Real estate Principals & Law - Chapter 2 Flashcards
1
Q
History
A
- California Real estate license law was first enacted in 1917, created the Department of Real Estate
- In 2013, the Department of Real estate (DRE) became the California Bureau of Real Estate (CBRE) as part of the Government Reorganization Plan of 2012; it became a bureau within the Department of Consumer Affairs in 2014
- In 2018, the Department was restored to independent department status by Senate Bill 173 and again become the Department of Real Estate (DRE).
- The DRE operates within the Business, Consumer Services and Housing Agency (BCSHA)
2
Q
Organization
A
- The chief officer of the DRE, acting under the direction of the BCSHA, is the Commissioner of Real Estate
- Department has seven major sections, each led by an assistant commissioner
- Enforcement
- Legal
- Audits
- Communications & publications
- Subdivisions
- Licensing & Administrative Services
- Legislation
3
Q
Commissioner
A
- Chief officer of the Department of Real Estate
- Appointed by governor
- Actively engaged as a broker in the state for 5 years or related experience with real estate in California for 5 of previous 10 years
- Must not have any simultaneous interest in a real estate firm or oil, gas, or mineral brokerage firm
4
Q
Commissioner duties
A
- Administer and enforce the real estate law for the protection of purchasers and those dealing with licenses
- Perform all acts provided for in the Real Estate Law
- Maintain main office in Sacramento, establish branches as deemed necessary
- Appoint deputies and others as needed
5
Q
Commissioner powers
A
- Regulate and control issuance and revocation of all subject licenses
- Employ deputies, clerks and others as needed to discharge duties
- Adopt rules and regulations necessary for enforcement
- Monitor activies of real estate licensees doing business as mortgage lenders and mortgage brokers
- Active mortgage loan brokers must submit reports to the Department to assist in surveying broker compliance with the law
- Hold hearing involving a licencee which may result in the suspension, revocation of denial of a real estate license
- Issue Desist and refrain orders to stop activities which are in violation of the Real Estate Law
- Issue citations and orders for violations of Real Estate Law or regulation
6
Q
Commissioner’s Legal Advisor
A
- Advisor and attorney for the Commissioner : Attorney general
7
Q
DRE Disciplinary Actions : Citations Orders fines
A
The commissioner is authorized to issue a citation containing an order of correction and/or assessing a fine for the violation of the real estate law or subdivided lands Law. Th max fine for a citaion is $2,500 even if the citation lists more than one violation
8
Q
DRE Disciplinary Action : Suspension & revocation
A
Can issu suspension or revocation if:
- A violation of the code has been knowingly committed or the person should have known
- The violation has caused material damage to the public
- A person charged has been convicted of a crime involving fraud
- The person has been help liable in a civil action for ran offense involving fraud.
9
Q
DRE Disciplinary Action
A
Can petition in writing for a monetray penalty any time after filing and accusationa nd before the date of an effective decison.
10
Q
DRE Real Estate fund & Consumer Recovery
A
All fees and charges collected are paid monthly into real estate Fund. Allocated to Consumer recovery account, Education and research, and carry out provision of real Estate Law
11
Q
DRE Real Estate fund & Consumer Recovery : Education and research account
A
8% of license fees credited to the education and research Account
12
Q
DRE Real Estate fund & Consumer Recovery : Consumer recovery Account
A
12% of licensee fees credited to this account is available for payment to aggrieved persons
- $50,00 limitation on liability of the Recovery Account for applications, $250,000 for any one licensee
13
Q
DRE licensed activities & exemptions : Who must be licensed
A
Anyone who acts in the business of a real estate broker or salesperson
- Anyone who acts or advertises as a mortgage loan originator within the state must have a license endorsement
14
Q
DRE License activities & exemptions : Activities requiring license
A
If someone does any of the following for compensation and regarding real property or business opportunity
- buy or sell
- solicit sellers or buyers
- Negotiate sales or exchanges
- Lease or rent
- Collect rents
- Solicit borrowers or lenders
- Perform services for borrowers or lenders
- Sell, buy or exchange sales contracts or promossory notes whole performing services for holders
15
Q
DRE CA license Types : Sales person
A
Salesperson licenses are in effect for a period of four years, renewable
16
Q
DRE CA license Types : Brokers
A
in affect for four years, renewable
17
Q
DRE CA license Types : Restricted
A
- May be issues to persons found to have committed violations that would justify suspension, revocation, or license denials
- Restrictions may apply to the license term, employment under a particular broker, and to specific privileges
- No right to renew a restricted license
18
Q
DRE CA license Types : Temporary
A
90-day temps license issued to applicant for renewal or reinstatement in previous active license was issued four or more years before application
