Ch30 Professional Ethics

Licensees should avoid disparaging comments about the competition such as these:

"Before you list with XYZ Realty, you should know that nobody works on their listings." "You don't want to list with ABC Realty; they don't know how to close a deal." "If they were truly professional, they would not allow part-timers to work for them."

Which of these phrases do you think might be evidence of conspiracy to commit an antitrust violation? Select all correct responses. Choose all that apply. "Everyone in town charges the same commission rate." "Let's do something about her discount fee policy." "No one will show your house for less than 6%." "This is my neighborhood. Tell him to go sell somewhere else." "You can't list that house; all the million dollar homes are ours."

"Everyone in town charges the same commission rate." "Let's do something about her discount fee policy." "No one will show your house for less than 6%." "This is my neighborhood. Tell him to go sell somewhere else." "You can't list that house; all the million dollar homes are ours."

Licensee Laura is taking a listing. In her discussion with the seller, which of the following statements suggests a violation of the Sherman Antitrust Act? "My office typically charges a 6% commission for this type of transaction" "I cannot charge less than the commission rate established by the local MLS" "You will owe me a commission, even if another agent finds a buyer" "I charge a lower commission rate than other companies"

"I cannot charge less than the commission rate established by the local MLS"

Licensees should never use statements such as the following:

"This is the rate every firm charges." "I'd like to lower the commission, but no one else in the MLS will show your house unless the commission is X%" "Commission rates are generally standard." "This is pretty much the average commission rate being charged."

Puffing and Opinion

"puffing," which is an exaggeration about the quality of a property that may be difficult to back up with proof. For example: "Compared to the sales prices for other homes in the neighborhood, this one appears to be an excellent buy." (Opinion) "This remodeled kitchen will turn you into a gourmet chef!" (Puffing) To prove fraud based on a false statement, it's necessary to show that the person relied on the statement. Because of their non-factual or exaggerated nature, opinions and puffing are not generally considered the type of statements that a reasonable person would rely on in making a decision to buy property. As such, they do not generally fall under the fraud category.

The FTC cautions that not every consumer injury is a result of unfairness. Generally for an injury to be unfair, it must be ____1______or something that _____________________2____________________________

1 substantial (usually involves substantial monetary harm, ex: when sellers coerce consumers into purchasing unwanted goods or services) 2 Could not reasonably been avoided

Fraud is said to be actionable when certain elements are present. To sue for actual or constructive fraud, the plaintiff must be able to prove all five elements:

1. A person makes a false statement of a material fact, or conceals a material fact that they have a legal duty to disclose. 2. The person making the statement knows or should know it is false. 3. The statement or concealment is made with the intent of inducing another to enter into a transaction. 4. The other person relies on the statement, or lack of knowledge of the concealed information, and is induced to enter the transaction. 5. The other person is harmed as a result of entering the transaction.

You can contact a former client for up to _____________ after a transaction closes even if that client is on the National Do Not Call Registry. 9 months 12 months 18 months 24 months

18 months

ABC Real Estate Company bought an e-mail list from a vendor and sent out 5,000 e-mails soliciting business. To comply with provisions of the CAN-SPAM Act, ABC must process any opt-out request it receives for at least ________ after the e-mails are sent. 10 business days 30 days 45 days 60 days

30 days Any opt-out mechanism must be able to process opt-out requests for at least 30 days after the message has been sent. Once a request is made, it must be honored within 10 business days.

Under the provisions of the National Do Not Call Registry, companies that solicit business through telephone calls are required to update their Do Not Call Lists every 31 days. 3 months. 6 months. year.

31 days.

Consent Decree

A binding agreement reached before judgment in a court case by which the accused party consents to change its behavior without admitting wrongdoing.

Boycott

A concerted refusal by two or more people to deal with a particular person or company.

Nonpublic Personal Information

A consumer's personal financial information that would not be easily obtainable by the general public, such as credit reports, bank accounts, and transactions.

Opt Out

A consumer's right to terminate future electronic communication from business and commercial entities.

Injunctive Relief

A court-ordered prohibition against a particular act, as opposed to a judgment for money.

material fact

A material fact is generally defined as one that, if known, might have caused a reasonable person to make a different decision. It generally does not apply to a client's confidential personal information, however. Remember that real estate licensees have a legal and ethical duty to disclose any material fact that could affect a transaction. They are also obligated to disclose known latent defects about a property, even if it does not seem them to be material.

Fraud, Constructive

A negligent misrepresentation or concealment of a material fact; when a person carelessly fails to disclose material information, or makes statements that they should realize are false or misleading. Also called Negligent Misrepresentation.

Established Business Relationship (EBR)

A relationship that may allow a telemarketer or seller to call a consumer for up to 18 months after the consumer's last purchase, delivery, or payment (even if the consumer's number is on the National Do Not Call Registry).

National Do Not Call Registry

A relationship that may allow a telemarketer or seller to call a consumer for up to 18 months after the consumer's last purchase, delivery, or payment (even if the consumer's number is on the National Do Not Call Registry).

Market Allocation

A situation where competitors agree to not compete with each other in specific markets by dividing up geographic areas, types of products, or types of customers. Also called Territory Allocation.

Monopoly

A situation where only one or very few companies dominate the market share of a particular product or service.

blockbusting

A specific type of panic selling, prohibited act under federal and state civil rights law. It is generally defined as intimidating homeowners into selling their homes by suggesting that the ethnic or racial composition of their neighborhood is changing. Homeowners are led to believe that their property values will be lower, the area will experience higher crime rates, and the quality of schools will decline.

Material Fact

A truth that would change the individual's actions if it were known; in real estate, this usually refers specifically to things wrong with the property itself.

