EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT

                                     BETWEEN

                             FAC REALTY TRUST, INC.

                                       AND

                                FRED P. STEINMARK


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                              EMPLOYMENT AGREEMENT

        THIS EMPLOYMENT AGREEMENT is entered into as of the 1st day of July,
1998 between FAC REALTY TRUST, INC., a Maryland corporation (the "Company"), and
FRED P. STEINMARK (the "Executive") for employment commencing on the Effective
Date (as hereinafter defined).

                                     W I T N E S S E T H:

        WHEREAS, the Company seeks to employ the Executive as its Executive Vice
President of the Company and the Executive agrees to be so employed:

        NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:

        1.     Employment.

               (a) The Company hereby employs the Executive as Executive Vice
President of the Company and the Executive hereby accepts such employment, on
the terms and subject to the conditions hereinafter set forth.

               (b) During the term of his employment under this Employment
Agreement and any extension hereof (all references herein to the term of this
Employment Agreement shall include any extension hereof), the Executive shall be
and have the title of Executive Vice President of the Company and shall devote
his entire business time and all reasonable efforts to his employment and
perform diligently such duties as are customarily performed by executive
vice-presidents of companies similar in size to the Company, together with such
other duties as may be reasonably requested from time to time by the Board of
Directors of the Company, which duties shall be consistent with his position as
set forth above and as provided in Paragraph 2; provided, however, that business
activities by the Executive with respect to passive investments, so long as such
activities do not, alone or in the aggregate, materially interfere with the
Executive's performance of his duties as described in this Paragraph l(b), will
not be deemed inconsistent with the requirements of this Paragraph l(b).

               (c) As the Company is headquartered in North Carolina and
Executive will work from the Company's Boca Raton, Florida office for the
Company, the parties agree to work together to mutually accommodate both
Executive and the Company.

        2.     Term and Positions.

               (a) Subject to the provisions for extension or termination
hereinafter stated, the term of this Employment Agreement shall begin as of the
first closing of that transaction described in that document entitled Master
Agreement by and among FAC Realty Trust, Inc., FAC Properties L.P. and the other
signatories to the Master Agreement thereafter contained dated as of February
24, 1998 which is expected to be July 1, 1998 (the "Effective Date") and shall
continue through June 30, 2001 (the "Expiration Date"). As of July 1, 1999 and
each

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successive anniversary thereof, such term automatically shall be extended
for one (1) additional year, unless; (i) this Employment agreement is terminated
as provided in Paragraph 5 or (ii) either the Company or the Executive shall
give written notice to the other at least thirty (30) days before the first
anniversary of the Effective Date or any subsequent annual anniversary thereof,
that this Employment Agreement shall not be so extended but shall terminate upon
the expiration of the then-existing term (for example, unless such written
notice of non-extension is given on or prior to May 31, 1999, the term of this
Employment Agreement automatically will be extended, effective July 1, 1999,
until June 30, 2002). In the event of a "change of control" (as hereinafter
defined) the term of this Employment Agreement shall automatically be extended
for a term of two (2) years from the then existing termination date.

               (b) The Executive shall be entitled to serve as Executive Vice
President of the Company. For service as an officer and employee of the Company,
the Executive shall be entitled to the full protection of the applicable
indemnification provisions of the Restated Certificate of Incorporation and
Bylaws of the Company, as the same may be amended from time to time, which
indemnifications shall remain effective after termination of this Employment
Agreement with respect to Executive's actions and inactions during the term
hereof.

               (c)    If:

                      (i) the Company materially changes the Executive's duties
        and responsibilities as set forth in Paragraphs l(b) and 2(b) without
        his consent;

                      (ii) the Executive's place of employment is located more
        than thirty (30) miles from the geographical center of Boca Raton,
        Florida;

                      (iii) there occurs a material breach by the Company of any
        of its obligations under this Employment Agreement, which breach has not
        been cured in all material respects within ten (10) days after the
        Executive gives notice thereof to the Company;

                      (iv) there occurs a "change in control" (as hereinafter
        defined) of the Company during the term of this Employment Agreement;

then in any such event the Executive shall have the right to terminate his
employment with the Company, but such termination shall not be considered a
voluntary resignation or termination of such employment or of this Employment
Agreement by the Executive but rather a discharge of the Executive by the
Company "without cause" (as defined in Paragraph 5 (a)). The Executive may
exercise such right of termination at any time within three (3) months following
the occurrence of the applicable event described in (i) and (iii) of this
Paragraph 2(c), and within six (6) months following the occurrence of the
applicable event described in (ii) and (iv) of this Paragraph 2(c).

