CA Real Estate Law

LISTING WITH AN OPTION -- Prohibited act

If a licensee takes a listing and an option on the same property, there is a conflict of interest, and the licensee must reveal his profit and obtain written permission from the owner before exercising his option.

CALIFORNIA FINANCE(ing) LAW (CFL)

Imposes licensing requirements on all entities seeking to make as well broker loans -- whether consumer or commercial loans -- in the State of CA.

HOUSING DISCRIMINATION ACT (HOLDEN ACT)

STATE LAW - Prohibits "Redlining," a form of channeling or steering. - Prohibits a financial institution from refusing to make a loan or offering less favorable terms based on neighborhood characteristics (except when necessary to avoid unsafe and unsound business practice), such as race, sex, color, religion, or national origin.

UNRUH CIVIL RIGHTS ACT

STATE LAW A California law which prohibits discrimination by a business establishment based on sex, race, color, religion, ancestry, national origin, physical disability or age (certain housing accommodations can be limited to senior citizens. PENALTIES: - Actual damages and punitive damages up to 3 times actual damages but not less than $4,000. - A broker who discriminates may be liable for paying $4,000 to the person against whom he discriminated, be liable for actual damages, and have his license suspended or revoked.

COMMISSIONER'S REGULATIONS

STATE LAW Prohibit discrimination by a real estate licensee in the sale, rental, financing or advertising of real property or a business opportunity based upon race, color, sex, religion, ancestry, physical handicap or national origin of the seller, buyer, landlord, tenant, guests, or neighborhood.

FAIR HOUSING LAWS

STATE LAWS: (1) Unruh Civil Rights Act (2) Rumford Act (3) Housing Financial Discrimination Act (Holden Act) (4) Commissioner's Regulations FEDERAL LAWS: (1) Civil Rights Act of 1866 (2) Jones vs. Mayer (3) Title VIII of the Civil Rights Act of 1968 (Federal Fair Housing Act, Federal Open Housing Law)

INDUCEMENT TO PANIC SELLING -- Prohibited act

Seeking listings on the basis of the entry into the neighborhood of a person or persons of another race or religion, ancestry or national origin.

STEERING

Showing minority prospects properties that are in segregated areas only -- illegal.

REAL ESTATE ADVISORY COMMISSION

Ten-member group (6 must be brokers) appointed by the Real Estate Commissioner that makes recommendations to the Commissioner on matters involving the California Bureau of Real Estate.

FEDERAL RESERVE SYSTEM

The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money and interest rates

TITLE 14 (THE MORTGAGE REFORM AND ANTI-PREDATORY LENDING ACT)

- The idea was to establish certain standards about mortgages issued to consumers. - A qualified mortgage is one in which the borrower will NOT be asked to pay more than 3% of the amount borrowed in points and fees, and with a residential, owner-occupied loan, the loan will be one that amortizes the debt during the term. - No interest only loans or negative amortization loans are allowed on a borrower's primary residence. - Also, no balloon payments and no loans spread out over more than a 30-year term. PURPOSE: To reduce the risk for the borrower to prevent the homeowner from losing their home to foreclosure, which in turn reduces the risk for the lenders who have made the loan, and the economy as a whole.

RECOVERY ACCOUNT

- Funded by the Real Estate Fund. - Protects the general public when they obtain uncollectible court judgement or arbitration award against a licensee. - If a claim against a licensee is paid, the licensee's license is suspended until he has repaid the recovery account, plus interest at the prevailing legal rate. - If there is not enough money to pay all claims, they will share proportionately. - The Commissioner is NOT authorized to collect penalties for the victims. LIMITS: (1) Each transaction -- $50,000. (2) Multiple transactions -- $250,000 for all claims against one licensee.

PANIC SELLING (BLOCKBUSTING / PANIC PEDDLING)

- Trying to persuade people to list or sell by telling them that members of another ethic group are moving into the neighborhood, and is illegal conduct. - It is a violation of BOTH state and federal law. - "Panic selling can only occur when the buyer is also a seller" = FALSE STATEMENT - In an integrated neighborhood, if a broker solicits listings under the slogan, "Sell now, save equity," or offers lower commission rates to Caucasians, he is in violation of the law for both activities. - If a real estate broker is securing listings by telling owners that minority groups are moving into an area and that values will decrease, the quality of schools will decrease, and crime will increase, he can be disciplined by the Real Estate Commissioner.

NEGATIVE AMORTIZATION LOANS

- Under which the debtor pays only the interest every month but owes a huge balloon payment at the end of the term. - Banned in CA as of 2010.

REAL ESTATE LAW

- The basic purpose of the Real Estate law is to prevent fraud. - It is primarily based upon English Common Law (Community Property laws were guaranteed by the Treaty of Guadalupe Hidalgo between the U.S. and Mexico). - The Real Estate Law is found in the Business and Professions Code. - Violation of the Real Estate Law can result in a $10,000 fine or six months in jail or both.