Two types of fraud

Actual Fraud Constructive Fraud

Cease and Desist Order

Administrative agency directive to stop an offending activity.

examples of deceptive and misleading advertising could include:

Advertising a property that is subject to an exclusive listing agreement with a sponsoring broker other than the licensee's own without the permission of and identifying that listing broker. Failing to remove advertising (signage, print, electronic, etc.) of a listed property within a reasonable time after the closing of a sale on the listed property or after the expiration or termination of the listing agreement, whichever circumstance is earlier. Advertising a property at auction as being without reserve, when there is a minimum bid or opening bid required. Advertising a property in a manner that creates a reasonable likelihood of confusion regarding the permitted use of the property. Examples of such advertising would be advertising a property zoned single-family as appropriate for multi-dwelling use by using words or phrases such as "apartment," "two units," or "separate living arrangement" unless that use is permitted by the zoning ordinance, a variance from the zoning ordinance, a conditional permitted use, or an existing legal non-conforming use

Licensees have a legal and ethical obligation to present a true picture in all their advertising. The requirement to be honest and truthful relates to ALL aspects of a real estate professional's dealings with consumers, including:

Advertising services and property in any medium (television, radio, print, Internet, etc.) Disclosing ownership interest or licensee status in advertising and other communication Maintaining accurate and current information on websites Refraining from practices that could mislead, misdirect, or confuse consumers on websites

Protect messages and computer records.

All computer documents should be password-protected. Passwords should not be shared, and password confidentiality should extend to password protection of any multiple listing services, computer logins, file access, etc.

Meetings and conversations with clients.

All meetings should be held in a designated private area. While on the telephone with clients, licensees should never use a speakerphone unless the conversation is taking place in a private room.

Identify the statement that is TRUE. An agent may never call a consumer on the company's internal Do Not Call list, even if there is an EBR. Consumers must register every 90 days to maintain their phone numbers on the national Do Not Call registry. Consumers must register every year days to maintain their phone numbers on a specific company's internal list. Once an office establishes its internal Do Not Call list, it is not necessary to monitor the national Do Not Call Registry.

An agent may never call a consumer on the company's internal Do Not Call list, even if there is an EBR.

Tie-In Agreement

An agreement in which one transaction or agreement is contingent on a second transaction or agreement. Also called Tying Agreement.

Price-Fixing

An antitrust violation that occurs when two or more competitors agree to fix the prices that they will charge. In real estate it might occur when brokers agree with other brokers on commission rates; even the implication that brokers have discussed and/or reached an agreement on fees could be illegal.

Antitrust

An area of law concerned with maintaining competition in private markets by prohibiting any restraint on trade.

Fraud, Actual

An intentional misrepresentation or concealment of a material fact; when a person actively conceals material information, or makes statements that they know are false or misleading.

Honor Opt-Out Requests Promptly.

Any opt-out mechanism you offer must be able to process opt-out requests for at least 30 days after you send your message. You must honor a recipient's opt-out request within 10 business days. You may not charge a fee, require personally identifying information beyond an e-mail address, or make the recipient take any step other than sending a reply e-mail or visiting a single webpage.

The DOJ and the FTC are not the only ones who can file antitrust lawsuits.

Anyone whose business or property has been injured by someone violating antitrust laws may file a private civil lawsuit in state or federal court. If the court finds against the defendant, the plaintiff could recover triple the damages plus any reasonable attorney fees.

Initial responses to a civil suit may include

Cease and desist orders Injunctive relief

Ad Identification.

Clearly and conspicuously disclose that your message is an advertisement

All computer documents should be password-protected. Passwords should not be shared, and password confidentiality should extend to password protection of any multiple listing services, computer logins, file access, etc.

Client confidential information should not be shared with other employees in the brokerage office unless the client gives permission. Office meetings involving confidential information should always take place in private to ensure that information is not overheard.

Telemarketing Sales Rule (16 C.F.R. Part 310) is the National Do Not Call Registry (DNC)

Consumers can request not to be called by commercial telemarketers by adding their name and number to the registry. The DNC Registry is managed by the Federal Trade Commission and enforced by the FTC, the Federal Communications Commission (FCC), and state law enforcement officials.

Slander

Defamation of another's character or reputation through that which is spoken or heard.

Secure office files.

Each agent should maintain a file on each client in a safe place that cannot be viewed by other clients or licensees. It is wise to keep files inside of a locked file cabinet and not place files with confidential information in a general office file. Any incoming faxes should be received by an administrative assistant or office manager. The original copies of faxes should never be left on the fax machine where others could view confidential information.

Which federal law requires companies to take measures to secure and dispose of sensitive personal information of consumers? CAN-SPAM Act Do Not Call Act Fair and Accurate Credit Transaction Act Gramm-Leach-Bliley Act

Fair and Accurate Credit Transaction Act The federal Fair and Accurate Credit Transaction Act (usually referred to as the FACT Act) includes provisions to protect the identity and personal information of consumers by requiring companies that handle such data to have policies to secure and destroy it.

"CAN-SPAM" is an acronym for "Controlling Access to Non-Solicited Phonecalls And Mail."

False The Controlling the Assault of Non-Solicited Pornography and Marketing Act is more commonly known as "CAN-SPAM."

The Federal Trade Commission ordered Best Deal Real Estate and We Sell Homes Fast Realty to destroy a commission tip sheet that they shared with their agents. This is an example of injunctive relief.

False This penalty was imposed by an administrative agency, the FTC, not the courts. Therefore, this is a cease and desist order, not injunctive relief. If a brokerage ignored the order, the FTC could ask the courts to step in and impose injunctive relief or stiffer penalties if appropriate.

deceptive if it contains a statement—or omits information—that is likely to mislead consumers acting reasonably under the circumstances or that is material to a consumer's decision to buy or use the product. Deceptive practices could include the following:

False oral or written representations or omissions Misleading price claims Failure to perform promised services Use of bait and switch techniques It's also critical to consider what the ad does not say. Does the omission of certain facts create a false impression in the minds of reasonable consumers? The issue is whether the act or practice is likely to mislead, rather than whether it causes actual deception.

Who manages the National Do Not Call Registry? Department of Housing and Urban Development Federal Housing Agency Federal Reserve Board Federal Trade Commission

Federal Trade Commission

Blind Advertisement

Generally speaking, any real estate advertisement that is used by a licensee regarding the sale or lease of real estate or of licensed activities that does not include the broker's name or business name. Prohibited in most states.

A real estate agent would like to contact a buyer that they previously represented to ask if that person would be interested in listing her home or if she has any referrals. Under what circumstances could the agent contact that person without having to consult the Do Not Call Registry? He represented the buyer within the previous 6 months. He represented the buyer within the previous 18 months. There is no limit; he can contact the buyer regardless. He may never contact the buyer.

He represented the buyer within the previous 18 months.

