Real Estate Risk Management
Which one of the following phrases does NOT create a potential antitrust liability?
"I promote all of my listings."
Which of these situations is considered discriminatory?
A licensee shows an African American couple only homes in predominantly African American populated neighborhoods without being asked to do so
Which of these services does RESPA prohibit a seller from requiring of the buyer
A particular title insurance provider
Which one of the following contracts can a licensee assist with?
A real estate sale agreement
What is the basic definition of a "risk"?
An exposure to the chance of injury or loss.
A meth lab would be most readily detected by what condition?
An odor like ammonia or cat urine
Torts are generally remedied by which legal procedure
Civil action
What was the main reason the Sherman Antitrust Act was passed by Congress in 1890?
Concerns about putting too much economic power in the hands of a few large businesses.
Which one of the following terms is NOT acceptable to use when advertising a home for sale or rent?
Couples preferred"
Which of these is NOT one of the three primary points of potential liability that comes from doing real estate business over the internet?
Economic uncertainty
What type of insurance can be used as a risk-shifting strategy, covering actions undertaken in the course of a professional activity?
Errors and omissions insurance
When a licensee ends up being included in a conversation about commission rates with competitors, what is the best defensive action to take?
Explicitly state that you have nothing to do with the conversation and leave.
Several brokerages get together to discuss a problem they all face. There is a new "discount" brokerage in town and it is quickly taking business away from them. The brokerages agree to try to limit the exposure of the discount broker and not show homes listed by the discount broker. Which antitrust action does this situation illustrate?
Group boycotting
Which of these products is LEAST likely to contain VOCs?
Hardwood
Which of these is the main way that asbestos enters the body?
Inhalation
Which of the following is NOT considered the unauthorized practice of law?
Interpreting the meaning of the earnest money forfeiture clause in a real estate sale agreement.
Which of the following statements is true regarding lead-based paint disclosures?
Lead-based paint disclosure laws apply to all 50 states.
When a lender rejects a mortgage application based upon poor credit, what is the lender required to do?
Lenders must provide the rejected applicant with specific reasons for the rejection.
What are liquidated damages?
Liquidated damages are specified in a contract in case of breach of contract
Mary agrees to sell Jane's house. Jane says she wants to start the price artificially high so she won't lose money when people try to talk her down. Mary feels this is a bad idea but agrees to take the listing. In an effort to try to sell the house quickly, Mary tells a buyer's agent that Jane will accept an offer lower than full list and thereby encourages a low offer. What is Mary doing that was wrong?
Mary is disclosing confidential information
Which one of the following is NOT one of the major areas where agency law violations occur
Missed listing agreement appointments
Which statement is true?
Mold is a material defect that must be disclosed
Which is NOT a part of proving an intentional misrepresentation?
No corrective action was taken after the deception
Which creates the greatest radon threat?
Poor ventilation
What is it called when a lender tries to make money at the expense of the customer by offering loan products with significantly worse terms or higher costs than similarly qualified customers?
Predatory lending
What is the most common source of problems with potable water in a real estate transaction?
Private wells
Which of these is NOT a risk-shifting method?
Purchasing umbrella liability insurance policies.
Redlining is best defined as
Refusing to make mortgage loans or issue insurance policies based upon racial, ethnic, religious, or national-origin composition of a neighborhood.
Which of the following is not addressed in The Americans with Disabilities Act of 1990 (ADA)?
Residential housing
Which part of a home built before 1978 would be the least likely to contain lead?
Sheetrock (wallboard)
What is the first antitrust law that forms the foundation for antitrust actions against the real estate industry?
Sherman Antitrust Act
What should a licensee do to safely dispose of documents that contain personal information?
Shred or burn the documents
6 Which population group is most at risk with lead exposure?
Small Children
Which one of the following is NOT a federal guideline to help licensees avoid risks when advertising real estate for sale or lease?
Source of Income: No income preference may be designated.
What is the main problem with former meth labs
Toxic waste
What is a good risk anticipation procedure if a client needs assistance on matters that are outside of the licensee's areas of expertise or beyond the scope of their license?