DIVIDED AGENCY -- Prohibited act

Acting for more than one party in a transaction without the knowledge and consent of all parties. (1) If agent informs and obtains consent from all principals, he may collect a commission from each. (2) If agent does not disclose his dual agency to both parties (e.g., landlord and tenant) he may be disciplined, may provide grounds for either party to rescind, and may be denied all commission. (3) "In house" sales (where a broker sells his own listing) often give rise to dual agency.

REAL ESTATE SETTLEMENT PROCEDURES ACT (1974)

Allows consumers to shop for settlement services and protects them from the scourge of rampant referral fees

CONVICTIONS -- Prohibited act

Any felony, or misdemeanor involving moral turpitude (wickedness), may result in denial of license.

PROHIBITED ACTS in CA REAL ESTATE LAW

"Section 10186 and 10177" A real estate licensee can be disciplined for the following violations of the Real Estate Law" (1) Misrepresentation (2) False Promise (3) Divided Agency (4) Commingling (5) Conversion (6) Termination Date (7) Copies (8) Secret Profit (9) Listing with an Option (10) Convictions (11) Misuse of "Realtor" (12) Supervision of Salesperson (13) Violating Government Trust (14) Inducement to Panic Selling (15) Employing or Paying an Unlicensed Person (16) Sales Price Notification (17) Advertising (blind; deceptive; puffing, etc.) (18) Records (19) Accepting "Kickbacks" Note: - Mental Illness: A broker's mental illness must be certified by a court before his license can be revoked. Sworn testimony by witnesses is NOT sufficient. - Selling a property for more than the listed price is NOT a violation of the law, and licensee is to be complimented. - Failure to inform a prospective buyer that the seller will sell for less than the listed price is NOT a violation. - Telling a buyer that the seller will sell for less than the listed price violates the agent's fiduciary obligations.

SUSPENDED LICENSE

- Temporary loss of a license. - The Real Estate Commissioner has the power to suspend a license. - Commissioner can fine licensee up to $250 a day up to a maximum of $10,000 in lieu of suspension. - If broker's license is suspended, the broker and the broker's salespeople may share commissions earned before suspension date.

NATIONAL MORTGAGE LICENSING SYSTEM (NMLS)

A web based platform for regulatory agencies to administer initial license applications and ongoing compliance requirements.

REAL ESTATE PRACTICE

(1) An agent should question the seller about his motives for listing the property. (2) It is not customary to advertise open listings. (3) Policy Manual: an outline of office procedures. (4) The advertising terms "classified," "display," and "reading notice" apply to newspapers. (5) The four elements of a sales presentation are: (1) attract attention, (2) arouse interest, (3) create desire, and (4) stimulate action. (6) An office specializing in residential resales should have a continuous flow of listings. (7) If a broker charges an "advance fee" for advertising a listing on the internet, he must give an annual accounting to the Real Estate Commissioner -- advance fee agreements must be in no less than 10-point type. (8) A buyer is usually a customer or prospect; a seller is usually a client or principal/employer. (9) Commissions are determined by agreement between client and broker and are NOT limited by law. (10) A broker's "desk cost" is calculated by dividing the operating expense of the office by the number of salespersons. (11) The "company dollar" is calculated by subtracting commissions paid from the gross income. (12) The broker's goals and objectives would influence the choice of a location for the office. (13) A contract entered into by the parties on or after April 1, 2006, must contain the following notice: Notice: Pursuant to Section 290.46 of the Penal Code, information about specified registered sex offenders is made available to the public via an Internet Web Site maintained by the Department of Justice at www.meganlaw.ca.gov. Depending on an offender's criminal history, this information will include either the address at which the offender resides or the community of residence and ZIP Code in which he or she resides.

ADVERTISING -- Prohibited act

(1) Blind Advertising: - Licensee must disclose, when advertising, that he is acting an an agent. - A blind ad is an ad where an agent appears to be the owner -- it doesn't identify the broker. - A salesperson's ad for the sale of property must include the name of the broker. (2) Deceptive Advertising: - A misleading map is prima facie (first impression) evidence that an advertisement is deceptive. - An ad that says "Move right in" when the house needs major structural repair would be deceptive. (3) A broker may advertise that he will give a gift to anyone buying a listed property if he reveals this to all interested parties. - If a seller's agent pays part of his commission to to a buyer, the seller must be informed. (4) When offering prizes, advertising must reveal if attendance at a sales presentation is required. (5) "Call 800-FOR-A-LOAN" would NOT be permitted under the regulations. (6) When advertising trust deeds for sale, a broker can use a specific yield only if the actual interest rate and the discount are included. (7) A broker's advertisement CANNOT imply that an owner can obtain a loan over the telephone without additional verifications. (8) When advertising their own property, agents and brokers must inform the public that the owner is a licensee. (9) Puffing: Making exaggerated claims about the property. (10) When advertising, the ad must include: "Real estate broker, California Department of Real Estate."