               (d) The Executive shall be deemed not to have consented to any
written proposal calling for a material change in his duties and
responsibilities unless he shall give written notice of his consent thereto to
the Board of the Company within fifteen (15) days after


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receipt of such written proposal. If the Executive shall not have given such
consent, the Company shall have the opportunity to withdraw such proposed
material change by written notice to the Executive given within ten (10) days
after the end of said fifteen (15) day period.

               (e) The term "change in control" means the first to occur of the
following events but shall specifically exclude any change in control associated
with that Stock Purchase Agreement by and between FAC Realty Trust, Inc. and
Prometheus Southeast Retail, LLC dated as of February 24, 1998 as amended:

                      (i) any person or group of commonly controlled persons
        owns or controls, directly or indirectly, fifty percent (50%) or more
        (directly or indirectly, including convertible shares or convertible
        partnership units) of the voting control or value of the capital stock
        of the Company following the Effective Date;

                      (ii) any person or group of commonly controlled persons
        owning less than five percent (5%) of the voting control or value of the
        capital stock of the Company within 30 days following the Effective Date
        owns or controls, directly or indirectly, more than twenty percent (20%)
        (directly or indirectly, including convertible shares or convertible
        partnership units) of the voting control or value of the capital stock
        of the Company; or

                      (iii) following the Effective Date, the stockholders of
        the Company approve an agreement to merge or consolidate with another
        corporation or other entity resulting (whether separately or in
        connection with a series of transactions) in a change in ownership of
        twenty percent (20%) or more (directly or indirectly, including
        convertible shares or convertible partnership units) of the voting
        control or value of the capital stock of the Company, or an agreement to
        sell or otherwise dispose of all or substantially all of the Company's
        assets (including without limitation, a plan of liquidation or
        dissolution), or otherwise approve of a fundamental alteration in the
        nature of the Company's business; provided, however, a pledge,
        hypothecation or other similar disposition for the purpose of providing
        collateral security made at the time the Company enters into a bona fide
        financing transaction with a party which at the time of such transaction
        is not an affiliate of the Company would not constitute a change in
        control.

Notwithstanding the foregoing provisions of this Paragraph 2, the ownership or
acquisition of capital stock by the Executive, C. Cammack Morton, Patrick M.
Miniutti, William H. Neville, and/or their respective affiliates, shall not be
deemed to result in a "change in control" of the Company.

        3.     Compensation.

               During the term of his employment under this Employment Agreement
the Company shall pay or provide, as the case may be, to the Executive the
compensation and other benefits and rights set forth in this Paragraph 3. All
restricted stock given as compensation shall be subject to the Company's 1996
Restricted Stock Plan.


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               (a) The Company shall pay to the Executive a base salary payable
in accordance with the Company's usual pay practices (and in any event no less
frequently than monthly) of (i) cash payments of Two Hundred Twenty-Five
Thousand and No/100 Dollars ($225,000.00) per annum and (ii) such increases (but
not decreases) from time to time (based upon the performance of the Company and
the Executive) as determined by the Board or the Company's Executive
Compensation Committee payable in the form of Common Stock of the Company
similar to (b) below commencing March 1, 1999.

               (b) The Company may pay to the Executive bonus compensation on a
calendar year basis pursuant to the terms of the incentive compensation plan
established by the Board from time to time, not later than March 1 following
each calendar year. Such bonus compensation may be payable in the form of cash
or Common Stock of the Company. In the event such bonus is paid in the form of
Common Stock, the determination of shares issued may be based on the cash
equivalent divided by the market price of the Common Stock on or about the date
of determination of the bonus compensation by the Board. Such shares will be
increased by 50% and shall automatically vest on the third anniversary of the
date of issuance (for example, March 1, 2002 for shares issued March 1, 1999)
unless the Executive voluntarily terminates his employment prior to such
anniversary date or his employment is terminated for "cause" (see Paragraph 5
(a) (iii)).

               (c) The Company shall provide to the Executive such medical,
hospitalization and dental insurance for himself, his spouse and eligible family
members, as may be available to other officers of the Company and term life
insurance in the amount of not less than $325,000.