A telemarketer or seller may call a consumer with whom it has an established business relationship (EBR) for up to 18 months after the consumer's last purchase,delivery, or payment, even if the consumer's number is on the National Do Not Call Registry In addition, a company may call a consumer for up to three months after the consumer makes an inquiry or submits an application to the company. Obtaining the name, phone number, and signature from a consumer provides written consent that does not expire until rescinded.

If a consumer asks to be put on a company's internal do not call list, the company may NOT call to solicit new business, even if there is an EBR. Calls may be made only in reference to a current relationship, such as a broker following up on a showing.

Monitor.

If you hire another company to handle your e-mail marketing, you remain liable for the actions that company takes on your behalf.

panic selling

In a generic sense, panic selling can be defined as scaring homeowners into selling their homes for some reason, for example by suggesting that the new auto plant being built will lower their property values or that the new school superintendent's policies will lead to a decline in the quality of the schools.

Unfairness Policy Statement

It causes or is likely to cause substantial consumer injury that a consumer could not reasonably avoid; and It is not outweighed by the benefit to consumers.

Which federal lawsuit affirmed that the real estate business, which offers the sale of services, as opposed to the sale goods or products, is not excluded from charges of restraint of trade? U.S. v. Long Island Board of REALTORS®, Inc. U.S. v. National Association of Real Estate Boards U.S. v. Prince George's County Board of REALTORS®, Inc.

It was U.S. v. National Association of Real Estate Boards that affirmed real estate agents are not excluded from charges of restraint of trade.

Which of these situations would LEAST LIKELY be considered an example of fraud? Licensee Bonnie knew that buyer Ben used doctored W-2s to apply for a mortgage loan. Licensee Brent did not disclose that his seller clients were getting divorced. Licensee Lori did not tell buyer Bob about a lien on the property she had listed. Licensee Sally advertised a lower list price to get interested buyers through the door.

Licensee Brent did not disclose that his seller clients were getting divorced.

Never use the words "standard," "average," or "going rate" when presenting your firm's commission to a potential client.

Licensees who make these statements seriously jeopardize themselves and their firms. They must learn to explain and, if necessary, defend their firm's prices and other competitive business decisions in terms that are consistent with competition, not conspiracy.

(Y/N) Do antitrust laws prevent you from discussing the commission you intend to offer a cooperating broker?

No

(Y/N) Hank and Russ are both sales agents for Northwoods Realty. At a company meeting, broker Bob told them not to accept any listing for less than 7%. Do you think this in an example of price-fixing?

No

(Y/N) Licensee Jim is trying to juggle too many clients, which is a good problem to have. But Jim is not very organized. He accidentally tells a buyer's agent that the King's house has a new furnace and that the roof was replaced last summer. But it was another property Jim is listing that has the new roof. The King's roof is 15 years old. Is this an example of actual fraud?

No

(Y/N) Louis and Louise are both licensees for LaLaLand Realty. At a company meeting, the employing broker tells them not to accept any listing for less than 7%. Do you think this in an example of price-fixing?

No

(Y/N) Kelly and Ryan are licensees for Andy's Realty. One day over lunch with their employing broker, they agree that Mike's Discount Real Estate is really hurting their commission earnings, so they decide not to show his listings to their buyer clients. Are they guilty of group boycotting?

No Both Kelly and Ryan work for Andy. The decision to not do business with Mike did not involve any other real estate firms, but is their own company policy. They are not guilty of violating antitrust laws. Of course another question is: Are they meeting their fiduciary duties to their buyer clients? Leo has another example of boycotting next.

(Y/N) Do you think that a so-called "discount" broker is violating antitrust laws if he advertises his commission rate?

No Simply advertising the rate to the consumer is not a violation. Since he's not consulting with any competing broker to set a commission rate, there is no restraint of trade. We'll look at another violation next.

Culpable Negligence

Occurs if a licensee operates in a reckless, careless, and excessively negligent manner. Culpable negligence is negligence for which one can be held legally accountable.

Concealment

Occurs when a licensee fails to disclose information that is material to a decision to a party to whom the licensee has such a duty.

Commingling

Occurs when a licensee mixes client funds with brokerage funds.

Do you think that puffing is illegal? definitely probably not

Probably not

In December of 1969, a civil action was filed in U.S. District Court for Maryland charging the Prince George's County Board of REALTORS®, Inc. with violating Section 1 of the Sherman Antitrust Act. At the time, the Board had about 1,000 agents in Prince George's and surrounding counties, and it operated a multiple listing service that most of the Board members joined. The Board required its members to submit listings for residential property in Prince George's County to the MLS using a recommended fee schedule. The complaint alleged that the Board's activities.

Raised commission rates, maintaining them at an artificial and non-competitive rate. Eliminated price competition. Denied sellers the right to use the services of agents at competitively determined rates of commission (boycotting).

Collusion

Secret agreement or cooperation among people, especially for deceitful or fraudulent purposes.

Licensee Pam has been working exclusively in residential real estate for two years. A satisfied client asks her to list his 40,000-square-foot warehouse for lease. Which statement is TRUE? Select all correct responses. She can ask a colleague at her brokerage with commercial leasing experience to assist in the transaction. She can disclose her lack of expertise to the client and continue with the transaction if the client agrees. She can see if her broker would like to team up with another brokerage that specializes in commercial leasing. She must turn down the listing since it is out of her area of expertise.

She can ask a colleague at her brokerage with commercial leasing experience to assist in the transaction. She can disclose her lack of expertise to the client and continue with the transaction if the client agrees. She can see if her broker would like to team up with another brokerage that specializes in commercial leasing.

Marge is a licensed sales associate at Bob's Brokerage. Which of these phrases is LEAST LIKELY to be evidence of her conspiracy to commit an antitrust violation? She tells a licensee from another brokerage, "Let's do something about Top's discount fee policy." She tells a prospective seller client, "No one will show your house for less than 6%." She tells a prospective seller client, "Our brokerage charges 7%, but I can talk to Bob about lowering that." She tells a salesperson from another brokerage, "This is my neighborhood. Go sell somewhere else."

She tells a prospective seller client, "Our brokerage charges 7%, but I can talk to Bob about lowering that."

Illegal Per Se

Something that is unlawful in and of itself without considering context or intent; generally made so because of statute, constitution, or case law.

