LESSON 11: DECEPTIVE TRADE PRACTICES Flashcards
What is fraud in real estate?
Fraud is when someone deliberately intends to gain something of value or cause damage to another. An example is when an agent tells a buyer that a property is sure to double in value in a year while knowing the area’s values only go up by 10% a year. Fraud is intentional and carries more severe legal penalties than misrepresentation.
What is misrepresentation in real estate?
Misrepresentation is the failure to provide all the relevant facts. For instance, if an agent doesn’t disclose that a creek behind a property overflows and the house has flooded twice in the past two years, that’s misrepresentation. It can also apply if an agent knows the seller is being dishonest in the seller’s disclosure or not disclosing everything.
How is fraud different from misrepresentation?
Fraud involves an intention to mislead, while misrepresentation is typically unintentional or negligent. For example, saying “I told the client the roof didn’t leak (even though I knew it leaked) so they would make an offer” is fraud, while “I didn’t tell the client about the leaking roof, although I didn’t know if it leaked” would be misrepresentation or negligent misrepresentation.
What is the Texas Real Estate License Act Section 1101.805 on misrepresentation or concealment?
Under Sec. 1101.805, a party is not liable for misrepresentation or concealment unless they knew about the falsity and failed to disclose it. This applies to license holders who fail to disclose their knowledge of a misrepresentation or concealment made by others.
What is a warranty of authority in real estate?
A warranty of authority is a promise made by an agent to confirm they are authorized to act on behalf of someone. If an agent acts without authority and the third party contracts with them, the agent could be personally liable.
What are the possible outcomes of negligence or wrongdoings in real estate?
Possible outcomes include: 1) Professional sanctions (such as fines or suspension of a license), 2) Rescission (the principal may cancel the agreement), 3) Avoidance (the principal can avoid the obligation to pay commission), and 4) Legal recourse (damages for the injury caused).
What is the Texas Deceptive Trade Practices Act (DTPA)?
The DTPA, enacted in 1973, protects consumers from false, misleading, and deceptive practices, unconscionable actions, and breaches of warranty. In 1995, it was amended to exempt real estate licensees from DTPA claims unless they commit an unconscionable act, misrepresentation of a material fact, or failure to disclose to induce a transaction. In 2011, real estate brokerage was specifically exempted unless the agent’s conduct meets these criteria.
What types of disclosures are required by good business practices or TRELA in real estate?
Required disclosures include: full property condition, things making the property notorious (e.g., murder/suicide), events in the area that affect the property (e.g., planned highways), or anything a typical buyer would want to know.
What disclosures are permitted but not required in real estate?
Examples of permitted but not required disclosures include: 1) Death on a property (by suicide, natural causes, or accident), 2) Information about registered sex offenders (if the seller chooses to disclose).
What disclosures are prohibited under real estate laws?
Disclosures prohibited by law include anything about protected classes under the Fair Housing Act, such as race, color, religion, sex, handicap, national origin, familial status, and sexual orientation and gender identity for NAR members.
What is the acronym “FRESH CORN” used for in real estate?
“FRESH CORN” is used to remember the protected classes under the Fair Housing Act: F - Familial Status, R - Religion, E - Ethnicity, S - Sex, H - Handicap, C - Color, O - Orientation, R - Race, N - National Origin.
How does the Texas Deceptive Trade Practices Act apply to sellers?
Sellers can be held liable under the DTPA for deceptive or unfair practices. This includes false or misleading business practices, which could result in legal consequences for the seller.
What is the role of the DTPA in Texas consumer protection?
The DTPA, enacted in 1973, protects consumers from false, misleading, and deceptive practices, unconscionable actions, and breaches of warranty. It offers no-fault liability and attractive remedies for consumers, providing a strong protection against deceptive business practices.
Who is considered a “consumer” under the DTPA?
A consumer under the DTPA is defined as any individual, partnership, corporation, or subdivision that seeks to acquire, purchase, or lease goods or services. It includes individuals or entities acquiring goods/services for personal or business purposes.
What is the final element in consumer status under the DTPA?
The purchase or lease must be of “goods or services,” where “goods” are tangible chattels or real property, and “services” are work, labor, or services purchased or leased for use.
What are “goods” according to the DTPA?
“Goods” are tangible chattels or real property purchased or leased for use, including real estate, but excluding intangibles like money, stocks, accounts receivable, etc.
What are “services” according to the DTPA?
“Services” are work, labor, or services purchased or leased for use, including those related to the sale or repair of goods. It also includes repair, construction, and professional services such as medical or legal services.
What is excluded from the definition of “goods” in the DTPA?
Exclusions include money, accounts receivable, stock, options contracts, certificates of deposit, insurance policy proceeds, trademarks, limited partnership interests, and lottery tickets.
What is excluded from consumer status under the DTPA?
Business consumers with assets of $25 million or more, or entities controlled by such corporations, are excluded from the definition of consumer for the DTPA.
What does the DTPA apply to?
The DTPA applies to false, misleading, or deceptive acts in trade or commerce, covering both tangible goods and services. It also includes unconscionable actions that take advantage of a person’s lack of knowledge or ability.
What is an unconscionable act under the DTPA?
An unconscionable act is one that “takes advantage of the lack of knowledge, ability, experience, or capacity of a person to a grossly unfair degree.”
What does the DTPA not cover in terms of professional services?
The DTPA does not apply to professional services that involve providing advice, judgment, opinion, or similar professional skill.
How does the DTPA relate to violations of other laws like RESPA or Fair Housing?
Violations of federal laws, such as DTPA, RESPA, or Fair Housing, are also violations of the Texas Real Estate License Act (TRELA), leading to consequences such as charges of misrepresentation or concealment.
What happens if a representation under the DTPA is fraudulent?
If a falsehood is an obvious falsehood, made with knowledge of the falsehood, and causes the other party to enter into an agreement, it is considered fraud and may result in civil and criminal liability.