THE APPRAISAL INSTITUTE

(1) M.A.I.: Member of Appraiser's Institute (initials used by members).

PROFESSIONAL ASSOCIATIONS

(1) National Association of Realtors (2) National Association of Real Estate Brokers (3) The Appraisal Institute (4) Institute of Real Estate Management (IREM) NOTE: - Membership in these organizations is VOLUNTARY. - There are no racial restrictions for membership in any of these organizations.

THE FAIR HOUSING AMENDMENTS ACT -- 1988

(1) This Act expanded protection to tenants in regard to people with disabilities and familial status. (2) The people with disabilities include victims of AIDS or HIV -- Landlords cannot discriminate on this issue. (3) Familial status refers to the protections of children under the age of 18 living with their parents, persons obtaining legal custody, and pregnant women. (4) Tenants with disabilities must be allowed to alter the rented premises at their expense, but may also have to restore the premises to original condition if a new tenant wants them restored. (5) When a broker prominently displays the Equal Housing Opportunity poster in his/her office, it places the burden of proof on the consumer to show that the broker was acting in a discriminatory manner.

THE AMERICANS W/ DISABILITIES ACT -- 1990

(1) This act prohibits discrimination for people with disabilities in the areas of employment, public services, public accommodations, and telecommunications. (2) The Equal Employment Opportunity Commission (EEOC) was given enforcement responsibility for this law. (3) The types of facilities subject to this law include non-residential properties such as stores, offices, theaters, stadiums, concert halls, malls, universities, and workplaces. (4) The standard renovation of such facilities is that which is readily achievable, meaning easily accomplished and not too expensive relative to property values and abilities of owners. (5) Disabilities include physical and mental. (6) The types of accommodations that can be provided include automatically opening doors, wider aisles, ramps, grab bars, shoppers' assistants, and allowing a customer's guide dog.

Real Estate Finance Documents:

(1) Trust Deeds and Real Property Sales Contracts (2) Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

MISREPRESENTATION -- Prohibited act

- False statement of facts. - Misrepresentation is fraud (e.g., A licensee listed income property showing a 12% return but did not include all of the expenses). - Licensees do not often make malicious misrepresentations. - Withholding negative information on the Transfer Disclosure Statement is illegal (negative fraud). - Misleading potential lender is unlawful conduct.

FICTITIOUS BUSINESS NAME / DBA

(D.B.A.; Doing Business As) - A broker, corporation or a partnership can operate under a fictitious name when filed with the County Clerk and licensed by the Real Estate Commissioner. - A DBA expires after 5 years. The Commissioner can refuse if the name: (1) Is misleading. (2) Implies a partnership or corporation when such does not exist. (3) Includes a salesperson's name. (4) Violates the law. (5) Has been used by a person whose license has been suspended or revoked.

ADMINISTRATIVE PROCEDURE ACT (APA)

- 1946 - Governs the process by which federal agencies develop and issue regulations. - It includes requirements for publishing notices of proposed and final rulemaking in the Federal Register, and provides opportunities for the public to comment on notices of proposed rulemaking.

MOBILE HOMES

- A broker may list or sell any registered mobile homes. - The mobile home must be greater than 8ft wide and 40ft long. - To transfer title to a mobile home, the registration card, title and fees must be sent to the Department of Housing and Community Development within 10 calendar days. - A broker selling mobile homes CANNOT advertise "No down payment" when the down payment is a second loan from a different lender.

TRUTH IN LENDING ACT (1968)

- A federal law that requires financial institutions to disclose specific information about the terms and cost of credit. - Ensures that consumers receive credit disclosures in a meaningful way and introduces the Annual Percentage Rate (APR), and the Real Estate Settlement Procedures Act (1974).

DECEPTIVE ADVERTISING -- Prohibited act

- A misleading map is prima facie (first impression) evidence that an advertisement is deceptive. - An ad that says "Move right in" when the house needs major structural repair would be deceptive.

SALESPERSON

- A natural person employed by a real estate broker to do any real estate act for compensation or in expectation of compensation. - Salesperson applicant must apply for license within one year from date to extermination. - A salesperson can be an independent contractor or an employee of the supervising broker. - The broker has responsibilities under the Worker's Compensation Law for all employees, including salespersons working as independent contractors. - An unlicensed subdivider CANNOT hire a salesperson; only brokers. - Salesperson (and brokers without their own office) must have written agreement with their supervising broker as required by the Commissioner's regulations. Copies must be kept by both for 3 years after termination. - The broker/salesperson agreement does not have to be approved by the Commissioner prior to use. - As an independent contractor, a salesperson pays Social Security Contributions. - Broker may work as a salesperson for another broker but mist agree, in writing, not to operate independently for his own account. - Salesperson's license must be at a broker's main office. - Salesperson receives all compensation for real estate acts from employing broker ONLY. TERM: - Licenses are issued every 4 years. TRANSFER OF LICENSE: - Former broker and new broker must notify Commissioner of change, in writing, immediately (former broker -- within 10 days; new broker -- within 5 days). - If salesperson is fired for cause, broker must immediately send the Commissioner a certified written statement of facts. - Within 3 days, former broker surrenders license to salesperson, who gives it to the new broker.

