Section 12: Texas Deceptive Trade Practices and Consumer Protection Act

¡Supera tus tareas y exámenes ahora con Quizwiz!

What type of language should be used to write contracts?

Plain language

Tamira, a Texas real estate agent, has received a DTPA demand letter charging that she did not disclose the foundation problems of the house at 1300 Oak Street to Jay and Alice Smith, the buyers.

-Tamira can use the Texas Association of REALTORS® form letter to respond. -The Smiths' lawyer may be unaware of the 2011 amendment to the DTPA.

Fortunately for real estate professionals, consumers can't just file a lawsuit on a whim. Before a lawsuit can be filed under the DTPA, which of the following conditions must be met?

-The consumer must initiate the lawsuit within two years of when the deceptive act occurred, or within two years after the consumer discovered (or should have discovered) the deceptive act -There must be a written contract, and the consumer must be represented by an attorney. -The consumer must prove that the deceptive act was the producing cause of damages

In order for a claim of misrepresentation to stand up, it requires four elements. These are:

-The false statement or representation of a material fact. -The person who falsely represented the material fact was aware of its falsity (or should have been). -Another person (reasonably) relies on the false information. -The person who relied on the false information is harmed.

Four elements must exist for misrepresentation to occur. What are these elements?

-The person making the false statement was aware of its falsity. -The person who relied on the false information was harmed. -Another person relied on the false information. -A false statement about a material fact was made.

According to the 2011 amendment to the DTPA, real estate licensees are not liable for innocent omissions, or for providing advice, judgment, or opinion unless ___________________.

They intended to deceive or commit fraud.

Which of the following acts protects Texas consumers against real estate licensees who use false, misleading, or deceptive actions or practices in the advertising, offering for sale, selling, or leasing of personal property or real property?

DTPA

What is the name of a deceptive act that is always intentional and deceptive?

Fraud

In order for misrepresentation to occur, what must happen to the person who relied upon it?

He must be harmed

If the written notice defense is used, both the information from the third party and the notification to the consumer must be _________________.

In writing

Which of the following actions would be a violation of the Texas Deceptive Trade Practices ‒ Consumer Protection Act?

Shari misrepresents the facts about the reasons for a price decrease.

Samantha is a real estate licensee. She's showing her client a property. The client asks about some spots on the ceiling and wonders if they're an indication of a roof leak. What should Samantha do?

Suggest that her client contact a roofing expert to make a determination.

One element of misrepresentation is when ______.

The false statement caused harm to the person who relied upon it

Which of the following is an element of positive misrepresentation?

The false statement caused harm to the person who relied upon it.

In order to utilize the written notice defense, a licensee must provide the consumer a written statement that they have relied on information from a third party. Which of the following is also true?

The information received from the third party must be in writing.

Who is liable for committing fraud in a real estate transaction under the Fraud in Real Estate and Stock Transactions Statute?

-Anyone who knew about the fraud, failed to disclose it, and benefited in any way from the transaction -The person who committed the fraud

Puffery

-Best house on the block! -Views you've only dreamed of! -Enjoy a view that never gets old!

Fraud

-Charley's seller tells him they have had water damage in the basement and asks him to conceal it from potential buyers. He obeys. -Jamie hears that there will soon be a highway expansion that will put the freeway practically in the backyard of a listing. It won't happen for a year or more, so he does not disclose this information to potential buyers. -Dwight tells potential buyers that the countertops in his new listing are granite, when the seller has disclosed to him that they are "faux granite."

Texas licensee Daniel is showing a home to his buyer client, Kathy. As they enter the kitchen, she notices some yellow spots on the ceiling. She asks if Daniel thinks that means the house needs a new roof. What should Daniel do?

Suggest contacting a roofing expert to make this determination.

Ethical

-When listing a property, you cooperate with the buyer's agents. -You treat all parties honestly, even customers. -You put the client's interests ahead of your own. -You prepare a comparative market analysis with a disclaimer that it is not an appraisal.

At least 60 days prior to filing a lawsuit under DTPA, what is the consumer required to do?

