Real Estate Test Ch.4
Rights of the Buyer (Mandated Disclosures)
1) A buyer has two years to sue a real estate licensee for failure to disclose known defects in the TDS 2) *If the TDS or amended TDS is delivered after the execution of an offer, the buyer has three days after delivery in person, or five days after delivery by mail, to terminate the offer in writing.
Agent Supervision *
A Broker must exercise reasonable supervision over salespersons and non-licensees in his/her employment. A broker can designate a salesperson to manage an office and review contracts as long as the salesperson has a minimum of two years of full time experience within the last five years working for any real estate broker
Easton v. Strassburger *(Mandated Disclosures)
A California court decision which led to the creation of the Transfer Disclosure Law. The agent was required to disclose all facts materially affecting the value of the property
Sharing Commission
A broker can share commission with an out-of-state broker, an unlicensed buyer, or a seller, as long as the broker discloses this to all parties.
Trust Ledger (Trust Journal)
A broker must keep a true record of all trust funds that he, or any of his employees, touch. "If you touch it, log it"
Change of Address
A broker who changes his/her main office or branch office address must send a written notice to the real estate commissioner no later than the next business day following the change
Secured Trust Deeds (permissible advertising)
A licensee may advertise "secured trust deeds" as long as he or she discloses to what extent the trust deeds ares secured.
Real Estate Education, Research, and Recovery Account (REERRA)
A portion of the real estate license fees are put into a client recovery account to protect the general public when they obtain uncollectible court judgements or arbitration awards against licensees. *The recovery is limited to $50,000 per transaction, $250,000 maximum per licensee *The licensee's license is suspended until he or she reimburses the recovery account for claims paid, plus interest.
Deed Restrictions (General Fair housing Information)
A racial deed restriction is unconstitutional and unenforceable, but the sale is valid
Brownfield Development
A real estate development with the presence or potential presence of hazardous or toxic substance, pollutant or contaminant. It typically results in abandoned structures or vacant lots.
Registered Mobile-Homes
A real estate license does not allow an agent to sell new mobile-homes, but a real estate license may handle the sale of used mobile-homes. A mobile home is considered "used" once it has been sold to a buyer and registered with the Department of Housing and Community Development
Compensation (Salesperson) *
A salesperson may receive compensation for real estate acts from her employing broker ONLY. It would be illegal for a salesperson working for a real estate broker to receive a referral fee or commission from a lender, loan broker, developer, or seller.
Salespersons
A salesperson may use his or her license only when the license is being held by a licensed real estate broker. All licensees employed by a broker must stop real estate activity immediately when the broker dies.
TDS Required (Mandated Disclosures)
A seller must give a TDS to the buyer of four or less residential units, even when selling the property "as is"
Transfer Disclosure Law * (Mandated Disclosures)
A seller must provide the buyer with a transfer disclosure statement (TDS) which discloses the condition of the property to the buyer. *The TDS includes both the condition of the improvements and the condition of the land*
Trust Fund Account
A separate checking account established by a broker to hold clients money. This separation avoids commingling and protects clients funds from legal claims against brokers.
Undisclosed Dual Agency
Acting as an agent for more than one party (principal) in a real estate transaction without the knowledge and consent of both parties. If only one party knows, the agent will not be entitled to any commission.
License Renewals
After obtaining a real estate license, both real estate brokers and salespersons are required to renew their license every four years.
Gifts (permissable advertising)
Agents may advertise that they will give gifts or prizes to buyers if they reveal this to everyone. *THERE IS NO FINANCIAL LIMIT on the size of the prize
Deceptive Advertising *(illegal advertising)
An ad that says, "Move right in" when the house needs major structural repair is considered illegal and deceptive advertising.
No Guarantee (Advance Fee)
An advanced fee contract may not include a guarantee that the sale, lease, or exchange will be completed
Brokers
An individual broker's license entitles a person to conduct a brokerage business under his/her name own name or, if so licensed, under a fictitious business name
Collecting Payments *
Any broker who services a loan by collecting payments must be authorized by the lender in writing. *The broker may retain payments in his trust account for NO MORE THAN 25 DAYS without written authorization from the lender.