               (d) The Executive shall participate in all retirement and other
benefit plans of the Company generally available from time to time to officers
of the Company and for which the Executive qualifies under the terms thereof
(and nothing in this Employment Agreement shall or shall be deemed to in any way
affect the Executive's rights and benefits thereunder except as expressly
provided herein).

               (e) The Executive shall be entitled to such periods of vacation
and sick leave allowance each year as are determined by the Company's Executive
Compensation Committee for officers generally; provided that Executive shall be
entitled to not less than four weeks (twenty days) of vacation each year.

               (f) The Executive shall be entitled to participate in any equity
or other employee benefit plan that is generally available to senior executive
officers, as distinguished from general management, of the Company. The
Executive's participation in and benefits under any such plan shall be on the
terms and subject to the conditions specified in the governing document of the
particular plan.

               (g) The Company shall reimburse the Executive or provide him with
an expense allowance during the term of this Employment Agreement for travel,
entertainment and other expenses reasonably and necessarily incurred by the
Executive in connection with the Company's business. The Executive shall furnish
such documentation with respect to reimbursement to be paid hereunder as the
Company shall reasonably request.

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               (h) The Company shall pay to the Executive an annual automobile
allowance of $8,000 payable on a pro rata monthly basis.

        4.     Payment in the Event of Death or Permanent Disability.

               (a) In the event of the Executive's death or "permanent
disability" (as hereinafter defined) during the term of his employment under
this Employment Agreement, the Company shall pay to the Executive (or his
personal representatives, heirs, successors and assigns in the event of his
death) an amount equal to two (2) times the Executive's then effective annual
base salary, as determined under Paragraph 3(a), plus a pro rata portion of the
bonus applicable to the calendar year in which such death or permanent
disability occurs, as such bonus is determined under Paragraph 3(b).

               (b) The pro rata portion of the bonus described in Paragraph 4(a)
shall be paid when and as provided in Paragraph 3(b). The remainder of the
benefit to be paid pursuant to Paragraph 4(a) shall be paid within ninety (90)
days after the date of death or permanent disability, as the case may be.

               (c) Except as otherwise provided in Paragraphs 2(b), 3(d), 4(a),
4(b) and 8, in the event of the Executive's death or permanent disability, the
Executive's employment hereunder shall terminate and the Executive shall be
entitled to no further compensation or other benefits under this Employment
Agreement, except as to that portion of any unpaid salary and other benefits
accrued and earned by him hereunder up to and including the date of such death
or permanent disability, as the case may be, or pursuant to any agreement
between the Company and the Executive related to any Restricted Shares or Stock
Options held by the Executive.

               (d) For purposes of this Employment Agreement, the Executive's
"permanent disability" shall be deemed to have occurred after one hundred twenty
(120) days in the aggregate during any consecutive twelve (12) month period, or
after ninety (90) consecutive days, during which one hundred twenty (120) or
ninety (90) days, as the case may be, the Executive, by reason of his physical
or mental disability or illness, shall have been unable to discharge his duties
under this Employment Agreement. The date of permanent disability shall be such
one hundred twentieth (120th) or ninetieth (90th) day, as the case may be. In
the event either the Company or the Executive, after receipt of notice of the
Executive's permanent disability from the other, dispute that the Executive's
permanent disability shall have occurred, the Executive shall promptly submit to
a physical examination by the chief of medicine of any major accredited hospital
in the Palm Beach County, Florida, area and, unless such physician shall issue
his written statement to the effect that in his opinion, based on his diagnosis,
the Executive is capable of resuming his employment and devoting his full time
and energy to discharging his duties within thirty (30) days after the date of
such statement, such permanent disability shall be deemed to have occurred.


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        5.     Termination.

               (a) The Employment of the Executive under this Employment
Agreement, and the term hereof, may be terminated by the Company:

                      (i)    on the death or permanent  disability  (as defined
          above) of the Executive;

                      (ii)   for "cause" at any time by action of the Board; or

                      (iii) "without cause" at any time by action of the Board.

