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Flashcards in License Law Deck (12)
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Today all states require that people in the real estate business be licensed by the state. The state's authority to require licenses falls under the state's police power to protect the health, safety, welfare and property of its citizens. The purpose of license law legislation is to protect the general public.

License laws require the licensee to possess the knowledge, skill and reputation for honesty, fair dealing and ethical conduct necessary to participate in the real estate business. License laws also govern the licensee's conduct in real estate business activities.


Statutes and Rules

Real estate students must be thoroughly knowledgeable of the license law statutes and of rules and regulations currently in effect for their state or jurisdiction. Students may obtain copies of the license law statutes and rules and regulations from the licensing authority in the state to which the student is applying for a real estate license.

This knowledge is essential for the student to pass the state licensing examination. As you progress through this course you will be given the appropriate links to your state website containing laws and commentary


Statutes and Rules

Part 2

National Association of Realtors® (NAR)

Because real estate laws vary from state to state, real estate students must become thoroughly familiar with the license law and rules and regulations in their own state or any other jurisdiction where they practice.

The most important provisions of real estate law are similar, but not identical, in all states. These are based on the model recommended by the National Association of REALTORS® (NAR).



Substantial uniformity among states also has resulted from efforts of the Association of Real Estate License Law Officials (ARELLO). Organized in 1930, ARELLO is made up of license law officials representing every state. The organization functions as a clearinghouse of real estate information and statistical data for members.

ARELLO and NAR have made substantial contributions to license legislation that have elevated the standards of the real estate industry, including sponsorship of several model license laws which have been adopted by the various states.


Real Estate Licensing Exams

Some real estate licensing examinations are divided into two parts. Applicants for license must pass both parts of the examination. One part consists of questions about the license law statutes and rules and regulations in effect in the state to which license application is being made (state law). The other part consists of questions covering all other real estate subjects of which the applicant must be knowledgeable (national law).

Variations in license law legislation from state to state usually involve administrative matters such as requirements for license eligibility. Examples include such requirements as minimum age for licensing, amount of prelicensing education required, residence, and apprenticeship.

There are often separate licensing examinations for brokers' licenses and for salespersons' licenses. The definitions of real estate broker and of real estate salesperson are fairly uniform in the various state licensing laws.


Real Estate Broker

The definitions of real estate broker and of real estate salesperson are fairly uniform in the various state licensing laws. A real estate broker is any person, partnership, association, or corporation who, for a payment or other valuable consideration:
Lists or offers to list;
Sells or offers to sell;
Buys or offers to buy;
Auctions or offers to auction;
Negotiates the purchase, sale or exchange; and/or
Leases or rents or offers to rent any real estate for others.



Many states add to the licensee's activities the functions of property management, rental collection, and sale of business opportunities.

A real estate salesperson is any person who performs any of the acts set forth in the definition of real estate broker for compensation or valuable consideration or promise of compensation or valuable consideration, and does so only while associated with and supervised by a licensed broker.


Supervised by a Broker

A real estate broker can own and operate a business, whereas a salesperson licensee can engage in the real estate business only when associated with and supervised by a broker. Therefore, a salesperson cannot operate independently.

A salesperson licensee is any person with a valid real estate or appraisal license. A real estate licensee can generally be active or inactive, or an individual, corporation or partnership. Only individuals can be licensed as appraisers.


Non-License Categories

State laws allow certain categories of persons to perform brokerage for consideration without a license. Some examples are:
Owners or lessors acting in regard to property they own or lease;

Individuals acting as attorney-in-fact under a duly executed power of attorney authorizing the final consummation of any contract of sale, lease or exchange of real estate. An attorney-in-fact is a person or organization appointed to perform certain legal acts on behalf of another under a duly executed power of attorney. The attorney-in-fact need not be an attorney at law, although people often give a power of attorney to their lawyers;


Non-License Categories part 2

An attorney-at-law, if the services are performed on behalf of clients as part of any attorney's provision of legal services to those clients;

Receivers, trustees in bankruptcy, guardians, administrators or executors acting under a court order;

Trustees acting under trust agreements, deeds of trust or will, or trustee's salaried employee; and

Property managers and building-developers


Real Estate Commission

The state assigns responsibility to a licensing board or commission to enforce real estate license law statutes. These bodies are authorized to issue licenses to qualified applicants and to revoke or suspend licenses in the event of statutory or regulatory violations by licensees.

The state licensing organizations also are empowered by statute to prosecute unlicensed individuals committing acts in violation of the license law statute. These violations typically are misdemeanors or infractions, not felonies, and the license law statutes empower courts to punish the violator either by fine or by imprisonment, or both, at the court's discretion


Standards of Conduct

Major portions of license law legislation set forth certain standards of conduct, and these are substantially uniform among the states.

The standards of conduct reinforce the licensee's obligations to the general public, which is the major purpose of license law legislation. Licensees' violations of the statutory requirements subject them to license revocation or suspension.