Puffing

Superlative statements about the quality of a property that should not be considered assertions of fact.

Senders of faxes are required to:

Take reasonable steps to verify that the recipient consented to have a fax number listed, if it was obtained from a directory or other source of information compiled by a third party. Provide notice and contact information on the fax that allows recipients to opt-out of future faxes (and honor such opt-out requests within the shortest reasonable period of time, not to exceed 30 days).

Competency

The ability to do something successfully or efficiently.

The Act covers what the law defines as "any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service." This includes e-mails that promote properties on real estate website

The federal CAN-SPAM Act (Controlling the Assault of Non-Solicited Pornography and Marketing)

Consumers are required to register only once to maintain their home or mobile telephone numbers on the National DNC Registry permanently unless or until

The number is invalid, disconnected, or reassigned. The individual to whom the number is assigned requests to have it removed.

Registering a phone number on the national Do Not Call Registry prevents only telephone solicitations directed to that number, not fax advertisements. However, under the federal Junk Fax Prevention Act of 2005, which amended the Telephone Consumer Protection Act (TCPA), it is unlawful to send unsolicited advertisements to any fax machine—at both businesses and residences—with the following exceptions:

The recipient provides prior express invitation or permission. The sender has an established business relationship with a recipient who voluntarily provided the fax number or posted it in some appropriate manner, as on the recipient's own directory, website, or advertising.

Content.

The subject line must accurately reflect the content of the message.

Spam

The use of any electronic messaging system to send unsolicited bulk messages indiscriminately.

Gary is one of three brokers recently convicted of illegal boycotting. What did Gary and his fellow co-conspirators do? They agreed to charge the same commission for specific services. They divided up their town into four quadrants so that each could focus on their specific area. They decided to avoid showing clients homes listed by Discount Dan. They included a clause in their listing contracts requiring clients to use AAA Co. as their home inspector.

They decided to avoid showing clients homes listed by Discount Dan.

Get it in writing.

To eliminate any confusion regarding confidential information, licensees should always request in writing from the client what he can disclose when negotiating and/or marketing the home. This information should be discussed prior to entering into a brokerage agreement.

To protect the privacy of consumer financial information, one provision of the FACT Act requires businesses to take measures to responsibly secure and dispose of sensitive personal information. Reasonable methods for security and disposal include the following:

To protect the privacy of consumer financial information, one provision of the FACT Act requires businesses to take measures to responsibly secure and dispose of sensitive personal information. Reasonable methods for security and disposal include the following:

(T/F) A licensee who is careless or negligent and provides inaccurate information or statements could be reasonably accused of fraud.

True

(T/F) Broker Kendra has had several clients who have had a bad experience with mortgage broker Otto. After a deal fell through, she complained about Otto on her real estate blog, refusing to send any more clients his way and urging her colleagues to do the same. Kendra has committed an antitrust violation.

True

(T/F) Licensee Ben has contacted former client Lisa, who is on the company's internal Do Not Call list, to see if she's interested in selling her house. Lisa files a complaint against Ben. Ben's employing broker may also be liable.

True

(T/F) Under CAN-SPAM, every electronic solicitation must include some clear option to opt out of future communications.

True

(T/F) You're on a listing appointment and the seller asks you "What's the going rate for commission?" You answer, "The going rate is around 7%." You could be guilty of price-fixing.

True

(T/F) Penelope, a licensee at Tom Smith Realty, told seller client Jeff that $140,000 was a reasonable list price. The house sold in two days. Jeff later discovered Penelope's brother bought the house then sold it a month later for $175,000. Jeff accuses Penelope of fraud. Employing broker Tom Smith is liable for her actions.

True Generally speaking, an employing broker can be held legally liable for the acts of their affiliated licensees if the actions are within the scope of their employment. Next, we'll look at some real court cases of fraud

market allocation

Two or more licensees from different brokerage firms cannot divide prospective clients and customers in any way. is a violation of antitrust laws because it limits competition. It could be that they've agreed to split their city into specific territories, or perhaps they've each agreed to handle properties within a certain price range or neighborhood. Even if the agreement seems logical, these actions could result in a restraint on trade because it limits the choices of the consumer, and as you know, any restraint on trade is illegal.

Nonpublic personal information could include the following types of information:

What a consumer or customer puts on an application Data about the individual from another source, such as a credit bureau Transactions between the individual and the company, such as an account balance, payment history, or credit/debit card purchase information Whether or not an individual is a consumer or customer of a particular financial institution

Conversion

When a licensee uses or makes available to her personal or business use funds or other property belonging to another.

Reasonableness

When determining whether or not the practice is likely to be deceptive, the FTC will examine it from the perspective of a consumer acting reasonably in the circumstances, and examining the entire advertisement, transaction, or course of dealing. Rather than focusing on certain words, the FTC indicates that it looks at the ad in context—including words, phrases, and images—to determine what it conveys to consumers.

(Y/N) Did Lisa and Amy conspire to boycott a legitimate competitor?

Yes

(Y/N) John from XYZ Realty calls Jack and asks if he had decided to give XYZ his listing. Jack replies, "I was going to, but Bill from ABC Brokerage said because XYZ is a discount broker, nobody will show your listings. So I listed with ABC." Do you think that broker John could prove that he was injured by Bill's actions?

Yes

(Y/N) Roger and his wife buy a new condo through Resort Realty. When they sign the papers at closing, they see a clause in the contract indicating that if they ever decide to sell their condo, they must re-list with Resort Realty. Is this also an example of an illegal tie-in?

Yes

Broker David sold a house to Sue eight months ago and just heard that she's getting transferred. Even though her name is on the National Do Not Call Registry, can David call her to see if she would list her house with him? No, since her name is on the national DNC Registry, she is protected from solicitation for new business. No, the transaction was so long ago that they no longer have an established business relationship. Yes, assuming that her name is not on his company's internal do not call list. Yes, they have an established business relationship that allows him to call her for up to 18 months with no restrictions.

Yes, assuming that her name is not on his company's internal do not call list. Broker David sold a house to Sue eight months ago and just heard that she's getting transferred. Even though her name is on the National Do Not Call Registry, can David call her to see if she would list her house with him? No, since her name is on the national DNC Registry, she is protected from solicitation for new business. No, the transaction was so long ago that they no longer have an established business relationship. Yes, assuming that her name is not on his company's internal do not call list. Yes, they have an established business relationship that allows him to call her for up to 18 months with no restrictions.