BROKER

- A person (natural or legal) who for compensation, or in expectation of compensation, regardless of form or time of payment, does any real estate act. - Acting as a broker without a license can result in a fine of $10,000 for an individual; $50,000 for corporation. - A broker is not required to inform the Commissioner of the number of properties he owns. TERM: - Licenses are issued for 4 years, with a 2 year grace period to renew during which the licensee must pay an extra fee. - The DRE may issue a temporary 150-day license to an applicant who is on the "delinquent child support" list. - When completing 45 hours of continuing education for license renewal, at least 18 hours must be "Consumer protection." OFFICE: - Active brokers must maintain an office. - When a broker changes the location of his office, the Commissioner must be notified no later than the next business day. - A prepaid rental listing service that is changing office location must notify its clients as soon as possible prior to relocation. - An advance fee rental agreement for has to be approved by the DRE. NONRESIDENT: - Broker's licenses are permitted for those living in some states. - Applicant must file a "Content to Service of Process." - Subpoenas would be delivered to the California Secretary of State. CITY BUSINESS LICENSE: ??? - Most cities require a broker to hold a city business license and pay a business license tax based on gross receipts. CORPORATION: - Broker's license can be issued in the name of a corporation. - A qualified broker must be designated as the responsible broker to supervise the real estate activities of the corporation. - If the designated broker is an officer and director of the corporation, salespeople may own a controlling interest or be officers and directors of the corporation. - If the designated broker is not an officer and director of the corporation, salespeople may not own a controlling interest of the stock and be officers or directors of the corporation. SERVICING LOANS: - When a broker services loans, he/she must report to the DRE when they have reached various thresholds in collecting loan payments, according to Business Professions Code 10232, and when any changes have occurred in fiscal year and other collection criteria (DRE Form RE 853).

RESTRICTED LICENSE

- A restricted license can be suspended without a hearing, pending the results of a hearing. - The Real Estate Commissioner has the power to restrict a license. It can be restricted by: (1) By term (time). (2) To employment by a particular broker. (3) To a certain type of activity.

TRUST FUND ACCOUNT

- Account must be designated as a trust account and broker must be named as trustee. - Broker is allowed to have a maximum of $200 of his own money in the trust account. - Broker does NOT need to maintain a minimum amount in the trust account. - Any interest earned on funds in the trust account must be credited as specified in a written agreement between principal and broker (interest CANNOT accrue to the benefit of the broker). - One of the main purposes of a trust fund account is so that the money won't be attached if broker is involved in a court action -- it separates the broker's funds from the funds of others. - Voided checks should be retained. - If the broker deposits a buyer's check and the buyer demands a refund before the offer is accepted, the broker CANNOT return the deposit until the buyer's check has cleared the buyer's account. - Salespersons' unpaid commissions should NOT be kept in a trust account. - The trust account bank balance must equal the total due all beneficiaries (the total aggregate trust fund liability). - The broker must keep a columnar record of deposit checks made payable to third parties (i.e., escrow). - When a broker's commission is a percentage of rents collected, it does NOT represent commingling if commissions are withdrawn within 25 days. WITHDRAWALS: The broker and any employee, when authorized by the broker, may make withdrawals. (a) Salesperson employed by broker. (b) Unlicensed employee who is bonded. (c) Broker may withdraw funds from trust account to pay for repairs on an apartment building he manages. RECONCILIATION: Comparing the bank's accounting with the broker's records. (a) Must be done monthly. (b) An unexplained overage must be kept in the existing trust account.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)

- An independent agency created by Congress to maintain stability and public confidence in the nation's financial system. - The government agency that insures customer deposits if a bank fails.

CONSUMER FINANCIAL PROTECTION BUREAU (CFPB)

- An independent agency, activated in 2011, operating within the Federal Reserve System. - Has enforcement authority over many of the financial laws that serve the American Consumer, including the Truth in Lending Act (1968), which ensures that consumers receive credit disclosures in a meaningful way and introduces the Annual Percentage Rate (APR), the Real Estate Settlement Procedures Act (1974), allowing consumers to shop for settlement services and protecting them from the scourge of rampant referral fees, and many other laws. - Prior to its establishment, numerous laws and agencies had partial control over regulation that affected the consumer, but this agency has centralized authority and the power to control the administration of these financial protection laws.