19
Q
Licensing regulations: Salesperson Licensing Process
A
- Salesperson’s license applicant must
- Be 18
- Apply for and pass RE exam
- Fulfill education requirements
20
Q
Licensing regulations: Broker Licensing Process
A
- be 18
- Have within the previous 5 years, two years of active real estate experience as a salesperson and be eligible for renewal
- Pass brokers exam
- Fulfill education requirements
21
Q
Licensing regulations: Grounds for rejection
A
- Convicted of a crime related to RE practices
- Conviction of sexual misconduct
22
Q
Licensing Regulation : Nonresident requirements
A
- Th applicant otherwise qualifies for licensure
- The applicants place of residence permits a resident of CAli to obtain a RE license in that jurisdiction
23
Q
Licensing regulation : License renewal
A
- Submitting fee, application, & evidence of completion of required continuing education courses
24
Q
License regulation : Continuing eduation
A
- 45 clock hours of education including courses of 3 hours each on ethics, agency, trust fund handling, fair housing, risk management, management of real estate offices and supervision of licensees (last two brokers only)
25
Licensing Regulations L License Violations
misrepresentation
false promises
undisclosed dual agency
commingling
no termination date on listing agreement
undisclosed compensation
exercising an option in a listing without consent of employer
any fraud or dishonest dealing
obtaining a commission or brokerage agreement from a buyer concerning a business opportunity property without prior written authorization from the property owner
failure to disburse mortgage funds according to agreement
intentional delay of a mortgage loan closing to increase charges
any act that is described as a violation of license law
transfer disclosure statement violation
false procurement of real estate license
conviction of, or plea of nolo contendere to, a felony
false advertisement of credentials
any willful violation of the Real Estate Law or Commissioner’s Regulations
any conduct that would warrant denial of license application
suspension or revocation of a license issued by another agency for conduct that would be grounds for suspension or revocation of a California real estate license
negligence or incompetence in a licensed activity
failure as a broker to supervise salespersons
violation of confidentiality
violation of terms of a restricted license
using fear of property value loss to induce sale or listing (“blockbusting”)
violation of Franchise Investment Law or Corporate Securities Law
failure to disclose ownership interest to a buyer-client
knowing misrepresentation of a real property’s value
illegal kickback for referral
final judgment in a civil case for fraud involving licensed activity
26
California Agency & Fiduciary Relationships
Principal delegates the right to act on their behalf
Agency relationship invokes rules and regulations which govern the rights and duties of principals and agents to each other and the obligations of both principals and agents to third parties
27
Agent
- A person acting under provisions of Title 9 in a real property transaction, including a person licensed as a real estate broker and under whose license a listing is executed of an offer to purchase is obtained
28
Associate license
A broker or sales person licensed under a broker or contracted with a broker to act as the brokers agent
- The broker for whom an associate licensee functions is responsible for the actions of the associate and owes the same duties as the associate licensee owes to a transaction party
29
Dual agent
An agent acting, either directly through an associate licensee, as agent for both seller & buyer in a real property transaction
30
Responsibilities : Principal to 3rd parties
Responsible for agents negligence and wrongful acts committed as a part of the transaction, and for the willful omission to fulfill the obligations of the principal, unless required by law to employ that particular agent
- not responsible for any wrongs committed by the principal's agent other than those just mentioned, unless the principal has authorized or ratified the actions
31
Responsibilities : Broker to principal
- A special agency, typically limiting the broker to soliciting and negotiating on behalf of the principal
- Real estate brokers cannot actin place of the agents or bind them contractually
- Agent owe fiduciary duty to the principal within the course & scope of the authority granted by the principal
32
Express vs implied Agency
Actual : when the agent is really employed by the principal
Ostensible : When the principal intentionally causes a causes a third person to believe another to be his agent who is not really employed by him
An oral authorization is sufficient except when required to be in writing.
33
Dual agency disclosures
May not disclose to the seller that the buyer is willing to pay more than the buyers written offer to purchase, nor disclose the buyer that the seller will take less that the listing price, without the express written consent of the party authorizing disclosure
Must disclose if buyer is unrepresented
Must disclose and obtain consent from both parties that they are acting as dual agent
Dual agency disclosures apply in all real property transactions, nit just 1-4 unit.