        For purposes hereof, the term "cause" shall mean:

                             (A) The Executive's fraud, commission of a felony,
               commission of an act or series of repeated acts of dishonesty
               which fraud, felony or dishonesty is materially inimical to the
               best interests of the Company, or which results in material
               injury to the business reputation of the Company, or the
               Executive's willful and repeated failure to perform his duties
               under this Employment Agreement, which failure has not been cured
               within fifteen (15) days after the Company gives notice thereof
               to the Executive; or

                             (B) The Executive's material breach of any material
               provision of this Employment Agreement, which breach has not been
               cured in all substantial respects within ten (10) days after the
               Company gives notice thereof to the Executive.

        For purposes hereof, the term "without cause" shall mean any reason
other than those set forth in subparagraphs (a)(i) and (a)(ii) of this Paragraph
5.

The exercise by the Company of its rights of termination under this Paragraph 5
shall be the Company's sole remedy in the event of the Executive's termination,
whether for "cause" or "without cause" the occurrence of the event as a result
of which such right to terminate arises. Upon any termination of this Employment
Agreement, the Executive shall be deemed to have resigned from all offices and
directorships held by the Executive in the Company.

               (b) In the event of a termination claimed by the Company to be
for "cause" pursuant to Paragraph 5(a)(ii), the Executive shall have the right
to have the justification for said termination determined by arbitration in
Raleigh, North Carolina. In order to exercise such right, the Executive shall
serve on the Company within thirty (30) days after termination a written request
for arbitration. The Company immediately shall request the appointment of a
single arbitrator by the American Arbitration Association and thereafter the
question of "cause" shall be determined under the rules of the American
Arbitration Association applicable to employment disputes, and the decision of
the arbitrator shall be final and binding on both parties except as otherwise
provided by the arbitrator. The parties shall use all reasonable efforts to
facilitate and expedite the arbitration and shall act to cause the arbitration
to be completed as promptly as


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possible. During the pendency of the arbitration, the Executive shall continue
to receive all compensation and benefits to which he is entitled hereunder, and
if at any time during the pendency of such arbitration the Company fails to pay
and provide all compensation and benefits to the Executive in a timely manner
the Company shall be deemed to have automatically waived whatever rights it then
may have had to terminate the Executive's employment for cause. Expenses of the
arbitration shall be borne equally by the parties.

               (c) In the event of termination pursuant to subparagraph (a)(i)
or (a)(ii) of this Paragraph 5, except as otherwise provided in Paragraphs 2(b),
3(d), 4(a) and 4(b), as applicable, the Executive shall be entitled to no
further compensation or other benefits under this Employment Agreement, except
as to that portion of any unpaid salary and other benefits accrued and earned by
him hereunder up to and including the effective date of such termination.

               (d) In the event of termination pursuant to Paragraph 2(c), or
subparagraph (a)(iii) of this paragraph 5, the Executive (in addition to any
rights of the Executive to any restricted shares or stock options pursuant to
the terms of other agreements between the Executive and the Company) shall be
entitled to

                      (i) severance pay payable within five (5) days of such
               termination in a lump sum equal to the sum of (A) the greater of
               (x) the total amount of unpaid base salary for the then-unexpired
               portion of the term of this Employment Agreement, including any
               extended term as provided by Section 2(a) hereof at the
               then-effective annual rate of salary, as determined under
               Paragraph 3(a) and (y) the amount of one year's base salary at
               the then-effective annual rate of salary, and (B) the product of
               the number of years (including fractions) representing the
               unexpired term of this Employment Agreement (but not less than
               one) times an amount equal to the average of the annual bonuses
               payable to the Executive under Paragraph 3(b) for the three (3)
               full calendar years immediately prior to termination of this
               Employment Agreement in which a bonus was payable or such lesser
               number of full calendar years during which the Executive was
               employed hereunder for which a bonus was payable provided,
               however, for purposes of this provision for any period prior for
               which a bonus is first payable there shall be an imputed bonus
               amount equal to the bonus last determined for the Company's COO,
               William H. Neville, except as to the Executive, the same shall be
               prorated as applicable,

                      (ii) during a period equal to the greater of one (1) year
               or the unexpired term of this Employment Agreement, all other
               benefits to which the Executive would have been entitled during
               the term of this Employment Agreement had the Executive's
               employment not been terminated,

                      (iii) during a period equal to the greater of one (1) year
               or the unexpired term of this Employment Agreement, the
               continuing use of a secretary and office space to be provided by
               the Company, in Boca Raton, Florida and

                      (iv) any other benefits accrued and earned by him
               hereunder up to and

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               including the effective date of such termination.