Buyer's agent, Bill, has actual knowledge of structural damage to the floorboards of a home due to termite infestation. He informs his client that there are no termites in the home. The buyer signs a contract to purchase the property. Could the licensee be susceptible to claims of fraud? No, because he is protected by the "as is" clause in the purchase agreement. No, because he said there were no termites, which could be true at present. Yes, because he knowingly made a potentially untrue statement that could be seen as an inducement to buy. Yes, unless there are visible signs of termites, in which case the buyer should have recognized it.

Yes, because he knowingly made a potentially untrue statement that could be seen as an inducement to buy.

Opt-Out Instructions.

Your message must include a clear and conspicuous explanation of how the recipient can opt out of receiving e-mail.

Disclose Physical Location.

Your message must include a valid physical postal address. This can be your current street address, a post office box you've registered with the U.S. Postal Service (USPS), or a private mailbox registered with a commercial mail receiving agency according to USPS regulations.

Header Information.

Your routing information—including the originating domain name and e-mail address—must be accurate and identify the person or business who initiated the message.

The typical group boycott allegation in the real estate brokerage business involves

a claim that two or more real estate firms have agreed to refuse to cooperate, or to cooperate on less favorable terms, with a third firm.

Under the provisions of the federal law known as CAN-SPAM, every electronic solicitation must include the business license number of the sender. a clear opportunity to opt-out of future communications. the contact information of the Federal Trade Commission. the name and phone number of the sender.

a clear opportunity to opt-out of future communications.

parens patriae

a legal concept that allows states to assert its standing to sue on behalf of its people When the state sues to enforce federal law, it must invoke

Who could MOST LIKELY be accused of the unauthorized practice of law? a licensee who drafts an addendum to a complicated sales contract a licensee who specializes in residential sales accepts a listing for a commercial building a licensee who signs a sales contract on behalf of their buyer client an unlicensed person who helps a friend find a buyer for their house

a licensee who drafts an addendum to a complicated sales contract In most states, real estate licensees do not have the authority to draft contracts and must use standardized contracts that are made available from local real estate boards or bar associations. In such a case, the licensee could be accused of the unauthorized practice of law. A single real estate license, in most states, allows a licensee to work in both residential and commercial real estate. A licensee can sign a contract on behalf of a client if the client authorizes them through a power of attorney. Without that, the licensee may be committing fraud, but they are not practicing law. Finally, remember that a license is not needed to help a friend find a buyer as long as that person does not accept compensation, Besides, that would be the unauthorized practice of real estate, not the unauthorized practice of law.

Many real estate firms utilize an ______________________ that lists all of the companies with which the broker has any type relationship and that provide any sort of real estate products or services. This disclosure will state that the client is under no obligation to use any of these companies when purchasing insurance, hiring a home inspector, obtaining a mortgage, etc. The form may explain that there are other companies that provide the same services. The purpose of the affiliate disclosure is to avoid any possible claim of a tie-in agreement against the broker.

affiliate disclosure form

When may a person use the term REALTOR®? after becoming a member of the National Association of REALTORS® after closing their first successful transaction as soon as the person passes the state real estate license examination upon the sponsorship of their employing broker

after becoming a member of the National Association of REALTORS®

National Do Not Call Registry

allows consumers to add phone numbers to a do not call list that prohibits calls from commercial marketers. Companies must synchronize their lists with an updated version of the national registry at least every 31 days.

The Federal Trade Commission Act of 1914

allows the Federal Trade Commission (FTC) to act in the interest of all consumers to prevent deceptive and unfair acts or practices.

A telemarketer or seller may call a consumer with whom it has

an established business relationship (EBR) for up to 18 months after the consumer's last purchase, delivery, or payment, even if the consumer's number is on the National Do Not Call Registry.

Jack and Jill, licensees from two different brokerage firms, discover that they are both trying to list the same house. The argument that followed stemmed from Jack scolding Jill for offering to take the listing at 6%. Jack's employing broker's policies are to take only 7% listings. What type of violation might this situation be considered, if any? agency law antitrust law license law no violation

antitrust law

A licensee who tells homeowners that property values are declining because the ethnic or racial makeup of the neighborhood is changing could be found guilty of blockbusting. price-fixing. steering. stigmatizing.

blockbusting.

An action intended compel a business to abandon its current marketing strategies or otherwise drive it out business can be called allocating. boycotting. fixing. tying.

boycotting.

Phone calls from who are limited by the National Do Not Call Registry? Select all correct responses. businesses charities political organizations telemarketers

businesses telemarketers The National Do Not Call Registry applies to commerce-related phone calls, such as telemarketers and sellers who provide, offer to provide, or arrange to provide goods or services to consumers in exchange for payment. It does not apply to political groups or charities.

Antitrust laws are in place to ensure that all monies in financial transactions are accounted for. competition in the marketplace is fair and unrestrained. licensees have a minimum level of education and training to protect the public. no one is discriminated against because of race, sex, or national origin.

competition in the marketplace is fair and unrestrained.

boycott

concerted refusal to deal with a particular party, such as when two or more businesses agree to refuse to deal with another competitor in order to force a change in a competitor's behavior or to attempt to drive the competitor out of business. purpose of the boycott, either explicitly or implicitly, is to eliminate the firm as a competitor in the market, or to cause the firm to abandon the discount or alternative marketing strategies. The antitrust laws clearly make boycotts such as these illegal.

This was considered a test case to determine whether Section 1 of the Sherman Antitrust Act could be applied to alleged illegal activities of a local board of real estate brokers. This particular case was settled with a ______________ which is a binding agreement through which the accused party, in this case, the Board, consented to change its behavior, but admitted no misconduct.

consent decree

Code of Ethics and Standards of Practice of the National Association of REALTORS®

contains statements intended to advise, guide, and regulate behavior while working in the world of real estate.

Every ______________, _______________ in the form of trust or otherwise, or ______________, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony... A conspiracy can involve as few as two competing members of the same trade.

contract combination conspiracy

Employing broker Ben accepted a commission check at closing. Affiliated licensee Lori was supposed to get half of that check for finding a buyer for the house. Instead, Ben deposited the check into his personal account and used it to pay off his late Visa bill. This is an example of collusion. commingling. concealment. conversion.

conversion.

