Ch 24: Risk Management

Question 1

What is the doctrine that governs most real estate transactions under common law when the buyer is responsible for verifying the condition of the property and the conditions of the sale?

Answer 1

Caveat Emptor - Let the Buyer Beware

Question 2

What are the top three issues regarding real estate complaints?

Answer 2

Agency issues, dual agency, and breach of fiduciary duties

Question 3

What does the law say regarding agency disclosure when the initial interview does not occur in person?

Answer 3

If the initial interview does not occur in person, the licensee must provide an oral disclosure at the initial interview and then a written disclosure statement no later than the earlier of:

The first meeting that the licensee has in person with the consumer after the initial interview.
The time the licensee or any person working with the licensee first shows a property to the consumer.

Question 4

What instrument is used to shift liability for property conditions disclosure to the property owner?

Answer 4

Property condition disclosure form

Question 5

What is the most common form of breaching a listing agreement?

Answer 5

Failing to advertise a property as agreed

Question 6

What is it called when a seller will sell one product only on the condition that the buyer also purchases a different product?

Answer 6

Tying Agreements

Question 7

What is the best way to avoid a fair housing complaint?

Answer 7

Have a standardized method of working with all clients, so that each client is treated in the same way.

Question 8

What is the major problem with using electronically printed contracts?

Answer 8

When using electronic templates, it may not be obvious where the standard form ends, and alterations begin.

Question 9

What organization provides a set of cross-jurisdictional guidelines with the intention of helping jurisdictions, firms and licensees standardize online communication to make it more efficient and productive?

Answer 9

The Association of Real Estate License Law Officials (ARELLO)

Question 10

What is puffing?

Answer 10

Puffing is exaggerated or superlative comments about a property’s benefits.

Question 11

When does puffing become misrepresentation?

Answer 11

Puffing can become misrepresentation when the “opinion” is stated as “fact” and the client uses it to make a purchase decision.

Question 12

What could happen if a licensee violates a duty to a client or customer?

Answer 12

Rescission of the listing agreement (causing a loss of a potential commission)
Forfeiture of any compensation that may have already been earned
Disciplinary action by the state license law authorities, including license suspension or revocation
Suit for damages in court

Question 13

What practice establishes regulations, statutes, codes of ethics, local practices and enhances a company’s reputation?

Answer 13

Establishing service standards

Question 14

What is the best methodology to use for defense recordkeeping?

Answer 14

Maintain a transaction file checklist.

Question 15

What is the best strategy to take when a buyer asks for a home inspector recommendation?

Answer 15

Provide at least three resources and make it clear that you are not recommending or endorsing any vendors listed.

Question 16

How does a property disclosure form reduce the listing licensee’s liability?

Answer 16

A property disclosure form helps shift potential costs of a suit on to the seller and can help mitigate your losses.

Question 17

What is a common term used to describe Errors & Omissions Insurance?

Answer 17

Malpractice insurance for real estate brokers

Question 18

What is it called when borrowers are coerced into subprime loans, even when they could qualify for a much more affordable home loan?

Answer 18

Steering

Question 19

What is it called when a homeowner is persuaded to refinance their mortgage when there is no real benefit?

Answer 19

Loan flipping

Question 20

In what types of situations are punitive damages awarded?

Answer 20

If misrepresentation is particularly blatant or willful, for instance in cases of fraud, a court may award punitive damages as punishment, to make an example of the offender and deter similar conduct by others.

Question 21

What do most brokers use to shift full disclosure responsibility to the property owner?

Answer 21

Property condition disclosure forms

Question 22

What describes the degree of wisdom and caution which could be expected of a reasonable person?

Answer 22

Standard of care

Question 23

What is a false statement of material fact called?

Answer 23

Misrepresentation

Question 24

What type of claims often occur due to failure of the seller to disclose contaminants?

Answer 24

Pollution claims

Question 25

Real estate advertising is regulated under the Fair Housing Act, state regulations for real estate brokerages, the National Association of REALTORS® code of ethics, and:

Answer 25

Regulation Z.

Question 26

How can an agent reduce misrepresentation claims when taking a listing?

Answer 26

By having the sellers fill out a seller’s disclosure

Question 27

What term is commonly defined as a meeting of the minds?

Answer 27

Offer and acceptance

Question 28

Since emails can be considered a form of advertising, the signature block must include the company’s name, phone number, and:

Answer 28

address

Question 29

What is the first contact between a licensee and a consumer of real estate-related services called?

Answer 29

The initial interview

Question 30

What kind of fact affects a party’s decision to enter into a real estate contract?

Answer 30

Material fact

Question 31

What can a licensee be held liable for if he or she drafts contract clauses or contingencies?

Answer 31

Practicing law

Question 32

What describes an agreement by a party to sell a product only if that buyer also purchases a different product?

Answer 32

A tying agreement