34
Lisiting agreement essentials
- Names of parties
- Identity of property
- terms and conditions of the anticipated sale, lease or loan
- Amount of commission orother compensation to be paid
- Expiration date of the agency
- Signatures of all parties concerned
- Agency agreements concerning owner-occupied residential property must contain a statement in ten point bold print or larger stating that commission amounts are negotiable and are not set by law
35
Agency termination
- Expiration of its term
- Extinction of its subject
- Death of the agent or principal
- incapacity of agent or principal
- Renunciation by the agent
- Revocation by the principal
36
Duties to principal
- Exercise utmost care, integrity, honesty and loyalty in dealings with the agents principal
- Exercise skill and care in performance of the services rendered by the agent
- Act honestly and without fraud or deceit
- Act fairly and in good faith
- Disclose material facts the agent knows or should know which are not known or readily observable by the parties to the transaction
37
Agency : Duties to third parties
- Fair & honest dealing
| - Complete and full disclosure of material facts
38
Agency disclosure guidelines
- Must provide disclosure form w/ sign acknowledgement of receipt from seller and buyer
- Listing agent must provide disclosure form ASAP before entering into the listing agreement
- Selling agent must provide disclosure form ASAP and before they make an offer on the house
- Disclosure must be consented to in writing by the seller and buyer
39
Essential Liability Guidelines
- Responsible for associate licensees
- Broker owes same duty as licensee
- Principal is responsible to third persons for negligence of his agent
- Name of the principal for whom the agent is acting must appear on the face of the contract
40
Broker - Sales person relationship
- Typically independent contractor - Can complete tasks at will
- Must notify commissioner when an agent terminates a contract and goes to another brokers
- Agent/salesperson contract must be in wriitng
41
Who may give & recieve comp
- Commission can only be paid to RE Broker who in turn pays licensed salesperson
- Salesperson can not accept payment form anyone other than a broker
- Licensed sales person cannot pay anything to a RE Licensee unless through the brokerage
42
Compensation Agreements: Listing broker
- Listing broker must have valid written contract with the principal
43
Selling broker
- Selling broker must either have a valid agreement with buyer, tenant/leasee or lender or be the "procuring cause" of the sale, tenancy or loan.
44
Agreemnet form and contracts
- Comp is not fixed must be included. It is negotiable.
45
Brokerage Place of business : Authorized business locations
- Must have and maintain place os biz in cali.
| - Where broker license is displayed
46
Officing reporting requirements
- every office must provide the Commissioner current office or mailing address that the licensee uses to perform and licensed activity
- Must inform commissioner if change of address
47
Brokers obligations
- Brokers must exercise reasonable supervision over the activities of their salespeople, or activities of the corporation
- Must establish policies, rules, procedures and systems to monitor conduct of broker and salespeople
48
Salesperson License retention
Certificate is kept at brokerage office until canceld or salesman leaves employe, at which time broker returns the certificate within 3 businesss days
49
Appontment of Brokerage office brand manageer
Licensee may not:
- Hold restrictee license
- be or have been subject to an order of debarment
- Have less than two years of full time real estate experience within five years preceding the appointment
50
Brokerage requirements : Required Records
- Retain copies of all listings, deposits receipts, cancels checks, trust records and other documents the broker has executed in connection with any transaction that is required
- Broker is not required to retain e messages of non material nature
51
Broker Record Keeping : Retention period
- 3 years from date of closing
52
Record keeping requirements : Audits
- After notice, the books, accounts and records must be made available for examination and copying by the commissioner
53
Record Keeping penalties
- Must pay cost of audit if there is and fund handling violatin
- Commissioner may susped, revoke, or deny renewal of brokers license if broker fails to pay the audit costs within 60 days
- Commissioner can sue to recovers costs
- DRE may suspend or revoke the license of any licensee who knowingly destroys, alters or conceals a record required to be maintained of that pertains to te commissioner's audit or examination of a licensee
54
Trust Fund Management
- Trust fund must be placed into the hands of the owner of the funds, into a neutral escrow depository, or into a trust account no later than 3 business days following receipt
- May be held uncashed ifcheckisnot negotiable by broker or the offeror has given written permission. and offeree is informed it is being held
- A RE salesperson who accepts fund on behalf of the broker, must immediately deliver fund to broker
55
Ethics, standards, & fair housing : Panic Selling
Prohibited to attempted to induce the sale or lease of real property through any representation regarding the entry of persons of another race, color, sex, religion, ancestory, marital status or national origin into an area or neighborhood
56
Ethics, standards, & fair housing : Appraisals
Prohibited to attempt to improperly influence the development, reporting, result or review of a real estate appraisal sought in connection with a mortgage loan
57
Ethics, standards, & fair housing : Discriminatory conduct based on race, color, sex, religion, ancestry physical handicap, marital status or national origin.
