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NC: Real estate schools failing to meet commission standards

North Carolina’s real estate schools aren’t living up to the standards set by the state’s real estate commission, a document obtained by Watchdog Wire shows.

The report, “Real Estate License Examination Performance Summary Report by School,” shows the percentage of students at each real estate school who passed the state real estate exam. The data is from July 2013 through June 2014 and includes data from students who took the exam for the first time and did not currently hold a real estate license.

The commission sets a passing rate of 70 percent as the standard for real estate schools and reserves the right to revoke an instructor’s license if it falls under that mark. Over three quarters of private real estate schools failed to meet the standard in the time period covered by the report.

The largest school in the state, JY Monk Real Estate School, had a passing rate of just 52 percent. Their broker pre-licensing course costs $439 according to their website.

The second largest school, Superior School of Real Estate, had a passing rate above the standard at 73 percent. North Carolina Real Estate Commission member Vic Knight is an instructor at that school, though the school’s website says he is teaching continuing education courses. The third largest school, HPW Real Estate School, has a passing rate below the standard at 62 percent. The pre-licensing courses at these schools cost $424 and $399, respectively.

Commission’s decision

shutterstock_130170548If two of the top three schools in the state are failing to meet the standard, does this mean some of the school’s instructors will not have their licenses to teach renewed?

Not necessarily so, according to an explanation of the rules by  NCREC’s Bruce Moyer, director of education and licensing.

“The 70% passing rate is set out in the Commission’s Rules,” he explained via email.

“Rule C.0608 gives the Commission similar authority to withdraw or deny the approval of any instructor approved to teach prelicensing and postlicensing courses,” Moyer continued. “Both rules are permissive, giving the Commission the authority to withdraw or deny the approval but not mandating withdrawal or denial of approval. Each case is assessed on its own merits, and any action taken is in accordance with due process of law.”

Moyer previously worked as an instructor at the Superior School of Real estate from March 2008 to August 2012, according to his public LinkedIn profile.

Below is the rule within North Carolina’s Administrative Code that sets out the commission’s authority to deny or approve licenses. It can be found in Title 21, Chapter 58C.

The Commission may deny or withdraw any approval granted to a school upon finding that such school has:

(1)        refused or failed to comply with any of the provisions of Sections .0100 or .0300 of this Subchapter;

(2)        obtained or used, or attempted to obtain or use, in any manner or form, North Carolina real estate licensing examination questions;

(3)        compiled a licensing examination performance record for first-time examination candidates which is below 70 percent passing for two or more of the previous five annual reporting periods; or

(4)        failed to provide to the Commission a within 30 days of a written request from the Commission a written plan describing the changes the school intends to make in its instructional program including instructors, course materials, methods of student evaluation, and completion standards to improve the performance of the school’s students on the licensing examination in the future following attainment by the school of a licensing performance record for first-time examination candidates which was below 70 percent passing for the previous annual reporting period.

Though that’s a lot of legal jargon, this situation raises some important questions about the role of occupational licensing.

Occupational licensing

shutterstock_178372898A number of organizations have highlighted the burden that occupational licensing places on people and the economy.

It also opens the door for abuse, especially when the people determining licensing are existing competitors in the market. They have an economic incentive to restrict competition.

Writing for the Library of Economics and Liberty, S. David Young explains the intended and practical effects of occupational licensing.

“The argument in favor of licensing always has been that it protects the public from incompetents, charlatans, and quacks,” he writes. “The main effect, however, is simply to restrict entry and reduce competition in the licensed occupation.”

By reducing competition, occupational licensing can actually harm consumers by artificially increasing costs to consumers. Licensing also gives consumers a false sense of security: just because someone is licensed doesn’t guarantee that he is competent or honest.

The Institute for Justice has pursued a number of court cases related to occupational licensing and published a comprehensive report on the subject called “License to Work.”

All 50 states require licensing for real estate agents.

All featured images from Shutterstock

Josh Kaib

Josh Kaib is the Assistant Editor of Watchdog Wire. Twitter: @joshkaib

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