Broker Survey Real Estate Exam

Tips to Avoid Conversion and Misappropriation Here are some quick tips to avoid conversion and misappropriation:

Never withdraw funds out of a trust account for general business use, such as paying fees or paying business expenses. Never withdraw funds out of a trust account for personal use. Never use non-deposited funds or property for personal use. Be absolutely clear in noting the balances in the trust account for each and every beneficiary. Account for every transaction, in and out of the trust account and record the transactions on the proper forms. Never use funds from one beneficiary to pay an obligation for another beneficiary. One beneficiary may not have enough funds to cover an obligation. Even though you might have plenty of funds in the trust account, you cannot use them to cover the obligation. You must go back to the beneficiary to provide for the obligation.

Non-cash funds must be accounted for as well.

Non-cash funds must be accounted for as well. The state of California does not prohibit the use of non-cash funds as trust funds in a real estate transaction. It is true that almost all real estate transactions are completed using checks as the deposit, but other items can be used as well: Promissory notes - where the buyer gives an unsecured note as a deposit Gold or precious stones Jewelry Stock or bond certificates Pink slips to automobiles The problem is how would you keep track of these types of deposits? What do you do with them? When you receive something of this nature, you first must record the receipt on the Record of All Trust Funds Received-Not Placed in Brokers Trust Account (RE 4524) form. Then you must store the item in a place where it cannot be commingled with personal or business assets. Some brokers have a special safe on the premises while others have a separate safe deposit box for that purpose. Placing an item in the safe deposit "trust" box within three business days would be like using a trust account. Just as with a check being forwarded to an escrow account, when the non-cash funds are transferred out of your possession and forwarded either back to the beneficiary or to the recipient, you would make another entry on the Record of All Trust Funds Received-Not Placed in Brokers Trust Account (RE 4524) form, to show the disposition of those assets.

If a real estate professional receives a gift for a referral to an appraiser, under what value would it be acceptable to keep the gift?

None, it is never acceptable to keep a gif

Complete form RE 4523 for each client who gives you trust funds.

Now let's talk about the Separate Record for Each Beneficiary or Transaction For Client's Funds Place in Trust Fund Bank Account (DRE form RE 4523). An example is shown below. The entry shown corresponds to the deposit recorded on the Bank Account Record (RE 4522) in the previous slide. 4523 Complete one of these forms for each trust fund transaction or beneficiary. For example, each client will have their own form on which you will record the disposition of the trust funds received or disbursed to that client for a specific transaction. Enter a record on this form whenever trust funds are deposited to or disbursed from the trust bank account. This includes a form for any interest earned, if applicable. The total of all balances (right-hand column of the RE 4523 forms) must equal the Bank Account Record balance (RE 4522) on any given date. Any difference must be reconciled. If you also accept funds from property management, it is recommended that you use CalBRE form RE 4525 to record those transactions, rather than RE 4523. RE 4525 allows you to record detailed information regarding the property and the tenant

Obtaining the seller or buyer signature on the disclosure

Obtaining the seller or buyer signature on the disclosure. As a seller's agent, you can provide your disclosure form to the seller using either of the methods listed below: Personally delivering the disclosure form to the seller. Mailing the disclosure form by certified mail to the seller's last known address. If sent by certified mail, you do not need to obtain the seller's signature on the document because certifying delivery serves as your acknowledgement receipt. Should a seller or buyer refuse to sign the disclosure, you must "set forth, sign, and date a written declaration of the facts of the refusal." (Civil Code § 2079.15).

One cannot be denied housing on the basis of requiring the use of a service animal, even in a "no pets policy" property. A service animal is not a pet, rather it is a care-giver. The right to possess a service animal is covered by several laws, including Federal Fair Housing Law, the Fair Housing Amendments Act (FHAA), the California Fair Employment and Housing Act (FEHA), the Americans with Disabilities Act and the Rehabilitation Act of 1973, Laws that govern service animals for housing differ from those for public access. Written proof that the service animal is required to accommodate a tenant's disability can be required by a landlord. However the landlord may not inquire as to the nature of the disability. Additionally federal guidelines specifically state that if the disability is obvious, written proof is not required. Service animals are not required to be registered as such. All 58 counties in California offer a voluntary registration process for service animals. Either the county clerk's office or the Animal Control Agency provides the registration. Example Duane is a landlord with a strict "no pets" policy, so he refuses to rent to a Sal, a blind person, because Sal uses a seeing-eye dog. This is discrimination because service animals assisting any disabled individual must be allowed in any housing or residential situation. These are working animals and are not considered pets; they are considered to be an extension of the person. Landlords cannot discriminate against individuals who use these types of animals, and additional deposits cannot be required. The landlord also cannot charge a higher monthly rent (not only could doing so be considered merely a maneuver to circumvent security deposit laws, but since security deposits in California are "refundable", the additional rent amount could be considered a "non-refundable" deposit and another violation). Landlords can require that the carpeting be professionally cleaned and "de-ticked" as needed when the tenant vacates. Owner's insurance policies frequently exclude coverage resulting from injuries caused by service animals. If you are a property manager, it can be a challenge to comply with Fair Housing laws relating to service animals and at the same time to ensure the property owner remains adequately covered by insurance. It may require exploring other insurance companies to see if the animal in question would not be excluded. Seeking legal advice in such a circumstance is a must.

Other types of trust fund mismanagement are conversion and misappropriation Conversion is a second activity to avoid

Other types of trust fund mismanagement are conversion and misappropriation Conversion is a second activity to avoid. Conversion occurs when someone who has control over someone else's property subsequently prevents the owner from using that property. This could include the use of cash deposits or property held in trust for personal or business purposes. Using funds entrusted to you for personal purposes, or for an unauthorized purpose, is known as misappropriation. You could also call it embezzlement, and it is illegal. Conversion can also occur when one beneficiary's funds are used for another.

Overages must be explained.

Overages must be explained. What happens if you have an unexplained overage in your account, meaning you have more money in the account than that belonging to the beneficiaries? What if you cannot identify who owns those funds? If you discover this, the first rule of thumb is to remember that those funds are still trust funds. You cannot withdraw them for your own use. You cannot use them to offset or cover shortages that may exist in the trust account. The funds must remain in your trust account or in a separate trust fund account established to hold such excess funds. You must keep a separate ledger of these unexplained overages. Such records must include the date of recording and the date which such funds became an unexplained trust account overage. You must reconcile this account each month along with the other trust fund reconciliations.

Perception and association are protected under California FEHA, but not the Federal FHA. As stated previously, perception and association are protected classes that have been added to the California Fair Employment and Housing Act. These classes have NOT been added to the Federal Fair Housing Act. Discriminating against someone that is "perceived" to belong to a class which is protected, even if the person does not actually belong to that class, is illegal in the state of California. Example Christopher, a White man, is friends with Tonya, who uses a wheelchair. Christopher is looking for an apartment to rent, and brings Tonya along to his appointment to view an advertised unit. However, the apartment manager takes one look at Tonya and tells Christopher that the apartment wouldn't be suitable as it is an upstairs unit and Tonya would not be able to visit and denies the application. Although the manager may have meant well, this qualifies as discrimination because of association.

Persons who have medical conditions, defined primarily as cancer or a genetic disease, are a protected class in the state of California. You may not refuse to sell, rent, or lend to someone based on a medical condition Example Lisa was fighting breast cancer, and wanted to rent an apartment closer to the hospital where she was receiving treatment. Petra, the property manager, lied to Lisa and said that there were no units available in her building simply because of Lisa's cancer diagnosis. Petra was concerned that other tenants may feel uncomfortable with Lisa's condition and consider moving. She also thought Lisa may begin asking for special consideration, such as accepting late or less rent due to increasing medical bills, or to make modifications to her apartment or using medical marijuana to accommodate her disease. This is discrimination based on medical condition.

Based on all the recorded transactions for the trust fund in the month of May, what is the balance as of 5/31/2013 on the Bank Account Record?

$4,453

Transaction #6 - May 10, 2013 Alice has been assisting Mark and Pam Brennan to find a new home in Anytown. They have found a perfect ranch-style home at 8723 Ridge Way and are making an offer. They give Alice a check for $1,200 as an earnest money deposit. The earnest money check is made payable to Anytown Title Company. Mark and Pam instruct Alice to forward the check to Anytown Title Company, which she does the next business day. How does Alice account for this check?

Place one entry on the Record of all Trust Funds Received- Not Placed In Brokers Trust Account (RE 4524) for the receipt of $1,200 only. The next day, enter a disposition of the check, the date of the disposition, and then forwarded the check to Anytown Title Company. At the time the check is received, it is recorded on the Record of All Trust Funds Received- Not Placed In Brokers Trust Account (RE 4524) record. When the check is sent, enter the disposition on the same line, showing to whom the funds were sent and when. Since the funds are not deposited to the trust account, the Separate Record for Beneficiaries is not used.

Transaction #4 - May 6, 2013 Brett has had a property listed for Adam Southerland, property address of 790 Westlake Drive, for 3 weeks and has just received an offer from Rick Smith on the property. He receives a check for $3,000 made payable to ABCD Realty as an earnest money deposit on the property. Rick gives instruction for the check to be held until the offer is accepted by the sellers. What is the proper action for Brett to follow

Place one entry on the Record of all Trust Funds Received- Not Placed in Brokers Trust Account (RE 4524), for $3,000 lace one entry on the Record of all Trust Funds Received- Not Placed in Brokers Trust Account (RE 4524) for $3,000 only. Since the check was not deposited, you do not need to have a Separate Record for Each Beneficiary or Transaction For Client's funds Placed In Trust Fund Bank Account (RE 4523).

Your score: 90% Bernadette, Congratulations! You successfully passed your quiz. Click below to return to the Table of Contents and continue your course. 1. Coraline, a broker, has three salespeople. In accordance with Regulation 2726, Coraline: A. Told her salespeople that a written agreement is optional B. Has a verbal agreement with each salesperson C. Has a written agreement with each salesperson Congratulations, this is the correct answer! D. Made it clear that written agreements are optional 2. It`s time for Mandy to renew her license, but she currently has a restricted license. Which of the following statements is true. A. She can renew her license the same as always. B. She does not have the right to automatically renew her license. Congratulations, this is the correct answer! C. She has to get a written letter of approval from her broker first. D. She must wait until at least half of her probationary time has passed. 3. As a broker, Heidi must _____________ over the activities of her salespersons. A. Exercise reasonable supervision Congratulations, this is the correct answer! B. Sit in judgement C. Exercise leniency D. Provide final approval for all emails 4. You`re a real estate broker with 15 salespeople in a mid-size office in a busy suburban area. What is the most effective way for you to protect your firm from lawsuits? A. Developing, implementing, and training your staff on policies and procedures Congratulations, this is the correct answer! B. Making timely use of your attorney C. Getting errors & omissions insurance D. Training your sales staff on effective negotiation skills 5. Jessica is a licensee who has a restricted license, and she`s eager to apply to have the restriction lifted. She will need to fill out a petition and pay a fine of:

$800

ll of the following are considered kickbacks, EXCEPT:

. A clock purchased at a silent auction sponsored by a mortgage compa

The statement "all parties in a sales contract must be of legal age" indicates which of the following

. Legal capacit

Louis, a broker, receives an earnest money check from his buyer. The offer is accepted and Louis deposits the earnest money check in the broker`s trust account. Within three days, the buyer and seller agree to cancel the purchase agreement and return the earnest money to the buyer. Which of the following is Louis` responsibility?

. Louis should disburse the earnest money deposit from the broker`s trust account, after Louis has ensured the earnest money check has cleared the buyer`s bank.

Transaction #10 - May 31, 2013 50 percent of the rents collected in the month of May are: • 246 Main St: $750 to John Tyler • 512 Oak Ave: $850 to Max Goldberg Make the appropriate entries on your columnar forms. Be sure to record the balances. What are the balances for 246 Main St. and 512 Oak Ave. separate accounts?

246 Main St: $600; 512 Oak Ave: $653 246 Main St: $1,500 rent - $150 management fee - $750 rent disbursement. 512 Oak Ave: $1,700 rent - $27 pest control expense - $170 management fee - $850 rent disbursement.

Under HOPA guidelines, in senior living communities, what is the minimum percentage level of occupied units that must have a resident over 55 years of age in order for a seller to refuse to sell to persons less than 55 years of age without engaging in discrimination?

80%

Even when terminating, some commitments must be met.

Prior commitments may still need to be fulfilled when a client or agent terminates an agency relationship prior to the agreement's expiration date, especially if the client is in breach of contract. The client, agent, or both parties may be responsible for damages or liabilities incurred during the agency relationship. The client may need to pay a commission to the agent, even if the client revokes the agency relationship. The agent may need to follow through on agency-related actions for the client until the agency relationship terminates.

A disabled tenant can request reasonable modifications to a property. If a property is not accessible for a disabled person, that person should discuss accommodations and modifications with the housing provider. Accommodations can include adjustments in policies, practices, or procedures. A landlord is not required to make any modification to a property that is not "covered" by accessibility laws. If reasonable modifications are needed, the tenant would have to pay for such modifications, and agree to restore the property to its original condition upon vacating the property. However, a landlord may not require the property to be restored if the modification does not restrict the utility or use of the property for the next tenant. For example, a tenant in a wheelchair can pay for ramps to be installed by the front door and grab rails in the bathroom. When the tenant leaves, only if these would restrict the use of the property for the next tenant would they have to be removed and the property restored to its original condition, at the tenant's expense. Such modifications are oftentimes property-specific, and whether or not they would detract from the utility of the property may depend on the characteristics of the property. The real estate licensee acting as a property manager is advised to seek legal advice if any question exists as to the proper course of action he or she should take. A tenant or applicant who asks for a parking space closer to his or her dwelling unit in a multifamily property must be reasonably accommodated. In a property in which all tenants have assigned parking, the property manager would be required to ask those tenants whose parking spaces would be most suitable for the disabled tenant to consider making a change. If they all say "no", a reasonable effort has been made and no further action is required.

commingling is a direct violation of the Business and Professions Code Section 10176 and 10177. You can have your license _______________ if you practice commingling funds.

A. suspended or revoked

To understand trust fund requirements, it helps to understand who the players are.

Account Holder/Trustee - The broker who opens and manages the account is considered the account holder. An account holder is also known as a trustee. Beneficiary - A beneficiary is the actual owner of the funds. For example, a beneficiary can be the person providing an earnest money deposit for a purchase offer; or, the landlord for whom rents are collected. Since trust funds can come from many different types of transactions, the following people may be involved in a transaction that uses trust funds: Offeror - Offerors are usually the prospective buyers who make earnest money deposits. Earnest money checks are either made payable to the brokerage or to a third party escrow company. Offeree - This is the person receiving the offer and who must accept the offer to create a contract, usually the seller of a property. If the purchase agreement is completed, the offeree will become the owner of the earnest money that has been deposited into a trust fund. Principal -As it relates to fiduciary duties, the principal is the person with whom you have contracted to provide real estate services. Principals can be buyers, sellers, landlords or tenants. Any of these people may be part of a transaction involving trust funds. Property Owners/Landlords -These parties will receive funds from a trust account. The funds are paid by the tenant through the broker, who deposits the funds into the trust account. Tenants -A broker who receives funds from tenants and prospective tenants must deposit the funds into a trust account. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Advertising based on sex, sexual orientation or familial status should be avoided. Advertisements containing explicit preferences, limitations or discriminations based on sex or familial status are illegal, such as: No women allowed Gentlemen's housing units No children please Married couples only Gay friendly community Common terms descriptive of rooms or unit functions are not a violation of sex or race discrimination provisions. Common physical descriptions of housing units or rooms that do not violate the fair housing laws include: Mother-in-law suite Bachelor apartment Master bedroom Two bedrooms Cozy Family room Descriptions of services, facilities, or neighborhoods are allowable, such as: No bicycles allowed Quiet streets

Advertising must avoid mention of disability. Any explicit exclusions, limitations, or other indications of discrimination based on a handicap or medical condition in real estate advertising are illegal. For example: No wheelchairs No pets under any circumstances, including service animals. (Note: a service animal is not legally considered a pet.) No disabled access Advertisements containing descriptions of properties, accessibility features, or neighborhoods are legal. Great view, fourth-floor walk-up, walk-in closets Wheelchair access Riding trail Walk to bus-stop Advertising describing conduct expected is also allowed, but remember to describe behavior - not people. "No smokers" or "No drunks" are unacceptable but describing a behavior is acceptable, such as: No smoking No drinking

Advertising should not mention protected class status. There should not be any stated preference or limitation as to race, color, or national origin in real estate advertising. If you see such descriptions as the following, you are looking at illegal and discriminatory language: Latino neighborhood Whites only African American family homes Indians need not apply Terminology relating to specific property features is permissible, such as: Italian marble entryway Spanish-style ceramic tile Japanese Zen garden

In 1963, William Byron Rumford co-authored the Rumford Fair Housing Act.

An early civil rights leader, Rumford had been involved with the Appomattox Club, perhaps one of the first African American political organizations in the San Francisco Bay area, supporting the policies of Franklin D. Roosevelt. As a northern California legislator, Rumford helped end discrimination by property owners and landlords who refused to rent or sell to "colored" people. The Act prohibited discrimination in public housing and all rental properties with more than four units. The Rumford Act was much more stringent than any other act that preceded it, and it became a model for the Federal legislation that followed. The Rumford Act and FEPA were combined in 1980 to create the California Fair Employment and Housing Act (FEHA). The Department of Fair Employment and Housing and the Fair Employment and Housing Council enforce FEHA.