               (e) In the event of the termination of his employment pursuant to
Paragraph 2(c) or Paragraph 5(a)(iii), the Executive shall have the option to be
released from his obligations under Paragraph 6(a)(i) for the one (1) year
period following the termination of his employment, by releasing the Company
from its obligations under Paragraph 5(d) hereof (other than those provided in
Paragraph 5(d)(iv)). Such option may be exercised by the Executive giving the
Company notice thereof within five (5) days of such termination.

               (f) In no event shall the Executive have or be deemed to have any
duty to seek employment or otherwise mitigate damages with respect to any
amounts or benefits due to him upon termination of this Employment Agreement as
provided in this Paragraph 5, nor shall any such amount or benefits be reduced
by reason of any other compensation or benefits which the Executive may earn
following termination of this Employment Agreement.

        6.     Covenants and Confidential Information.

               (a) The Executive acknowledges the Company's reliance and
expectation of the Executive's continued commitment to performance of his duties
and responsibilities during the time when he is employed under this Employment
Agreement. In light of such reliance and expectation on the part of the Company
(but subject to Paragraph 5(d), 5(e) and 5(f) above), during the time when he is
employed under this Employment Agreement and for a period of one (1) year after
the termination of such employment for any reason other than the expiration of
the term hereof in accordance with Paragraph 2(a)(ii) hereof (and, as to clause
(ii) of this subparagraph (a), at any time during and after the term of this
Employment Agreement), the Executive shall not, directly or indirectly, do
either of the following:

                      (i) Own, manage, control or participate in the ownership,
        management, or control of, or be employed or engaged by or otherwise
        affiliated or associated as a consultant, independent contractor or
        otherwise with, any other corporation, partnership, proprietorship,
        firm, association or other business entity primarily engaged in the
        business of, or otherwise engage in the business of, acquiring, owning,
        developing or managing factory outlet shopping centers in the United
        States; provided, however, that the ownership of not more than one
        percent (1%) of any class of publicly traded securities of any entity
        shall not be deemed a violation of this covenant; or

                      (ii) Disclose, divulge, discuss, copy or otherwise use or
        suffer to be used in any manner, in competition with, or contrary to the
        interests of, the Company, any confidential information relating to the
        Company's operations, properties or otherwise to its particular business
        or other trade secrets of the Company, it being acknowledged by the
        Executive that all such information regarding the business of the
        Company compiled or obtained by, or furnished to, the Executive while
        the Executive shall have been employed by or associated with the Company
        is confidential information and the Company's exclusive property;
        provided, however, that the foregoing restrictions

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        shall not apply to the extent that such information (A) is obtainable in
        the public domain or known in the industry generally, (B) becomes
        obtainable in the public domain or known in the industry generally,
        except by reason of the breach by the Executive of the terms hereof, (c)
        was not acquired by the Executive in connection with his employment or
        affiliation with the Company, (D) was not acquired by the Executive from
        the Company or its representatives, or (E) is required to be disclosed
        by rule of law or by order of a court or governmental body or agency.

               (b) The Executive agrees and understands that the remedy at law
for any breach by him of this Paragraph 6 may be inadequate and that the damages
following such breach are not readily susceptible to being measured in monetary
terms. Accordingly, it is acknowledged that, upon adequate proof of the
Executive's violation of any legally enforceable provision of this Paragraph 6,
the Company may be entitled to immediate injunctive relief and may obtain a
temporary order restraining any threatened or further breach. Nothing in this
Paragraph 6 shall be deemed to limit the Company's remedies at law or in equity
for any breach by the Executive of any of the provisions of this Paragraph 6
which may be pursued or availed of by the Company.

               (c) The Executive has carefully considered the nature and extent
of the restrictions upon him and the rights and remedies conferred upon the
Company under this Paragraph 6, and hereby acknowledges and agrees that the same
are reasonable in time and territory, are designed to eliminate competition
which otherwise would be unfair to the Company, do not stifle the inherent skill
and experience of the Executive, would not operate as a bar to the Executive's
sole means of support, are fully required to protect the legitimate interests of
the Company and do not confer a benefit upon the Company disproportionate to the
detriment to the Executive.

        7. Stock Options. The Executive shall receive stock options under the
Company's Amended and Restated 1993 Employee Stock Incentive Plan as more fully
described in that certain Non-Qualified Stock Option Agreement dated July 1,
1998 the terms and conditions of which are incorporated herein by reference.