Provide a written notice to the person against whom the suit is to be filed

Lawsuits against Real Estate Licensees

-A listing agent tells a buyer agent that there are no radon issues with the house, even though the seller told the agent there could be a radon issue, and that the neighbors on either side have had radon detectors installed. -A licensee doesn't mention to a potential buyer that the house they are interested in is going into foreclosure shortly. -A buyer agent tells an elderly client that there is no need to have a property or termite inspection done, because the seller's disclosure notice indicated no known issues with the property. The agent is very familiar with the property, and knows it needs some work and that there is evidence of termites.

Because of the DTPA amendment, brokers and agents can no longer be held liable for opinion, judgments, or advice, as long as they didn't intend to deceive or commit fraud. However, they are still fully liable for misrepresentation, failure to disclose, and unconscionable acts. Brokers and sales agents often rely on information provided to them from third parties, including sellers, property inspectors, appraisers, and others. What happens if you get bad information and use that information in a transaction, and it results in a DTPA lawsuit against you? One primary allowable defense in a DTPA lawsuit is for the broker to give a written notice to the consumer before the sale closes stating that they are relying on information provided by others. There are certain requirements for using this defense, and it's important for you to understand them. Indicate whether each of the following meets the criteria of this defense.

-Before the Smiths purchased the property, Tamira provided them with a written notice stating that she was relying on written information from the seller and home inspector about the foundation. -Tamira did not know, and could not have known, about the foundation problems.

Misrepresentation

-Home values in this neighborhood are going to skyrocket in the next five years! -Enjoy a view that will never be obstructed! -Kelly's seller client told her that their home was 2,500 square feet, when it was really 2,200 square feet. Kelly did not verify the square footage of home. It was listed and sold as a 2,500-square-foot home. -Carmen accidentally forgets to tell a potential buyer that the stream on the property frequently floods the basement. After purchasing the home, the buyer suffers a loss of $10,000 as a result of a flooded basement.

What Constitutes Fraud in a Real Estate Transaction?

-Without checking with her seller client first, Pam, the listing agent, tells potential buyers that if they make an offer today and agree to close early, she can get the seller to accept a lower offer, and he'll throw in the washer/dryer for free. -Although there had been an issue with termites—and some damage to the home—a few years ago, the seller and the listing agent agreed it would be best not to mention that in the seller's disclosure notice. -During several open houses, the listing agent, Tracy, made a point of telling everyone that the seller was planning to have all new appliances installed, along with replacing the furnace and water heater. The seller had no such plans.

Who does the DTPA define as a consumer for the purposes of filing a lawsuit?

A business consumer that has assets of $25 million or less

Which of the following is an example of self-dealing?

A licensee purchases a listing through his cousin but does not inform the seller.

Which of these describes self-dealing?

A licensee sells her own property without informing all parties that she's licensed.

Which of the following constitutes fraud in real estate according to the Fraud in Real Estate and Stock Transactions Statute?

A listing agent purposely fails to mention the structural damage caused by a recent electrical fire in the wall.

Which of the following is true about positive misrepresentation?

A principal was harmed by the misstatement.

Amanda has initiated a groundless DTPA lawsuit against Toby, a real estate licensee. Which of the following is true?

Amanda will be responsible for Toby's attorney fees and court costs.

As a real estate licensee in Texas, if you advertise, otherwise market, or deal with a consumer using lies, misrepresentations, fraud, or other deceptive practices or acts, which act are you violating?

Deceptive Trade Practices-Consumer Protection Act

What must a licensee do regarding property the licensee holds directly or indirectly if it becomes the subject of a real estate transaction?

Disclose the interest to all parties to the transaction.

Fidelity, integrity, competency, consumer information, and _________________ are the Canons of Professional Ethics and Conduct.

Discriminatory practices

Why are ethics important in real estate?

Ethics uphold the profession.

Which of the following is true regarding the 2011 amendment to the DTPA?

It helps prevent frivolous lawsuits against real estate licensees.

Jamie, a seller, deliberately hid the evidence of a termite infestation from potential buyers. Annette, his listing broker, agreed to not disclose the presence of termites in the home, even though she had seen them for herself. Jamie also paid Fred, a friend and home inspector to leave it out of his report. According to the Fraud in Real Estate and Stock Transactions Act, who is liable?

Jamie, Annette, and Fred

What amount of liability does a Texas licensee who acted in cooperation with another person(s) to commit a third-degree felony have?

Joint and separate responsibility for all damages

What must a licensee do when preparing a CMA (or opinion of price) for a consumer?