Article 5 of the Code of Ethics also covers disclosure of personal interest.

Article 5 of the Code of Ethics reads, "REALTORS® shall not undertake to provide professional services concerning a property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties." Can you imagine the chaos that may result if you provide a valuation assessment of a property that an owner uses to determine a listing price for a house you intend to buy? Surely questions would arise regarding the integrity of your valuation. Did you provide the seller with a skewed valuation in order to purchase the property yourself well below market value? To ensure that all clients receive professional and ethical services and have no reason to question you or the integrity of the industry you represent, you cannot provide professional services regarding a property for which you may have interest without first disclosing any interest to all affected parties.

How long after receipt of a trust fund check may the broker hold trust funds, before they are deposited? A. A broker can hold trust funds u

B. A broker can hold trust funds up to three business day

Luella is a broker of Luey Realty. Luella has a trust account that is used to receive rent payments. Luella`s property management fee of 10 percent is paid from the rents once a month. When does Luella withdraw her fees?

B. Luella`s broker fees must be disbursed within 25 days of the deposit.

TRANSACTION #7 - MAY 11, 2013 Adam Southerland has accepted the offer from Rick Smith. Brett deposits the earnest check for $3,000 made payable to ABCD Realty as an earnest money deposit on the property. What forms will require an entry?

Bank Account Record (RE 4522) for receipt of $3,000, Separate Record for Each Beneficiary or Transaction For Client's Funds Placed In Trust Fund Bank Account (RE 4523) for receipt of $3,000, and the Record of All Trust Funds Received- Not Placed In Brokers Trust Account (RE 4524) for the disposition of $3,000.Bank Account Record (RE 4522) for receipt of $3,000, Separate Record for Each Beneficiary or Transaction For Client's Funds Placed In Trust Fund Bank Account (RE 4523) for receipt of $3,000, and the Record of All Trust Funds Received- Not Placed In Brokers Trust Account (RE 4524) for the disposition of $3,000. Since the Record of all Trust Funds Received- Not Placed In Brokers Trust Account (RE 4524), already had a receipt entry on May 6, Brett would just add the disposition to that same line to show that the funds were disposed to the trust account and the date of the disposition.

Transaction #9 - May 31, 2013 ABCD Realty charged the following property management fees: $150 for 246 Main Street $170 for 512 Oak Ave Which transaction recording is correct?

Bank Account Record (RE 4522): Paid out $150 for 246 Main St; new line Paid Out $170 for 512 Oak Ave. Both entries to ABCD Realty. Separate Record for Each Property Managed (RE 4525) 246 Main St: Amt Disbursed $150. Separate Record for Each Property Managed (RE 4525) 512 Oak Ave: Amt Disbursed $170.

Transaction #8 - May 13, 2013 Eleanor paid $27 to Dark Star Pest Control for a monthly pest control treatment on the property at 512 Oak Ave. Check #1001 from the trust account is used to make this payment. How would you complete the form or forms for this transaction?

Bank Record (RE 4522) with "Paid to" as Dark Star Pest Control, description to include 512 Oak Ave., and the check amount, check number, and date written under the "Paid Out" columns, and $27 deducted from running balance. Check #1001 also recorded on the Separate Record for Each Property Managed for 512 Oak Ave

Be aware of local discrimination laws. Some communities in the state of California include "size" as a protected class. Additional rules and protected classes, such is this, may exist in various municipalities above and beyond the federal and state statutes. You should take the time and effort to be aware of your local requirements. Some classes, such as smokers, people in the military, or people of differing political affiliations, are not specifically included as protected classes, but you should take care not to discriminate against any group of people. If smoking is restricted in a property, the notice should state "no smoking" rather than "no smokers." You should target the undesired behavior, not the people that engage in that behavior. VIRTUAL FIELD TRIP: If you would like to review more about protected classes and consumer rights under the California Fair Employment and Housing Act, click the following link to access videos from the California Department of Fair Employment and Housing. These videos are not a required component of this course.

Transaction #5 - May 8, 2013 Eleanor collects the monthly rent of $1,700 for 512 Oak Ave. Check #2090 from Roger and Helen Samuels. The funds are deposited to the trust account the same day. On which forms should Eleanor make entries?

Both the Separate Record for Properties Managed for 512 Oak Ave and the Bank Account Record.

TRANSACTION #3 - MAY 5, 2013 Eleanor collects the monthly rent of $1,500 for 246 Main St. Check #293 from Lisa James. The funds are deposited to the trust account the same day. Which entries would be the correct actions for Eleanor to make?

C. One entry for the $1,500 on the Bank Account Record (RE 4522), and one entry for the $1,500 on the Separate Record for Each Property Managed (RE 4525), for 246 Main Street.

Situations where broker funds are allowed to be in a Trust Fund

CalBRE describes two ways in which it is acceptable for a real estate broker's personal funds to be in the trust account: Up to $200 to cover checking account service fees and other bank charges such as check printing charges and service fees on returned checks. Trust funds may not be used to pay for these expenses. (The preferred practice, however, is for the broker to have the bank debit his/her own personal account for any trust account fees and charges.) Commissions, fees, and other income earned by a broker and collectible from trust funds may remain in the trust account for a period not to exceed 25 days from the date deposited, or from the date commissions and fees are deemed earned. Regulation 2835 recognizes that it may not always be practical to disburse the earned income immediately upon receipt. For instance, a property management company may find it too burdensome to collect its management fee every time a rent check is received and deposited to the trust account. Therefore, as long as the broker disburses the fee from the trust account within 25 days after deposit, or from the date the commission or fees are deemed earned, there is no commingling violation. However, if there is any dispute between the broker and the principal as to the broker's portion of the funds, the amount of the funds in dispute are not to be withdrawn until the dispute is resolved.

Key Points from Unit 2

California Civil Code Section 229 defines the term "agency" as, "The representation of another person called a principal, by an agent, in dealings with third persons." The concept of agency is not dependent on whether the agent is compensated by the principal. There are three primary parties associated with a real estate agency: Principal, Agent, and Broker/Brokerage Firm. Agents must have a valid real estate salesperson license and be must employed by a real estate broker. Single agency means that a real estate brokerage firm, and all the brokers and agents for that firm, act in a fiduciary capacity for either the buyer or the seller in a transaction, but not for both. Dual agency means that a real estate brokerage firm, and all the brokers and agents for that firm, act in a fiduciary capacity for both the buyer and seller in a transaction. Such a transaction is often referred to as "in-house." "Express Agency" means that you and your client have a written agency agreement in place. Express agreements are the ideal way to establish an agency relationship because they provide, in writing, the duties and responsibilities for both you and your client. You and your client are clear about the expectations required of each other. California is an "implied agency" state, meaning that if you act on behalf of a client in any way associated with a real estate transaction, you legally are in an agency relationship with that client. Undisclosed agency, also known as divided agency, occurs when one agent represents both the buyer and the seller in a transaction without proper disclosure and consent. Undisclosed agency is illegal in California. Agents must provide fiduciary duties to buyers and sellers including obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care (OLDCAR). Agency may be terminated by destruction of the property, completion of sale, mutual agreement, incapacitation or death, bankruptcy, renouncement by the agent, revocation by the client, and expiration of the agency agreement. The purpose of a written disclosure of agency relationship is to inform all parties about the agent/brokerage responsibilities during a residential property transaction. Disclosure does not create an agency relationship. The disclosure process simply educates potential clients about the type of agency relationships that are available. Agency disclosure is official when the client signs a written disclosure acknowledgement. Signing the disclosure form does not establish or confirm an agency relationship. Disclosed agency relationships must be confirmed in writing. This requirement can be satisfied by signing a purchase agreement which contains confirmation acknowledgement or by having the seller, the buyer, and the agent(s) sign a separate written confirmation document. California law prohibits you from engaging in activities for profit without full disclosure to, and consent from, your client.

California added perception and association to the equation. Here are some thoughts that may be helpful when considering how protected classes fit into California fair housing mandates. In January 2000, California added two concepts to the California Fair Employment and Housing Act regarding protected classes. Perception: If an individual discriminates against someone because they "perceive" them to belong to a protected class it is illegal, even if the person does not actually belong to that class. For example, if someone is perceived to be of a certain sexual orientation by a landlord who then refuses to rent to that person, this is illegal under FEHA whether or not the person is of the perceived sexual orientation. Skin color may fall under this category. A person with a certain complexion may be perceived as belonging to a race that they are not in actuality a part of, yet discrimination against such a person based on this perception is still illegal. Association: If someone associates with friends from a protected class, even though that person does not belong to the protected class themselves, they may experience discrimination because of that association. For example, it would be illegal for a seller to discriminate against a person whose religion was Baptist, but associated with a person whose religion was Scientology, because the seller disliked the religion of Scientology. As new fair housing laws continue to develop, perhaps you worry about giving an inadvertent offense or that someone will sue you for perceived discrimination that you did not intend. Think of it this way: when you walk into a store or office, how do you want to be treated? If you treat everyone with whom you come in contact with the same courtesy and respect you expect from others, it is unlikely you will ever give offense or be perceived to be discriminatory.

California requires confirmation as well as disclosure of agency relationships

California requires confirmation as well as disclosure of agency relationships. California requires you to first educate the client about agency relationships through disclosure. The disclosure must happen prior to entering into a written agency agreement with a client. Whether you create a written agreement with the client or not, the agency relationship must be confirmed by the client at some point prior to or concurrent with signing the purchase agreement. The steps in this process look like this: Disclosure. REALTORS® may use the C.A.R. form Disclosure Regarding Real Estate Agency Relationship. Express agreement creating agency relationship with seller or buyer, if used. When working with a seller, this will be the listing agreement; with a buyer, a buyer broker agreement. Keep in mind that even if you don't have a written contract with the client, your actions can create a state of implied agency. Confirmation. This statement is where the client confirms the agency relationship(s) being used for the transaction. At the very latest, this occurs as part of the purchase agreement. The disclosure and confirmation steps are required by law; creating an express agreement with your client is just a good idea. Disclosure Agency disclosure is official when the client signs a written disclosure regarding the agency relationship. Signing the disclosure form does not establish or confirm an agency relationship. Confirmation Disclosure of agency relationships and the type of agency relationships used for the transaction must be confirmed in writing. This requirement can be satisfied when signing a purchase agreement which contains a paragraph for confirmation acknowledgement. This confirmation can also happen by having the seller, the buyer, and the agent(s) sign a separate written confirmation document. REALTORS® can use the form Confirmation of Real Estate Agency Relationships (C.A.R. Form AC). Confirmation can happen simultaneously with disclosure, or it can take place later. Regardless, confirmation must occur prior to submitting an offer and should be included in the purchase agreement. The California Association of REALTORS® contracts include a section that confirms agency relationships. California Civil Code Section 2079.17 states that agency relationships between selling agents and the buyer and seller "shall be confirmed in the contract to purchase and sell real property or in a separate writing executed or acknowledged by the seller, the buyer, and the selling agent prior to or coincident with execution of that contract by the buyer and the seller, respectively." Similarly, the same code states that agency relationships between listing agents and sellers "shall be confirmed in the contract to purchase and sell real property or in a separate writing executed or acknowledged by the seller and the listing agent prior to or coincident with the execution of that contract by the seller."

Changes and Additions to the Fair Housing Act fence

Changes and Additions to the Fair Housing Act fence Title VIII of the Fair Housing Act was amended in 1988. The original intent of the Fair Housing Act was to protect racial and religious minorities. Some of the important changes that were made as a result of the 1988 amendments, which became effective March 12, 1989, include: Expanded the coverage of the Fair Housing Act to prohibit discrimination based on disability or on familial status (presence of child under age of 18, and pregnant women); Established new administrative enforcement mechanisms with HUD attorneys bringing actions before administrative law judges on behalf of victims of housing discrimination; and Revised and expanded Justice Department jurisdiction to bring suit on behalf of victims in Federal district courts.

There are three exceptions to the three-day deposit rule

Checks held by the broker Checks sent to the principal (seller) Checks sent to a neutral escrow depository Checks Held by the Broker When you, as a broker, receive a check as earnest money for the purchase of a property, you can hold that check in your possession (secured and uncashed), until the acceptance of the offer if: The check is not payable to you or the brokerage (meaning you cannot cash it) or the offeror (prospective buyer) gives written instructions that the check is to be held until acceptance, AND The offeree (the seller) is informed that the earnest money check is being held by the broker. Once the offer is accepted, you would then have three business days to deposit the check into the trust fund account (unless you have written instructions to continue to hold the check) or forward the check to the proper recipient (usually an escrow company). Checks Sent to the Principal (Seller) If both the buyer and the seller agree in writing, an earnest money check can be sent directly to the seller once the offer has been accepted. Checks Sent to a Neutral Escrow Depository Some principals feel more comfortable if the funds within a transaction are handled by a neutral third party company like an escrow company. You should follow the same principles of accounting for the funds while they are in your possession. The check would be held until the offer is accepted and then forwarded to the escrow company within three business days, unless otherwise directed in writing. note NOTE: Having the checks made out directly to the escrow company is the most common method of handling earnest money deposits.

There are three exceptions to the three-day deposit rule.

Checks held by the broker Checks sent to the principal (seller) Checks sent to a neutral escrow depository Checks Held by the Broker When you, as a broker, receive a check as earnest money for the purchase of a property, you can hold that check in your possession (secured and uncashed), until the acceptance of the offer if: The check is not payable to you or the brokerage (meaning you cannot cash it) or the offeror (prospective buyer) gives written instructions that the check is to be held until acceptance, AND The offeree (the seller) is informed that the earnest money check is being held by the broker. Once the offer is accepted, you would then have three business days to deposit the check into the trust fund account (unless you have written instructions to continue to hold the check) or forward the check to the proper recipient (usually an escrow company). Checks Sent to the Principal (Seller) If both the buyer and the seller agree in writing, an earnest money check can be sent directly to the seller once the offer has been accepted. Checks Sent to a Neutral Escrow Depository Some principals feel more comfortable if the funds within a transaction are handled by a neutral third party company like an escrow company. You should follow the same principles of accounting for the funds while they are in your possession. The check would be held until the offer is accepted and then forwarded to the escrow company within three business days, unless otherwise directed in writing. note NOTE: Having the checks made out directly to the escrow company is the most common method of handling earnest money deposits.

In what form must trust fund deposits be recorded? Congratulations! That's the correct answ

Columnar and chronologicalColumnar and chronological

Lesson 5: Recording Deposits and Withdrawals

Deposits Withdrawals Earnest money deposits Deposits sent to escrow companies Advance payments for home inspections and appraisals Payments for inspections and appraisals Advance payments for down payments or closing costs Rent disbursements to property owners Rent payments on client properties Payments for property operating expenses such as maintenance, taxes and loan payments Security deposits on client properties Returned to the tenant or disbursed to vendors to pay for tenant-caused damage Receipt of funds to cover property maintenance Disbursed to vendors who complete property maintenance Each one of these transactions must be recorded on the proper columnar forms or in your accounting systems. Electronic fund transfers Deposits and withdrawals can be made using checks or electronic transfers. If you receive or send an electronic transfer, you will need to have a record of the transaction so you can validate the transaction when you reconcile the account.

You`re a real estate broker with 15 salespeople in a mid-size office in a busy suburban area. What is the most effective way for you to protect your firm from lawsuits?

Developing, implementing, and training your staff on policies and procedures

Disability is a federally protected class; California protection is even broader. A person with a disability is someone who has a physical or mental condition that greatly limits at least one major life activity, such as walking, talking, learning, and so forth. A person with a disability is protected under both Federal and California fair housing laws. California law is broader than federal law regarding disabilities. A property owner or property manager, however, may deny housing to anyone who is deemed to be a direct threat to the health or safety of others. Example: John, a tenant in apartment 16, is an alcoholic. He has been receiving treatment for this disease but recently has become verbally abusive toward his neighbors. Tim, the property manager, has been informed by several other tenants that they are concerned John may become physically abusive. This morning Tim received a phone call from the tenant in apartment 15 that John constantly yells at her, and now she is afraid to go outside for fear John may do something violent. Tim felt he had no other choice than to deliver a "three day notice to quit" to John. The notice informs John that unless he ceases his present behavior he must move. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Discrimination based on national origin and ancestry is also illegal. National Origin National origin relates to where a person (or his/her family) was born. While you may prefer your own culture and national origin over someone else's, you may not allow this preference to influence your professional and business life. A person may file national origin discrimination complaints in a variety of different categories. These include: Hispanics: All persons of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish cultures without regard to race. Asian or Pacific Islander: All persons of the Far East, Southeast Asia, the Indian Sub-Continent, or the Pacific Islands. Included are: China, Japan, Korea, the Philippine Islands, and Samoa. American Indian or Alaskan Native: All persons having origins in any of the original people of North America. This is not an exhaustive list. Any person who feels that they have received discriminatory treatment because of their national origin can file a complaint. This also includes discrimination because a person speaks a different language. Example Dan lists his house for sale in the newspaper and monitors calls for the home on an answering machine. He tells callers with foreign accents that the home is no longer available, but he tells callers without foreign accents that the home is still available. Ancestry Ancestry differs from national origin as it is specific to the members of a person's family, whether living or deceased, close or distant. Example If a person discriminates against Marguerite Castro because she or her parents come from Cuba, the discrimination is based on national origin. But if the discrimination against Marguerite Castro is based on the fact that she is Fidel Castro's second cousin, the discrimination is based on ancestry. Both are illegal.

