If you’re selling a house, you know you need a real estate agent.  That means someone who has achieved educational requirements, passed significant testing, undergone a background check and reinvests each year in continuing education. Do you know that in many states, selling a restaurant also requires a license?

It’s true. For sixteen states, it is a specific and certain legal requirement that business brokers or restaurant brokers hold a real estate license. Failure to do so is a Third Degree Felony in the state of Florida and a misdemeanor in Georgia punishable with a fine of $1000 for each violation with each day that person practices as a separate violation.

As of this date, the following states both require a license and have been very consistent in requiring a real estate license in order to sell a business without any real estate. These include: Florida, Georgia, Colorado, California, Washington, Oregon, Nevada, Arizona, Nebraska, Utah, Idaho, Wyoming, South Dakota, Minnesota, Wisconsin and Alaska. In Illinois, the law is slightly different and requires that you register with the Securities Division of the Secretary of State.  That's a total of 17 states with a licensing requirements for business brokers.  In the event that real estate is involved, all fifty states require a license for the transaction to occur legally.

What are these states hoping to accomplish by requiring a real estate license or other form of licensing for selling a restaurant?

First of all, each license holder is subjected to fingerprinting and a background check. If there are any convictions, clouds or issues arising from the background check, the applicant will not be able to get a license. If you consider that you’re about to spend several hundred thousand dollars at the advice of business broker, is it really such a bad idea to know if they’ve been convicted of fraud first?

Secondly, a real estate licensee is subject to specific educational requirements, including legal and ethics coursework. This education insures that the person holding money and advising you on buying or selling a restaurant understands the legal elements of a contract including, escrow, consideration, buyer and seller acceptance and much more. You would never dream of visiting an unlicensed doctor, why would you put thousands of dollars in the hands of an unlicensed person practicing business brokerage?

Lastly, a real estate license holder is held to specific standards for holding escrow money, advertising listings, the language and content of listings and in some cases, even the legal forms he or she may use for a business.

Each of these items protects the consumer, you, the person buying or selling a restaurant. In the event something goes wrong, the Real Estate Commission in each state has a full complaint and disciplinary process that can result in fines, loss of a license and other sanctions, including, for those operating illegally, criminal charges.

How do you know if your broker has a license to sell your business or help you buy a restaurant? Don’t bother trying to find out on the national listing websites. This restaurant broker did a quick check online and found that in Georgia, fully 50% of the “featured” brokers advertising on BizBuySell did not have a current Georgia real estate license.

The internet has made it incredibly easy to advertise, leading to what I personally believe is the “wild west” mentality where anyone gets listings anywhere. There are no checks and balances on the national listing websites so you will not be able to tell if someone is licensed. For this restaurant broker, who spends an incredible amount of time and money each year complying with educational requirements, paying for licenses and renewal fees and staying current in many states, it is inconceivable that others simply operate in the open without proper licensing. All listings on the We Sell Restaurants website are represented by duly licensed representatives for that state.

How do you confirm a business broker is operating legally? Fortunately, the real estate commission for each state has a simple process where you can verify licensing. I’m including links to each state below. Before you inquire on a listing for sale, take five seconds and confirm the person representing it has the legal right to do so.

What happens if you’re listed with an unlicensed broker? In my opinion, you should immediately terminate the listing. That person has no legal right to represent you and any agreement would be unenforceable in a court of law.

What if you are in contract on a listing with an unlicensed broker? Seek legal counsel. If the broker has mistakenly represented the he or she has the authority to represent your business, you may avoid paying commission. An unlicensed party to a contract making a false claim could easily void any requirement to pay on your behalf.

Lastly, if you discover a broker is unlicensed and representing a listing in a license state, take a moment and report this activity to your real estate commission. There are laws on the books to protect your community and while the real estate commission may not be swift in follow up, they will ultimately investigate any claim you file.

Confirm a real estate license for each state by clicking the link on each state below:

• Alaska
• Arizona
• California
• Colorado
• Florida
• Georgia
• Idaho
• Illinois (Illinois requires registration with the state securities commission-check at this link)
• Minnesota
• Nebraska
• Nevada
• Oregon
• South Dakota
• Utah
• Washington
• Wisconsin
• Wyoming

Robin Gagnon, Certified Restaurant Broker®, MBA, CBI, CFE is the co-founder of We Sell Restaurants and industry expert in restaurant sales and valuation. Named by Nation’s Restaurant News as one of the “Most Influential Suppliers and Vendors” to the restaurant industry, her articles and expertise appear nationwide in QSR Magazine, Franchising World, Forbes, Yahoo Finance, and BizBuySell. She is the co-author of Appetite for Acquisition, an award-winning book on buying restaurants.