Fraud

deliberate act with the intent to deceive or with reckless indifference to the truth. any form of deceit, trickery, breach of confidence, or misrepresentation by which one party attempts to gain some unfair or dishonest advantage over another. Failing to disclose information you're required to disclose can be a form of fraud. Fraud also includes actively concealing information and making false or misleading statements. Fraud falls into two broad categories: Actual fraud Constructive fraud

Which types of commercial solicitation must include an opt-out option for consumers? Select all correct responses. e-mail faxes text messages telephone calls

e-mail faxes text messages Under provisions of the CAN-SPAM Act and the Junk Fax Act, electronic commercial solicitations via e-mail, fax, or text messages must include an opt-out option. Such a requirement does not apply to telephone calls, even robocalls.

It is important to note, however, that an ________________ is generally ______________for the acts of affiliated licensees and employees if the actions are ______________________________________, regardless of whether the employing broker knew about the actions or not.

employing broker legally liable within the scope of their employment

It is perfectly okay to own a real estate company and an insurance company, do home inspections, and be a mortgage broker, and so on. You or your firm can offer all of those services to any consumer. While that is perfectly legal, you may not______________________of that service on any buyer or seller. If you do sell the house or the property, the mortgage, the homeowners insurance, and any other service to go along with it, you must __________________

force the use You cannot require one with the other. For example, you may not say to a buyer, "If you buy a house through us, you have to get your mortgage through us." You can make it incredibly convenient for them to get their mortgage through you, but if they choose to go across town and get it somewhere else, that's their business. If you try that, it is a tie-in arrangement. disclose, disclose, disclose

Licensee Sandy learns that various family members are fighting over the property that she has been asked to list. She's told that a distant cousin has filed a lawsuit to gain title, but the occupant of the house assures her that the deed is in his name. If Sandy markets this property for sale, she could be accused of conversion. false advertising. fraud. inadvertent negligence.

fraud.

Financial Privacy Rule

governs the collection and disclosure of customers' personal financial information—known as nonpublic personal information—restricting when and under what circumstances such information may be disclosed to affiliates and to nonaffiliated third parties.

What possible antitrust violation could be avoided by giving a client an affiliate disclosure form? group boycotting market allocation price-fixing tie-in agreement

group boycotting An affiliate disclosure form lists the firm's business relationships with other service providers so as to avoid any possible claim of a tie-in agreement against the broker.

Gramm-Leach-Bliley Act AKA Financial Services Modernization Act of 1999,

includes provisions to protect and regulate the disclosure of consumers' personal financial information. These regulations apply to financial institutions, which include not only banks, securities firms, and insurance companies, but also companies providing many other types of services to consumers, including residential real estate settlement services.

An agent sends faxes to clients highlighting prospective properties that they might like. The faxes should always include the address of each property. agent's license number. brokerage phone number. instructions on how to opt out of receiving more faxes.

instructions on how to opt out of receiving more faxes.

Antitrust

is a business activity that attempts to monopolize, contract, or conspire (or any of these things together) in a way that negatively impacts another's ability to do business

Failure to account

is a form of conversion that occurs when a licensee is required to produce money or property belonging to another in the normal course of business and either cannot or will not produce.

Constructive fraud

is a negligent misrepresentation or concealment of a material fact. When information is not disclosed or false statements are made unintentionally, it may be considered constructive fraud. Here, the false statements or failure to disclose is the result of carelessness or negligence, rather than intent to deceive. This is also called negligent misrepresentation. Any type of fraud may constitute grounds for possible civil action for damages.

Market allocation

is an antitrust trust violation where licensees from different brokerage firms divide prospective clients and customers in some way, such as property type, geographic area, or property value.

Actual fraud

is an intentional misrepresentation or concealment of a material fact. Actual fraud is also when a person actively hides information, or makes statements known to be false or misleading. When any of these is done with an intent to deceive, it constitutes actual fraud. example: if the seller's agent advises the sellers to paint their basement before showing the home in order to hide the smell of mold, and neither the licensee nor the homeowner discloses the mold problem, both are guilty of fraud.

A blind advertisement

is any real estate advertisement used by a licensee that does not include the broker's business name. Most states prohibit blind advertisements, as they could mislead consumers into thinking that the property is for sale by owner.

The CAN-SPAM Act

is intended to curb unsolicited commercial e-mail and text messages. It gives recipients the right to opt out of receiving e-mails. Senders must honor opt-out requests within 10 business days.

Misrepresentation

is simply false or misleading information. Misrepresentation could involve any of the following: Documents, such as an altered pay documentation or false information on applications Misstatements, such as telling a buyer a property is 3 acres when it is not Omission, which is failing to mention or disclose information is more than mere puffing, which is an opinion that is not necessarily intended as a representation of fact, such as "best customer service in town!" When a misrepresentation is made to a consumer with the intent to deceive, it is a form of fraud and can result in prosecution. Note that written disclosures or fine print may not necessarily be sufficient to correct a misleading representation.

Darren and Martin are agents for a large brokerage firm. They decide that Darren will specialize in listing and selling houses on the north side of the river and Martin will specialize in listing and selling houses on the south side of the river. Such a practice is illegal, because only designated brokers may agree to this kind of arrangement. illegal, because both federal and state laws prohibit market allocation. legal, because the agreement was to increase efficiency (and thus it did not restrict trade). legal, because the prohibition against market allocation does not apply to agents working for the same firm.

legal, because the prohibition against market allocation does not apply to agents working for the same firm.

Culpable negligence

like negligence misrepresentation, occurs if a licensee operates in a reckless, careless, and excessively negligent manner. Culpable negligence is negligence for which one can be held legally accountable.

A seller obtained listing presentations from three different agents. The first one proposed a price of $700,000. The second one proposed a price of $800,000. The third agent didn't perform a CMA and simply set the price at $900,000. The property eventually sold for $720,000. The third agent's actions could best be described as an example of failure to disclose. misrepresentation. negligence. puffing.

negligence.

When showing a listing, a licensee is asked about the condition of the basement. Without having seen the basement, the licensee says that, to the best of her knowledge, the basement is free of dampness. In fact, the basement leaks steadily whenever it rains. This is most likely an example of actual fraud. bait and switch. negligence. no error, since she had never been in the basement.

negligence.

