house signs increase local home sales, the rate of sales and revenue collection for municipalities.
  • Open house signs improve access for all citizens to housing and support fair housing and non-discrimination efforts.
  • Municipalities can continue their narrowly tailored exemptions based on this content.

City and county governments don’t want to be tied up in lawsuits, which is why their first inclination might be to take all exemptions away. Unfortunately, that will likely create more litigation from real estate organizations that rightfully wish to keep their current signage rights.

By pre-emptively engaging and educating local leaders with this information early, we can preserve the ability to advertise open houses without opening the floodgates of rampant right-of-way signage.

Many thanks to our Realtor staff, volunteer leaders and housing specialists in providing the background for this post.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and 2016 president-elect of Seattle King County Realtors. You can find his team at SeattleHome.com and SeattleCondo.com.