LICENSES

- Any person doing any real estate act for another for compensation or in expectation of compensation MUST have a license. - The compensation may be commission, salary, or anything of value. ACTIVITIES: (1) Selling, buying, soliciting purchasers or buyers for, soliciting or obtaining listings of, or negotiating the purchase, sale or exchange of real property or a business opportunity. (2) Leasing, renting, collecting rents (managing property), or negotiating the sale, purchase, or exchange of leases on real property or a business opportunity. (3) Assisting in filing application for purchase or lease of, or locating, government-owned land. (4) Soliciting borrowers or lenders, or negotiating loans on real property or a business opportunity. (5) Selling, buying, or exchanging a real property sales contract or a promissory note secured by real property or a business opportunity. (6) Buying, selling, exchanging, collecting payments on, or performing services in relation to, real property sales contracts or notes secured by real property liens. (7) Charging an advance fee in connection with the promotion, sale or lease of real property, or a loan on real property or a business opportunity. (8) Issuing, selling, listing, or soliciting buyers or sellers, or negotiating the purchase, sale, or exchange of a real estate syndicate security. EXEMPTIONS: The following are not required to hold a real estate license: (1) Principal: One who owns the property (could be a corporation or a subdivider). (2) Attorney-in-fact: The person authorized to act for another in his stead by a duly executed "power of attorney" (instrument). If real estate acts are involved, the "power of attorney" must be in writing and recorded. --> (a) Can sign the name of his principal to legal documents. When signing a deed, the attorney-in-fact would write the name of the principal followed by his signature as attorney-in-fact. --> (b) Cannot give property away, sell or mortgage it to himself, even if he pays fair market value for the property. He cannot act if his principal dies or is adjusted incompetent -- If principal becomes incompetent, the power of attorney is still effective for one year if the property is the primary residence of the principal. --> (c) CANNOT sell a home if it is Homesteaded. (3) Attorney at Law (Lawyer) while performing duties as an attorney at law. (4) Trustee selling under a trust deed. (5) Clerical Employee (unlicensed assistant) while performing clerical duties. --> (a) Can place advertisements if specifically approved by broker. --> (b) Cannot explain the significance of a document (e.g., an inspection report)n to the parties. (6) Appraiser -- however, any appraiser who appraises property for a federally-related lending institution must be licensed or certified by the Bureau of Real Estate Appraisers (BREA). (7) Resident Property Manager -- He must reside on the property that he manages. Typically, a resident property manager would collect rent, fix up the property, show vacant units, and hire maintenance people. --> (a) The owner must reside on the property or have a resident property manager if there are 16 or more units. (8) Court Order: Anyone working under the direction of a court (e.g., executor, guardian). Note: - A California licensee can negotiate in California for the sale of property in another state. - Hostesses in model homes or handymen in subdivisions who hand out price brochures and direct people to model homes MUST have a license because they are quoting prices and showing property.

SALES PRICE NOTIFICATION -- Prohibited act

- Broker must inform seller and purchaser of the selling price within one month after the closing of the transaction. - Usually accomplished by escrow closing statements.

RECORDS -- Prohibited act

- Broker must retain for 3 years all documents related to real estate transactions. - Period shall run from: (a) Date of closing the transaction, or (b) Date of listing. - The Uniform Electronic Transaction regulations require that a broker make available to the Commissioner a paper copy of any electronic document.

REAL ESTATE COMMISSIONER

- Chief executive of the Department of Real Estate. - Presides over the Real Estate Advisory Commission. - Appointed by the Governor. - Advised by the Real Estate Advisory Commission and the State Attorney General who would defend him in lawsuits concerning real estate matters. DUTIES: (1) Determine administrative policy. (2) Enforce the Real Estate Law. (3) Screens and qualifies applicants for licenses -- has the sole authority to issue, suspend and revoke all licenses, and to publicly revoke all licensees. (4) Issues (promulgates) rules and regulations, which have the force and effect of law and become a part of the California Code of Regulations

TITLE X (THE CONSUMER FINANCIAL PROTECTION ACT)

- Created an independent agency operating within the Federal Reserve System called the Consumer Financial Protection Bureau (CFPB) -- this agency was activated in July of 2011.

REAL ESTATE FUND

- Education, Research and Recovery Account. - Approximately 12% of all license fees are directed to this account. - Part of these funds are used for education research; most are placed in the recovery account.

CANCELLED LICENSE

- Expiration, revocation or suspension of broker's license, or broker's death, cancels licenses of all salespeople in the broker's employ. - The Real Estate Commissioner has the power to cancel a license. - Sales people CANNOT close transactions they have been negotiating. - If broker died before escrow closed, transaction would continue and the broker's heirs would collect the commission from the broker's estate.

