N. Real Estate Practice Flashcards
Patricia is meeting with James and Cindy, potential buyers of a property listed by one of Patricia’s colleagues. They’re in Patricia’s office preparing their offer when James says, “The only thing that bothers me are those black spots on the bathroom ceiling. Do you think that could be the bad kind of mold? It’s not dangerous, is it?” What should Patricia do?
A. Tell them not to worry about it.
B. Tell them that she will personally go out and clean it up.
C. Refer them to a qualified mold professional.
D. Tell them they could probably clean it up with a little bleach.
C. Refer them to a qualified mold professional.
Patricia’s fiduciary duties—especially her duty to practice only in her area of competence—prevent her from providing advice about home maintenance issues, so telling James and Cindy “not to worry” about the spots on the ceiling is a bad choice. Let’s toss option A out. It’s also not Patricia’s responsibility to perform any kind of property-related tasks, so option B is incorrect. While the spots may clean up with some bleach, there may be a bigger issue, and Patricia doesn’t want to find herself in the position of having provided inaccurate (and perhaps even dangerous) advice. That eliminates option D. Patricia’s clients should contact a specialist to be sure the spots on the ceiling aren’t harmful mold, so option C is the best choice.
While working with a buyer client, Jeffrey filled in the blanks on the state-approved purchase agreement, drafted an early-occupancy addendum, and assured his buyer that she was “fully protected” and would get her earnest money back if the sale didn’t close. He encouraged her to hire an attorney to review the contract and addendum and invoiced her for a nominal $15 fee to prepare transaction documents. Which of these tasks would NOT be considered unauthorized practice of law?
A. Filling in the contract
B. Drafting an addendum
C. Interpreting contract provisions
D. Charging a fee for preparing legal documents
A. Filling in the contract
Note that the question is asking which of the choices is NOT unauthorized practice of law. Licensees are prohibited from performing tasks that only attorneys should perform. Drafting contract documents or interpreting the potential consequences of contract clauses are two of these prohibited tasks, so that eliminates options B and C. Charging a fee for drafting transaction documents crosses the line into unauthorized practice of law, too, so option D is out. Jeffrey is permitted to fill in the blanks on an approved contract form, so option A is the only task here that’s NOT unauthorized practice of law.
It’s fine for Clarissa to phone Gerry, who’s on the National Do Not Call Registry, even for solicitation purposes, because ______.
A. Gerry is listed in the phone book
B. She’s calling on behalf of her broker
C. She has an established business relationship with Gerry
D. She’s calling on behalf of one of her clients to see if Gerry is interested in selling his property
C. She has an established business relationship with Gerry
Businesses with which a consumer has an existing business relationship may contact a consumer who’s on the registry for up to 18 months after the consumer’s last purchase, payment, or delivery, unless the consumer says otherwise. This strict stipulation makes options A, B, and D incorrect. Clarissa must have an established business relationship with Gerry in order to be permitted t call him, so option C the correct answer.
James, a seller, signed a listing agreement that allows him to contract with multiple agents but only pay a commission to the agent who locates a buyer. This type of listing agreement is called ______.
A. Exclusive agency
B. Seller’s choice
C. Open listing
D. Net listing
C. Open listing
An exclusive agency listing does provide a commission “out” for the seller: If the seller finds a buyer, then the listing agent won’t get commission. But this doesn’t give the seller the right to work with multiple licensees. Answer option A isn’t correct. Seller’s choice, option B, sounds like a lot of fun, but this isn’t a recognized listing type. A net listing, option D, pairs the seller with a single licensee and addresses how much the agent’s commission will be if the property sells. It’s not the right answer. That leaves open listing, which is correct. An open listing is like a free-for-all, and only the licensee who locates the buyer will be paid.
Claudius has some trust issues; he’s been to three different brokerages already and still refuses to sign an agency agreement. He says he wants to keep his “options open.” What should you tell him?
A. “I can’t represent you without a written agreement.”
B. “You won’t be able to enter into a contract without buyer representation.”
C. “If you sign today, I’ll waive the administrative fee.”
D. “Signing the form is legally required.”
A. “I can’t represent you without a written agreement.”
Buyers can certainly enter into real estate purchase contracts without having agency representation (option B). In fact, buyer representation is a relatively new concept in the history of real estate agency. Licensees can perform clerical or administrative tasks for buyers without representing them. It’s illegal in most states to imply that agency is required (option D), or to entice buyers into agency relationships with financial incentives (option C). But it’s true that representation is created when the buyer and the licensee sign a buyer representation agreement.
When it comes to landlord-tenant relations, a property manager needs to know ______.