Make a statement that the opinion isn't an appraisal.

Unintentional

Making an inadvertent misstatement -A seller tells Chris a crack in the wall is not an indication of foundation issues. The agent shares this with the buyer, who purchases the home. It turns out there are foundation problems.

A licensee stating that a property is "guaranteed to increase in value over the next five years" is an example of _______.

Misrepresentation

Jose forgot to measure the home's interior to verify the square footage. After the buyer moved in, she found that he had made an error, and that her home was 200 square feet smaller than she had been told. What violation has Jose committed?

Misrepresentation

Broker Joseph tells his clients that the property they're interested in purchasing is zoned as residential, even though he knows it's zoned as commercial. This violation is an example of ______.

Misrepresenting or omitting

Which of the following would be a violation of the Texas Deceptive Trade Practices—Consumer Protection Act (DTPA)?

Misrepresenting the facts about the reasons for a price decrease

Don's client, Bill, has made an offer on an auction property. Don must submit all of the completed paperwork by 1 p.m. in order for his client's offer to be considered. The contract clearly states that Don has received the $2,000 earnest money check. Even though he doesn't actually have it yet, Don is sure Bill will stop by soon to deliver it, and he doesn't want Bill to lose out on a bid just because of a technicality. Don submits his client's bid so he can meet the 1 p.m. deadline. Has Don abided by the canon of integrity?

No

TREC Consumer Protection Notice

Real estate inspectors must also display the TREC Consumer Protection Notice.

The 2011 amendment to the DTPA states that licensees are not held liable for their advice, judgment, or opinion as long as they don't intend to deceive. Do each of the following scenarios involve advice, judgment, or opinion?

Samantha is a real estate broker hired by Carl to prepare a property valuation and sales recommendation on a property he intends to sell. Does this service involve advice, judgment, and opinion?

If this demographic is targeted, a licensee can be fined up to $250,000 on top of other penalties in a DTPA lawsuit. What is the demographic?

The elderly

When a DTPA lawsuit is found to be groundless, the law allows for which of the following?

The person initiating the lawsuit is responsible for the defendant's attorney fees and court costs.

One element of misrepresentation is that ______.

The person making the false statement knew it was false (or should have known)

What's the Difference?

The primary difference between fraud and misrepresentation is in the intent. Fraud is an intentional, deceptive act, while misrepresentation is a false statement of a material fact that can either be intentional or unintentional.

A sales agent may only accept a commission for a real estate transaction if the commission is paid by which of the following parties?

The sales agent's broker

Which of these is an example of a material fact?

The seller would not have accepted an offer had he or she known the fact.

As you know, the DTPA gives consumers the right to sue, but what if the consumer decides they don't want to sue? Given what you know about the consumer's rights, is the following statement true or false? Under the DTPA, consumers cannot waive their right to sue.

This statement is false. Consumers do have the statutory ability to waive their rights to sue under the DTPA, but in order for the waiver to be enforceable and valid, the DTPA requires the consumer to be represented by an attorney and to sign a written waiver stating that they voluntarily consent to waive their right to sue.

What is the purpose of DTPA with regard to real estate practices?

To protect consumers from real estate licensees who use false, misleading, or deceptive actions or practices in the advertising, offering for sale, selling, or leasing of personal property or real property

Self-dealing

Undisclosed personal interest in a transaction -Chris represents the buyer and doesn't tell the buyer that the seller is offering the buyer's agent a bonus if the offer he brings closes within 30 days. -Chris accepts an undisclosed referral fee from a mortgage broker.

Margaret, a consumer in a DTPA lawsuit, was able to prove that the licensee in her suit knowingly failed to disclose information. What type of damages is Margaret entitled to?

Up to three times the original damages

Given what you know about the 2011 amendment to the DTPA, let's reconsider Melissa's mistake from the earlier lesson. Melissa was the listing agent for the property at 12 Main Street. Her seller clients indicated that the furnace and roof on the home were both one month old. She included this information in her listing and used it as a selling point for potential buyers. The house sold to the Millers, a young couple who found out after they closed on the house that both the furnace and the roof had not been replaced since the home was built. The Millers have threatened to sue Melissa for misrepresentation under the DTPA. Under the amended DTPA, is Melissa liable for misrepresentation?