Attorney-in-fact
Any competent person may be designated to act for another by a duly executed and recorded "power of attorney". May not deed property to himself
Licenses
Any person who does any real estate act for another, for compensation, or expected compensation (regardless of form or time of payment) must have a license
Real Estate Commissioner
Appointed by the Governor to head the BRE. Has the right to promulgate (publish or make laws) regulations which control the actions of real estate licenses and have the force and effect of law. Only this person can issue, restrict, suspend, or revoke a real estate license (courts cannot)
Disclose Real Estate License Numbers (permissible advertising)
Both brokers and salespersons must disclose their real estate license numbers on all solicitation materials intended to be the first point of contact with consumers. *Excluded is print advertising in any newspaper or periodical, as well as "For Sale" signs
Violations of Real Estate Law
By a licensee or non-licensee can result in a $20,000 fine, six months in jail, and/or loss of the real estate license
Redlining
Charging higher interest rates or not lending in certain neighborhoods based upon suspect characteristics, such as race, color, age, national origin.
U.S. Supreme Court Case* (Federal Law)
Decided in 1968, upheld anti-discrimination laws on the basis of the *13th amendment to the U.S. Constitution
Ethics
Describes a set of values by which individuals guide their own behavior and relationship to others. Also describes an agent's relationship with customers, other agents, and the general public. All licensees must adhere to the ethical and legal guidelines found in the Business and Professions Code. If a licensee is a member of the National Association of Realtors, the Real Estate Commissioner requires the licensee to obey the guidelines in the Realtor's Code of Ethics
Blind Advertising (illegal advertising)
Does not disclose that an agent is representing a seller. When advertising, a licensee must disclose that he is an agent. * An ad placed in the newspaper by a real estate salesperson must also include the name of the broker.
Misrepresentation
Failure to disclose material facts or lying
TDS Not Required (Mandated Disclosures)
For husband-wife transfers, probate sales, foreclosure sales, bankruptcies, REO's, and when one co-owner sells to another co-owner.
Section 8 Program* (General Fair housing Information)
HUD's program is intended to make affordable housing available to very low-income individuals/families, senior citizens, and persons with disabilities by providing rent subsidies to private landlords.
Institute of Real Estate Management
IREM. Certified property managers are "CPM"
Transfer of License
If a salesperson is fired for a violation of real estate law, the broker must immediately (forthwith) send the commissioner a certified written statement of facts.
Guides include (Earthquake Safety Guides )
Include maps and information on geologic and seismic hard conditions. *The state geologist delineates earthquake fault zones. *Earthquake fault zones are usually about 1/4 mile wide on official maps.
Business Opportunities
Involve the sale or lease of both the inventory and good will of an existing business enterprise or opportunity . Business opportunities are classified as personal property.
False Promise
Is a false statement about what the promisor is going to do. Is actual fraud.
Mobile-homes
Is personal property until owner has taken steps to turn into real property.
Department of Fair Employment and Housing (Cal. State Law)
Is the state agency created under this act which is responsible for enforcing fair housing laws on the state level. Victims have one year* after the discrimination occurs to file a complaint.
Commingling*
Is when an agent mixes a principal's or client's money with the agent's own money (keeping a client's money in a broker's safe). Is a violation of the Business and Professions Code and is grounds for suspension or revocation of a real estate license.
Marital status * (General Fair housing Information)
It is a violation of fair housing law for a landlord to discriminate against single tenants. *It is even illegal for a landlord to make, or cause to be made, any written or oral inquiry concerning the martial status of a prospective tenant.
Housing Financial Discrimination Act (Holden Act) (Cal. State Law)
Makes discrimination in lending practices illegal. Prohibits Redlining. Prohibits lending institutions from charging an extra annual fee (per annum) on loans to non-English speaking borrowers.
Property Management
Managing property for the general public. A real estate license is required to manage real property
Common Violations of Real Estate Law
Misrepresentation, False Promise, Undisclosed Dual Agency, Commingling, Conversion, and Kickbacks
Independent Contractor (Salesperson)
Most real estate salespersons are considered to be independent contractors for income tax and social security tax purposes. Brokers report a salespersons income as an independent contractor to the IRS with a 1099 form.