A. The names of the tenants’ children
B. Lease renewal laws
C. How much money all tenants have in their bank accounts
D. Architectural trends
B. Lease renewal laws
When it comes to landlord-tenant relations, a property manager needs to know lease renewal and fair housing laws.
Burt terminated his exclusive right-to-sell listing agreement with Scott, his listing broker, without cause. Burt may legally do this as long as he’s ______.
A. Unhappy with Scott’s services
B. Willing to find his own buyer
C. A real estate licensee
D. Willing to pay Scott’s commission anyway
D. Willing to pay Scott’s commission anyway
Exclusive right-to-sell listing agreements represent the highest level of representation to the seller, but they also represent the listing agent’s right to a commission regardless of who finds a buyer. Option B isn’t correct. Listings may be terminated for a number of reasons, but one party or the other being unhappy isn’t mutual agreement, and Burt terminated the agreement without cause (meaning there was no reason for him to be unhappy with Scott’s work). Option A isn’t the right answer. Real estate licensees don’t get special privileges when it comes to listing agreements, so C isn’t the right answer. However, Burt may still owe Scott commission in an exclusive right-to-sell situation
Randall’s clients, Carma and Trent, are looking for a mountain cabin. They tell Randall they’ll pay him a $2,000 finder’s fee if he finds the cabin that checks all their boxes and they close on it. Randall finds a likely candidate as a FSBO, and negotiations begin. What circumstance is required for Randall to receive the finder’s fee?
A. Randall must disclose the finder’s fee to the seller and it must be paid outside of closing.
B. Carma and Trent must pay the finder’s fee to Randall’s broker.
C. Another licensee must represent the seller.
D. Carma and Trent must disclose the finder’s fee payment to the seller.
B. Carma and Trent must pay the finder’s fee to Randall’s broker.
Even though Randall must disclose the finder’s fee to the seller, whether he’s paid at or outside of closing isn’t relevant. Option A is incorrect. Licensees are permitted to represent clients who wish to pay a finder’s fee as long as the fee is paid according to state licensing law. Option C is incorrect. The client isn’t responsible for compensation-related disclosures; the licensee bears this responsibility, so Option D is incorrect. In order for Randall to receive the finder’s fee, he must disclose it to the seller and receive payment through his broker.
Fair housing laws give home seekers a legal right to which of the following?
A. No discriminatory limitations on communities or locations of housing
B. Credit to purchase the home of their choice, regardless of ability to repay
C. Access to a “rent to own” program for properties when they can’t pay the required down payments
D. Complaint process for rejected home offers, even if the offer is significantly below list price
A. No discriminatory limitations on communities or locations of housing
Various regulations prohibit discrimination in lending practices and require that lenders provide specific information to borrowers, but lenders aren’t required to fund loans to borrowers who can’t prove the ability to repay. This eliminates option B. Likewise, sellers aren’t required to provide “rent to own” opportunities, making option C incorrect. Fair housing legislation makes provisions for complaint processes for potential buyers who believe they were discriminated against when an offer was rejected, but sellers are permitted to reject offers for any other reason(s). Option D is incorrect. The overall purpose of fair housing laws is to ensure that all who seek a home to rent or purchase are afforded the opportunity to seek such housing without discrimination
Corinne is 68 years old and employed full time. She’s of Spanish descent, is raising her 12-year-old grandson, and lives with her partner, Katherine. She requires an accessible apartment because she uses a wheelchair. Under which of the following federally protected classes might Corinne be protected if she faces housing discrimination?
A. Age, employment status, national origin, familial status, and sexual identity
B. Sex, religion, familial status, and disability
C. Age, race, familial status, sexual identity, and disability
D. National origin, sex, disability, and familial status
D. National origin, sex, disability, and familial status
This question focuses on federal fair housing protected classes, so you need to eliminate any classes that aren’t part of federal law. Age, employment status, and sexual identity aren’t protected classes under federal law (though they may be in some states). This eliminates options A and C. Religion is a protected class, but based on the information provided there’s no evidence that Corinne would be discriminated against due to her religion, eliminating option B. We’re left with option D, which notes that discrimination against Corinne may be based on four federally protected classes: national origin (she’s Spanish), sex (she’s female), disability (she uses a wheelchair), and familial status (she’s raising a child who’s under 18).
Which of these statements accurately describes finance- and housing-related legislation?
A. The Equal Credit Opportunity Act of 1974 required lenders to provide consumers with equal access to credit and prohibited credit discrimination based on just the three protected classes of race, color, or national origin.