        8. Restricted Stock. The Executive shall receive grants of 20,000 shares
and 7,000 shares (the "Restricted Shares") of restricted common stock of the
Company ("Common Stock") granted under the Company's 1996 Restricted Stock Plan.
Prior to vesting, the Restricted Shares will be registered under the Securities
Act on Form S-8, will be listed on the NYSE and following vesting thereof will
be freely tradable subject to applicable provisions of Rule 144 promulgated
under the Securities Act. With respect to each of said grants, the Company and
the Executive shall enter into Restricted Stock Agreements in a form mutually
agreed upon by the Company and the Executive providing: as to (a) the 20,000
Restricted Shares (i) the 20,000 Restricted Shares shall vest in three (3) equal
installments of thirty three and one-third percent (33.33%) on March 1, 1999 and
each successive anniversary thereof (provided as to each installment that the
Executive continues to be employed by the Company) and as to the 7,000
Restricted Shares the same shall automatically vest on January 1, 2001 unless
the Executive voluntarily terminates his employment prior to such vesting date
or his employment is terminated for "cause" as defined in paragraph 5(a) hereof
and (b) all unvested Restricted Shares

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shall immediately vest upon the Executive's death or permanent disability (as
defined in Paragraph 4(d)) during his employment by the Company; or termination
of the Executive's employment by the Company pursuant to Paragraph 2(c) or
Paragraph 5(a)(iii); or pursuant to Paragraph 5(a)(iii) if such termination
occurs within three (3) months prior to, at the time of, or within one (1) year
following a "change of control" (as defined in Section 2(e) hereof) or provided
that such change is effected, the execution of a definitive agreement therefor
(notwithstanding the requirement of continued employment in subparagraph (a)
above, upon such termination of employment).

        9. Tax Adjustment Payments. If all or any portion of the amounts payable
to the Executive under this Employment Agreement (together with all other
payments of cash or property, whether pursuant to this Employment Agreement or
otherwise, including, without limitation, the issuance of common stock of the
Company, or the granting, exercise or termination of options therefor)
constitutes "excess parachute payments" within the meaning of Section 280G of
the Code that are subject to the excise tax imposed by Section 4999 of the Code
(or any similar tax or assessment), the amounts payable hereunder shall be
increased (in the same manner, to the extent applicable, without duplication, as
provided in (i), (ii) and (iii) below) to the extent necessary to place the
Executive in the same after-tax position as he would have been in had no such
tax assessment been imposed on any such payment paid or payable to the Executive
under this Employment Agreement or any other payment that the Executive may
receive in connection therewith. The determination of the amount of any such tax
or assessment and the incremental payment required hereby in connection
therewith shall be made by the accounting firm employed by the Executive within
thirty (30) calendar days after such payment and said incremental payment shall
be made within five (5) calendar days after such determination has been made.
If, after the date upon which the payment required by this Paragraph 9 has been
made, it is determined (pursuant to final regulations or published rulings of
the Internal Revenue Service, final judgment of a court of competent
jurisdiction, Internal Revenue Service audit assessment, or otherwise) that the
amount of excise or other similar taxes or assessments payable by the Executive
is greater than the amount initially so determined, then the Company shall pay
the Executive an amount equal to the sum of: (i) such additional excise or other
taxes, plus (ii) any interest, fines and penalties resulting from such
underpayment, plus (iii) an amount necessary to reimburse the Executive for any
income, excise or other tax assessment payable by the Executive with respect to
the amounts specified in (i) and (ii) above, and the reimbursement provided by
this clause (iii), in the manner described above in this Paragraph 9. Payment
thereof shall be made within five (5) calendar days after the date upon which
such subsequent determination is made.

        10. Representations and Warranties of the Company.

               (a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland and has all
requisite corporate power and authority to enter into, execute and deliver this
Employment Agreement, fulfill its obligations hereunder and consummate the
transactions contemplated hereby.

               (b) The execution and delivery of, performance of obligations
under, and consummation of the transactions contemplated by, this Employment
Agreement have been duly


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authorized and approved by all requisite corporate action by or in respect of
the Company, and this Employment Agreement constitutes the legally valid and
binding obligation of the Company, enforceable by the Executive in accordance
with its terms.