Natural Hazard Zone Disclosure Statement
Must be given to a buyer who is entitled to the TDS. Additionally, the seller must make these disclosures when selling any property in one or more of the following areas: 1) Special Flood Hazard Area 2) Area of potential flooding 3) Very high fire hazard severity zone 4) Wildland Area 5) Earthquake fault zone 6) Seismic Hazard Zone 7) State Responsibility Area * There is no such thing as "Severe Weather Hazard Zone"
Commercial Property Owner's Guide ( Earthquake Safety Guides )
Must be given to the buyer of any masonry building with wood frame floors or roofs built before January 1, 1975* (if residential property, both guides are given; if commercial property only the commercial is given)
Homeowner's Guide (Earthquake Safety Guides)
Must be given to the buyer of any real property improved with a residential dwelling *BUILT PRIOR TO JANUARY 1, 1960 and consisting of one-to-four units, any of which are conventional light-frame construction
Converting Mobile-homes into Real Property*
Must do all of the following: 1) Obtain a building permit 2) Attach the mobile home to an approved foundation 3) Record the document reflecting that the mobile home has been affixed to an approved foundation 4) Obtain a certificate of occupancy
Panic Selling (Panic peddling, blockbusting)* (General Fair housing Information)
Occurs when agents attempt to persuade neighbors to sell by telling them that members of another ethnic group are moving into the neighborhood. *This is a violation of both state and federal law
Promotional Note
One of a series of notes that is less than three years old, secured by liens on parcels in a subdivision which is regulated as a real property security. * Remember, a 37 month old promotional note is not regulated as a real property security
Kickbacks (Referral Fees)
Paid to real estate licensees by escrow companies, structural pest control companies, title companies, and/or home warranty companies, are illegal
Title VII of the Civil Rights Act of 1968 (Federal Fair Housing Act, Fedral Open Housing Law)
Prohibits discrimination in housing transactions. Complaints must be filed with the Department of Housing and Urban Development (HUD) within one year of discrimination. * Allows victims of housing discrimination to enforce their rights by bringing a civil action in state or local court, or a complaint filed with HUD.
Fair Employment and Housing Act (Rumford Act) (Cal. state Law)
Prohibits discrimination in supplying housing accommodations based on race, color, religion, sex, marital status, national origin, ancestry, age, family status, or disability
Bureau of Real Estate (BRE or CalBRE)
Regulates the real estate industry
Commission Disputes *
Settled by civil lawsuits. The BRE does not settle commission disputes
Compensation (Property Mangament)
Should not be compensated with kickbacks and/or discounts on goods and supplies. Usually receive a flat fee plus a percentage of the gross income over the terms of the lease. There amount of compensation is set by mutual agreement between the owner and the property manager.
Steering (General Fair Housing Information)
Showing minority buyers homes that are only in segregated areas violates fair housing laws.
Unruh Civil Rights Act* (Cal State Law)
State law that prohibits discrimination by businesses
Conversion *
Stealing client's money
Record Keeping
The Business and Professions Code provide that a real estate broker will retain for three years copies of all listings, deposit receipts, canceled checks, trust records, and other documents. The retention period will run either from the date of the closing of the transaction or, if the transaction is not consummated, from the date of the listing.
Criminal Prosecutions *
The District Attorney of the county in which the activity occurred would prosecute a non-licensed person who performed acts requiring a real estate license
Employment Agreement
The Real estate Commissioner requires that every salesperson and every broker working for another broker have written employment agreement with an employing broker. Both the employing broker and employee licensee must keep a copy of this employment agreement for three years from the termination of employment. Everyone in the office must be insured under the Workers Compensation Insurance Law.