Fair Housing in practice:

- If an owner insists that he will not sell to minorities, the broker should refuse to discuss the listing. - If a broker, acting as an agent of the owner, takes a larger deposit from single men than from single women or couples, or takes a larger deposit from minorities than from Caucasians, he is guilty of discriminating. - The race, creed or color of a prospective buyer or tenant is not a material fact and should not be disclosed by a licensee to his principal, even if asked. - Listing a home at an inflated price for minorities, but accepting a lower price from others could cause the agent to be liable for money damages in a fair housing suit. - A broker may refuse a listing because the owner's required price is substantially above the market price in that area. - If a broker tells his employees to direct their advertising to women or to charge more rent to certain ethnic and religious groups, he is in violation of fair housing laws for both instructions. - African American prospects should be shown the same homes that would be shown to any other prospect making a similar inquiry. - A licensee should select homes for showing to a Hispanic prospective buyer as he would for any other prospect. - A licensee may refuse to show a home to a minority prospect when the owner is out of town and has told the licensee not to show it in his absence. - If an African American inquired about a house he had seen in an African American neighborhood, you should assume that he wanted a house of that architectural styling. - Discrimination includes blockbusting and hiring sales personnel only from a specific ethnic group. - A racial deed restriction has not effect on the conveyance, but the covenant is unenforceable because it violates the U.S. Constitution. - Discrimination is unenforceable, illegal and unlawful. - Licenses should possess an attitude that is "color blind" or absolutely free from bias. - A "color blind" industry includes: Maintaining an attitude that is "color blind," the opinion that race, creed or color is not a material fact, and the concept, do unto others as you would have them do unto you. - A private dwelling which is for sale by owner is exempt from displaying the equal housing opportunity symbol. - An agent's license cannot be revoked or suspended under federal law -- it can be revoked or suspended by the Real Estate Commissioner. - A broker cannot assign licensees to prospects or offices on the basis of the race of the prospects, licensees or neighborhood. - A landlord who discriminates against single tenants is violating the fair housing laws. - A mobile home park may enforce an "Adults only" policy. - Condominiums can establish separate areas for occupancy by adults only. - A qualified offeror, who has no intent to discriminate, would probably not be guilty of violating the fair housing laws. - Steering: Showing minority prospects properties that are in segregated areas only -- illegal.

SECURE AND FAIR ENFORCEMENT FOR MORTGAGE LICENSING ACT OF 2008 (the SAFE Act)

- In the past, anyone with a real estate license could originate a loan before this act was put in place. - Now, Mortgage Loan Originators (MLOs) must pass a background check and meet certain character, credit, and educational requirements -- they also must pass a written test, and be assigned a unique identifier number issued by the National Mortgage Licensing System (NMLS). - With a real estate license issued by the Department of Real Estate (DRE) and their MLO unique identifier number, an individual could work for a Mortgage Broker. - Or, with just their MLO unique identifier, they could work for a Mortgage Banker as a direct lender without a real estate license -- they would be governed by the California Residential Mortgage Lending Act (CRMLA) or the California Finance Law (CFL). - One other option, is a loan officer working for a financial institution insured by the FDIC like a bank or savings & loan can obtain an MLO unique identifier without taking a test and relying on their employer to supervise the lending process and offer required Basic and Continuing Education.

DEPARTMENT OF REAL ESTATE

- Includes the Real Estate Commissioner and the Real Estate Advisory Commission. DUTIES: (1) Regulates subdivisions and real property securities transactions, in some respects. (2) CANNOT recommend property for sale. (3) Does NOT settle commission disputes (those are settled by a civil action in court). (4) Investigates complaints against licensees and non-licensees who engage in acts requiring a real estate license. --> (a) Holds hearings under the Administrative Procedure Act (found in the Government Code): (1) Serves accusation upon the the licensee; (2) Must institute action within 3 years. --> (b) If the person has broken the law, the District Attorney would prosecute. --> (c) The Commissioner CANNOT make the licensee pay damages -- Only the courts can do this. --> (d) If a buyer wins a civil judgement against a broker for fraud, the commissioner can suspend or revoke the broker's license only after a hearing.

DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT OF 2010

- Law passed by the U.S. Congress in July 2010. - Resulted from the failure of major financial institutions and the economic crash of 2008. PURPOSE: - It's purpose is to promote financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail," to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial service practices, and for other purposes. - Regulates the process of responsible loan origination and established a new license to ensure that the individual working in loan origination is qualified morally, ethically, and professionally to safeguard the well-being of the consumer. Two primary parts of this act that create the most impact on the mortgage industry: (1) Title X -- Consumer Financial Protection Act: Created an independent agency operating within the Federal Reserve System called the Consumer Financial Protection Bureau (CFPB) -- this agency was activated in July of 2011. (2) Title 14 -- Mortgage Reform and Anti-Predatory Lending Act: The idea was to establish certain standards about mortgages issued to consumers.

BLIND ADVERTISING -- Prohibited act

- Licensee must disclose, when advertising, that he is acting an an agent. - A blind ad is an ad where an agent appears to be the owner -- it doesn't identify the broker. - A salesperson's ad for the sale of property must include the name of the broker.

PARTNERSHIP

- Licenses are NOT issued in the name of a partnership. - A partnership may be formed by two licensed brokers, a broker and a salesperson, or a broker and an unlicensed person.

REVOKED LICENSE

- Loss of license. - The Real Estate Commissioner has the power to revoke a license.

