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Government Regulations In Real Estate Investing

Aug 17, 2007
As real estate investments continue to dominate the financial world, there is a growing number of frauds in the market. With the growing number of agencies, the Government has understood the need for laws to regulate the transactions. All the states and the District of Columbia enforce laws for licensing and regulating, and a code of conduct for the agents. The industry has strongly supported real estate licensing law.

Objectives of the Laws
Prevention of fraudulent practices is the major objective of the laws. The real estate world is vulnerable to abuses so the courts have made it mandatory for the sellers to disclose all the essential information to the buyers for consumer protection. This document containing all the facts is called the public report.

Codes of Law
On August 4, 1943, the legislative power of the Department of Real Estate (DRE) was categorized as two Parts of the Division 4 catering to the Business and Professions Code. Part 1 is now known as Sections 10000 to 10580. It is titled, "Licensing of Persons" and can be quoted as the Real Estate Law. Part 2 is called Sections 11000 to 11200. It is titled, "Regulation of Transactions" and can be quoted as the Subdivided Lands Law.

The Requirement of A Real Estate License
Under the Sections 10131, 10131.1, 10131.2, 10131.3, 10131.4, 10131.45, and 10131.6 of the Real Estate Law, the activities of the broker are defined. Under Sections 10131 (d) and 10240 of the Real Property Loan Law, the activities of the mortgage loan broker are defined.

In the absence of a license, no compensation will be given to a person for carrying out any of the acts stated within the scope of a licensed broker. The law enforces penalties for an individual claiming to be a real estate broker without having a license. Any would be real estate broker who charges a person fees without a license for carrying out activities, which call for a real estate license, faces fines from the Commissioner. Furthermore, a person, who is found charging individuals fees without a license shall be found guilty of a crime under Sections 10138, 10139, 10139.5 of the Code.

The Importance Of Rules And Regulations
Before going into transactions, it is best to become familiar with the rules and regulations. The buyers should know their rights to avoid sellers taking undue advantage. A well informed buyer is able to get a fair deal from the agents, and may even go to court if the agent strays from the law.
About the Author
David Gass is President of Business Credit Services, Inc. His company publishes a free weekly e-newsletter on Small Business Consulting at their web site http://www.smallbusinessconsulting.com
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