Unit 10

Question 1

Learning Objective: Distinguish between laws, ethics, and morals and identify examples of each.

Answer 1

Answer:

• Laws: Rules enforced by governing bodies; examples include TRELA and federal fair housing laws.
• Ethics: Professional guidelines that go beyond legal obligations, focusing on doing what is right; examples include the NAR Code of Ethics.
• Morals: Personal beliefs about right and wrong; these are often guided by individual conscience and cultural norms.

Question 2

Learning Objective: List the various federal and Texas laws that guide a license holder’s conduct in a real estate transaction.

Answer 2

Answer:
Federal laws include the Fair Housing Act, Americans with Disabilities Act, and RESPA. Texas laws include TRELA, TREC rules, and other state-specific real estate regulations that dictate license holder conduct.

Question 3

Learning Objective: Describe the role of TRELA and TREC in guiding license holder conduct and protecting the public.

Answer 3

Answer:
TRELA establishes the legal framework for real estate license holders, while TREC enforces these laws through rules, regulations, and disciplinary actions to ensure public trust and consumer protection.

Question 4

Learning Objective: Describe the role professional codes of ethics have in guiding license holder/member conduct.

Answer 4

Answer:
Professional codes of ethics, such as those from NAR and TAR, provide additional guidance for ethical behavior, emphasizing integrity, fairness, and responsibility beyond legal requirements.

Question 5

Learning Objective: Describe ways in which laws and ethics work together to guide a license holder’s actions.

Answer 5

Answer:
Laws set the minimum standards for behavior, while ethics encourage higher standards of professionalism. Together, they help ensure decisions and actions meet legal requirements while promoting trust and fairness in real estate transactions.

Question 6

Key Point Question 1: Why are business practitioners, including real estate license holders, increasingly in the public spotlight regarding ethical conduct?

Answer 6

Answer:
The current real estate and general business environment places almost all business practitioners in the public spotlight in relation to ethical conduct.

Question 7

Key Point Question 2: How do ethical obligations differ from legal obligations?

Answer 7

Answer:
Ethical obligations are distinguished from legal obligations as those duties that go beyond the law and focus on not just the legal thing to do, but also the right thing to do.

Question 8

Key Point Question 3: What guides real estate license holders in their conduct?

Answer 8

Answer:
Real estate license holders are governed by numerous federal, state, and local laws, the Real Estate License Act, and the Rules of the Texas Real Estate Commission. The license holder should be familiar with current law and rules.

Question 9

Key Point Question 4: What formalizes ethical conduct for license holders beyond laws and regulations?

Answer 9

Answer:
In addition to the noted laws and regulations, license holders have a duty of ethical conduct that in some cases has been formalized by professional organizations such as NAR, TAR, local REALTOR® associations, and other professional groups.

Question 10

Key Point Question 5: What considerations should guide a license holder’s decisions and actions?

Answer 10

Answer:
Decisions and actions should consider long- and short-term goals, the impact on stakeholders, the ability to follow through, and the potential negative implications of reversing the decision. All actions should pass the light-of-day test.

Question 11

Key Point Question 6: What is considered a baseline for ethical decision-making?

Answer 11

Answer:
While ethics models and practical guides are useful, the golden rule is still considered a baseline in these matters.

Question 12

Which of the following is enforceable only by conscience?
A. Laws
B. Morals
C. Ethics
D. Rules

Answer 12

Answer: B. Morals
Reasoning for the answer: Morals are guided by personal beliefs and conscience, without the formal enforcement mechanisms of laws, rules, or professional ethics.

Question 13

The rules of the Texas Real Estate Commission are created by
A. statutory law.
B. civil law.
C. administrative law.
D. criminal law.

Answer 13

Answer: C. administrative law
Reasoning for the answer: TREC rules are created under administrative law to enforce the statutory requirements of TRELA and regulate license holder conduct.

Question 14

Disputes relating to commissions between REALTORS® are settled by
A. an arbitration committee.
B. civil courts.
C. justice courts.
D. court-appointed arbitrators.

Answer 14

Answer: A. an arbitration committee
Reasoning for the answer: REALTOR® associations use arbitration committees to resolve commission disputes between members, avoiding formal court proceedings.

Question 15

Failing, within a reasonable time, to respond to inquiries from a seller regarding marketing activities or efforts on the part of the listing broker would violate
A. legal obligations.
B. moral obligations.
C. ethical obligations.
D. no obligations.

Answer 15

Answer: A. legal obligations
Reasoning for the answer: License holders are legally required to keep their clients informed of marketing efforts and other transaction-related updates.

Question 16

Broker Beta invested considerable time and effort into showing properties to a nonrepresented buyer. The buyer subsequently purchased a home Beta had shown him previously, but he purchased directly through the listing company—excluding Beta. Beta believes he is entitled to share in the commission; the listing broker disagrees. This is an example of
A. discrimination.
B. contractual dispute.
C. regulatory dispute.
D. procuring cause dispute.

Answer 16

Answer: D. procuring cause dispute
Reasoning for the answer: Procuring cause disputes arise when brokers disagree about who is entitled to a commission based on their efforts in bringing about a transaction.

Question 17

The quick guide for ethical decision-making, which was presented in this chapter, does not consider which of the following?
A. Existing contractual and promissory obligations
B. Public scrutiny
C. Commission rates
D. Consumer expectations

Answer 17

Answer: C. Commission rates
Reasoning for the answer: Ethical decision-making focuses on obligations, scrutiny, and expectations but does not consider commission rates, as they are not relevant to ethical principles.

Question 18

Which of the following statements is TRUE?
A. An action may be legal but unethical.
B. An action may be ethical but illegal.
C. An action may be immoral but legal.
D. All of these.

Answer 18

Answer: D. All of these
Reasoning for the answer: Ethics, laws, and morals are distinct concepts, and actions can be judged differently under each framework, leading to the possibility of being legal but unethical, ethical but illegal, or immoral but legal.

Question 19

Almost all codes of ethics include reference to which of the following?
A. The preamble
B. The golden rule
C. Religious doctrine
D. Legal doctrine

Answer 19

Answer: B. The golden rule
Reasoning for the answer: The golden rule—treat others as you wish to be treated—is a foundational concept in most professional codes of ethics, emphasizing fairness and integrity.

Question 20

Given the current business environment, from a legal perspective, real estate practitioners should be keenly aware of
A. consumer trends.
B. housing availability.
C. public scrutiny.
D. alternate financing methods.

Answer 20

Answer: C. public scrutiny
Reasoning for the answer: Real estate practitioners operate under significant public scrutiny, and their actions are judged based on both legal and ethical standards, making awareness essential for compliance and trust.

Question 21

A sales license holder who receives an undisclosed direct bonus payment from a customer buyer would violate which of the following?
A. Ethical behavior
B. TRELA
C. TREC rules
D. All of these

Answer 21

Answer: D. All of these
Reasoning for the answer: Receiving an undisclosed bonus violates ethical standards, TRELA, and TREC rules, as it breaches fiduciary duties and transparency requirements.