Discrimination based on religion is illegal. Showing a preference for or against a religious group, or showing intolerance for that group's observation of its religious practices or dietary habits, constitutes religious discrimination. Many licensees inadvertently violate fair housing when they try to be too helpful. A person might say that they are Jewish and the licensee may begin talking about the local synagogue or churches in the area. A licensee cannot bring up the discriminatory topic, but may answer if asked. Example Alfred, a Christian, is a landlord. He refuses to show or rent an apartment to someone who is not a Christian. This is a violation of fair housing rules.

Disparate Impact Julio and Sonia Rodriguez were trying to get approved for a loan to purchase a home in Alexandria. They had their eye on a home in an older subdivision with a large Hispanic population and had chosen an agent. They heard that there was a special loan program available to first time buyers to work with the Federal First-Time Homebuyer Credit tax incentive. They went to their neighborhood bank to apply for the loan. The home they wanted to buy was appraised at $90,000. When they asked a loan officer at their neighborhood bank about the loan program, they were told that in order to qualify for the special loan package the property had to be appraised at a minimum of $110,000. Can Julio and Sonia file a complaint for Disparate Impact? They can; their chances of winning their case depend on their ability to prove a discriminatory effect to the loan program they applied for.

Disparate impact is subtle discrimination. A more subtle form of discrimination, and one that is often done unintentionally, is called "disparate impact." When a broker or lender applies a policy or practice uniformly to all applicants, but the consequences disproportionately affect a protected class, disparate impact occurs. Disparate impact claims can be difficult to prove, especially if a business can show that there were no nondiscriminatory alternatives available. You should be aware of certain practices or actions that may be considered discriminatory in this manner. Two examples of disparate impact are: Many mortgage lenders set a minimum loan amount for home equity loans; this practice may cause a disproportionate amount of denials from a protected class. Prior to 1986, service clubs could legally exclude women from membership (Rotary, Lions, Kiwanis, etc.). If a mortgage lender offered preferred rates or programs to service club members, that policy had a disparate impact on women.

Disparate treatment is different treatment. Disparate treatment occurs when "similarly situated" home seekers (buyers or renters) are treated differently. Home seekers, or applicants, are "similarly situated" when they have similar characteristics such as creditworthiness (credit history and income) and receive "disparate treatment" if they are treated differently because of their race, color, national origin, religion, or other protected class. Example: Disparate Treatment Adam is the listing agent for a property in a high-end neighborhood. Adam received a call from LaKisha, who he thought was of African-American descent because of her name. LaKisha wished to view the home that afternoon. Adam stated that the home was unavailable for showings that day and she would have to make an appointment some other day. Several minutes later, Adam received a call from Amy, who Adam thought was of British descent because of her accent. Amy also asked to view the home that day. Adam said yes and set up a time to view the home that day. As it turns out, LaKisha and Amy are next-door neighbors and reported their experiences with Adam to each other. LaKisha filed a discrimination complaint against Adam. Does her complaint have merit? Yes. The showing of available properties must be provided to all potential buyers without discrimination. As a listing agent, Adam cannot pick and choose to whom he will show the property based on discrimination against a protected class; he must make the listing available for showings on a level basis. This would also hold true if the home seeker was looking for a rental. Landlords cannot deny the showing of a property to one class and then show it to a different class.

Property Managed (RE 4525)

Each property should be listed on the Separate Record for Each Property Managed (RE 4525), for EACH property but with no entries yet, since there have been no funds collected or disbursed.

Earnest money is trust fund money, and must be handled and disbursed accordingly.

Earnest money is trust fund money, and must be handled and disbursed accordingly. When your client enters a purchase agreement, the terms and conditions regarding the earnest money deposit are usually spelled out in the agreement, such as what would constitute the return of the earnest money deposit to the buyer, and what would constitute a forfeiture of the earnest money deposit to the seller. When the sale is concluded successfully, the earnest money deposit is usually used as a credit to the buyer's closing costs. Many times you will see issues with the earnest money deposit when the transaction does not close. If you have deposited an earnest money deposit into your trust account, and the transaction does not go through, you will have to determine if the funds should be returned to the buyer, or whether part or all of the earnest money deposit should be given to the seller. When this situation occurs, you must be aware of the general legal requirements involved, as well as California License Law. In order to protect yourself and your brokerage from risk, keep in mind that in general, the buyer is entitled to get the earnest money deposit back as long as the contract was not breached by the buyer. If the buyer breaches the contract or purchase agreement, then the seller is entitled to the earnest money deposit if it is provided for under the contract as liquidated damages.

Enter all trust fund desposits in chronological order on form RE 4522

Enter all trust fund deposits in chronological order on form RE 4522.Let's take a look at how you will complete a record on form 4522, which we'll call the Bank Account Record. 4522 You must record: The date funds were received. For example, the date a buyer gives you the earnest money check. Name of the payee or payor A description of the fund being received or paid out If it is a received amount: Amount received Reference, such as the check number Date of the deposit If it is a disbursement: Amount paid out Check number and date paid out Daily balance of trust bank account Enter each transaction in chronological order. Calculate the new balance each time you enter a record. The balance shown in the right-hand column of the form must agree with the balance shown on the trust account's bank statement. The balance may be adjusted for deposits in transit, outstanding checks, and any other reconciling items. Any difference between the two records must be reconciled. You can use the column headed "XX" for reconciliation purposes. For example, place a check in this column to indicate that the record reconciles with the bank account entry. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Tony, a broker, is representing Lewis in the sale of a home. Lewis is under contract and the property is set to close at the end of the month. The buyer has given an earnest money deposit to escrow to hold until closing. What capacity is escrow acting in?

Escrow is acting as the neutral party in the transaction and is holding the funds in trust

Every transaction you make requires documentation to support it.

Every transaction you make requires documentation to support it. This collection of documents is called a "paper trail." Having all documents that support each transaction will not only help you to verify every action and transaction, but it will support your actions if you are audited. The CalBRE requires you to keep the following documents for each of the following transactions and activities: Transaction or Activity Documentation Required Receiving earnest money deposits from buyers Real estate purchase agreement and receipt for earnest money deposit signed by the buyer Receiving rents and security deposits from tenants Rental agreements and collection receipts Depositing trust funds Bank deposit slips and receipts from the bank Forwarding buyer's check to escrow company Receipt from the title/escrow company and copy of the check Returning buyer's check Copy of buyer's check signed and dated by buyer, signifying buyer's receipt of check Disbursing trust funds Copy of checks issued and supporting papers for the checks, such as invoices, escrow statements, billings, receipts, etc. Receiving offers and counteroffers from buyers and sellers Real estate purchase agreement and receipt for earnest money deposit, signed by respective parties; agency disclosure statement; transfer disclosure statement. Collecting management fees from the trust fund bank account Property management agreements between broker and property owners and copies of cancelled checks (Note: If only one trust fund check is issued for management fees, charged to various property owners, there should be a schedule or listing on file showing each property and amount charged, and the total amount, which should agree with the check amount.) Reconciling Bank Account Record (RE 4522) with Separate Record For Each Beneficiary or Transaction For Client's Funds Placed In Trust Fund Bank Account (RE 4523) Record of reconciliation Section 10148 of the Business and Professions Code states that you must retain all of the above documents for three years from date of the closing of the transaction or from the date of the listing, if the transaction did not happen. The only exception may be mortgage records, which could have a longer retention period.

The following examples demonstrate how trust funds flow in and out of the account.

Example #1 Allen is a broker who has entered into a listing agreement with Stella to sell her beach house. Stella is the broker-owner of Stella Realty. Allen conducts an open house at the beach house. Josh, a buyer, comes to the open house with his broker, Babbette. Babette is the broker-owner of Babette Properties, LLC. Josh and Babette have a buyer broker agreement. Josh has decided that the beach house is perfect for him. Through Babette, he writes up an offer. He writes a check for the earnest money deposit made payable to Babette Properties, LLC. Josh indicates in his offer that the earnest money check will be deposited and not held. Babette deposits the earnest money check into her brokerage's trust account and records the transaction. At the closing, Babette withdraws the earnest money deposit from the trust account, recording the withdrawal properly. She transfers it to the escrow company (closing agent), who credits the earnest money deposit amount to Josh's final closing cost requirement. Example #2 Charles is interested in purchasing an old Victorian home and has contracted with William, broker-owner of William Realty, to help him prepare the offer. He writes a check for the earnest money deposit, but instructs William, in writing, to hold the check until the seller, Julie, accepts the offer and until all of the contingencies have been met, including the home inspections and termite inspections. Once the inspection contingencies have been removed, William has been instructed to send the check to ABC Escrow, a third party escrow company who will conduct the closing. Once the inspections have been completed, William forwards the earnest money check, payable to ABC Escrow, to the escrow company.

Familial status and marital status are protected under fair housing laws. Familial Status Familial status refers to the presence of children under the age of 18 who are members of the household because of their birth, adoption, or because they have been legally placed in the household. Familial status also includes pregnant women. Example When Veronica became pregnant with her fourth child, her landlord told her she would be evicted from her apartment unless she paid an additional deposit to cover the extra child. In fact, the landlord cannot legally enforce either of those actions. Marital Status Discrimination against couples or groups who apply to buy or rent but are not married is in violation of the California FEHA. Example Sheldon is a landlord who does not approve of couples who live together without being married. When he refuses to rent to such a couple, he is in violation of the California FEHA.

Familial status is a protected class. Unless a building or community qualifies as housing for older persons, it may not discriminate based on familial status. That is, it may not discriminate against families in which one or more children under 18 live with any of the following: A parent A person who has legal custody of the child or children The designee of the parent or legal custodian, with the parent or custodian's written permission Familial status protection also applies to pregnant women and anyone securing legal custody of a child under 18.

A(n) ___ is a professional identity or brand name under which activity requiring a real estate license is conducted.

Fictitious business name

For funds not depostied, use form RE 4524

Finally, let's talk about using the Record of All Trust Funds Received - Not Placed in Broker's Trust Account (CalBRE form RE 4524). 4524 This form is used to record all trust funds that you receive that are not deposited into the trust bank account. For example, these would include checks to be held uncashed according to agreement, notes, or anything of value used as a deposit, such as the title to a vehicle. You will also record the disposition of these funds on this form. Items that should be recorded on this form include: Earnest money deposits held by the brokerage. Earnest money deposits forwarded to a neutral escrow repository. Rents forwarded directly to the property owner. For each such item received, record on the form: Date funds were received Form of payment Amount received Received from Description of property Identity of person to whom funds were forwarded Description and date of disposition

Using the c olumnar forms to balance the trust account.

For a single trust fund account, the total of all Separate Record for Each Property Managed (RE 4525) and Separate Record for Each Beneficiary or Transaction for Client's Funds Placed in Trust Fund Bank Account (RE 4523) balances must equal the daily balance shown on Bank Account Record (RE 4522) on any given date. Any difference must be reconciled. In other words, the items recorded on all pages of two of these forms must balance with the third one, the Bank Account Record. Then the Bank Account Record must be balanced with the account statement from the bank. Think of it like this

Payment of earnest money indicates the presence of which of the following? A. Legal capacity

Good faith to complete the transaction

Heidi is a new broker. She wants to create a comprehensive office policy manual to help reduce her exposure to risk. Which of the following topics should she address?

Guidelines for licensed and unlicensed activitie

Coraline, a broker, has three salespeople. In accordance with Regulation 2726, Coraline:

Has a written agreement with each salesperson

rnold is a broker and knows it is important to identify possible risks for his brokerage. Which of the following would be the best approach for Arnold to identify risks?

Have a company meeting and ask his agents and staff to share their thoughts about possible risks

Jay is a broker. He wants to create a written office policy, because he believes it will:

Help standardize tasks and procedures

Follow these steps when providing agency disclosures to potential clients.

If you are the listing agent, you must provide your client (the seller) with a copy of the agency disclosure form before signing a listing agreement. The seller signs this form to acknowledge receipt. If you are the buyer's agent, you must provide two disclosures: The first one goes to your buyer client as soon as possible, preferably before the first discussion regarding the client's real estate needs. If you sign a buyer-broker agreement with the client, give them the disclosure first and have them sign it. In either case, the buyer must receive and sign the disclosure before you can present any offer to purchase. Provide a second copy of the agency disclosure form to the seller prior to presenting an offer to purchase. If you are not working face-to-face with the seller, you can have the listing agent give the disclosure form to the seller for you. The seller signs this form to acknowledge receipt. When done correctly, a seller will receive and sign two disclosure forms (one from each agent) and the buyer will receive and sign one form (from his or her own agent) for each transaction. img Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

In 1959, California saw passage of new civil rights legislation.

In 1959, California saw passage of new civil rights legislation. In 1959, civil rights activists finally won a long political battle in California with passage of the Fair Employment Practices Act (FEPA). During the same time, California's Public Accommodations Statute of 1897 was revised and amended to become the new Unruh Civil Rights Act. Along with these, the California legislature enacted the Hawkins Act, a law prohibiting discrimination in publicly assisted housing. FEPA banned employment discrimination on the basis of race, religious creed, color, national origin, and ancestry. This was an important development in relation to fair housing laws because most fair housing laws have been based on fair employment law. Jesse M. Unruh authored the Unruh Civil Rights Act (California Civil Code Section 51), which prohibits arbitrary discrimination by businesses that offer services to the public. This includes housing and public accommodations. While the act lists such protected classes as age, ancestry, color, disability, national origin, race, religion, sex, and sexual orientation (which was added as a later amendment), court rulings interpreted this list as illustrative rather than restrictive. This means that protections under the Unruh Act are not necessarily restricted to people with these characteristics. The Act effectively covers all arbitrary and intentional discrimination by a business establishment. According to the California Department of Justice, the Unruh Act has been judicially and statutorily construed to apply to arbitrary discrimination based on personal traits, beliefs, or characteristics.

Disclosure Required for Additional Profit money coins Additional profit requires disclosure.

In addition to the California law, NAR Code of Ethics also requires REALTORS® to disclose any personal relationships with anyone involved in the transaction or who might have financial interests impacting your clients. The representation of clients who are "immediate family" must be made in writing in the listing agreement and in any contract for sale or for lease. NAR adopted this definition of "immediate family" for Article 4: As used in the Code of Ethics, the term "immediate family" includes, but is not limited to, the REALTOR® and the REALTOR'S® spouse and their siblings, parents, grandparents, children (by birth or adoption), grandchildren and other descendants. If the client is a member of the agent's firm, disclosure must be made because it would be presumed that the client might be given preferential treatment in the transaction. For example, if you represent the seller, and your brother-in-law is an interested buyer, you are required to disclose those facts in writing to your client. You need to do so before your client enters into a contract with the buyer. The following information is from Standard of Practice 4-1 of the Code of Ethics, which requires you to disclose: Any interest or offer you would present yourself, or Your relationship to an immediate family member who is also a party to a transaction, or Your relationship to a firm or any member of a firm who becomes a party to a transaction, or Your relationship to any entities in which you have any ownership that become a party to a transaction, or Your relationship to a property that you own yourself. All of these circumstances require disclosure in writing. You are under the same legal obligations when selling your own property (or representing a family member) as you are with any other client.

The Code of Ethics also requires disclosure of personal interest.

In addition to the California law, NAR Code of Ethics also requires REALTORS® to disclose any personal relationships with anyone involved in the transaction or who might have financial interests impacting your clients. The representation of clients who are "immediate family" must be made in writing in the listing agreement and in any contract for sale or for lease. NAR adopted this definition of "immediate family" for Article 4: As used in the Code of Ethics, the term "immediate family" includes, but is not limited to, the REALTOR® and the REALTOR'S® spouse and their siblings, parents, grandparents, children (by birth or adoption), grandchildren and other descendants. If the client is a member of the agent's firm, disclosure must be made because it would be presumed that the client might be given preferential treatment in the transaction. For example, if you represent the seller, and your brother-in-law is an interested buyer, you are required to disclose those facts in writing to your client. You need to do so before your client enters into a contract with the buyer. The following information is from Standard of Practice 4-1 of the Code of Ethics, which requires you to disclose: Any interest or offer you would present yourself, or Your relationship to an immediate family member who is also a party to a transaction, or Your relationship to a firm or any member of a firm who becomes a party to a transaction, or Your relationship to any entities in which you have any ownership that become a party to a transaction, or Your relationship to a property that you own yourself. All of these circumstances require disclosure in writing. You are under the same legal obligations when selling your own property (or representing a family member) as you are with any other client.

Key Points for Unit 3

Key Points for Unit 3 Disputes over the inappropriate handling of client trust funds are a major cause of litigation against licensees and their brokers. It's not enough to simply know not to steal, borrow, or mix trust funds. Licensees must also understand how to set up trust fund accounts and how to appropriately account for funds in those accounts through proper record keeping and reconciliation. The mixing or combining of trust funds and non-trust funds is called commingling, and it is expressly prohibited under California law and is grounds for suspension or revocation of your license. If you as a broker (or one of your agents) use trust funds for personal use, you could be found guilty of conversion, which is a crime under California law. Trust funds must be placed in a separate account in a financial institution insured by the federal government and located in the state of California. Trust funds must be deposited within three business days of receipt. The proper accounting for trust funds depends on the fiduciary duties of reasonable skill and care and accounting. Trust fund transactions must be kept in columnar form in chronological order. Property management trust fund management requires specific forms. Each client, beneficiary, or transaction should have his or her own separate record form. Trust fund accounts must be reconciled monthly.

