What Are the Top Reasons a Real Estate Agent Loses Their License?
There are a number of reasons that a real estate agent can lose their license. This guide will cover why people lose their real estate license, why licenses get suspended, and if you can get your license reinstated after losing it. Each state’s real estate commission or licensing board has rules in place to protect real estate licensees and their clients. Keep in mind, these are not all of the reasons that a license can be revoked and each state has different rules regarding the revocation of a license — but by reading this guide, you’ll have a better understanding of how and why real estate license revocation occurs.
Breaching Client Confidentiality
When you’re working with a client on a purchase or sale, what they tell you is confidential. Yes, you can share the listing information of the home, but sharing where they work, their marital status, and the names of their family members, for example, are off-limits. If you become a luxury real estate Salesperson or real estate Broker, client confidentiality is non-negotiable. If you’re working with a famous client, you may be tempted to brag about it on social media. But you may break client confidentiality if you post that Tweet. Whether you’re working with an average client or a famous one, you could have your license suspended by your state’s commission if you spill too much of their personal information. As a licensee, it’s best to avoid sharing details regarding your clients and keep up to date with the licensure rules in your state so you don’t risk losing your license.
Failing to Disclose Information
One of the benefits of being a real estate Broker or Salesperson is that you can work for yourself. However, you must disclose your financial interest to all other parties involved in possible real estate transactions to remove any potential conflict of interest. If you fail to disclose your financial interest in a prospective deal, you can have your license revoked or suspended. Do not try to hide your financial interest, even if you think it will scare your client off. Just be honest and upfront with people. Remove that potential conflict of interest from the jump by being transparent, and you shouldn’t experience any related problems down the line.
Mishandling or Stealing Client Money
Mishandling a client’s money is one of those scenarios that is typically more related to negligence than anything nefarious — unless, of course, you actually steal a client's money. In that situation, you would need to worry about not just getting your real estate license suspended but also the criminal charges you would face, which may require seeking legal advice. One of the most common occurrences of mishandling client finances unfolds when an agent deposits the money from a real estate sale into their personal account as opposed to the title company account. If you work for a property management firm, you may forget to deposit checks from the various renters. That’s certainly not criminal, but their money was mishandled. To avoid this scenario, maintain stellar bank records so things don’t slip through the cracks.
Certain Criminal Convictions
Each state handles criminal convictions differently, so it’s crucial to know how your state deals with an agent’s criminal history as related to real estate licensure. In most circumstances, the various real estate commissions will suspend or revoke licenses on a case-by-case basis if an agent has committed a crime. Before you even get your license, most states require that you submit your criminal background.
Some states are more lenient than others when it comes to licensing potential agents with a criminal history. But if you happen to live in one of the six no-nonsense states [Alabama, Arizona, California, Georgia, Michigan, and North Carolina] and you’ve committed a felony, you should consider a different career path. If you get your real estate license and then commit a crime, your license can be suspended, particularly if you commit a felony. In simple terms, if you want to remain in good standing with your state’s real estate commission, don’t break the law.
Mortgage Fraud
It may be hard to believe, but there are those in the real estate business who try to game the system. Mortgage fraud is one such way that people try to cheat in this industry. The most common act of mortgage fraud unfolds when a client doesn’t get approved for a mortgage. Instead of finding the honest workaround, some real estate agents decide to fudge the numbers or disclose false information to the person as if they were approved. Needless to say, you should absolutely never lie to your client and commit mortgage fraud. You’ll not lose your real estate license, but you will face criminal liability as well. If you have a client who doesn’t get approved for a mortgage, talk with them and offer solutions that don’t involve a rap sheet.
Failing to Cooperate With Regulatory Agencies
Most real estate regulation boards take all complaints seriously and conduct investigations to determine whether disciplinary action is needed. As a real estate Salesperson, Associate Broker, or REALTOR®, cooperating with your regulatory agencies is a must. If you’ve done nothing wrong, you should have nothing to hide — and if you have done something wrong, be upfront with investigators. Either way, agents, Brokers, and REALTORS® get in trouble when they decide not to cooperate with an investigation and ignore it instead. This course of inaction only makes the situation worse, so save yourself the headache and give the investigators whatever they need.
Violating the Fair Housing Laws
There is no excuse for violating the Fair Housing Act. The Fair Housing Act prohibits discrimination in housing due to:
- Race
- Color
- National origin
- Religion
- Sex
- Familial status
- Disability
One of the ways agents can violate fair housing laws is by refusing to rent to or work with Black or LGBTQIA+ clients, for example. In both scenarios, these bigoted agents are violating the Fair Housing Act, and their license will be suspended after an investigation.
Failing to Meet Licensing Requirements
This is probably the most common reason agents lose their real estate license. They wait until the last possible second to complete their required Continuing Education [CE] during the license renewal process, and then they’re in the lurch. If you fail to meet the CE deadline, most states will put your license on hold. If that happens, you can’t practice real estate until the issue is resolved, which may warrant a late fee. It’s also important to note that you may have to retake your Pre-Licensing education to reinstate your license if a significant amount of time elapses after your license is revoked or expired. Again, check your state’s real estate commission website for more details.
Pro Tip:
Instead of waiting until the last minute to renew your real estate license, complete your CE early so that you do not miss your renewal deadline.
Can a Real Estate License Be Reinstated After Revocation?
In most cases, if your license is revoked, all real estate activities must stop. Until the issues are resolved, you’re not allowed to practice real estate. In most situations, the majority of the states allow agents to apply for a petition to get their license back one year after it was revoked.
In short, yes, it’s common for a real estate license to be reinstated after revocation if you clear up whatever caused the license to be revoked and pay any related fees. However, it’s better to avoid letting your license lapse or engaging in any activity that doesn’t align with the industry’s Code of Ethics. Namely:
- Do not commit crimes
- Be transparent with your clients while protecting their privacy
- Maintain excellent records to avoid mishandling money
- Serve all of your clients equally in accordance with the Fair Housing Act
- Cooperate with regulatory agencies
- Complete your CE early so that your license doesn’t lapse
While The CE Shop can’t stop you from committing crimes [just say no to mortgage fraud!], we can teach you everything you need to know to be a top-producing agent. Even better, our innovative CE curriculum is 100% online, meaning you can stay ahead of your renewal requirements wherever you are, whenever you want, and on any device. We also offer engaging electives that can help you snip negligence in the bud. Check out our The Code of Ethics in Action: Real-Life Applications, Current Issues and Trends in Real Estate, and Marketing, Advertising, and Social Media Compliance courses to get you started.