FALSE PROMISE -- Prohibited act

- Making a promise likely to influence or persuade. - Guaranteeing a profit which doesn't occur could subject a broker to civil penalties and disciplinary action.

EMPLOYING OR PAYING AN UNLICENSED PERSON -- Prohibited act

- Maximum fine of $2,500. - Broker may have his license revoked or suspended if he employs or compensates any unlicensed person for performing acts requiring a real estate license. - Broker can share his commission with an unlicensed buyer or seller if the broker informs all parties.

CONVERSION -- Prohibited act

- Misappropriation of trust funds. - Using others' money as his own (e.g., for a vacation in Nevada).

QUALIFIED MORTGAGE

- One in which the borrower will NOT be asked to pay more than 3% of the amount borrowed in points and fees, and with a residential, owner-occupied loan, the loan will be one that amortizes the debt during the term. - No interest only loans or negative amortization loans are allowed on a borrower's primary residence. - Also, no balloon payments and no loans spread out over more than a 30-year term.

INSTITUTE OF REAL ESTATE MANAGEMENT (IREM)

-An organization acting as an exchange for management ideas, and recognizing achievement in the field. - Has a Code of Ethics for real estate managers. (1) C.P.M.: Certified Property Manager (initials used by members). (2) Membership is restricted to individuals only. (3) Property managers should NOT be compensated by receiving discounts on purchases (kickbacks). (4) Absentee ownership often justifies the hiring of a property manager. (5) The commission of a leasing agent is typically figured on the total rent collected over the term of the lease. (6) Maintenance is easier to schedule on a new property because owner's manuals are available. (7) Inspection and maintenance tasks are covered in the management agreement. (8) Primary accountability for periodic inspections lies with the property manager. (9) Under the usual management agreement, the manager receives a flat fee plus a percentage of the gross income.

TRUST FUNDS

A broker must keep a true record (trust journal, trust ledger) of all trust funds which pass through his hands.

BALOON PAYMENTS

A large payment due at the end of the contract term.

ACCEPTING "KICKBACKS" -- Prohibited act

A licensee may NOT receive referral fees or commissions from an escrow company, termite company, title company, lender, or home warranty company.

VIOLATING GOVERNMENT TRUST -- Prohibited act

A licensee who is employed by the government CANNOT use confidential records for his own benefit.

TRUST DEEDS & REAL PROPERTY SALES CONTRACTS

Article 5 -- These controls do not apply to loans or notes created in connection with the sale or exchange of property handled by the licensee. (1) Anyone buying for resale or selling 8 or more trust deeds, mortgages, or real property sales contracts, in a calendar year is "in the business" and must have a real estate license or handle the transaction through a broker. - Any principal may buy or sell any number of real properties without coming under the controls of this law. (2) Any licensee who services a promissory note by collecting payments shall have written authorization to do so, and CANNOT retain those payments for more than 25 days without written authorization from the obligee (lender). (3) Any licensee who negotiates a loan secured by a trust deed shall have the trust deed recorded prior to the disbursement of the funds, or deliver a written recommendation to record within 10 days. (4) When a licensee negotiates the assignment of a note or real property sales contract, he must see that it is recorded within 10 days or give the purchaser a written recommendation. (5) "A promissory note secured collaterally by a lien on real property" indicates that a loan is being made on the security of another loan. (6) If a broker escrows a sales transaction and the seller carries back a trust deed, the broker must record the trust deed immediately.

CALIFORNIA RESIDENTIAL MORTGAGE LENDING ACT (CRMLA)

Authorizes licensees to make federally related mortgage loans, to make loans to finance the construction of a home, to sell the loans to institutional investors, and to service such loans.

SUPERVISION OF SALESPERSON -- Prohibited act

Broker must exercise reasonable supervision over activities of sales people. (1) Broker must review, oversee, inspect and manage all contracts affecting a transaction. (2) A broker can designate a salesperson to review and initial all contracts if the salesperson has a least 2 years full-time experience within the last 5 years (working for the same broker is NOT necessary).

TERMINATION DATE -- Prohibited act

Claiming a commission on an exclusive listing which does not contain a definite and final termination date.

ANNUAL PERCENTAGE RATE (APR)

Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan.

TITLE VIII OF THE CIVIL RIGHTS ACT OF 1968 (FEDERAL FAIR HOUSING ACT)

FEDERAL LAW (Federal Fair Housing Act/Law, Federal Open Housing Law) - Prohibits discrimination in the sale or rental of a residential property on the basis of race, color, religion, national origin or sex. - The purpose of the Federal Fair Housing Law is to prohibit discrimination in housing transactions, while declaring a U.S. policy of providing fair housing for all persons throughout the U.S. - Complaints must be filed with the Department of Housing and Urban Development (HUD) within one year from occurrence. - The U.S. Attorney General would most likely enforce the Federal Open Housing Law when a conspiracy exists to practice resistance to it. - A person who is discriminated against may, under the Civil Rights Act of 1968, institute a private action in a state or federal court for injunctive relief or actual damages. - If an owner refuses an offer on listed property for the listed price because of the buyer's race, the broker may sue for the commission, advise the buyer of his right to complain to HUD, and warn the seller that he is violating the Fair Housing Act of 1968. The Federal Fair Housing Law applies to: (1) Single-family residences offered through a real estate broker. (2) Single-family residences owned by individuals who own more than 3 such residences. (3) All family dwellings of 5 or more units. (4) Dwellings owned or operated by the federal government. (5) Dwellings having loans made or insured by the federal government. (6) Dwellings provided by the development or the redevelopment of property purchased from a state receiving federal assistance for slum clearance.

