Regulation of business practices  Real estate license laws

Regulation of business practices

The real estate industry is regulated by every level of government. Federal and state statutes, as well as a large body of court decisions, generally referred to as common law, circumscribe how real estate can be developed, managed, and transferred.

Among the laws most relevant to agents and brokers are those relating to:

  • agency
  • contracts
  • disclosure
  • environmental impact
  • fair housing

In addition to federal, state, and local laws and regulations, the real estate industry is, to a degree, self-regulated by the codes of ethical conduct propounded by the industry’s many trade organizations. For example, the National Association of Realtors® Code of Ethics not only reflects the law but sets an even higher standard of performance for member brokers and agents.

It is imperative for new practitioners to understand and abide by the many laws which regulate the industry.

Real estate license laws

State real estate license laws comprise the primary body of laws and regulations governing real estate brokerage practice. License laws in each state specify who must obtain a license to practice real estate and set the requirements for obtaining and maintaining the license. License laws also define critical aspects of real estate brokerage, including

  • procedures for handling escrow deposits and fees
  • procedures for advertising
  • guidelines for dealing with clients and customers

State license laws are administered in each state by a real estate commission. The commission is charged with administering and enforcing license laws. In addition, the commission may pass regulations that further refine or clarify state statutes.