Practice of Real Estate

Question 1

Discriminatory Misrepresentation

Answer 1

An agent may not conceal available properties, represent that they are not for sale or rent, or change the sale terms for the purpose of discriminating. For example, an agent may not inform a minority buyer that the seller has recently decided not to carry back second mortgage financing when in fact the owner has made no such decision.

Question 2

Discriminatory Advertising

Answer 2

An agent may not advertise residential properties in such a way as to restrict their availability to any prospective buyer or tenant.

Question 3

Steering

Answer 3

the practice of directly or indirectly channeling customers toward or away from homes and neighborhoods. Broadly interpreted, steering occurs if an agent describes an area in a subjective way for the purpose of encouraging or discouraging a buyer about the suitability of the area.

For example, an agent tells Buyer A that a neighborhood is extremely attractive, and that desirable families are moving in every week. The next day, the agent tells Buyer B that the same neighborhood is deteriorating, and that values are starting to fall. The agent has blatantly steered Buyer B away from the area and Buyer A into it.

Question 4

Blockbusting

Answer 4

the practice of inducing owners in an area to sell or rent to avoid an impending change in the ethnic or social makeup of the neighborhood that will cause values to go down.

For example, Agent Smith tells neighborhood owners that several minority families are moving in, and that they will be bringing their relatives next year. Smith informs homeowners that, in anticipation of a value decline, several families have already made plans to move.

Question 5

Restricting MLS Participation

Answer 5

It is discriminatory to restrict participation in any multiple listing service based on one’s race, religion, national origin, color, or sex.

Question 6

Redlining

Answer 6

the residential financing practice of refusing to make loans on properties in a certain neighborhood regardless of a mortgagor’s qualifications. In effect, the lender draws a red line around an area on the map and denies all financing to applicants within the encircled area.

Question 7

Title VIII (Fair Housing Act)
Civil Rights Act of 1968

Answer 7

prohibits discrimination in housing based on race, color, religion, or national origin. The Office of Fair Housing and Equal Opportunity (FHEO) administers and enforces Title VIII under the supervision
of the Department of Housing and Urban Development (HUD).

Question 8

Title VIII Exemptions

Answer 8

• a privately owned single-family home where no broker is used and no discriminatory advertising is used, with certain additional conditions
• rental of an apartment in a 1-4 unit building where the owner is also an occupant, provided the advertising is not discriminatory
• facilities owned by private clubs and leased non-commercially to members
• facilities owned by religious organizations and leased non- commercially to members, provided membership requirements are not discriminatory

Question 9

Jones V. Mayer

Answer 9

In 1968, the Supreme Court ruled in Jones v. Mayer that all discrimination in selling or renting residential property based on race is prohibited under the provisions of the Civil Rights Act of 1866. Thus, while the Federal Fair Housing Act exempts certain kinds of discrimination, anyone who feels victimized by discrimination based on race may seek legal recourse under the 1866 law.

Question 10

Equal Opportunity in Housing Poster

Answer 10

In 1972, HUD instituted a requirement that brokers display a standard HUD poster. The poster affirms the broker’s compliance with fair housing laws in selling, renting, advertising, and financing residential properties. Failure to display the poster may be construed as discrimination.

Question 11

Filing an FHEO Complaint

Answer 11

Complaints alleging fair housing violations must be filed with the Office of Fair Housing and Equal Opportunity within one year of the violation. HUD then initiates an investigation in conjunction with federal or local enforcement authorities. If HUD decides that the complaint merits further action, it will attempt to resolve the matter out of court. If efforts to resolve the problem fail, the aggrieved party may file suit in state or federal court.

Question 12

Filing Suit

Answer 12

In addition to or instead of filing a complaint with HUD, a party may file suit in state or federal court within two years of the alleged violation.

Question 13

Penalties

Answer 13

If discrimination is confirmed in court, the respondent may be enjoined to cease practicing his or her business. For example, a discriminating home builder may be restrained from selling available properties to buyers. Also, the plaintiff may be compensated for damages including humiliation, suffering, and pain. In addition, the injured party may seek equitable relief, including forcing the guilty party to complete a denied action such as selling or renting the property. Finally, the courts may impose civil penalties for first-time or repeat offenders.