Key Points from Unit 4 Seven classes receive protected status under the federal Fair Housing Act. These include race, color, religion, sex, handicap, familial status, and national origin. California adds the following classes to protected class status under state fair housing and anti-discrimination laws: marital status, sexual orientation, age, medical condition, ancestry, and source of income. Although age is a protected class, exceptions are made under HOPA for senior housing. To qualify, the housing must be advertised as senior housing and at least 80 percent of the units must have at least one individual age 55 or older residing there. Local laws may add additional protection; real estate licensees should know their local laws. California law extends discrimination laws to consider perception and association. If the individual is discriminated against because of a perception that the individual belongs to a protected class status, or is associated with those who do, this is unlawful. The protected class of familial status includes pregnant women and households with minor children. Advertising must not contain language or symbols that appear to discriminate against a protected class. Individuals who believe they are victims of discrimination should either file a complaint with the Department of Fair Employment and Housing (DFEH) or file a private lawsuit. HUD will also investigate and enforce federal fair housing laws, and in some cases will refer the case to the Justice Department. The Holden Act is a California law that governs financial discrimination practices. The Equal Credit Opportunity Act (ECOA) is designed to ensure that financial institutions and other lenders do not discriminate in the evaluation of an applicant's creditworthiness. Discrimination may be overt, disparate treatment or disparate impact.

Laws exist to prevent discrimination in housing. You can probably think of many ways that fair housing laws impact your work as a real estate professional

Laws exist to prevent discrimination in housing. You can probably think of many ways that fair housing laws impact your work as a real estate professional. Consider this example of a typical, seemingly simple situation where fair housing laws can make a difference in someone's work, and someone's life: Jason is of Caucasian descent and has applied for a mortgage loan through Jenny, a mortgage broker. Jason explained to Jenny that he needed help filling out the application. Jenny sat Jason down at her desk and typed his application into her computer then spent about 30 minutes going through the application process and learning about Jason's needs. Jenny told Jason, "I will get back to you within 72 hours." Once Jenny finished with Jason, Jenny greeted her next customer, Juan, who is of Hispanic descent and has similar income and credit data as Jason. Juan explained that he wished to apply for a mortgage loan and needed help with filling out his application. Jenny spent about 5 minutes with him, then handed Juan a paper application and sat him at a desk in the back room to work on filling it out on his own. After completing the paper application, Jenny told Juan, "I will get back to you." Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Lesson 10: Audits and Examinations magnify glass

Lesson 10: Audits and Examinations magnify glass Be prepared for an audit. As part of the responsibilities granted to the DRE, by California Law, the Commissioner of the DRE has authorized auditors to conduct trust fund audits for all licensed brokers in the state. When it is deemed necessary, usually because of consumer complaints, the Commissioner can order an audit of all trust fund records for any broker licensed in the state. The audit may uncover deficiencies in trust fund handling and record keeping. If you are audited, you must make all of your accounts and records available for examination. If the audit discloses actual trust fund imbalances or money handling procedures that may cause monetary loss, you may be subject to disciplinary proceedings and penalties issued by the DRE.

Lesson 10: Equal Credit Opportunity Act, the Holden Act and Fair Housing Equal Credit Opportunity and the Holden Act also afford protection. In addition to the fair housing laws already discussed (both federal and state) there are additional laws that specifically govern lending practices. The California Housing Financial Discrimination Act of 1977, also known as the Holden Act. The Federal Equal Credit Opportunity Act All real estate professionals should be aware of how these laws impact California state lending practices.

Lesson 11: Identifying Discrimination in Various Forms discrimination Overt discrimination is blatant. When anyone openly refuses to associate with or assist another person solely based on any of the protected classes, this behavior is called "overt" discrimination. Some examples of overt discrimination are: An agent intentionally refuses to take an application, show a property, or proceed with a transaction because the potential buyer is Hispanic. A seller, who is a member of an Evangelical Christian church, refuses to accept offers from any person who is atheist. A lender refuses to lend to gay/lesbian couples. A landlord refuses to show apartments to Muslims. Any individual in any portion of the real estate business, from appraisers to lenders, from buyers to sellers, and from agents to brokers, is required to obey fair housing laws. All such individuals may be assessed penalties if they are found to have discriminated against protected classes as defined in fair housing laws. Overt discriminatory practices are usually easy to spot because they are open and intentional, and therefore easier to detect and remedy. But there also exists more subtle discriminatory practices that are more difficult to trace and prove, yet are just as discriminatory and just as illegal. Defining discrimination and studying its ramifications will help you stay on the right side of the law and keep your integrity and good name intact.

HUD and Fair Housing

Lesson 5: HUD and Fair Housing HUD enforces fair housing laws. Federal definitions of "protected classes" expand and change. As you learn about and review protected classes throughout this course, keep in mind that it is your responsibility to remain aware of changes in the law that impact the real estate industry. You do not want to be involved in litigation if you can possibly avoid it, and to avoid it, you must have a keen knowledge of the rules. For example, since the 1988 amendments to the Fair Housing Act, the Department of Housing and Urban Development (HUD) has taken on greater responsibilities in the enforcing of fair housing laws. Prior to 1988 HUD investigated complaints and pursued conciliation between complainants. Now HUD refers unresolved complaints to one of their own administrative law judges for mitigation, and then to the United States Department of Justice if the either party elects to litigate.

Lesson 6: California Adds to Fair Housing Protection cookie California lists additional protected classes. The state of California led the way in the early days of the civil rights movement; fair housing is no exception. Today California is still on the cutting edge of civil rights for protected classes. The California Fair Employment and Housing Act (FEHA) adds additional protected classes beyond the seven already defined in the Federal Fair Housing Act. The additional protected classes are: Marital status - extends the concepts of familial status to include protecting those persons who are divorced or separated. Sexual orientation - added to the FEHA in the year 2000, this class extends protection to persons who experience discrimination based on sexual orientation and encompasses homosexuality, heterosexuality, and bisexuality. Age - refers to the protection of those persons over the age of 40. Medical condition - extends the concepts of disability to include those persons with temporary medical conditions, such as pregnancy, recent childbirth, or broken limbs; or permanent conditions, such as cancer and diabetes; or to people requiring oxygen. This protected class includes discrimination based on conditions that may not be disabling, but are disfiguring; such as genetic conditions, dwarfism, etc. Ancestry - extends the concepts of national origin to include the place a person's family is originally from. For example, a person may be born in the United States (and so was his father and grandfather), but his ancestors may have come from Saudi Arabia. The Act further extends national origin to include language preferences. Source of income—extends protection to people who receive public assistance as part or all of their source of income, whose source of income is limited to social security or a pension, or who receive veteran's benefits. Individual cities in the state of California may include additions or variations regarding protected classes within their own city codes. For example, San Francisco and Santa Cruz have the inclusion of "size" as a protected class. You should be aware of local variations in your own market area.

Lesson 7: Compliance and Requirements whistle Discrimination based on race or color is illegal. The following pages offer examples of how to recognize unfair treatment and discrimination against people who belong to a protected class. Race Race is the protected class that commonly draws the most attention, and the one that initiated the drive for civil rights reform. Race is a protected class federally as well as in the state of California. Therefore, all of us are part of a protected class, by virtue of all belonging to a race. Occasionally a landlord will use subtle cues that indicate a propensity to discriminate, such as requiring extra conditions for a tenant of one race while not requiring the same conditions for a tenant belonging to a race that the landlord prefers. This behavior is punishable under the law. Example George, a minority applicant for a mortgage loan, is required by the lender to provide proof of employment for the past five years. However the lender requires that Isabelle, a non-minority applicant, indicate only current steady employment. Color Many people confuse the federally protected class of color with the class of race, but there are many varying skin tones within every race. Discrimination based on skin color is just as illegal as discrimination based on race. Example Landlord Ayesha is a lighter-skinned person from India. When she refuses to rent to Lakshmi, a darker-skinned person who is also from India, Ayesha is guilty of discrimination.

Lesson 7: Managing Funds Outside of a Bank Account check Funds passed to escrow must be recorded.

Lesson 7: Managing Funds Outside of a Bank Account check Funds passed to escrow must be recorded. When a buyer writes a check for an earnest money deposit to purchase a property, this is usually done with the signing of an offer to purchase. If you are acting in the role of the buyer's agent, your client will hand the check to you along with the bid. In California, most buyers and sellers will use a third party escrow company to handle the closing. The earnest money check would be made payable directly to the escrow company. When this occurs, you will be responsible for forwarding the check to the escrow company. When you receive the check to be forwarded to the escrow company, you will need to record the information on the Record of All Trust Funds Received-Not Placed in Broker's Trust Account (RE 4524) form. Even when you receive written instruction to hold the check until the offer is accepted before forwarding the check to the escrow company, you must still record the receipt of the check on the proper form (RE 4524) and then place the check in a secure location. When the time comes to forward the check, you will make another entry on the record indicating the check left your possession and was forwarded. Because these funds are not deposited into the trust account, you will not need to have an entry on the Bank Account Record (RE 4522).

Lesson 8: Proper Advertising Advertising must not be discriminatory. The Federal Fair Housing Act makes it illegal to publish an advertisement that expresses a preference, limitation, or discrimination on the basis of any protected class. The California FEHA echoes federal requirements and includes the additional classes protected under California law. Make sure your brokerage firm has clear policies regarding advertising and how ads are to be written and constructed. Evaluate how your advertisements might be perceived by the general public. The following slides list some examples of phrases and word usages that are acceptable and are not acceptable based on each type of protected class. Note that this is in no way an exhaustive list. If in doubt, you may contact the California Department of Fair Employment and Housing for additional information.

Lesson 9: Account Reconciliation, Documentation and Records bank

Lesson 9: Account Reconciliation, Documentation and Records bank Each month, you will receive a bank statement for the trust account. ABCD Realty had a lot of activity in that new trust fund in May. Give yourself a pat on the back for getting those entries completed! The next step is one that will be performed monthly, when the bank statement for the trust account is received from the bank. You must reconcile (or balance) the entries and transactions on the bank statement with the trust fund's Bank Account Record (RE 4522) (or with the accounting systems you are using). Reconciling an account confirms that all transactions in the account are correct and valid. Balancing your account once a month reduces accounting errors and ensures proper trust fund handling. You will conduct two separate reconciliations: Reconcile the Bank Account Record (RE 4522) with the bank statement; and, Reconcile the Bank Account Record (RE 4522) with the Separate Record For Each Beneficiary or Transaction for Client's Funds Placed In Trust Fund Bank Account (RE 4523) or Separate Record For Each Property Managed (RE 4525). Remember that a bank statement is a snapshot in time. The statement shows all the transactions the bank has recorded between two fixed dates. If checks have not cleared the bank account at the time of the statement cutoff, they will appear on the next month's statement. However, you may have recorded such a check in your records, so you will have to account for any checks that are still in transit. You must also account for any banking fees charged during the month and make adjustments on your records.

Lesson 9: Procedures to Follow and Remedies Available violation Understand the process for complaints. As a real estate professional, it is important to understand how seriously the California Office of the Attorney General and the Department of Fair Employment and Housing (DFEH) take any violation of fair housing laws. If a client or customer feels that you have violated fair housing laws and decides to file a claim, and if you are found guilty, the penalty could easily total thousands of dollars and could cause you to lose your license. The "UNLAWFUL DISCRIMINATION - Your Rights and Remedies Civil Rights Handbook," produced by the California Office of the Attorney General, outlines the options and process should a consumer believe that he or she has been a victim of housing discrimination. (See http://www.ag.ca.gov/ ) Victims of discrimination are urged to file complaints immediately. They can do so by filing a claim with the DFEH or by filing a private lawsuit. Real estate professionals are commonly a potential target for complaints and accusations; as such, you want to be scrupulous and exact in following all fair housing laws. If you were found liable in a civil suit, you could also incur additional civil fines and penalties. In addition, local district attorneys or city attorneys also have the ability to bring actions against those who violate fair housing laws. Example: Working with Clients Luis Martinez was selling a home, and contracted with Marinda Lopez to serve as his agent. Luis lives in the same neighborhood that his parents lived in, and his four grown children all live nearby. Luis had built a newer home just up the hill and was ready to market his old home. Sam and Beverly Jones (who are of African American descent) came to look at the property and expressed an interest in purchasing it. They made an offer on the home on Wednesday. On Thursday, Luis's friend, Saul Rodriguez, told Luis that he was interested in the property. When Luis told him that Sam and Beverly Jones had offered $325,000 for his home, Saul told Luis that he could only afford to pay $315,000. Later that evening, Saul's father called and commented "this neighborhood has been good to our family and we need to protect our culture here, you should sell the house to Saul." Luis called Marinda and instructed her to tell Sam and Beverly Jones that he had already accepted a previous offer on the home before theirs was made and that the home is no longer available. What should be Marinda's response to Luis? Marinda should tell Luis that she cannot carry out his instructions because such instructions are illegal and against her ethical duties. She should explain that misrepresenting the availability of housing because of the race and national origin of the potential buyers violates the law. Sam and Beverly Jones, as African Americans, are protected by the Federal Fair Housing Act and the California Fair Employment and Housing Act. If Saul can't find enough cash reserves to match or beat the Jones' offer, Luis will avoid engaging in discrimination by selling to the Jones.

Let's follow the money. You will now assume the role of the managing broker for ABCD Realty in Anytown, California. Your organization conducts both residential home sales and property management. Assume that your fictitious brokerage uses the CalBRE forms to track entries, and not an electronic accounting system.

Let's follow the money. You will now assume the role of the managing broker for ABCD Realty in Anytown, California. Your organization conducts both residential home sales and property management. Assume that your fictitious brokerage uses the CalBRE forms to track entries, and not an electronic accounting system. Alice, Brett, and Eleanor work for you as salespersons: When each of your agents comes to you with a trust fund transaction, you must complete the correct forms with the correct entries. To get the most value from this exercise, download and print a set of blank forms so you can fill them in as you work through the exercise: COLUMNAR RECORD OF ALL TRUST FUNDS RECEIVED AND PAID OUT TRUST FUND BANK ACCOUNT (Print 1) SEPARATE RECORD FOR EACH BENEFICIARY OR TRANSACTION FOR CLIENT'S FUNDS PLACED IN TRUST FUND BANK ACCOUNT (Print at least 2) RECORD OF ALL TRUST FUNDS RECEIVED — NOT PLACED IN BROKERS TRUST ACCOUNT (Print at least 2) SEPARATE RECORD FOR EACH PROPERTY MANAGED (Print at least 2)

Collecting Commissions after Termination Example

Let's say a seller terminates an agency agreement by withdrawing the property from the market prior to the expiration of a listing agreement. This is a common form of termination where an agent might be eligible to receive compensation after the termination of the agency relationship. In general, you may be able to seek commissions from a seller if your agency agreement specified a time to complete the transaction. With an open listing agreement, which does not include a time limit, you may not be able to seek compensation. note NOTE: Written Confirmation of Termination You should always require a written notice of termination from a client who wants to terminate an agency relationship. REALTORS® may use the Termination of Buyer Agency form (C.A.R. Form TBA) to obtain written authorization to terminate an agency relationship.

Lisa has a salesperson`s license, but she does not have a broker`s license. Lisa is not currently working with a broker, but she wants to help list her neighbor`s house. Which of the following is true?

Lisa cannot receive compensation, since she is not contracted with a broke

Quincy, a salesperson, wants to manage his risk. Which of the following is a good idea?

Reconciling Columnar Forms

Reconciling Columnar Forms Must Be Completed Monthly Unlike the bank account reconciliation, the reconciling of the Bank Account Record (RE 4522) with the Separate Record for Each Beneficiary or Transaction For Client's Funds Placed In Trust Fund Bank Account (RE 4523) is required by Commissioner's Regulation 2831.2. This must be completed monthly except for those months where there is no trust fund activity.

The _______________ is used to record all trust funds received and not deposited into the trust bank account, including uncashed checks, notes, or anything of value used as a deposit, and the disposition of such funds.

Record of All Trust Funds Received - Not Placed in Broker`s Trust Account (RE 4524)

All trust funds must be property accounted for.

Regardless of the type of system you use, your trust fund records must include the following information: All receipts and disbursements, with pertinent details, presented in chronological sequence The balance of the trust fund account, based on recorded transactions All receipts and disbursements affecting each beneficiary's balance, presented in chronological sequence The balance owing to each beneficiary or for each transaction. Good accounting requires you to: Set up appropriate accounts, records, and systems to make sure all funds are managed properly. Make sure you have a record of exactly how much money you owe each of the beneficiaries at any time. Never use one person's funds to pay out to another. Balance the trust fund account each and every day. If there are discrepancies, investigate and resolve these immediately. Guarantee that the funds for each beneficiary are insured up to the maximum FDIC insurance coverage. Reconcile the account with the bank statements each month.

Tips to Avoid Commingling Here are some quick tips to avoid commingling:

Remember the difference between trust funds and non-trust funds, and be meticulously detailed in recording and tracking each one separately. Account for every transaction, in and out of the trust account. Withdraw any funds owed to you or your brokerage within 25 days of them being earned. This includes commissions and property management fees. Never deposit personal funds into the trust account, except as allowable by law, such as opening the account or reimbursing the fund for bank fees. Never deposit rents or security deposits from properties owned by the broker or brokerage into the trust account. These are NOT considered trust funds and must be kept separate from the trust funds.