Use a written disclaimer to advise the client to seek a competent professional for advice or services
Which one of the following is a red flag that a knowledgeable real estate agent should be able to easily notice that could indicate a potentially serious problem with the property?
Water stains on walls or ceilings
Which is NOT a valued characteristic of asbestos?
Water-soluble
The classic group boycott is also known as
a concerted refusal to deal.
A licensee should attempt to minimize liability exposure by developing __________ for risk management.
a plan
An individual who violates the Sherman Antitrust Act can receive penalties of:
a prison term of up to 10 years and fines not to exceed $1,000,000.
A noticeable adverse condition about a property that licensees should be able to recognize and alert their clients to is called
a red flag.
Damages awarded to place an injured party in the same position as before a contract was entered into are called
actual damages.
A real estate brokerage should __________ that will help to minimize risk and potential liability exposures.
adopt written policies and procedures
Licensees must disclose __________ that they are aware of.
all material facts
A high-risk situation can occur if a licensee is involved in __________ , which is typically illegal in all states.
an undisclosed dual agency
A licensee is allowed to fill in the blanks of a preprinted, standardized form
at the direction of a principal to the transaction such as the seller or buyer.
Risk anticipation means to identify or predict problems that can arise in a transaction. Licensees should attempt to establish a strategy to _____ problems instead of dealing with them after they happen.
avoid
Negligence is a result of a licensee not measuring up to a reasonable standard of
care
The duty to protect a client's confidential information:
continues after the agency relationship has terminated.
The Equal Credit Opportunity Act allows for discrimination in credit transactions based on:
credit worthiness of the applicant.
A risk situation that can occur when the same licensee represents two or more principals who are negotiating with each other in the same transaction is called a
dual agency.
Usually the best way to control an active complaint is through
early communication.
A criminal penalty for violating RESPA's anti-kickback, referral fees, and unearned fees provisions could cost a licensee
fines of up to $10,000 and imprisonment for up to one year
A licensee who knowingly fails to disclose a material fact is guilty of:
intentional concealment.
A licensee should have basic knowledge to be able to alert a buyer to potential environmental hazards on a property, but a licensee:
is not required to identify all sources or potential sources of environmental hazards.
An unintentional tort in real estate usually involves _____.
negligence
A licensee who unknowingly gives misleading information and who does not exercise due diligence in getting or giving that information is guilty of
negligent misrepresentation.
Dual agency occurs when the same licensee represents two or more principals that are
negotiating with each other in the same transaction.
Willow listed Zander's high-priced vacation property. Because Zander keeps the house vacant most of the year, he told Willow that he doesn't want a For Sale sign on the property. Willow knows it will be several months before any potential buyers visit the property, so she decides to put out her For Sale sign regardless of Zander's instructions. Willow is in violation of her fiduciary duty of:
obedience.
In today's consumer-oriented environment, the public expects a real estate licensee to have a basic knowledge of:
potential material matters or conditions that may impact the value of a property.
The main purpose of errors and omissions insurance is to:
protect a licensee from claims brought by an unhappy client because of the actions taken by that licensee during the course of representation.
The main purpose of RESPA is to
protect the public.
The information gained by an agent representing a seller or buyer must be __________ in order to avoid confidentiality risks.
protected
Punitive damages are awarded as a means of __________.
punishment
If a lender refuses to issue a mortgage loan based on the national origin composition in a specific neighborhood and not because of the loan applicant's qualifications, the lender is guilty of
redlining.
Recordkeeping is a good example of _____.
risk anticipation
The liquidated damages agreed to in a real estate transaction usually consist only of
the earnest money deposit agreed to by the buyer and seller.
Tort law attempts to right an injured party by awarding monetary damages to
the one who has been wronged.
If a brokerage will only take a listing if the seller agrees to use the brokerage's partner escrow service, this is called:
tying arrangement
All of the following are part of a reasonable risk shifting strategy, EXCEPT:
using only open-source software in the office.