               (c) No provision of the Company's governing documents or any
agreement to which it is a party or by which it is bound or of any material law
or regulation of the kind usually applicable and binding upon the Company
prohibits or limits its ability to enter into, execute and deliver this
Employment Agreement, fulfill its respective obligations hereunder and
consummate the transactions contemplated hereby.

        11.    Miscellaneous.

               (a) The Executive represents and warrants that he is not a party
to any agreement, contract or understanding, whether employment or otherwise,
which would restrict or prohibit him from undertaking or performing employment
in accordance with the terms and conditions of this Employment Agreement.

               (b) The provisions of this Employment Agreement are severable and
if any one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions and any partially
unenforceable provision to the extent enforceable nevertheless shall be binding
and enforceable.

               (c) The rights and obligations of the Company under this
Employment Agreement shall inure to the benefit of, and shall be binding on, the
Company and its successors and assigns, and the rights and obligations of the
Executive under this Employment Agreement shall inure to the benefit of, and
shall be binding upon, the Executive (other than obligations to perform services
and to refrain from competition and disclosure of confidential information) and
his heirs, personal representatives and assigns.

               (d) Any controversy or claim arising out of or relating to this
Employment Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association applicable to
employment disputes then pertaining in the City of Raleigh, North Carolina, and
judgment upon the award rendered by the arbitrator or arbitrators may be entered
in any court having jurisdiction thereof. The arbitrator or arbitrators shall be
deemed to possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration; provided, however, that nothing in this
Paragraph 11(d) shall be construed so as to deny the Company the right and power
to seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by the Executive of any of his covenants contained in
Paragraph 6 hereof.

               (e) Any notice to be given under this Employment Agreement shall
be personally delivered in writing or shall have been deemed duly given when
received after it is posted in the United States mail, postage prepaid,
registered or certified return receipt requested, and if mailed to the Company,
shall be addressed to its principal place of business, attention: President, and
if mailed to the Executive, shall be addressed to him at his home address last
known on the records of the Company, or at such other address or addresses as
either the

                                                                              12
<PAGE>

Company or the Executive may hereafter designate in writing to the
other. All notices provided for hereunder to the parties shall be accompanied by
simultaneous copy of such notice sent to the attorneys for such parties, as
follows:

               If to the Executive:     Fred P. Steinmark
                                        3757 N.W. 52nd Street
                                        Boca Raton, Florida 33496

               If to the Company:       FAC Realty, Inc.
                                        11000 Regency Parkway,
                                        Third Floor East Tower
                                        Cary, North Carolina 27511
                                        Attention: President

Notices sent by Federal Express or similar overnight delivery service or by
facsimile transmissions shall also constitute due notice under this paragraph
11(e), effective upon receipt thereof.

               (f) The failure of either party to enforce any provision or
provisions of this Employment Agreement shall not in any way be construed as a
waiver of any such provision or provisions as to any future violations thereof,
nor prevent that party thereafter from enforcing each and every other provision
of this Employment Agreement. The rights granted the parties herein are
cumulative and the waiver of any single remedy shall not constitute a waiver of
such party's right to assert all other legal remedies available to it under the
circumstances.

               (g) This Employment Agreement supersedes all prior agreements and
understandings between the parties made prior to the date hereof and may not be
modified or terminated orally. No modification, termination or attempted waiver
shall be valid unless in writing and signed by the party against whom the same
is sought to be enforced.

               (h) This Employment Agreement shall be governed by and construed
according to the laws of the State of North Carolina.

               (i) Captions and paragraph headings used herein are for
convenience and are not a part of this Employment Agreement and shall not be
used in construing it.

               (j) Where necessary or appropriate to the mean hereof, the
singular and plural shall be deemed to include each other, and the masculine,
feminine and neuter shall be deemed to include each other.

               (k) This Employment Agreement may be executed in multiple
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. This Employment Agreement
may be executed by facsimile signature.


                                                                              13
<PAGE>


IN WITNESS WHEREOF, the parties have executed this Employment Agreement on the
day and year first set forth above.

                                                   FAC REALTY TRUST, INC.

                                                   a Maryland corporation

Attest:______________________
           (Corporate Seal)

                                         By:____________________________________
                                                C. Cammack Morton
                                                President
                                                Chief Executive Officer

                                         _________________________________(SEAL)
                                         FRED P. STEINMARK