Brokering Real Estate Without a License

The practice of real estate is a highly regulated profession because states must ensure that the rights of consumers and investors are protected. Furthermore, what happens in the real estate market can substantially influence both local and national economies. All states require that anyone wishing to practice real estate as a sales agent or broker must first obtain a state license to do so. Without such a license, anyone practicing real estate in the state commits a crime.

What Does It Mean to Practice Real Estate?

Each state has its own definition of what it means to practice real estate, though these definitions involve the same general type of activity. A person practices real estate whenever they engage in financial transactions involving real property as a sales agent or broker. Any time you act on someone else's behalf when buying or selling real estate to receive a fee, commission, or other type of compensation, you have engaged in the practice of real estate.

Examples of real estate transactions include buying a house, selling land, and leasing a commercial space. Practicing real estate can also consist of advertising yourself as an agent or simply negotiating on behalf of another person or entity.

Who Needs a Real Estate License?

A person who wants to engage in real estate transactions on behalf of another must first obtain a license to do so from the state in which they practice. For the most part, these individuals are brokers, sale agents, and, sometimes, lawyers. Real estate license requirements vary from state to state.

Agents. To get an agent's license, a person needs to complete a minimal amount of real estate education, apply to the state's real estate governing board, and pass a written examination. Additionally, agents must find a broker who's willing to hold their real estate license. A broker is the person financially liable for the agent's mistakes.

Brokers. Acting as a broker requires another specialized license above and beyond the agent's real estate license. Brokers need this license because they have a tremendous amount of liability and can be held responsible for their agents' errors. In order to obtain a broker's license, an agent must practice real estate for a minimum length of time, conduct a certain amount of transactions, take a brokerage education class, and pass the brokerage examination.

Exempted actions. All states exempt individuals or entities who are managing their own property from the license requirement. For example, if a homeowner lists their house as "for sale by owner," they don't need a real estate license. Another common exception to the licensure rule is when the real estate transaction does not involve compensation. States define "compensation" quite broadly, so it's imperative to determine your state's legal definition.

What Are the Penalties for Acting as a Real Estate Broker or Agent Without a License?

Penalties for practicing real estate without a license vary by state and can include criminal and civil penalties.

Criminal Penalties

Some states make it a felony to practice real estate without a license. A felony conviction carries the possibility of prison time of a year or more, plus fines. Arizona makes practicing real estate without a license a class 6 felony, punishable by up to two years in prison and a $150,000 fine for first-time offenders and up to 5.75 years' incarceration for repeat offenders. In Kentucky, a first-time offender receives a misdemeanor conviction that carries up to 12 months in jail, but it's a class D felony for subsequent offenses. The law also authorizes Kentucky circuit court judges to impose an additional penalty of up to six months incarceration and a $1,000 fine for each transaction in which the offender engaged. If any commission was earned, the judge can add that amount to the offender's fine.

Penalties vary depending on the circumstances. For instance, it might be a misdemeanor to practice with a delinquent or inactive license but a felony to misrepresent one's credentials. Oftentimes laws will provide for harsher punishments for certain actions or parties. For example, many states penalize an unauthorized person who buys and sells real estate more severely than they do a person who unlawfully rents or leases out property, despite all these actions falling under the umbrella of practicing without a real estate license. Additionally, entities tend to receive more serious penalties than individuals, depending on the circumstances.

(Ariz. Rev.Stat. §§ 13-702, 13-801, 32-2165; Ky. Rev. Stat. § 324.990 (2025).)

Civil Penalties and Lawsuits

On top of criminal penalties, state law generally authorizes civil penalties for violations, as well as injunctive remedies. Civil penalties usually accrue on a per-violation basis and, most notably, include substantial fines.

A person who engages in practicing real estate without a license also may face civil lawsuits. The plaintiff in such a lawsuit can file for injunctive relief or a temporary restraining order, in addition to monetary compensation. These forms of temporary relief prevent a defendant from continuing to engage in the unauthorized behavior during the pendency of the action.

Administrative Penalties

Each state has their own administrative boards that oversee professional licensure, including real estate licensing. The Texas Real Estate Commission, for example, is a licensing board that provides real estate licenses and education, as well as investigates claims made by those who believe they are victims of real estate fraud. An alleged offender can be required to attend an administrative hearing regarding their unlawful behavior. If the commission determines sufficient evidence of wrongdoing exists, it will impose disciplinary action, such as a formal reprimand, fines and fees, and even a temporary or permanent license suspension.

Related Offenses in Real Estate Licensing

In addition to practicing real estate without a license, many related offenses can result in similar criminal, civil, or administrative penalties. These offenses include application fraud, misrepresentation, negligent practicing of real estate, unlawful dual agency representation, nondisclosure violations, discrimination, bad faith actions, unlawful referral fees, failure to complete continuing education, and practicing real estate law without a law license.

Getting Legal Help

Criminal charges for the unauthorized practice of real estate can incur serious fines and substantial incarceration time, as well as loss of your professional license. Whenever you face an investigation or charge, it's best to consult a local criminal defense attorney. You might also want to contact a lawyer who has experience defending civil lawsuits for real estate-related torts and appearing before administrative boards.