Viola is a real estate agent. She sent one of her clients to Wayne, who works for a title company. Wayne sends Viola five lottery tickets in a "Thank You" card. What should Viola do?

Return the lottery tickets and explain to Wayne that she cannot accept gifts

Review Columnar Form Entry Your Bank Account Record should look like this:

Review Columnar Form Entry Your Bank Account Record should look like this: crē Date Received: May 4 From Whom: ABCD Realty Description: Opening Deposit Received Amt: $200.00 Reference: Ck #2005 Date of Deposit: May 4 Daily Balance: $200.00 Remember, the maximum amount of non-trust funds a broker is allowed to keep in a trust account is $200.

Review Columnar Form Entry Your Form 4523 completed to record the deposit that opened the trust account should look like this:

Review Columnar Form Entry Your Form 4523 completed to record the deposit that opened the trust account should look like this: sré Separate Record for Each Beneficiary or Transaction for Client's Funds Placed In Trust Fund Bank Account (RE 4523), identifying ABCD Realty as a beneficiary with a balance of $200.

Separate but equal" is found to be in violation of the U.S. Constitution

Separate but equal" is found to be in violation of the U.S. Constitution. In 1954 in Topeka, Kansas, third grade student Linda Brown became famous when her father, Oliver Brown, brought suit because he had tried to enroll Linda in a segregated school that was closer to her home and the school board refused. The United States Supreme Court fired the first shot against Jim Crow laws by agreeing to hear the case Brown vs. School Board. On May 17, 1954, the Court found that a "separate but equal" way of life is a violation of the United States Constitution. Over the next 14 years, new civil rights legislation reaffirmed the equal rights originally mandated in 1866. The Eisenhower Administration's Civil Rights Acts of 1957 and 1960 established the U.S. Justice Department as guarantor of minority voting rights, but it did nothing to remedy discrimination in public housing or employment. Legislation that became known as the Civil Rights Act of 1964 was prepared by John F. Kennedy and Robert Kennedy and signed into law just months after President Kennedy's assassination. The Act prohibits discrimination in public accommodations and in employment.

Sex discrimination and sexual orientation discrimination are not the same thing. Sex Sex discrimination is based on a person's gender, not their sexual orientation. This includes protection from sexual harassment; a person cannot be denied housing because he or she refuses sexual advances from a seller or landlord. Both women and men may experience illegal discrimination in housing because of their sex. In the case of roommates or boarders, there are exceptions to the fair housing rules. A person who rents out a single room in an owner-occupied home is not subject to the same rules as the landlord renting out a home. If the housing has a shared common living area, or is a dormitory in an educational institution, a preference for sex is allowable. HUD regulations permit a person to both restrict and advertise the rental of housing to only one sex (e.g., advertise a gender preference) "where the sharing of living areas is involved." Source: http://www.dca.ca.gov/publications/landlordbook/discrimination.shtml Examples Kendra, a landlord, will not rent to men, stating that her complex is for "women only," but there are no shared living spaces. At the house across the street, landlord Jerry tells a potential renter Bambi that she may rent an apartment from him only if she "goes out with him." Both of these are discriminatory practices. NOTE: It was very common to find discrimination against women by lending institutions prior to 1974. For mortgage application purposes, a woman's income might have been used for debt offset only, not for qualifying purposes. A woman who did qualify for a loan might have been required to sign an affidavit stating that she would not have children for a requisite number of years. These practices are now illegal. Sexual Orientation The California Government Code, § 12926, (s), defines sexual orientation as, "heterosexuality, homosexuality, and bisexuality." These are all protected classes in the state of California, though they are not currently protected in the Federal Fair Housing Act. Example Kyle refuses to rent an apartment to Linda and Beth, a homosexual couple, because they are gay. Linda and Beth then find an apartment complex that advertises itself as "gay friendly." In fact, both Kyle's refusal to rent and the "gay friendly" advertisement are violations of fair housing rules.

Medical Marijuana is legal in California, but illegal under federal law. An increasing problem for real estate licensees who are property managers is a tenant's use of medical marijuana. California law allows a qualified person who possesses a state-issued permit to grow and/or use medical marijuana to do so in their residences; yet both these activities are illegal under federal law. The property manager and property owner both may find themselves in a true dilemma: Comply with California state law, or be at risk of arrest and seizure of the real estate for having committed a crime under federal law. As unlikely as it is for that to happen, it nevertheless is possible under the law. Conversely, complying with federal law places the licensee and property owner at risk of a civil suit by the tenant under California law. The California Association of REALTORS® legal counsel recommends that if a landlord or property manager has tenants, or applicants, who wish to possess, use, or grow medical marijuana on the premises, the licensee and landlord should consult legal counsel on how best to proceed.

Situations where broker funds are allowed to be in a Trust Fund CalBRE describes two ways in which it is acceptable for a real estate broker's personal funds to be in the trust account:

Situations where broker funds are allowed to be in a Trust Fund CalBRE describes two ways in which it is acceptable for a real estate broker's personal funds to be in the trust account: Up to $200 to cover checking account service fees and other bank charges such as check printing charges and service fees on returned checks. Trust funds may not be used to pay for these expenses. (The preferred practice, however, is for the broker to have the bank debit his/her own personal account for any trust account fees and charges.) Commissions, fees, and other income earned by a broker and collectible from trust funds may remain in the trust account for a period not to exceed 25 days from the date deposited, or from the date commissions and fees are deemed earned. Regulation 2835 recognizes that it may not always be practical to disburse the earned income immediately upon receipt. For instance, a property management company may find it too burdensome to collect its management fee every time a rent check is received and deposited to the trust account. Therefore, as long as the broker disburses the fee from the trust account within 25 days after deposit, or from the date the commission or fees are deemed earned, there is no commingling violation. However, if there is any dispute between the broker and the principal as to the broker's portion of the funds, the amount of the funds in dispute are not to be withdrawn until the dispute is resolved. Most purchase contracts contain contingencies (most commonly relating to financing and inspection). If the contingencies are not satisfied, notwithstanding good faith efforts by the parties, then the contract is null and void, and the buyer would receive the earnest money deposit back. For example, if the contract has a contingency stating that the buyer must obtain financing within a specified amount of time and the buyer cannot qualify, then the contract is cancelled and the buyer would receive the earnest money deposit back. However, if the buyer does not act in good faith in attempting to satisfy the contingency (for instance, by delaying the loan application process), then a court may rule that the seller is entitled to the earnest money deposit, even though the contingency has not been satisfied or removed. note NOTE: Any time you make a disbursal of earnest money from the trust account, you will need to record the transaction on the Bank Account Record (RE 4522) and on the Separate Record for Each Beneficiary or Transaction for Client's Funds Placed in Trust Fund Bank Account (RE 4523), using the DRE forms or your firm's accounting systems.

Standards of Practice 2-4 and 2-5 pertain to fraudulent documents and "non-material" issues.

Standard of Practice 2-4 states, "REALTORS® shall not be parties to the naming of a false consideration in any document, unless it be the naming of an obviously nominal consideration." Your name should never appear as a party naming any false consideration on any document. Do not affix your name to any falsehood. In this way you will protect your name and reputation as well as that of your agency and profession. Be honest in all you do. Standard of Practice 2-5 reads, "Factors defined as 'non-material' by law or regulation or which are expressly referenced in law or regulation as not being subject to disclosure are considered not 'pertinent' for purposes of Article 2." (Adopted 1/93) Sometimes a law or regulation will indicate a specific factor as "non-material" or as not subject to disclosure. Such facts do not fall under the guidelines given in this Standard. For instance, if a REALTOR® inadvertently misspelled the street name of a property, this may not be considered a material misrepresentation by law, depending on the circumstances. cs CASE STUDY: This case is reprinted from the current NATIONAL ASSOCIATION OF REALTORS® Code of Ethics and Arbitration Manual. Names have been added for teaching purposes only and do not reflect actual names of any individuals. REALTOR® Abe owned a home that he listed through his own brokerage firm. The property listing was filed with the Multiple Listing Service of the Board. REALTOR® Bill called REALTOR® Abe and told him of his interest in purchasing the home for himself. REALTOR® Abe suggested a meeting to discuss the matter. The two agreed upon terms and conditions and the property was sold by REALTOR® Abe to REALTOR® Bill. A few months later, during hard rains, leakage of the roof occurred with resultant water damage to the interior ceilings and side walls. REALTOR® Bill had a roofing contractor inspect the roof. The roofing contractor advised REALTOR® Bill that the roof was defective and only a new roof would prevent future water damage. REALTOR® Bill contacted REALTOR® Abe and requested that he pay for the new roof. REALTOR® Abe refused, stating that REALTOR® Bill had full opportunity to look at it and inspect it. REALTOR® Bill then charged REALTOR® Abe with violation of Articles 1 and 2 of the Code of Ethics by not having disclosed that the roof had defects known to REALTOR® Abe prior to the time the purchase agreement was executed. At the subsequent hearing, REALTOR® Bill outlined his complaint and told the Hearing Panel that at no time during the inspection of the property, or during the negotiations which followed, did REALTOR® Abe disclose any defect in the roof. REALTOR® Bill acknowledged that he had walked around the property and had looked at the roof. He had commented to REALTOR® Abe that the roof looked reasonably good, and REALTOR® Abe had made no comment. The roofing contractor REALTOR® Bill had employed after the leak occurred told him that there was a basic defect in the way the shingles were laid in the cap of the roof and in the manner in which the metal flashing on the roof had been installed. It was the roofing contractor's opinion that the home's former occupant could not have been unaware of the defective roof or the leakage that would occur during hard rains.

Carmen, a real estate professional, takes steps to protect herself from unnecessary risk by:

Staying current on all required training

Three additional federal acts add fair housing protection to persons with disabilities.

The Architectural Barriers Act of 1968 requires that buildings and facilities designed, constructed, altered, or leased with certain Federal funds after September, 1969 must be accessible to and usable by handicapped persons. The Rehabilitation Act of 1973, Section 504, prohibits discrimination on the basis of disability in any program, service, or activity that receives Federal financial assistance. A housing provider may not deny or refuse to sell or rent to a person with a disability, nor impose fees or penalties different than those that would be charged to a person without a disability. The Americans with Disabilities Act of 1990, Title II, prohibits discrimination based on disability in programs, services, and activities provided or made available by public entities. HUD enforces Title II as it relates to state and local public housing, housing assistance, and housing referrals. Click the link below to see more information on changes and additions to civil rights laws:

You can keep trust fund records with these four forms.

The CalBRE has developed four useful forms that you can use to track and monitor all the funds going into and out of your trust fund accounts. These are called "columnar records" and follow a format prescribed by Commissioner's Regulations 2831 and 2831.1. The columnar form or record is simply a format that puts all the pertinent information for one entry in a single row, or record. You can click the form names in the table below to download. Use these forms to record the following essential trust fund information: Form Title Use Columnar Record of All Trust Funds Received and Paid Out - Trust Fund Bank Account (DRE form RE 4522) This form is used to record all receipts of trust funds and accompanying deposits into the trust fund bank account. You will also record any withdrawals (disbursements) from the account. If you have more than one trust account, you will have to maintain different Bank Account Records (RE 4522) for each trust account. Separate Record for Each Beneficiary or Transaction (DRE form RE 4523) Complete a copy of this form for each client for whom you are acting as trustee. This form allows you to record any deposits or disbursements for the single client or transaction. This is an important way of maintaining records of each client's trust fund balance, as opposed to the balance of the trust fund account at the bank, which can include funds from other sources such as the opening amount provided by the brokerage. Record of All Trust Funds Received - Not Placed in Broker's Trust Account (DRE form RE 4524) Use this form to record all trust funds received that will not be deposited into the trust bank account. This is for items that won't be deposited into the trust fund account by agreement (not items that aren't deposited as a result of negligence). This can include uncashed checks, notes, or anything of value used as a deposit. This form also allows you to record the disposition of those items, for example, when the item received from the buyer as earnest money is forwarded to the seller upon conclusion of the sale. Separate Record for Each Property Managed (DRE form RE 4525) Use this form instead of RE 4523 if the trust fund account holds funds from property managed for others. Once again, this may seem quite complicated, but each form is fairly straightforward to use. You will soon get the hang of how they work together to maintain a complete record of all funds entrusted to you.

It is important to be able to explain agency to your clients.

The California disclosure forms include the following text to help educate clients on the type of agency relationships available to them as clients. After reviewing this information, a client should understand the duties and responsibilities of seller's agents, buyer's agents, and dual agents (agents representing both the seller and buyer). Potential clients must sign the disclosure, acknowledging that they have received the information, before you can form a written contractual relationship with them. These forms have recently been revised to be more appropriately applicable to landlords and tenants in rental or lease transactions. California Civil Code 2079.16 requires that the text shown below appears on the Disclosure Regarding Real Estate Agency Relationship, whether or not you use the CAR form. 2079.16

The Civil Rights Act of 1968 is also known as the Fair Housing Act.

The Civil Rights Act of 1968 The Civil Rights Act of 1968 is also known as the Fair Housing Act. On April 11, 1968, 102 years after the first civil rights legislation, and just one week after the assassination of Dr. Martin Luther King, Jr., President Lyndon B. Johnson signed into law the Civil Rights Act of 1968, commonly known as the "Fair Housing Act." The Fair Housing Act prohibits discrimination in: The sale, rental, or advertisement of residential dwellings Brokerage service The Appraisal of real estate Real estate loans and loan purchases The original Fair Housing Act of 1968 defined that certain classes of people are federally protected against discrimination. The original "protected classes" were: Race Religion National origin Color vft VIRTUAL FIELD TRIP: Review this 10-minute documentary "Fair Housing Act: Looking Back, Looking Forward" to better understand the history and circumstances surrounding the passage of the Fair Housing Act. This is an optional resource.

The Civil Rights Act of 1968 is also known as the Fair Housing Act

The Civil Rights Act of 1968 is also known as the Fair Housing Act. On April 11, 1968, 102 years after the first civil rights legislation, and just one week after the assassination of Dr. Martin Luther King, Jr., President Lyndon B. Johnson signed into law the Civil Rights Act of 1968, commonly known as the "Fair Housing Act." The Fair Housing Act prohibits discrimination in: The sale, rental, or advertisement of residential dwellings Brokerage service The Appraisal of real estate Real estate loans and loan purchases The original Fair Housing Act of 1968 defined that certain classes of people are federally protected against discrimination. The original "protected classes" were: Race Religion National origin Color vft VIRTUAL FIELD TRIP: Review this 10-minute documentary "Fair Housing Act: Looking Back, Looking Forward" to better understand the history and circumstances surrounding the passage of the Fair Housing Act. This is an optional resource.

The ECOA requires financial institutions to make credit equally available to ALL creditworthy applicants. The Equal Credit Opportunity Act (ECOA) is designed to ensure that financial institutions and other lenders do not discriminate in the evaluation of an applicant's creditworthiness. It requires lenders and other creditors to make credit equally available without discrimination based on: sex; race; color; religion; national origin; age; marital status; or receipt of public assistance. ECOA also makes it unlawful to discriminate on the basis of an applicant's "exercise of rights under the Consumer Protection Act," meaning they have previously registered a complaint, filed a law suit, or other taken some other regulatory action about violations of equal treatment). In short, ECOA's purpose is to require financial institutions to make credit equally available to ALL creditworthy applicants. The ECOA prohibits financial institutions from: Asking questions concerning a loan applicant's sex; race; color; religion; national origin; age; marital status; or receipt of public assistance. Requiring signatures from both spouses if one spouse qualifies for the loan on his /her own. Making loan qualifications for minority applicants more difficult than for non-minority applicants. If an application is denied, the financial institution must notify the applicant within 30 days and must deliver to the applicant a written statement specifying the reasons for denial. See http://www.fdic.gov/regulations/laws/rules/6500-2900.html for the full text of the ECOA.

The Fair Housing Act includes exemptions for senior housing.