JONES VS. MAYER

FEDERAL LAW - A U.S. Supreme Court case (1968) which tested the constitutionality of the 1866 Act. - The Court upheld it on the basis of the 13th Amendment to the U.S. Constitution which is the basis of fair housing laws through the U.S.

CIVIL RIGHTS ACTS OF 1866

FEDERAL LAW - Passed by Congress shortly after the Civil War. - It provides that "All citizens of the U.S. shall have the same right in every state and territory, as is enjoyed by white citizens thereof, to inherit, purchase, lease, sell, hold and convey real and personal property.

COPIES -- Prohibited act

Failing to give a copy of a listing or deposit receipt to the person signing, when he signs it.

SECRET PROFIT -- Prohibited act

Failure of a licensee to disclose to his principal the full amount of commission or profit. (1) Licensee must reveal to the other party that he has a license whenever he is involved in a real estate transaction as a principal -- licensee CANNOT buy through a "dummy buyer." (2) If a licensee is a member of a syndicate (e.g., corporation), and syndicate buys property, broker must reveal his membership in the syndicate -- if undisclosed, either party can rescind. (3) If buyer is a close relative (e.g., brother-in-law), broker must reveal fact to seller. (4) Accepting land as a commission and selling it at a profit IS ACCEPTABLE behavior. (5) A licensee CANNOT make a secret profit regardless of time, form, or source. (6) If a buyer and seller have a transaction and neither one is a licensee, the buyer does not need to reveal any profit that he will make in any future sale of the property.

PUFFING -- Prohibited act

Making exaggerated claims about the property.

COMMINGLING -- Prohibited act

Mixing his own money or property with the property of others. (1) Failure to deposit or place trust funds received into escrow, into the hands of the principal, or in a trust fund account within 3 business days is commingling. (2) Keeping the buyer's cash deposit in broker's safe is commingling. (3) Broker may hold an uncashed check with written instructions from the parties. (4) The opposite of commingling is to segregate. (5) A licensee who own rental property would not put rent from that property (or deposit on a purchase to offer for it) into the trust account.

INTEREST ONLY LOANS

Mortgage loans that do not require any amortization of principal over the loan term.

NATIONAL ASSOCIATION OF REAL ESTATE BROKERS

National organization composed predominantly of African American brokers. (1) REALTIST: Name used by members.

MISUSE OF "REALTOR" -- Prohibited act

Only members of National Association of Realtors (NAR) may use this term.

RUMFORD ACT

STATE LAW (Section 5 of the Health and Safety Code) - Forbids discrimination on the basis of race, color, sex, marital status, national origin, or ancestry in the sale, rental, lease, financing or advertising of residential dwellings. - Complaints are submitted to the Department of Fair Employment and Housing within 18 months of the alleged violation -- this department also enforces anti-discrimination in housing laws. - A single-family unoccupied dwelling that is encumbered is exempt from the Rumford Act. - If an owner of an apartment building included a question concerning race or marital status in an application form for protective tenants, that would be a violation of the Rumford Act. If the law is violated: (1) The owner must go through with the rental or sale, or (2) The complainant is entitled to the next vacancy, or (3) The owner must pay up to $50,000 in damages for the first offense. "Publicly Assisted Housing" under the Rumford Act would include: (1) Housing granted tax exemptions, housing built on land sold at a low cost by a state or local agency pursuant to the Federal Housing Act of 1949. (2) Housing located in a multiple dwelling where there is a loan insured by a government agency.

NATIONAL ASSOCIATION OF REALTORS(R) (N.A.R.)

Unifies the organized real estate interests of the nation. (1) REALTOR(R): Name used by members of the N.A.R. (2) MEMBERSHIP: Does NOT authorize a broker to conduct real estate activities in another state. (3) CODE OF ETHICS: A guideline for the ethical conduct of the members of the N.A.R. (REALTOR(R)'s Golden Rule). - Ethics is "The science dealing with morals and good conduct." - Ethics concerns honesty and fairness in dealing with public, clients, associates and customers. - Provides that no sign is to be placed on the property without the owner's consent. - "Under all is the land. Upon its wise utilization and widely allocated ownership depend the survival and growth of free institutions and of our civilization." -- Part of the Preamble.