Yes

Melissa was the listing agent for the property at 12 Main Street. Her seller clients indicated that the furnace and roof on the home were both one month old. She included this information in her listing and used it as a selling point for potential buyers. The house sold to the Millers, a young couple who found out after they closed on the house that both the furnace and the roof had not been replaced since the home was built. The Millers have threatened to sue Melissa for misrepresentation or fraud. Has Melissa committed either of these violations?

Yes Melissa has not behaved competently, and she has misrepresented material facts. If she had done it to intentionally deceive the buyer, it would constitute fraud.

According to the 2011 amendment to the DTPA, real estate licensees are still fully liable in which of the following situations?

They intended to deceive or commit fraud.

Meet George, a real estate licensee who's fairly new to the industry. In an attempt to build his business, he drove through neighborhoods, looking for homes listed for sale. After identifying a few, doing some research, and preparing comparative market analyses (CMAs), he contacted several sellers. He told the sellers he'd appraised their property at a higher value than their current listing agent. He offered the sellers a discount on the commission if they terminated their listing with their current agent and signed a contract with him. What three things did George do wrong?

-Contacted sellers for the purpose of asking them to break their contracts with their agents -Told sellers that he appraised their property -Contacted sellers who were working with other agents

Prohibited by the DTPA

-Eunis wants to earn the business of two very well-to-do potential clients, so she tells them that she is the listing agent for several exclusive properties in the wealthy part of town, when in fact, those properties aren't even for sale. -Max, the listing agent for the sellers, tells potential buyers that he's sure he can talk the sellers into taking $10,000 off the asking price if they can come to the table with no contingencies. -Harry has just opened his own brokerage and wants to build his clientele quickly, so he tells any new prospective clients that unlike other brokerages in the area, he has never been sued by his customers. -Jose knew he had a good listing and that the property would sell quickly if only he would help it along a bit. He wrote in the MLS that the house had a new roof (it was only seven years old), new carpeting throughout (it was only five years old), and brand-new appliances (the microwave was new and the other appliances looked new).

Identifying Discriminatory Practices

-Juan represents Dave, a landlord who owns multiple buildings in the city. After meeting a potential renter, Dave says, "That guy looks sick. Do you think he has AIDS? I want you to ask him. If he does, I'm not renting to him." Dave agrees to try to make some casual inquiries and find out what he can. -Anita asks her clients, Ted and Bill, if they are married or have any children so that she can determine what houses to show them.

When consumers file lawsuits under the DTPA, they can be awarded certain types of damages. Licensees who are found guilty of violating the DTPA can face specific types of penalties.

-Licensees can pay damages up to $75,000 for a single violation. -Under the DTPA, civil penalties of up to $20,000 for each violation can be imposed. -Licensee who target the elderly will receive additional fines.

As a licensee, if you commit a fair housing violation, which agencies could impose sanctions?

-Real Estate Commission -Texas Workforce Civil Rights Division

The resource describes puffery and how it is different from misrepresentation. So, what is the difference?

A reasonable buyer would know puffery to be an exaggerated statement and not rely on it, whereas misrepresentation occurs when a reasonable buyer would rely on the statement, as it is coming from an expert in the field.

Mavis plans to file a lawsuit under the DTPA. How many days prior to filing the lawsuit is Mavis required to send written notification to the licensee that she is suing him for damages?

At least 60 days

Intentional

Concealment of a known defect -Chris is aware of a basement leak in his listing but doesn't disclose this to prospective buyers.

Which of the following states that the person who committed the fraud, as well as anyone who knew about the fraud, failed to disclose it, and benefited from it, can be held liable for actual damages?

Fraud in Real Estate and Stock Transactions


Conjuntos de estudio relacionados

Clinical Exam Diagnostics test 1

View Set

Ch. 4 Treatment Settings and Therapeutic Programs

View Set

GI disordering flicker questions

View Set

Chapter 4,5,6 Legal Environment of business

View Set

CHAPTER 4 (GORSE) SUDDEN CARDIAC ARREST

View Set

Finance 3150 Cost of Capital Quiz

View Set

Antiterrorism Officer (ATO) Level II MODULE 2

View Set

Civil liberties and Civil rights

View Set

Salesforce ADM 201- Security and Access

View Set