California Real Estate Laws and Regulations
The basic purpose of real estate law is to prevent fraud. Most of these laws are found in the Business and Professions Code. *Real estate laws are passed under the authority of the police power of the government
Notification of Days (Mobile home)
The broker must give written notice of the transfer to the Department of Housing and Community Development no later than TEN CALENDAR DAYS* after the sale
Electronic Documents
The broker shall provide, at the broker's expense, a paper copy upon request of the BRE. A real estate broker's e;electronic document storage must be non-erasable "write once, read many" (WORM)
Lead-based Paint Disclosure
The buyer of "target housing" (pre-1978 housing) must be given an EPA pamphlet entitled "Protect your family from Lead in Your Home" prior to entering into a contract to purchase the home. If the pamphlet is given after the contract is formed, the buyer has the right to cancel the contract. Additionally, the seller and/or agent who violates this disclosure law may be subject to civil and/or criminal penalties.
Franchise
The buyer of a franchise is buying the right to conduct business under the seller's (franchisor's) marketing plan
Transfer Document (Mobile-Homes)
The document used to transfer and/or encumber a registered mobile-home is a certificate of title (Certificate of Ownership)
Americans with Disabilities Act (ADA) (General Fair housing Information)
The law requires equal access to public buildings for disabled (handicapped) persons. Know what ADA stands for
Management Agreement (Property Management)
The most essential document needed to establish the relationship between a property management company and the property owner is a written ___________ ___________.
Non-Disclosure* (General Fair Housing Information)
The race, color, sex, national origin, or religion, of buyer or tenant is not a material fact and should not be disclosed by an agent to his principal, even if asked.
Earthquake Safety Guides
The seismic Safety Commission has developed a "Homeowner's Guide to Earthquake Safety" and "Commercial Property Owner's Guide to EarthQuake Safety"
Role of the Real Estate Agent (Mandated Disclosures)
The seller must make a reasonable inspection before completing the disclosure statement. The real estate licensee may not fill out a TDS for the seller. *The TDS should be prepared when the listing is taken and a copy kept in the listing broker's office. If the seller refuses to fill out the TDS truthfully at the time of the listing, the agent should not accept the listing. The listing and selling agents must also inspect the property and add any additional disclosures regarding the conditions within their knowledge. The broker who procured the offer is responsible for delivering the TDS to the buyer . The TDS should be delivered to the buyer as soon as practicable before the transfer of title.
Pocket Listing
The unethical practice by a real estate licensee of withholding a new listing from the Multiple Listing Service until he has had time to find a buyer himself
Employee (Salesperson)
Under California Real Estate Law, a salesperson is considered to be an employee of a broker
Expired License
When a real estate license expires, the licensee must immediately stop all activity which requires a license. Licenses must renew their licenses within a 2 year grace period if they wish to avoid taking the real estate exam again.
Puffing (illegal advertising)
When a real estate licensee exaggerates the features of a property or the location in an ad by giving an opinion as part of the sales process. * Is considered misrepresentation only if a reasonable person would rely upon the statement as fact, rather than an opinion.
Sales Tax
When purchasing a business, the buyer (transferee) should request a "certificate of clearance" from the State Board of Equalization during escrow. This receipt protects the buyer of a business from the successor's liability for unpaid taxes
Advance Fee Contracts
When the broker wants to charge fees prior to providing services, the advance fee contracts and advertising materials must be submitted to the real estate commissioner for approval at least 10 calendar days before they are used.
Applying for a License
When you pass the salesperson or broker exam, you have one year from the date of your exam tom apply for the license
Unlicensed Assistant
Works in a real estate office but performs clerical duties only. *May not choose the structural pest control inspector in a transaction; the choice must be made by agreement of the buyer and the seller. * Can create advertising, but the broker must read an approve all material before it is used. * May assist a licensee at an open house, but cannot solicit business for the licensee or discuss availability of property or loans
Temporary License
a 150-day temporary license may be issued to an otherwise qualified applicant who is on the state's list of child support obligators. If the applicant fails to submit an appropriate release from the district attorneys office to the BRE within the 150 day period, the licensee is suspended
Fictitious Business Name
when a real estate broker decides to operate an office using a fictitious business name, before soliciting business name broker must: 1) File a "Fictitious Business Name Statement" 2) Publish the name in the newspaper 3) Have a broker's license issued by the Bureau of Real Estate after the name has been approved has been approved by the Real Estate Commissioner