The Fair Housing Act includes exemptions for senior housing. The Fair Housing Act includes an exemption to the provisions barring discrimination on the basis of familial status for those housing developments that qualify as housing for persons age 55 or older. Senior housing, or housing for older persons, can take the form of either 55-and-Over Housing or 62-and-Over Housing. The 62-and-over housing is straightforward: all residents must be over 62. To qualify as 55- and-over housing, the housing complex in question must have at least 80% of the units occupied by at least one person age 55 or older, and must publish and adhere to policies and procedures that demonstrate intent to provide housing for persons 55 or over. HUD has identified seven factors to help determine compliance with the intent requirement: The manner in which the housing facility or community is described to prospective residents Any advertising designed to attract prospective residents Lease provisions Written rules, regulations, covenants, deed, or other restrictions The maintenance and consistent application of relevant procedures Actual practices of the housing facility or community Public posting of statements in common areas describing the facility or community as housing for persons 55 years of age or older If the complex meets the legal standard for 55 or 62-and-over housing, then the complex does not have to rent to families with children. Unit Quizzes and the minimum required study time m

The Fair Lending Notice is required. The Holden Act requires lenders to supply this notice: "We may provide credit information about your account to our affiliates from time to time. This information may be used to qualify you for other credit offers. Married persons may apply for a separate account. Loans will be made pursuant to a California Department of Corporations Finance Lenders License. California Fair Lending Notice - The Housing Financial Discrimination Act of 1977 (see below for text). The Housing Financial Discrimination Act of 1977 Fair Lending Notice: It is illegal to discriminate in the provision of or in the availability of financial assistance because of the consideration of: Trends, characteristics or conditions in the neighborhood or geographic area surrounding a housing accommodation, unless the financial institution can demonstrate in the particular case that such consideration is required to avoid an unsafe and unsound business practice; or race, color, religion, sex, marital status, national origin or ancestry. It is illegal to consider the racial, ethnic, religious or national origin composition of a neighborhood or geographic area surrounding a housing accommodation or whether or not such composition is undergoing change, or is expected to undergo change, in appraising a housing accommodation or in determining whether or not, or under what terms and conditions to provide financial assistance. These provisions govern financial assistance for the purpose of the purchase, construction, rehabilitation or refinancing of one-to four-unit family residences occupied by the owner and for the purpose of the home improvement of any one-to four-unit family residence. If you have questions about your rights or if you wish to file a complaint, contact the management of this financial institution or: Department of Corporations Suite 600 3700 Wilshire Los Angeles, CA 90010 Department of Corporations Suite 810 1390 Market Street San Francisco, CA 94102"

The HUD publication "Fair Housing - It's Your Right" describes the following prohibited actions. Under the federal FHA, no one may take any of the following actions based on race, color, national origin, religion, sex, familial status or handicap: In the Sale and Rental of Housing Refuse to rent or sell housing Refuse to negotiate for housing Make housing unavailable Deny a dwelling Set different terms, conditions or privileges for sale or rental of a dwelling Provide different housing services or facilities Falsely deny that housing is available for inspection, sale, or rental For profit, persuade owners to sell or rent (blockbusting) or Deny anyone access to or membership in a facility or service (such as a multiple listing service) related to the sale or rental of housing. In Mortgage Lending Refuse to make a mortgage loan Refuse to provide information regarding loans Impose different terms or conditions on a loan, such as different interest rates, points, or fees Discriminate in appraising property Refuse to purchase a loan or Set different terms or conditions for purchasing a loan. In addition, it is illegal for anyone to: Threaten, coerce, intimidate or interfere with anyone exercising a fair housing right or assisting others who exercise that right; Advertise or make any statement that indicates a limitation or preference based on race, color, national origin, religion, sex, familial status, or handicap. This prohibition against discriminatory advertising applies to single-family and owner-occupied housing that is otherwise exempt from the Fair Housing Act. Source: http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair_housing_equal_opp/FHLaws/yourrights

The Holden Act prohibits discrimination when making housing loan decisions. The Housing Financial Discrimination Act of 1977, known as the "Holden Act," consists of a set of California laws governing financial discrimination practices. This law forbids banks and other financial institutions from discriminating in the "provision and availability" of housing loans. Financial institutions are specifically prohibited from using irrelevant aspects of either the property in question or potential borrowers in the making of housing loan decisions. "Irrelevant aspects" used in common property discrimination include the consideration of geographic location and neighborhood. Other aspects would include details regarding the protected classes involved in fair housing. As discussed earlier in this unit, one of the discriminatory practices that prompted the Holden Act is known as "redlining." Redlining happens when a bank, savings institution, mortgage company, insurance agency, or other business refuses to extend business or assume financial risk involving property located within an area which has been defined as "high risk," such as an inner-city neighborhood. The Federal Fair Housing Act and the California Holden Act both mandate that redlining is illegal. By making redlining illegal, the Holden Act encourages increased lending in neighborhoods where, in the past, financing had been unreasonably difficult or altogether unavailable. The major goal of the Holden Act is to ensure and increase the supply of safe and decent housing for creditworthy borrowers, and to prevent neighborhood decay.

The Home Mortgage Disclosure Act (HMDA) collects statistical information. When a borrower applies for a mortgage loan, there is a legally mandated section on the application where the borrower and co-borrower (if applicable) are asked questions regarding race, ethnicity, and sex. On the surface, such questions may seem like a violation of the Equal Credit Opportunity Act (ECOA), but in actuality, this section is for statistical purposes and is required by another Federal law called the Home Mortgage Disclosure Act (HMDA). Unlike ECOA, HMDA does not prohibit any activity. Rather its goal is, in its simplest form, to make information available. It was designed to monitor if financial institutions are adequately serving the credit needs of their communities and not engaging in "redlining" activities. HMDA requires financial institutions to report the geographic location, race or national origin, sex, and income of each applicant. This information helps to identify unfair lending practices and helps the government to identify private sector neighborhoods (as opposed to public housing) that are in need of assistance. It is important to remember that while HMDA is used to identify unfair lending practices, it does not encourage unsound or risky lending. HMDA information may only be used for monitoring and may not be used in any underwriting process, nor may it be considered by financial institutions when determining the credit worthiness of an applicant.

The Housing for Older Persons Act was enacted in 1995.

The Housing for Older Persons Act was enacted in 1995. In order to help eliminate confusion or any misunderstanding regarding senior housing exemptions based on age or familial status under the FHA amendments of 1988, Congress enacted the Housing for Older Persons Act of 1995 (HOPA). One change was that a senior community was no longer required to have significant services or facilities for the elderly. Additionally, HOPA established immunity from damages for anyone who in good faith believes that the 55 and older exemption applies to a particular property, as long as the property has formally stated in writing that it qualifies for the exemption. In other words, you don't need to prove the 80% occupancy rate as long as it appears to be and markets itself as a senior living community. This means that owners of units in retirement communities are not guilty of discrimination if they refuse to sell their unit to families with children. On the other hand, families and children are legally allowed to live in housing that is advertised to those 55 or older; there is no requirement that they be excluded.

Which of the following is a general requirement and the broker`s fiduciary responsibility to his client?

The broker should maintain records of disbursements and deposits of funds held in a trust account

As a broker, Sandy must exercise reasonable supervision over which of the following:

The handling of trust funds

Mismanagement of Trust Accounts jar of money Mixing general business or personal funds with trust funds is commingling, and it is prohibited.

The most important thing to remember about trust funds is this: the funds are NOT yours. You are holding trust funds that belong to either your clients or your customers. Mismanagement of these funds may lead to penalties such as having your license suspended or revoked. One form of mismanagement you must avoid is called "commingling." The term commingling means "to mix together," and would result from combining trust funds with non-trust funds. Commingling would occur if you: Deposit trust funds into personal or business accounts. Deposit personal or business funds into a trust account. The only exception to this is when you open the account, and that cannot be more than $200. This amount can be replenished as used, for example, to pay account fees. Leaving commissions, fees, or other income due to you in the trust account longer than 25 days from the day they were earned. For example, if your property management fee is deducted from rents that are held in a trust account, you must withdraw that fee within 25 days of the date when it is payable to you. Commingling is a direct violation of the Business and Professions Code Section 10176 and 10177. You can have your license suspended or revoked if you commingle funds.

There are currently seven federally protected classes

There are currently seven federally protected classes. The following information is found on the U.S. Department of Housing and Urban Development (HUD) website http://www.hud.gov/offices/fheo/FHLaws/yourrights.cfm and in other related sources. According to HUD, when you represent a seller or a landlord, neither you nor your clients may discriminate based on the following protected classes: Race - refers to people being treated differently because of their inclusion in a group that shares common characteristics. The group is socially constructed typically by physical characteristics such as skin color and the group is often socially treated the same due to their association with their race. Color - refers to being treated differently because of different skin colors and tones; even within the same racial group. Generally, people have filed fair housing complaints because they were discriminated against as a result of being lighter-skinned or darker-skinned. National origin - refers to being treated differently because of a person's place of birth or familial place of birth. Religion - refers to being treated differently because of religion or religious affiliation. The act of showing intolerance or preference for a group's observance of its religious practices or dietary habits is also considered religious discrimination. Sex - refers to being treated differently because of a person's gender. Both women and men may experience illegal discrimination in housing because of their sex. This protected class includes sexual harassment. Disability or handicap - refers to being treated differently because of: Physical or mental conditions (including hearing, mobility, and visual impairments, cancer, chronic mental illness, AIDS, AIDS Related Complex, and mental retardation) that greatly limits one or more of his/her major life activities. Major life activities include (but are not limited to) walking, talking, seeing, hearing, learning, working, breathing, etc. A record of such a condition. A perception of having such a condition. Familial status - refers to being treated differently because of familial relationships; which include marital status and the presence of children under the age of 18 who are members of the household because of their birth, adoption, or because they have been legally placed in the household. Discrimination in this protected class includes placing limitations on the number or age of the children in the family.

Lesson 8: Disclosure Required for Additional Profit money coins Additional profit requires disclosure.

There may be occasions when you see an opportunity to make a little extra cash from a transaction. Be careful; California law prohibits you from engaging in certain activities for profit without full disclosure to, and consent from, your client. These activities include: Acquiring any secret interests that adversely affect your client. Profiting from the agency relationship outside of the commission defined in your representation agreement. Holding interest in a property that your client is interested in purchasing. As you represent your client, either a buyer or a seller, you cannot work behind the scenes for your own profit. This most commonly occurs when you, personally, have an interest in the property being transacted. Business and Professions Code Section 10176(g) requires you to disclose all additional compensation obtained from real estate transactions. This would be compensation outside of the normal commission structure in your representation agreement. Generally, the purchaser has the right to terminate the sales contract and receive a full return of the good faith earnest money deposit if he or she has not received proper written disclosure from his or her own agent. Sellers can cancel the contract with no obligation to pay a commission if proper disclosures aren't provided. The moral of the story is: Agents become liable if they fail to properly disclose additional profit when in an agency relationship.

Kevin is a designated broker, and knows that risk is inherent in every action. However, Kevin also knows that there is a reason people continue to engage in such actions. Which of the following best describes the reason that Kevin (and others) engage in actions that involve risk?

They need to balance risks with the need to be productive

In 1977, the Holden Act was passed.

This legislation, formally known as the Housing Financial Discrimination Act of 1977, made unlawful the practice of considering, for lending purposes, "the racial, ethnic, religious, or national origin composition of trends in neighborhoods surrounding a housing accommodation." http://www.fdic.gov/regulations/laws/rules/6500-2515.html#6500hcdā977 The intent of the legislation was to slow decay of inner cities by making more money available to urban applicants. If buyers were financially able to apply to purchase residential property, the lenders could not discriminate by refusing to loan funds simply because of the area where the property was found. Historically, some lenders avoided these high risk loans by "redlining." The practice of redlining occurs when lenders try to exclude lending to applicants financing properties in areas considered bad credit risks due to high foreclosure rates or locations near areas with high crime. The practice got its name from the lenders' use of maps which were colored in red to designate such areas. The Holden Act, and associated legislation, makes redlining illegal.

To balance your Bank Account Record (RE 4522) with the bank statement, follow these steps.

To balance your Bank Account Record (RE 4522) with the bank statement, follow these steps. Compare all checks listed as issued on the Bank Account Record (RE 4522) with the checks paid on the bank statement. Identify any checks on the Bank Account Record (RE 4522) that do not appear on the bank statement. Determine if those checks are still in transit. Compare all deposits listed on the Bank Account Record (RE 4522) with the checks paid on the bank statement. Note any deposits on the Bank Account Record (RE 4522) that were made past the ending date of the bank statement. These will appear on next month's statement. Take note of any checks that have been returned as non-sufficient funds (NSF). Make sure they are recorded properly on the Bank Account Record (RE 4522) and the Separate Record for Each Beneficiaries or Transaction For Client's Funds Placed In Trust Fund Bank Account (RE 4523). Any bank fees on the statement need to be added to the Bank Account Record (RE 4522). The entries on the Bank Account Record (RE 4522) will be considered "Paid Out" amounts. Since bank fees are not paid by your beneficiaries, you will need to make an entry on the Separate Record for Each Beneficiary or Transaction For Client's Funds Placed In Trust Fund Bank Account (RE 4523), you established for your brokerage. The amounts are actually deducted from the opening balance of the account. Note the new daily balance on the Bank Account Record (RE 4522). From the ending balance of the bank statement: Add the total amount of deposits made after the ending date of the bank statement (outstanding), and therefore not appearing on the statement. Subtract the total amount of checks still outstanding (checks that you have written that do not show up on your bank statement). The total should equal current balance on the Bank Account Record (RE 4522). In summary: Bank Account Statement Ending Balance + Deposits Outstanding - Checks Outstanding = Ending Balance on Bank Account Record (RE 4522). Account reconciliation is not required by California Real Estate Law or the Commissioner's Regulations. However, completing this practice monthly is vital for best practices in accounting and trust funds management. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Which of the following is a true statement regarding trust funds?

Trust funds are held "in trust" by the broker for a client

Property management funds require separate forms.

Trust funds from properties that you manage for a client are recorded on the Separate Record for Each Property Managed (CalBRE form RE 4525). 4525 When this form is used, the Separate Record for Each Beneficiary or Transaction for Client's Funds Placed In Trust Fund Bank Account (RE 4523) will not be maintained for the same transactions. Rule of thumb: Each client, beneficiary, or transaction should have his or her own separate record form.

Types of Agency

Types of Agency Single agency is separate agency. fish "Single agency" means that a real estate brokerage firm, and all the brokers and agents within that firm, act in a fiduciary capacity for either the buyer or the seller in a real estate transaction, but not for both.

Unit 4: Fair Housing » » Lesson 4: Changes and Additions to the Fair Housing Act Page 4 of 10 Slide: U5C1L4S4

Unit 4: Fair Housing » » Lesson 4: Changes and Additions to the Fair Housing Act Page 4 of 10 Slide: U5C1L4S4 • Print Slide Example - Sale of Property in a Senior Living Community Rob Hernandez and his family had recently moved to Southern California and were living in temporary housing. Rob has a great job in Del Mar and was looking for a place for his family to live in Encinitas. Stephanie, his wife, was expecting their sixth child in a few months, so they wanted to get settled as soon as possible. They wanted to find a home in a quiet neighborhood and were really drawn to a specific home they drove by in the Sunny Vistas community. Noticing the realty sign in the front yard of the home, they called Mark Evans, the listing agent. Mark informed Rob and Stephanie that Sunny Vistas is specifically marketed as a senior living community with 200 total units. There were currently 20 units for sale in the community, and 171 of the units were occupied by at least one person aged 55 or older, according to the Sunny Vistas HOA. Mark told Rob and Stephanie that he lacked confidence in their chances of a successful sale at Sunny Vistas, because of its specific senior designation. Rob and Stephanie appeared undaunted and persisted in making an offer on the unit they wanted. The seller, Harry Morgan, turned them down, because of their ages and the large number of children in their family. Extremely upset, Rob told Mark that he intended to take legal action against Harry for discrimination. Do Rob and Stephanie's discrimination claims against Harry have validity? Under the provisions of the Housing for Older Persons Act of 1995 (HOPA), Harry is allowed to refuse to sell his property, without fear of discrimination claims, in a senior community, if the community is marketed as a senior community, and at least 80% of the occupied units in Sunny Vistas have at least one person aged 55 or older currently living in them. Because the correct marketing was in place, and because 171 of Sunny Vista's 180 occupied units were currently occupied by a person 55 years old or older, Harry was within his rights to refuse to sell his home to Rob and Stephanie.

Use caution when mentioning religious terms in advertising. Advertisements containing explicit religious references are discriminatory and illegal such as: No Mormons Christian home Buddhist community Close to African American Methodist Church If a religious organization is selling property and the advertising must use the religious entity's name or symbol such as a cross or crescent, the advertising should include a disclaimer to avoid violating fair housing laws such as: "This property does not discriminate on the basis of race, color, religion, national origin, sex, handicap, or familial status." For example: If the Windward Hills Southern Baptist Church is selling an old building after building new facilities, the advertising may use the church's name, as long as the disclaimer is also used. Secularized terms or symbols relating to religious holidays such as "Santa Claus" or the "Easter Bunny" are acceptable. "Merry Christmas," "Happy Easter," and other such phrases may also be used.

