California Institutes Larger Fines for Selling Real Estate Without a License

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In California, it's illegal to sell a house without a real estate license from the state. But that hasn't stopped hundreds of people and companies from doing it over the last decade. Monday, Governor Schwarzenegger signed a bill that increases fines for the crime. KPCC's Julie Small reports the bill's author hopes that'll curtail the practice.

Julie Small: Not everyone who sells a house has a license to do it. And some who don't have a license don't have the skill to handle the deal the right way. In the last decade, the state's Department of Real Estate has issued more than 750 cease-and-desist orders to individuals and companies that sell homes in California without a license.

But the number is going up. State Senator Jack Scott of Pasadena says profits are big – and fines are too small.

Senator Jack Scott: Let's say if you sold a home and the commission was 30 or 40,000, and so you risk a $10,000 fine, then that might not be a deterrent.

Small: Scott's bill doubles the fine to $20,000. That's for individuals. A company doing the same will pay up to $60,000. Tom Pool with the Department of Real Estate says home sales done by unlicensed agents often end in foreclosure. He likes the bigger fines.

Tom Pool: You just got to make sure the incentives and the laws are in place to make sure that people think twice before breaking the laws. And I think with the increased fines, we're going to see that.

Small: The new law also deposits most of the fines into a fraud-busting fund. Pool thinks that will give county district attorneys greater incentive to prosecute these cases – something they rarely do now. The bill takes effect next year.