Chapter 23 - Risk Managment Flashcards
Risk Avoidance:
Refraining from an activity that carries risk.
Risk Reduction:
Taking steps to reduce the probability or the severity of a potential loss.
Risk Transference:
Passing the risk to another party, by contract or other means.
Risk Retention:
Entering into an activity in spite of known risks and taking full responsibility for the consequences.
Disclosure:
Ensuring that all parties have the information they are entitled to.
General Liability:
Insurance that provides coverage for risks incurred by a property owner when the public or a licensee enters the owned property.
Errors and Omissions Insurance:
The primary method for transferring the professional liability risks of brokers, managers, and licensees.
Agency Duties:
Certain duties that licensees are required to assume by law toward the parties to the transaction. The basic duties to all parties are: honesty, fairness, reasonable care and skill, and disclosures. The basic duties to clients are: skill, care, diligence, loyalty, obedience, confidentiality, accounting, and full disclosure.
Conflict of Interest:
When an agent forgets to put the best interests of a client ahead of those of everyone else. For example: undisclosed dual agenices, broker-owned listings, licensees buying for their own account, etc.
Confidentiality:
A licensee’s responsibility to keep certain kinds of information they obtained concerning clients and customers confidential (secret/private)
Statute of Frauds:
A law requiring certain contracts to be in writing in order to be enforceable. Examples are real property conveyances, listing agreements, and longterm leases.
Unauthorized Practice of Law:
It is illegal for real estate professionals who are not attorneys to draw up contracts for transactions they are not involved in or to charge a separate fee for preparing a contract.
Fair Housing:
The Act that forbids real estate advertising that mentions race, color, religion, national origin, sex, handicap, or familial status in any way that suggests preference or discrimination.
Antitrust:
Laws that forbid brokers to band together to set a price on their services in listing and selling property.
Misrepresentation:
Unintentional misrepresentation: When a licensee unknowingly conveys inaccurate information to a consumer concerning a property, financing or agency service.
Intentional misrepresentation: When a licensee knowingly conveys false information about a property, financing or service.
ECOA:
Equal Credit Opportunity Act which states that it is illegal to:
threaten, coerce, intimidate or interfere with a person who is exercising a fair housing right or assisting another to exercise that right.
indicate a limitation or preference based on race, color, national origin, religion, sex, familial status, or handicap in any advertisement or communication.
RESPA:
The Real Estate Settlement and Procedures Act which stipulates that the parties to certain purchase transactions must be given accurate information reflecting their closing costs. It also prohibits certain business practices that are not considered to be in the consumer’s best interest.
Trust Fund:
Laws stating that a broker must hold money received in connection with the purchase or lease of real property in a trust fund account. The type of account and financial depository are specified. The broker must record receipt of the money and place that money in the trust account within a specified time period.
Commingling:
An unlawful practice of mixing escrow funds with the agency’s operating funds.
Conversion:
An illegal act of appropriating escrow funds for payment of an agency’s operating expenses.