Use the proper steps for opening the trust fund account When you open a trust account, you will use your personal or business funds

Use the proper steps for opening the trust fund account When you open a trust account, you will use your personal or business funds. The opening deposit with these funds cannot be more than $200. You will account for the opening deposit as follows: Enter the deposit on the Bank Account Record (4522) for this trust fund account. Complete a Separate Record for Each Beneficiary or Transaction For Client's Funds Place in Trust Fund Bank Account (RE 4523). On this form, identify the brokerage as the beneficiary. During a typical month, you might incur bank fees on the account. Such bank fees could include monthly account fees, non-sufficient funds (NSF) fees, cashier's check fees, wire transfer fees, etc. Bank fees are a business expense and trust funds cannot be used to pay these fees. The $200 you originally deposited may be used to pay those fees. You can then make a deposit to the account from your business account to restore the amount back to $200, so the $200 is still available for future bank fees.

fair housing

Use your knowledge of fair housing laws to recognize discriminatory treatment. In the scenario you just read, Jason and Juan received disparate treatment from Jenny, apparently based on their color or race. This is discrimination. Jenny should provide the same level of service for every customer, regardless of their background, culture, or preferences. History gives ample proof of blatant attempts by real estate professionals and lenders to steer members of minority groups away from some neighborhoods and toward others. Less dramatic actions such as Jenny's are still all too common today, and are just as illegal. Past discrimination in housing, lending, and commerce prompted federal and state laws to address such inequities. The state of California led the way by passing laws that anticipated Federal statutes, providing legal avenues of redress for those who have been treated unfairly as a result of prejudice. Fair housing is good business. On the surface, the strict following of fair housing rules may seem limiting. In reality, practicing the concepts and philosophies of fair housing will help you increase your business and improve our communities. When you consider the scenario with Jenny, Jason, and Juan, does it seem like a good business practice to give some clients less of your time, attention, and assistance than other clients? How does this reflect on your reputation and integrity? Treating all clients and customers with courtesy and respect is good business practice. If you feel that your actions as a real estate professional should be driven primarily by economics, consider this statistic from Harvard University: "Minorities—and particularly younger adults—will also contribute significantly to household growth in 2013-23, accounting for seven out of ten net new households. An important implication of this trend is that minorities will make up an ever-larger share of potential first-time homebuyers." Source: Joint Center for Housing Studies of Harvard University, "The State of the Nation's Housing 2013," the President and Fellows of Harvard College, 2013. p. 3 Of course, it is also good business to know and follow the law. This will help you avoid facing legal action for discriminatory practices, and will prevent you from facing fines and losing your license as a result of violating the law. Any way you look at it, success as a real estate professional requires you to follow both the letter and the spirit of fair housing law. Fair housing principles are integral to the real estate industry. Many real estate professionals choose their career because they enjoy helping others. The principles espoused in fair housing laws are inherent in this career choice. The practices of fair housing are integral to the real estate industry. A testament to this commitment is written in the Fair Housing Declaration which is agreed to by each REALTOR® associated with the National Association of REALTORS®. Professionals agree to: "Provide equal professional service without regard to the race, color, religion, sex, handicap, familial status or national origin of any prospective client, customer, or of the residents of any community. Keep informed about fair housing law and practices, improving my clients' and customers' opportunities and my business. Develop advertising that indicates that everyone is welcome and no one is excluded; expanding my client's and customer's opportunities to see, buy or lease property. Inform my clients and customers about their rights and responsibilities under the fair housing laws by providing brochures and other information. Document my efforts to provide professional service, which will assist me in becoming a more responsive and successful REALTOR®. Refuse to tolerate non-compliance. Learn about those who are different from me, and celebrate those differences. Take a positive approach to fair housing practices and aspire to follow the spirit as well as the letter of the law. Develop and implement fair housing practices for my firm to carry out the spirit of this declaration." Unit Quizzes and the minimum required study time must be met to unlock Final Exam. Lesson 2: Fair Housing Prior to 1964 civil rights The Civil Rights Act passed in 1866. On April 9, 1866, just one year after the Civil War, the 39th United States Congress passed the Civil Rights Act of 1866. "All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other" (42 U.S.C. § 1981, paragraph a). As a major legislative initiative of the Federal Reconstruction, this Act granted certain civil rights to freed blacks, including property rights, contract rights, and equal protection under the law. The Fifteenth Amendment to the Constitution and further civil rights legislation in 1870 gave former slaves the right to vote. In theory, the law requires all United States citizens to be treated equally. In practice, many people found and continue to find ways to practice discrimination. In the 1880's many state legislatures passed segregation laws, referred to as "Jim Crow" laws, in opposition to the federal statutes regarding equality. Jim Crow laws enforced segregation of businesses, schools, and living accommodations. Segregation continued, supported by state laws, throughout the first half of the twentieth century. Signs and advertising prohibiting blacks and others from entering retail stores, museums, libraries, restaurants, etc., were commonplace. Black people who rode the bus were told they could only sit in the back. Segregation and discrimination led to separate water fountains and restrooms. People of cultures that varied from local norms often experienced real difficulty and prejudice when searching for suitable real estate and rental property.

Trust Fund Handling and Timing Proper handling of trust funds depends on two fiduciary duties

When you act as a real estate agent, you have fiduciary duties to your clients, as well as expected duties to your customers who are not contracted with you. Two of those duties are reasonable skill and care, and accounting. Reasonable Skill and Care To use your professionalism, education, and skill to perform your duties for your clients to the best of your ability. Accounting To account for money and personal property entrusted in your care as it relates to transactions. As you perform your duties, you must maintain trust accounts and handle trust funds with the highest degree of professionalism. The Commissioner's Regulations set forth rules for handling trust accounts beginning at Regulation 2830 et seq.

Trust Fund Handling and Timing Proper handling of trust funds depends on two fiduciary duties. When you act as a real estate agent, you have fiduciary duties to

When you act as a real estate agent, you have fiduciary duties to your clients, as well as expected duties to your customers who are not contracted with you. Two of those duties are reasonable skill and care, and accounting. Reasonable Skill and Care To use your professionalism, education, and skill to perform your duties for your clients to the best of your ability. Accounting To account for money and personal property entrusted in your care as it relates to transactions. As you perform your duties, you must maintain trust accounts and handle trust funds with the highest degree of professionalism. The Commissioner's Regulations set forth rules for handling trust accounts beginning at Regulation 2830 et seq.

Use the proper steps for opening the trust fund account

When you open a trust account, you will use your personal or business funds. The opening deposit with these funds cannot be more than $200. You will account for the opening deposit as follows: Enter the deposit on the Bank Account Record (4522) for this trust fund account. Complete a Separate Record for Each Beneficiary or Transaction For Client's Funds Place in Trust Fund Bank Account (RE 4523). On this form, identify the brokerage as the beneficiary. During a typical month, you might incur bank fees on the account. Such bank fees could include monthly account fees, non-sufficient funds (NSF) fees, cashier's check fees, wire transfer fees, etc. Bank fees are a business expense and trust funds cannot be used to pay these fees. The $200 you originally deposited may be used to pay those fees. You can then make a deposit to the account from your business account to restore the amount back to $200, so the $200 is still available for future bank fees.

Trust funds must be deposited within three business days.

When you receive funds from your client, you are required to deposit those funds into the trust account within three business days of receipt, if not requested in writing to do otherwise. If you are a broker, your agents must deliver trust funds to you for deposit. Section 10145 goes on to state: Funds remain in the account until such time as the contract with the client dictates. Withdrawals are completed by an authorized person, whose signature is listed with the bank as an authorized signer. This is usually the broker or a designated broker, if the broker is a corporation.

Trust funds must be deposited within three business days.

When you receive funds from your client, you are required to deposit those funds into the trust account within three business days of receipt, if not requested in writing to do otherwise. If you are a broker, your agents must deliver trust funds to you for deposit. Section 10145 goes on to state: Funds remain in the account until such time as the contract with the client dictates. Withdrawals are completed by an authorized person, whose signature is listed with the bank as an authorized signer. This is usually the broker or a designated broker, if the broker is a corporation. lr LEGAL REFERENCE: BPC Section 10145 "[T]rust funds received must be placed into the hands of the owner(s) of the funds, into a neutral escrow depository, or into a trust fund account maintained pursuant to Commissioner's Regulation 2832 not later than three business days following receipt of the funds by the broker or by the broker's salesperson." "(c) A real estate sales person who accepts trust funds from others on behalf of the broker under whom he or she is licensed shall immediately deliver the funds to the broker or, if so directed by the broker, shall deliver the funds into the custody of the broker's principal or a neutral escrow depository or shall deposit the funds into the broker's trust account."

Lesson 4: Trust Account Requirements calculator Basic accounting principles are a must.

While you do not have to be a CPA to manage trust funds properly, you do need to learn some basic accounting principles that will help you be accurate and effective. Even if you designate an employee to maintain the accounts for the trust fund, you still need to understand how they should be correctly managed. With the help of this course and a few fairly simple forms, you'll be more than ready to maintain proper accounting records for your trust funds. note NOTE: Under California law, the broker responsible for a trust fund may authorize another licensee in writing to make withdrawals from it. The broker may even authorize an unlicensed employee to do so as long as he or she is covered by a fidelity bond equal to the aggregate amount of funds in the account at any time. You can use the CalBRE's forms, or you can use your own accounting systems or computer accounting systems as long as they adhere to general accounting practices. Whatever system of accounting you use, make sure that you set policies and procedures for handling trust and non-trust funds. Each person in your brokerage must adhere to these policies consistently to ensure that every dollar is accounted for and each transaction recorded. This applies to every transaction, whether the funds are deposited to a trust account, held by the brokerage, sent to an escrow company, or sent to the principal.

LEGAL REFERENCE: BPC Section 10145

[T]rust funds received must be placed into the hands of the owner(s) of the funds, into a neutral escrow depository, or into a trust fund account maintained pursuant to Commissioner's Regulation 2832 not later than three business days following receipt of the funds by the broker or by the broker's salesperson." "(c) A real estate sales person who accepts trust funds from others on behalf of the broker under whom he or she is licensed shall immediately deliver the funds to the broker or, if so directed by the broker, shall deliver the funds into the custody of the broker's principal or a neutral escrow depository or shall deposit the funds into the broker's trust account."

Margaret is a broker and deposits $100 in trust funds from her client, Linda, on June 4. Which of the following is the correct entry?

deposit should be recorded on The Bank Account Record and on a Separate Record For Each Beneficiary or Transaction For Client`s Funds Placed In Trust Fund Bank Account (RE 4523).

Recording Deposits and Withdrawals In a typical brokerage trust account, you will have regular deposits and withdrawals. Below are some typical types of transactions for a brokerage trust account (not an exhaustive list

eposits Withdrawals Earnest money deposits Deposits sent to escrow companies Advance payments for home inspections and appraisals Payments for inspections and appraisals Advance payments for down payments or closing costs Rent disbursements to property owners Rent payments on client properties Payments for property operating expenses such as maintenance, taxes and loan payments Security deposits on client properties Returned to the tenant or disbursed to vendors to pay for tenant-caused damage Receipt of funds to cover property maintenance Disbursed to vendors who complete property maintenance Each one of these transactions must be recorded on the proper columnar forms or in your accounting systems. Electronic fund transfers Deposits and withdrawals can be made using checks or electronic transfers. If you receive or send an electronic transfer, you will need to have a record of the transaction so you can validate the

Defining Trust Funds money in hand

esson 1: Defining Trust Funds money in hand Trust funds are part of real estate. When a client (or a customer) gives you funds to handle, it is said that these funds are being held "in trust," or simply that they are "trust funds." Trust funds can be anything that is given to you, as a licensed agent, to hold for a client or customer as part of a real estate transaction. You have a fiduciary responsibility to manage, track, and account for all of those funds accurately and effectively. . Here are some examples of trust funds you may handle: Earnest money, which can be given to you in different forms. These include: Cash A check made payable to your broker, to an escrow company, or to a title company Personal note made payable to the seller in exchange for the earnest money deposit. Notes to other property (automobile titles, property titles, etc.) Property to be used in exchange for the earnest money deposit (gold, jewelry, stocks, bonds, securities, etc.) Rent: Cash or checks received from tenants of principal-owned properties Security Deposits: Cash or checks received from tenants of principal-owned properties. Client Funds to Pay Fees: Cash or checks from clients to be used to pay upfront fees, such as credit report fees, mortgage points, inspections, appraisal fees, etc. Payments on notes being collected by the broker on behalf of a principal.

As a broker, Heidi must _____________ over the activities of her salespersons.

exercise reasonable supervision

Other accounting systems may be used.

f you choose, you can use other accounting systems to track and maintain trust accounts. According to Commissioner's Regulations 2831 and 2831.1, you must use systems that adhere to general accounting principles and "and must include detail specified in subdivision (a) of these Regulations and be in a format that will readily enable tracing and reconciliation in accordance with Section 2831.2." These systems can be manual or electronic, but they must be auditable should you be requested to show your trust fund records to an official. One thing to be aware of: Standard checkbook entries are NOT an acceptable method for keeping trust fund records. These records do not comply with Regulation 2831. Your accounting system must be able to generate the following reports or records: Chronological Journal - This is a report of each transaction in and out of the brokerage account, by date. Must be able to identify the name or reference to the payee or payor, the check number, and the beneficiary of the transaction. Cash Ledger - This is a summary of the increases and decreases to the balance of the account. Beneficiary Ledger - Contains separate reports for each beneficiary showing the deposits and withdrawals individually.

ge and source of income are protected classes in California. Age Brokers, agents, and lenders must take care to treat persons of any age as fairly as they would treat any other class of people. It is unlawful in California to discriminate in housing on the basis of age. For example, a person in their sixties who applies for a loan must be considered using the same guidelines as someone in their thirties. Source of Income In 1999, FEHA added a person's source of income as a protected class in the state of California. This means that it is illegal to discriminate based on the source of a person's income. A landlord, seller, or lender may make decisions to rent or sell based on the amount of income only and not the source. One caution here: If more than one person is on an application for housing or a loan, the landlord, seller, or lender must use the combined income of all the applicants as the criteria for accepting or rejecting the application. Of course, a person making illegal income, such as drug money, does not qualify as a protected class.

Lesson 6: Eight Ways to Terminate an Agency Relationship terminate There are eight ways in which an agency relationship may be terminated.

he client's goals were met during the term of the agency agreement (i.e., the sale is completed). The specified term in the agency agreement expires. The client and agent mutually agree to dissolve the relationship. The client or agent becomes incapacitated or dies. The property is destroyed for any reason, making the property unmarketable. The client or broker files for bankruptcy. The client revokes the agreement prior to the agreement's expiration date. A client can revoke an agency relationship with no penalty if he or she lacks confidence in the agency or believes the agency to be untrustworthy. If the client revokes the agreement for no specific reason or without good cause, the client may be in breach of contract. The agent renounces the agreement prior to the agreement's expiration date. This is similar to the client's ability to revoke the agreement. It should not be done without good cause. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

The disclosure you provide to a potential client does not create an agency relationship.

he disclosure process simply educates potential clients about the type of agency relationships that are available, and the duties owed under those agency relationships. California Disclosure Forms The California Association of REALTORS® form for agency disclosure (C.A.R. form AD, revised 12/2014) includes three versions, all exactly the same except for identifying for whom it is intended: Disclosure Regarding Real Estate Agency Relationship - Listing Firm to Seller (C.A.R. Form AD-1) Disclosure Regarding Real Estate Agency Relationship - Selling Firm to Buyer (C.A.R. Form AD-2) Disclosure Regarding Real Estate Agency Relationship - Selling Firm to Seller (C.A.R. Form AD-3) Members of the California Association of REALTORS® can use and download copies of these forms from the California Association of REALTORS® (C.A.R.) website located at http://www.car.org/. You must log in to access the forms.

Use the proper steps to open a trust account.

hen you open a trust account, you will: Open it in a financial institution insured by the federal government and located in the state of California. (1) Open it with no more than $200 from the brokerage's general business account. Establish the account in the name of the broker, as trustee. Open an account that is a non-interest bearing checking account. (2) The reason it is recommended that you do not use an interest bearing account is that the interest accrued into the account would have to be allocated to each and every beneficiary, on a daily basis. This can cause an accounting nightmare. If you have a single beneficiary who is depositing a large amount of funds, you can open a separate account just for that one beneficiary, the interest can be accounted directly to that one beneficiary. For example, a potential buyer makes a deposit of $250,000 for a large commercial property. He requests the funds be placed in an interest bearing account since the funds will be sitting idle for three to four months. The broker would then open a separate account with this deposit as the only funds. Once the transaction is concluded, the interest would be paid to the beneficiary (the buyer) and the account would be closed. note NOTE: A broker may have an out-of-state trust account if the account is insured by the Federal Deposit Insurance Corporation (FDIC) and is used to service first loans for the types of note owners/investors specified in Section 10145(a)(2) of the Business and Professions Code. To learn more about the risks and requirements for using interest-bearing accounts, refer to

The following examples demonstrate how trust funds flow in and out of the account.

hese case studies represent two different types of transactions: earnest money deposits and lease payments. These are examples and are just two of the many types of transactions you may handle. Example #1 Allen is a broker who has entered into a listing agreement with Stella to sell her beach house. Stella is the broker-owner of Stella Realty. Allen conducts an open house at the beach house. Josh, a buyer, comes to the open house with his broker, Babbette. Babette is the broker-owner of Babette Properties, LLC. Josh and Babette have a buyer broker agreement. Josh has decided that the beach house is perfect for him. Through Babette, he writes up an offer. He writes a check for the earnest money deposit made payable to Babette Properties, LLC. Josh indicates in his offer that the earnest money check will be deposited and not held. Babette deposits the earnest money check into her brokerage's trust account and records the transaction. At the closing, Babette withdraws the earnest money deposit from the trust account, recording the withdrawal properly. She transfers it to the escrow company (closing agent), who credits the earnest money deposit amount to Josh's final closing cost requirement. Example #2 Charles is interested in purchasing an old Victorian home and has contracted with William, broker-owner of William Realty, to help him prepare the offer. He writes a check for the earnest money deposit, but instructs William, in writing, to hold the check until the seller, Julie, accepts the offer and until all of the contingencies have been met, including the home inspections and termite inspections. Once the inspection contingencies have been removed, William has been instructed to send the check to ABC Escrow, a third party escrow company who will conduct the closing. Once the inspections have been completed, William forwards the earnest money check, payable to ABC Escrow, to the escrow company. Unit Quizzes and the minimum

Trust Fund Accounts lock of money Trust funds must be deposited into a trust account.

rust funds must be kept separate from your general business funds. You must establish a separate bank account specifically to hold trust funds. This account must be opened as a federally insured account. The bank where the account is located must also be insured by the federal government. Having a separate account allows you to: Manage and track transactions more effectively Prevent any mixing of business with trust funds (called commingling) Provide easier management and auditing Prevent funds from being frozen or seized if the broker files for bankruptcy, becomes incapacitated, or dies Prevent funds from being frozen or seized if the brokerage falls into litigation Receive federal insurance for each client up to $250,000, not just insurance on the entire account. lr LEGAL REFERENCE: BPC Section 10145 (a) (1) "A real estate broker who accepts funds belonging to others in connection with a transaction subject to this part shall deposit all those funds that are not immediately placed into a neutral escrow depository or into the hands of the broker's principal, into a trust fund account maintained by the broker in a bank or recognized depository in this state. All funds deposited by the broker in a trust fund account shall be maintained thrust funds must be kept separate from your general business funds. You must establish a separate bank account specifically to hold trust funds. This account must be opened as a federally insured account. The bank where the account is located must also be insured by the federal government. Having a separate account allows you to: Manage and track transactions more effectively Prevent any mixing of business with trust funds (called commingling) Provide easier management and auditing Prevent funds from being frozen or seized if the broker files for bankruptcy, becomes incapacitated, or dies Prevent funds from being frozen or seized if the brokerage falls into litigation Receive federal insurance for each client up to $250,000, not just insurance on the entire account. lr LEGAL REFERENCE: BPC Section 10145 (a) (1) "A real estate broker who accepts funds belonging to others in connection with a transaction subject to this part shall deposit all those funds that are not immediately placed into a neutral escrow depository or into the hands of the broker's principal, into a trust fund account maintained by the broker in a bank or recognized depository in this state. All funds deposited by the broker in a trust fund account shall be maintained there until disbursed by the broker in accordance with instructions from the person entitled to the funds."ere until disbursed by the broker in accordance with instructions from the person entitled to the funds."