B. The Americans with Disabilities Act added familial status and disability (both physical and mental) to the existing protected classes.
C. As a stipulation of the Housing and Community Development Act, lenders must offer reasons when rejecting loan applications and must respond to all applications within 30 days.
D. The Civil Rights Act of 1866 provided every U.S. citizen with the right to buy, sell, convey, inherit, and possess property.
D. The Civil Rights Act of 1866 provided every U.S. citizen with the right to buy, sell, convey, inherit, and possess property.
The Equal Credit Opportunity Act prohibits lending discrimination based on race, color, religion, national origin, sex, marital status, or age and requires that lenders respond to loan applications within 30 days, so options A and C are incorrect. The Fair Housing Amendments Act, not the Americans with Disabilities Act, added familial status and disability to the list of protected classes. That eliminates option B. Option D correctly states that the Civil Rights Act of 1866 provides every U.S. citizen with the right to buy, sell, convey, inherit, and possess property.
Marcus, who primarily represents sellers, hired multiple groups of actors to portray large, poor families who attend an open house in a neighborhood of mostly retired, wealthy families. He then mailed postcards to residents, offering to purchase their properties quickly for a discounted price before the neighborhood make-up changes. What is this an example of?
A. Blockbusting
B. Redlining
C. Steering
D. Collusion
A. Blockbusting
Redlining is when lenders refuse to provide mortgage financing to borrowers in specific geographic areas based on area demographics, and that’s not what’s happening here, so option B isn’t right. Steering is the act of guiding prospective buyers to or away from specific areas based on membership in or a preference for or against a protected class, making option C incorrect. Collusion is an agreement to do something illegal or with the intent to deceive someone, so option D incorrect. Blockbusting is the practice of inducing the sale of properties in a neighborhood by threatening that members of a protected (usually minority) class moving into the neighborhood will decrease property values, so option A is correct.
Nathan is placing a listing ad for a soon-to-be-built expensive home in a gated community. He includes the words “exclusive” and “ultra-conservative community” in his ad. Does this violate fair housing law?
A. No, because the terms are a true characterization of the neighborhood and the property.
B. No, as long as the developers have used the same terms to describe the development.
C. Yes, because it implies that the listing is suitable only for a particular type of buyer.
D. Yes, unless the developers specified that he use these terms in all marketing tools.
C. Yes, because it implies that the listing is suitable only for a particular type of buyer.
Regardless of whether the terms “exclusive” and “ultra-conservative” truly describe the neighborhood or whether the developers characterized the neighborhood with these terms or asked that these terms be used in marketing, it’s discriminatory to suggest that only certain buyers are appropriate for the listing. Use of the term “exclusive” in particular runs a very real risk of being discriminatory. The term “ultra conservative may not raise concerns on a federal level, but may pose a threat under various local and state laws. This makes options A, B, and D incorrect.
What is one of HUD’s primary goals?
A. To prohibit discrimination with respect to granting mortgage loans
B. To ensure that credit reporting agencies correctly report credit scores to lenders
C. To ensure that everyone has access to fair and equal housing
D. To prohibit illegal and robocalls to homeowners.
C. To ensure that everyone has access to fair and equal housing
HUD works to prevent discrimination in housing, but the primary agency involved in discrimination in mortgage lending is the Department of Justice through the Equal Credit Opportunity Act. This eliminates option A. The Consumer Financial Protection Bureau (CFPB) supervises financial entities and non-bank consumer reporting agencies, which makes option B incorrect. The Federal Trade Commission manages the national Do Not Call registry and prohibits illegal and robocalls to homeowners, so option D is incorrect. HUD’s primary focus is on ensuring that every U.S. citizen has access to fair and equal housing, making option C the correct answer.
Which of these situations does the Americans with Disabilities Act address?
A. Meridian Apartments provides a gym and pool area for residents, but it’s not accessible to residents who use wheelchairs.
B. Marcus, a property manager, routinely dismisses rental applications families with children under the age of 18.
C. The Golden Gate senior housing center has no exercise or activity center for its residents.
D. Metro Agents hired an interpreter to assist Spanish-speaking clients with the real estate process.
A. Meridian Apartments provides a gym and pool area for residents, but it’s not accessible to residents who use wheelchairs.
Discrimination based on familial status is illegal, but it’s not a part of ADA requirements, so option B is incorrect. ADA doesn’t require that housing complexes provide recreational activities or facilities, so option C is out. Metro Agents is going above and beyond in hiring an interpreter, but ADA doesn’t require this. Option D out. ADA requires that residential real estate complexes that provide services or facilities for residents must make those services and facilities available to and accessible by all residents.