Question 14

Home Mortgage Disclosure Act

Answer 14

This statute requires lenders involved with federally guaranteed or insured loans to exercise impartiality and non- discrimination in the geographical distribution of their loan portfolio. In other words, the act is designed to prohibit redlining. It is enforced in part by requiring lenders to report to authorities where they have placed their loans.

Question 15

Seller’s Disclosure Form

Answer 15

Many states require sellers to make a written disclosure about property condition to a prospective buyer. This seller disclosure may or may not relieve the agent of some liabilities for disclosure. The residential property condition disclosure is the seller’s written summary of the property’s condition at the time of contracting for sale. The disclosure is entered on state-approved forms

Question 16

Owner’s Role

Answer 16

State legislation requires owners of previously occupied single family homes and buildings containing 1-4 dwelling units to provide the disclosure to prospective buyers if they are selling, exchanging, or optioning their property. Some exceptions and exemptions apply. When required, the disclosure must be transmitted to the prospective buyer no later than when the buyer makes an offer.

A typical form requires the seller to affirm whether or not problems exist in any of the listed features and systems of the property. In denying that a problem exists, the seller claims to have no knowledge of a defect. If a defect does in fact exist, the seller can be held liable for intentional misrepresentation. A third possible response to a property condition question is that of “no representation.” Here, the seller makes no claim of knowledge as to whether a problem exists. With this answer, the seller is no longer held liable for a disclosure of any kind relating to a particular feature, whether a defect is known or otherwise.

Question 17

Licensee’s Role

Answer 17

The residential property re-seller must comply with the property condition disclosure requirement whether an agent is employed in the transaction or not. If an agent is involved in the transaction, the agent must disclose any and all material facts he or she knows or should reasonably know about the property, regardless of what the seller may have disclosed on the form.

Question 18

Right of Rescission

Answer 18

Sellers who fail to complete and deliver the property condition disclosure statement to buyers in a timely fashion effectively give the buyer a subsequent right under certain conditions to rescind the sale contract and re-claim their deposits. The buyer must follow certain procedures and meet certain deadlines in order to legitimately effect the cancellation. The buyer’s right to cancel persists until closing or occupancy, whichever comes first.

Question 19

Homeowner’s Association

Answer 19

State law will typically require the association or management company to provide association documents to the buyer to satisfy the seller disclosure requirements. These documents may be attached to or delivered in conjunction with the sale contract. The contract itself usually specifies the timing of the disclosures. There may be a place on the contract for the buyer to acknowledge receipt and knowledge of the HOA disclosures. In some states, the seller’s agent gathers and provides the documents to a buyer or buyer’s agent before the writing of an offer.

Question 20

Code of Ethics

Answer 20

The real estate industry has developed a code of professional standards and ethics as a guideline in serving the real estate needs of consumers. This professional code has emerged from three primary sources:
- federal and state legislation
- state real estate licensing regulation
- industry self-regulation through trade associations and institutes

Question 21

Job Performance

Answer 21

A professional real estate agent must understand the skills and knowledge the profession requires and make a commitment to maintain and improve expertise in these areas. Of particular importance are:
- market knowledge
- real estate laws
- evolving standards of practice

Other aspects of professional performance that are usually supported include:
- promoting exclusive listings
- promoting the professionalism of the real estate industry
- promoting arbitration of disagreements rather than litigation
- obtaining transactional agreements between parties in writing
- submitting offers and counteroffers in a timely and objective manner
- keeping the funds of others separate from broker and personal
funds
- providing equal professional services to all persons
- providing services only within the agent’s area of competence or
with the assistance of a specialist
- observing the highest standards of truthfulness in advertising
- cooperating with real estate boards and commissions in their enforcement of standards

Question 22

Professional Relationships

Answer 22

Professional conduct excludes disparagement of competitors. Real estate professionals also
- forgo pursuit of unfair advantage
- arbitrate rather than litigate disputes
- respect the agency relationships of others
- conform to accepted standards of co-brokerage practices