Dave and Sue are sales associates for #1 Realty. Over lunch one day, they discuss the new Save-a-Lot Brokerage in town that charges a flat $2,000 fee instead of a commission rate. They decide that they will not show Save-a-Lot's listing to prospective buyers. What type of violation might this situation be considered, if any? boycotting market allocation price-fixing no violation

no violation Since they are affiliates of the same brokerage and did not involve licensees from other brokerages in their decision, they are not guilty of violating antitrust laws.

A licensee is generally __________ to any party for false information that the licensee's client provided to the licensee and the licensee in turn provided to another party in the transaction, unless the licensee had _______________ that the information was false or the licensee acted with ______________________

not liable actual knowledge reckless disregard for the truth.

Concealment

occurs when a licensee fails to disclose information that is material to a decision to a party to whom the licensee has such a duty. Typically, a licensee must disclose any fact, report, or rumor concerning the transaction to the principal. If the licensee is aware of the ignorance of a customer about a subject, the licensee may have a duty to speak as well.

Conversion

occurs when a licensee uses or makes available someone else's funds or property for their own personal or business use.

The Federal Trade Commission also addresses the illegal practice of bait and switch.

occurs when an advertiser makes an alluring but insincere offer to sell a product or service which the advertiser, in truth, does not intend or want to sell. The intent is for consumers to switch from buying the advertised product or service to buying something else, usually at a higher price or in some way more advantageous to the advertiser

False or misleading advertising

occurs when one disseminates or causes to be disseminated any false or misleading information by any means for the purpose of offering any real estate for sale, lease, or rent.

Collusion

occurs when someone forms a scheme with another or designs with another intending to defraud a third party.

Still, a real estate licensee, however, should be very cautious about stating unsubstantiated opinions. In special circumstances, _____________________________. A court may allow recovery based on opinions stated by an expert hired to give advice, or a person who has superior knowledge and is acting in a fiduciary relationship. Someone who states an opinion that they don't actually believe may also be held liable.

opinions may be actionable

Filing false documents

or unauthorized documents in the public record such as liens, contracts, or deeds is a form of fraud.

Federal Trade Commission Act

passed in 1914, creating the Federal Trade Commission (FTC) as the nation's consumer protection agency. The stated mission of the FTC is to Prevent business practices that are anticompetitive or deceptive or unfair to consumers. Enhance informed consumer choice and public understanding of the competitive process. Accomplish this without unduly burdening legitimate business activity. purpose was to prevent unfair methods of competition in commerce.

At a local convention of real estate licensees, broker Quinn mentioned that he was going to have to raise his commission rates or close his office. Quinn could be found guilty of allocation. price-fixing. securities violations. nothing; he did not violate any rules or laws.

price-fixing. Even the appearance of discussing fees could be considered an example of illegal price-fixing.

Who is required to follow the provisions of the NAR Code of Ethics and Standards of Practice? all appraisers and real estate agents who participate in a residential property transaction all real estate licensee any real estate licensee who participates in a residential property transaction real estate licensees who are members of the National Association of REALTORS®

real estate licensees who are members of the National Association of REALTORS®

Fair and Accurate Credit Transaction Act (FACT Act)

referred to as either the FACT Act or simply FACTA, amended the federal Fair Credit Reporting Act and is intended primarily to help consumers fight the growing crime of identity theft. The FACT Act was passed in 2003, a time in which identity theft was an ever-increasing problem for consumers and creditors. Thus, the law focused on accuracy, privacy, limits on information sharing, and new consumer rights to disclosure.

If you have a client who questions your firm's commission fee, you should ask your employing broker if they would consider charging less. refuse to work with that client. show them the MLS guidelines on commission. tell them that your firm charges the standard commission rate.

refuse to work with that client. There is no standard commission rate and to imply that there is could be an antitrust violation. Your broker might have a standard rate they want to charge but could be willing to negotiate with that client.

Antitrust laws

regulate business activities in general, concluding that any restraint of trade practices are so injurious to competition that they could never be justified as anything but unreasonable and, therefore, illegal

Senders of faxes

required to take reasonable steps to verify that the recipient consented to have a fax number listed, if it was obtained from a directory or other source of information compiled by a third party. They must also provide notice and contact information on the fax that allows recipients to opt out of future faxes and must honor such opt-out requests within the shortest reasonable period of time, not to exceed 30 days.

The Fair and Accurate Credit Transaction Act

requires businesses to secure and dispose of sensitive personal information. The Gramm-Leach-Bliley Act protects the disclosure of consumer's personal financial information.

A tie-in agreement

results when someone tries to make one transaction or agreement contingent on a second transaction or agreement.

A tie-in agreement, also called a tying agreement or tie-in arrangement

results when someone tries to make one transaction or agreement contingent on a second transaction or agreement.

If a real estate agent is sending out e-mails offering their services, the federal CA.N-SPAM Act requires the agent to avoid e-mailing persons on the "do not call" list include the brokerage firm's name as licensed. make sure that a licensee, not an unlicensed person, was responsible for the content. tell recipients how to opt out of receiving future e-mails.

tell recipients how to opt out of receiving future e-mails.

Seller Susie tells her agent that there have been leaks in a bathroom wall from some faulty plumbing, but that the leaks were repaired and that there haven't been any other problems with those pipes. She tells agent Alan not to disclose this information to the buyers, since the problem has been fixed. The agent should say nothing, since he owes the duty of loyalty to the seller. say nothing about the leak, even if asked. tell the buyers about the leak but emphasize that the leak was a minor issue. tell the buyers about the leak and that the buyers are entitled to request an inspection.

tell the buyers about the leak and that the buyers are entitled to request an inspection.

Hank and Jeanine run brokerages on opposite sides of town. They decide they can save a lot of money on gas if they concentrate on their side of town only. Hank agrees to send customers interested in north side properties to Jeanine if she will send him any customers interested in south side properties. This is an example of territory allocation. blockbusting. price-fixing. redlining.

territory allocation.

Rob is a licensee at ABC Brokerage and Ronnie is a licensee at XYZ Realty. They're having dinner when Ronnie mentions she's having trouble getting listings in a particular part of town. Rob says he's happy to handle all the listings in that neighborhood if she agrees to quit trying to land clients there. In exchange, he'll send prospective clients her way if they live closer to her business. This is an example of boycotting. price-fixing. territory allocation. tying in.

territory allocation.