- Refusing to negotiate the sale, lease or financing of a property or otherwise make it available
- Refusing to show, rent sell or finance a real property
- Steering a person away from a real property
- Discriminating in the terms, conditions or privileges of a sale, lease or financing of a real property
- Discriminating in providing services in connection w/ sale or rental or financing of real property
- Representing that a property is not available when it in fact is.
- Encouraging discrimination in others
- Refusing to work with another licensee
- obstructing a purchase, sale or rental,
- Expressing or implying limitation, preference, discrimination
- Coercing, intimidating, threatening, or interfering with another's enjoyment of any federally or state protected right
- Witholding information
- Discouraging rental, sale, financing
- Agreeing to or carrying out discriminatory instructions
- Discriminatory advertising
- Quoting or charging different rates
- Applying different standards of financial qualification
- Providing unequal managemnt services
- Rules that limit a persons opportunity
- Encouraging any violation of federal or state fair housing law
- Assisting any person to discriminate
58
State and national fair housing laws : The Unruh Civil Rights Act
Outlaws discrimination based on sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, or sexual orientation
59
State and national fair housing laws : The Fair Housing Act (Title VIII)
Title VIII of the Civil Rights Act of 1968 and the Civil Rights act of 1866 prohibit discriminatory practices in the sale or rental of a dwelling and serve as potential bases for imposing liability imposing liability for damages on brokers who participate in discriminatory practices
60
State and national fair housing laws : California Fair Employment & housing Act (FEHA) Also known as the Rumford Act
Prohibits discrimination based on "race, color, religion, sex, marital status, national origin, ancestry, familial status, disability or sexual orientaion in housing accommodations even when requested by the seller
61
State and national fair housing laws : The Real Estate Law & commissioner's regulations
Provide for the revocation of a brokers license for discriminatory behavior
62
State and national fair housing laws : The holden Act
Outlaws discriminatory laws in lending practices.
63
Advertising regulation : Disclosure of licensed status
- Any advertising regarding licensed activity must disclose licensed status
- "First point of contact advertising and purchase contracts must disclose the licesee's name, license ID number and unique identifier
- Terms broker, agent, Realtor, loan correspondent or abbreviations fulfill disclosure requirements
- Must diclose DRE number for loan services
64
Advertising Regulation : Solicitation materials
Any materials intended to be "first point of contact" with a consumer must disclose real estate license numbers of all licensee's who appear in the solicitation.
Does not apply to "For Sale" Sign where only the responsible brokers name appears
65
Advertising regulation : Misleading advertising
- Advertising by real estate licenses may not contain any false, misleading or deceptive statement of the rates, terms, or conditions of a purchase or loan
- False statements concerning any land offered for sale or lease are a public offense punishable by fine, imprisonment and license suspension/revocation
- Salesperson must include name of responsible broker in any advertisement for services requiring a license
- cannot offer a gift, premium or other object of value as an inducement to make a loan on real property
66
RESPA
Real estate Settlement Procedures Act
67
Executive order 11603
Prohibits discrimination in housing whenever federal funds are involved
68
1988 Fair Housing amendment
Protected familial status as a protected class
69
Disclosing and agency relationship
Disclose, record, confirm
70
Proposition 60
Benefits citizens 55 and older
71
How much of a tax exemption are owner occupied homeowners entitled to?`
$7,000
72
When was proposition 13 enacted
1978
73
proposition 58
Allows property to be transferred between family members without being taxed on the first million dollars of market value
74
Depreciation calculation : Depreciable basis
(Property value + capital improvements - land value)
75
Depreciation calculation : depreciation by term
Depreciable basis / depreciation term
76
Formula to calculate point of a loan
Fees paid / loan amount
77
Amortized loan
The interest paid, is taken out of the interest payment every month, reducing the overall interest paid during the term