Sherman Antitrust Act of 1890

the first federal law outlawing practices considered harmful to consumers, such as monopolies. At the time, large corporations accused of anticompetitive practices were organized as trusts, hence the name of the act. Of primary concern with this law is collusion between two or more persons or organizations to limit competition, set artificial price controls, or—through fraud or misrepresentation—attempt to gain an unfair advantage.

The primary purpose of federal antitrust laws is to ensure that fair housing is available to all people. licensees have a minimum level of education to protect the public. licensees do not charge excessive commission rates. there is no unreasonable restraint on trade.

there is no unreasonable restraint on trade.

The antitrust prohibition on price-fixing refers to

two or more competing real estate firms who discuss or agree on the commission rate that each will charge. Licensees must not discuss commission rates with licensees from other brokerages and must take care to avoid even implying that they have discussed or reached an agreement on fees.

The federal CAN-SPAM Act (Controlling the Assault of Non-Solicited Pornography and Marketing)

was enacted to curb the annoying and costly problem of unsolicited commercial e-mail, or spam, to both computers and wireless devices without prior permission Establishes requirements for the use of commercial e-mail. Gives recipients the right to opt-out of receiving e-mails or text messages at any time. Provides tough penalties for violations, including significant fines for each e-mail violation.

Clayton Antitrust Act of 1914

was passed to enhance the Sherman Antitrust Act by prohibiting specific anticompetitive practices. For example, it bans mergers and acquisitions as well as price discrimination that lessens competition and creates a monopoly in any line of commerce. It also provides for more stringent penalties to businesses who do not abide by these laws. also authorizes private parties to sue for damages when they have been harmed by conduct that violates either the Sherman or Clayton Act. This can lead to a court order prohibiting the business from further anticompetitive practices.

Cease and desist orders

which are administrative agency directives to stop the offending activity.

Injunctive relief

which is a court-ordered prohibition against a particular act, as opposed to a judgment for money, often imposed for violating a cease and desist order.

Licensee comments that could create the impression that a tie-in arrangement is being imposed include the following:

"If I'm going to submit an offer for you, I need you to use XYZ Home Inspectors." "I only work with ABC Insurance Company, so you need to call them before we proceed."

Licensee comments that could create the impression that territories or markets are being allocated include the following:

"It could save us both a lot of gas if your firm would concentrate on the north side and ours concentrated on the south side." "This is my neighborhood. Tell them to go someplace else." "We'll take the million dollar listings, since we're equipped to handle them and you concentrate on the starter homes."

Of these, which is LEAST LIKELY to be considered an example of puffing? "Best view in the city" "Exquisite décor that will make your friends jealous" "Feel like royalty in this palatial beauty" "Priced to sell; likely to go quickly in this popular neighborhood"

"Priced to sell; likely to go quickly in this popular neighborhood"

Bait and Switch

A deceptive sales technique that involves advertising to a consumer with a particular product, service, or rate to attract consumers, then persuading them to accept something less favorable or desired. Most states have consumer protection laws that make this tactic illegal.

Misrepresentation

A false or misleading statement.

Code of Ethics

A set of principles and standards based on core values by which a professionals are expected to conduct themselves.

According to the FTC Act, truth in advertising rules apply to anyone who places an ad. Under the act,

Advertising must be truthful and not deceptive. Advertisers must have evidence to back up their claims. Advertisements cannot be unfair.

Sherman Antitrust Act Federal Trade Commission Act Clayton Antitrust Act

Believing that fair competition was necessary for the economic health of the country, the federal government began to consider laws to outlaw monopolies and rein in unfair business practices. The earliest antitrust laws

When is an ad unfair? According to the FTC, an ad or business practice is unfair if it

Causes or is likely to cause substantial consumer injury that a consumer could not reasonably avoid; and Is not outweighed by the benefit to consumers.

Negligence

Conduct that falls below the standard of care that a reasonable person would exercise under the circumstances; an unintentional breach of a legal duty resulting from carelessness, recklessness, or incompetence.

The Code of Ethics contains three sections:

Duties owed to clients and customers Duties owed to the public Duties owed to other REALTORS®

(T/F) If a local real estate board publishes a suggested commission schedule but does not mandate that members follow it, it would NOT be considered an antitrust violation.

False

(T/F) Ted and Vicky are brokers at Farmland Realty. Ted takes all of Farmland's listings on the Westside, while Vicky takes all of Farmland's listings on the Eastside. They could be guilty of market allocation.

False

(T/F) The Sherman Antitrust Act was enacted to enhance the regulations contained in the Clayton Antitrust Act.

False

(T/F) You have listed Walter's house, and you notice a water stain on the ceiling. You advise Walter to paint over it before you show the house. This is an example of constructive fraud.

False

Ethics

The fundamental principles of honesty and integrity that guide a person's behavior.

Licensee Lois has had a listing on Mark's house for months. Buyers aren't interested in purchasing the property, as it is subject to several liens, which Lois had been disclosing. Eager to sell the property, she tells Jake, the latest interested buyer, that there are no liens and the title to Mark's property is good. Which statement is TRUE? This is OK as Lois is looking out for the best interests of her client. This is OK since the liens will be discovered by the title insurance company. This is OK because the seller has promised to pay off the liens before closing. This is not OK since the presence of known liens is a material fact.

This is not OK since the presence of known liens is a material fact.

Licensee Betty accidentally deposited a buyer's good faith deposit into her brokerage's general fund, and her broker used the money to pay the rent on the office. Which statement is TRUE? There is no problem with mixing client and business funds if good records are kept. This was an honest mistake, so it could not be considered fraud. This was fraud since Betty illegally commingled, but her broker did nothing wrong. This was fraud since Betty illegally commingled, and her broker could be held responsible.

This was fraud since Betty illegally commingled, and her broker could be held responsible.

What is another word to describe a specific type of panic selling? blockbusting channeling redlining steering

blockbusting

Commingling

occurs when a licensee mixes client funds with brokerage funds.

collusion

two or more persons or organizations to limit competition, set artificial price controls, or—through fraud or misrepresentation—attempt to gain an unfair advantage.