It'sime for Mandy to renew her license, but she currently has a restricted license. Which of the following statements is true.

she does not have the right to automatically renew her license. Congratulations, this is the correct answer!s

Minnie is representing a seller. Minnie finds out that the house was tested for radon gas 18 months ago and traces of the gas were detected. Is Minnie required to disclose the information about the radon gas?

yes, the radon gas is an environmental hazard and must be disclosed.

Before we see the reasoning from the Hearing Panel, read the text of Article 12.

Article 12 states: "REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations. REALTORS® shall ensure that their status as real estate professionals is readily apparent in their advertising, marketing, and other representations, and that the recipients of all real estate communications are, or have been, notified that those communications are from a real estate professional" (Amended 1/08). The promotion of your business and the properties your firm represents depends heavily on your ability to market and advertise. Advertising can be defined as "any public communication representing the offer of products or services for purchase or sale." In real estate, this means promoting yourself and your real estate firm in any media, and includes listed properties for sale, rental properties, or any other services that you offer

Article 12 requires honest, truthful advertising

Before we look at Article 12, let's take a look at a case study reprinted from the NAR Code of Ethics and Arbitration Manual that is used to illustrate the importance of Article 12. Note that the names have been added for teaching purposes, and don't reflect the actual names of the individuals involved in this case. REALTOR® Audrey placed a full page ad in the Sunday supplement of her local newspaper. In the body of the ad were pictures of several homes and their addresses. At the top of the page was the following: "We've sold these—we can sell yours, too." The following week, three complaints were received from other Board Members alleging that Audrey's ad was in violation of Article 12. Each of the complaints noted that REALTOR® Audrey had participated in the transaction as the successful cooperating broker who had located the eventual purchasers, but the complaints also claimed that her claim to have "sold" these properties was false and misleading, since none of the properties had been listed with her. Because all the complaints involved the same advertisement, the complaints were consolidated to be heard at the same hearing before a Hearing Panel of the Professional Standards Committee. At the hearing, REALTOR® Audrey defended her actions on the basis that although the properties had been listed with other brokers, she had been the "selling" or "cooperating" broker and was entitled to advertise her role in the transactions.

cients duties

C When working under an agency relationship, clients also have duties and responsibilities. Sellers are ultimately responsible for any representations or disclosures they know about and that are given to you, your broker, buyers, buyer's agents, or third parties about a property, except in cases where there is agent fraud. Sellers are responsible and liable for any actions taken by a real estate licensee on their behalf, such as: Listing the property Advertising and marketing the property Showing the property Negotiating a transaction with a third party Buyers and sellers are both obligated to abide by the terms of their agreements. Every agreement will have different terms and requirements. Clients are obligated to pay the agreed upon compensation. It is in everyone's best interests to have the agreements in writing and signed by all parties.

Ethical practice includes advertising.

Ethical practice includes advertising. Standard of Practice 10-3 states that you can't print, display, or circulate any statement or advertisement with respect to selling or renting of a property that indicates any preference, limitations, or discrimination based on race, color, religion, sex, handicap, familial status, national origin, sexual orientation, or gender identity. Article 10 and the Fair Housing laws intend to create a marketplace where those of similar means have access to similar properties. This allows everyone the same opportunity to live wherever they choose. The law binds and protects every participant in the real estate market in the same way, so everyone receives fair treatment when searching for residential properties. Federal, state, and local fair housing laws affect every step of the real estate transaction process. Builders, brokers, lenders, developers, sellers, and buyers are all covered by the equal opportunity housing laws.

Lesson: Best Practices and Procedures target

Lesson: Best Practices and Procedures target Regardless of what the industry as a whole is doing, or even what the policies are for your brokerage, you can implement your own best practices and procedures that place your personal safety at the top of the priority list. But, as a self-employed business professional, you likely aren't waiting around to be told what to do anyway!

Mitigating professional risk factors

Mitigating professional risk factors. As seen from the case studies, agents have found themselves in a range of uncomfortable to even threatening situations varying from harassing phone calls, being robbed, being physically or sexually assaulted or raped, to being killed. While it's impossible to 100% prevent yourself from being a victim or to predict exactly who is going to pose a safety threat to you, there are ways to reduce the opportunities for someone with ill intentions to make you a victim. There are a range of suggested best practices for salespersons and brokers to employ to enhance their personal safety, tilting the odds in favor of you, the professional, while undermining the intentions of a would-be criminal.

California Disclosure Forms

OLD CAR" Definitions Obedience To follow the instructions of your client which are allowable within the law. To follow all federal, state, and local laws and regulations. Loyalty To place the interests of your clients above all other interests, including your own. Disclosure To disclose information about transactions and properties vital for your clients/customers to know in order to make informed decisions. Confidentiality To keep information received from your clients that might harm your clients' positions in transactions private and confidential. Accounting To accurately keep accounts of money and personal property entrusted in your care as they relate to transactions. Reasonable Skill and Care To use your professionalism, education and skill to perform your duties for your clients to the best of your ability.

Lesson: Adopting a Safety Mindset

One of your biggest assets in practicing personal safety protocols is your mindset. While most people won't say it out loud, there is a voice inside that tends to reassure and says "That couldn't happen to me." No one wants to constantly brood over various 'what if' situations and assume everyone is out to cause them harm, nor does anyone want to think of themselves as a victim. It's natural to push those thoughts off as scary—and not necessarily realistic or plausible. Also, most people have a strong fear of being considered paranoid. Paranoia isn't healthy, right? To constantly be in a state of dread and fear is exhausting, so it's not particularly effective in the long-run. The perfect medium between "not me" and "everyone is out to hurt me" would be to have a healthy respect for people and their capabilities and intentions: both good and nefarious. It's with this mindset that you can establish a system of procedures that you use because looking out for your own safety is the smart thing to do, and is an integral part of your overall professionalism as a self-employed business person. A boogeyman doesn't always look like a boogeyman, so judging someone as 'safe' just because they aren't wearing a dark trench coat, a mask, and don't have a hook for one hand while clutching a knife in the other is not a safety mindset. Unfortunately, many professionals seem to be relying on just that simple a view of criminals.

Here are some things you can do to reduce your risks of implied agency and undisclosed dual agency:

Reduce your risk! Here are some things you can do to reduce your risks of implied agency and undisclosed dual agency: Review your brokerage firm's policies on agency and dual agency. Understand clearly the disclosure requirements. Clearly understand your fiduciary duties as an agent, both for the buyer and for the seller. Before you act in any way as an agent, secure an express agency agreement, either a Listing Agreement or a Buyer Broker Agreement. If you are engaging in dual agency, ensure you have the written consent of all parties involved. Provide all parties with the proper disclosures.

Let's dig into the Preamble.

he Preamble to the Code of Ethics contains important information about the intent of the Code. It begins like this: "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." "REALTORS® should recognize that the interests of the nation and its citizens require the highest and best use of the land and the widest distribution of land ownership. They require the creation of adequate housing, the building of functioning cities, the development of productive industries and farms, and the preservation of a healthful environment." Inspiring, yes? You play an important role in the transactions that control the land. Therefore, you must conduct yourself with the utmost integrity so that transactions of one of this country's most important resources happen in an honest and safe manner. The standards outlined in the Code of Ethics are much higher and more stringent than those of federal and state legal systems.

Duties to Clients and Customers, Article 1 client Article 1 says "Put your clients first

rticle 1 states, "When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly." In other words, you represent your client and must protect their best interests. In addition, you must treat all parties to any transaction honestly. Your primary responsibility to your client does not warrant mistreatment or dishonesty in regard to any other party. This article is cited in more complaints than any other article.

Standard of Practice 12-7 states:

"Only REALTORS® who participated in the transaction as the listing broker or cooperating broker (selling broker) may claim to have "sold" the property. Prior to closing, a cooperating broker may post a "sold" sign only with the consent of the listing broker" (Amended 1/96). You only have the right to advertise that you "sold" a property if you acted as the listing or selling broker, and only upon acceptance of a purchase offer by the seller. That said, if you're acting as the buyer broker, then you can post a "sold" sign prior to closing with the consent of the listing broker.

article 5 requires disclosure of personal interest when providing professional services.

"REALTORS® shall not undertake to provide professional services concerning a property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all affected parties." To ensure that all clients receive professional and ethical services and have no reason to question you or the integrity of the industry you represent, you cannot provide professional services regarding a property for which you may have interest without first disclosing any interest to all affected parties.

Lesson 2: Types of Agency Single agency is separate agency.

"Single agency" means that a real estate brokerage firm, and all the brokers and agents within that firm, act in a fiduciary capacity for either the buyer or the seller in a real estate transaction, but not for both.

Lesson: Complacency: the Enemy of a Safety Mindset

A key area of vulnerability for anyone is complacency. Being complacent is defined as "unconcerned" and complacency as "self-satisfaction especially when accompanied by unawareness of actual dangers or deficiencies." In short, it's when you let your guard down, comfortable doing business in the same traditional manner that it has always been done. After a tragic incident occurs, personal safety is in the forefront of everyone's mind, and offices scramble to move safety training onto schedules. But then it moves to the back as more pressing concerns—such as getting a closing completed or selling a home before it goes into foreclosure—take center stage. Brokerages, commissions and associations can give you the tools, but it's up to you to do something with those tools and to avoid that sense of complacency, the idea that dangerous situations can't happen in your state, region, or neighborhood. Think back to the 2011 Realtor Safety Report, as well as the other findings related to the steady increase in assaults on real estate professionals. Did any of the findings challenge your assumptions? For example, had you always thought that the real danger was in showing a property after dark, and therefore only did showings in broad daylight? If so, were you surprised to learn that the majority of assaults happened in the afternoon? One of the single best ways to combat complacency is to challenge your assumptions and consider that things can go from ordinary to extra-ordinary at any random moment.

Business Practices » » Lesson: Complacency: the Enemy of a Safety Mindset Page 1 of 5 Slide: U3C1L2S1 • Print Slide Lesson: Complacency: the Enemy of a Safety Mindset

A key area of vulnerability for anyone is complacency. Being complacent is defined as "unconcerned" and complacency as "self-satisfaction especially when accompanied by unawareness of actual dangers or deficiencies." In short, it's when you let your guard down, comfortable doing business in the same traditional manner that it has always been done. After a tragic incident occurs, personal safety is in the forefront of everyone's mind, and offices scramble to move safety training onto schedules. But then it moves to the back as more pressing concerns—such as getting a closing completed or selling a home before it goes into foreclosure—take center stage. Brokerages, commissions and associations can give you the tools, but it's up to you to do something with those tools and to avoid that sense of complacency, the idea that dangerous situations can't happen in your state, region, or neighborhood. Think back to the 2011 Realtor Safety Report, as well as the other findings related to the steady increase in assaults on real estate professionals. Did any of the findings challenge your assumptions? For example, had you always thought that the real danger was in showing a property after dark, and therefore only did showings in broad daylight? If so, were you surprised to learn that the majority of assaults happened in the afternoon? One of the single best ways to combat complacency is to challenge your assumptions and consider that things can go from ordinary to extra-ordinary at any random moment. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Let's define "material adverse facts."

A material adverse fact includes a problem with the property that would have a negative impact on the property value or pose an unreasonable risk for the people who will reside in it. If you represent the seller, California requires that you advise the client of his or her responsibilities to disclose material adverse facts. A material fact might determine whether or not a particular buyer/client would purchase or not purchase a particular property. It might also play a factor in determining the initial price offered for a property. In all states, conditions that may affect the health and /or safety of a subsequent owner of the property must be disclosed. This would apply to a condition not readily discovered by the buyer. Due to renumbering, only three Standards of Practice currently exist to define Article 2. These are Standards of Practice 2-1, 2-4 and 2-5: Standard of Practice 2-1 states, REALTORS® shall only be obligated to discover and disclose adverse factors reasonably apparent to someone with expertise in those areas required by their real estate licensing authority. Article 2 does not impose upon the REALTOR® the obligation of expertise in other professional or technical disciplines". (Amended 1/96) You are not expected to be an expert at investigating or inspecting properties if it is outside your area of expertise. Encourage your clients to seek professional property inspection services to determine material adverse facts.

A written agency employment agreement includes these components.

A written agency employment agreement includes these components. The names of the parties involved in the agency relationship. The address and/or location that identifies the property (in a seller's agreement). All terms and conditions which apply to the purchase, sale, lease, or loan. The amount of commission to be paid to the brokerage firm for completing the objectives of the agreement. The agreement's expiration date, which terminates the agency relationship. Exclusive listings must include a specified date when the agreement will expire. Signatures of all parties in the agreement. note NOTE: Additional Listing Agreement Clause Regarding Commissions You must include an additional clause regarding brokerage firm commissions in written agency agreements that represent the sale of residential properties (1 - 4 units) and mobile homes. The clause regarding brokerage firm commissions must be written using 10-point boldface type (or larger), and indicate that the commission amount is negotiable between the seller and the broker and is not set by law. The requirements for this clause and the suggested text of the clause are outlined in California Business and Professions Code Section 10147.5.

Unit 2: Agency » » Lesson 5: Types of Agency Relationships Page 2 of 7 Slide: U3C1L5S2 • Print Slide A written agency employment agreement includes these components.

A written agency employment agreement includes these components. The names of the parties involved in the agency relationship. The address and/or location that identifies the property (in a seller's agreement). All terms and conditions which apply to the purchase, sale, lease, or loan. The amount of commission to be paid to the brokerage firm for completing the objectives of the agreement. The agreement's expiration date, which terminates the agency relationship. Exclusive listings must include a specified date when the agreement will expire. Signatures of all parties in the agreement. note NOTE: Additional Listing Agreement Clause Regarding Commissions You must include an additional clause regarding brokerage firm commissions in written agency agreements that represent the sale of residential properties (1 - 4 units) and mobile homes. The clause regarding brokerage firm commissions must be written using 10-point boldface type (or larger), and indicate that the commission amount is negotiable between the seller and the broker and is not set by law. The requirements for this clause and the suggested text of the clause are outlined in California Business and Professions Code Section 10147.5.

The following are methods of promoting your services and schedule, but these are also methods used by criminals to target victims. Therefore, each is worth consideration so you can determine how you will implement your own best practice for handling them.

Advertising. The following are methods of promoting your services and schedule, but these are also methods used by criminals to target victims. Therefore, each is worth consideration so you can determine how you will implement your own best practice for handling them. Photos: In your advertising, you want to portray an attractive, successful image. But it's a double-edged sword: in some crimes—as was represented in one of the case studies—advertisement photos were used to target victims. For example, many in the industry recommend against "glamour shots" that lean more toward glamour and less toward polished, business-like professionalism. When putting together your advertising, how you present yourself in a photo should be a consideration—or whether or not you will even use a photo. Sales success/numbers: Another consideration would be a common method used in the real estate industry for projecting success: advertising oneself as a top agent with X amount in sales. For some would-be robbers, this makes the agent prime for the picking—they "obviously" have the money, goes the criminal thinking. Vacant listings: How about advertising a home as "move-in ready" because it's vacant? While this is a selling point for some buyers, it has been used by criminals as a calling card. They make an appointment to view the conveniently vacant property—no chance of running into a homeowner at the same time. Social media: Having the ability to post in-the-moment onto social media sites such as Facebook and Twitter is a quick way to promote open houses, new listings, and details of your schedule and travel. It's also a way for criminals to track where you will be. For example, it's recommended that people don't advertise that they are either leaving for vacation or on vacation, because burglars like to receive that sort of notice. For agents, advertising that you are holding an open house at 123 Main Street and the home is vacant so buyers can better envision their furniture there can also be a signal to a criminal that you will be by yourself for a certain period of time. When advertising, think about the amount of information you share. Keep business and personal as separate as possible: no home address, home phone number. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

When working as a buyer's agent, it is best to have a written agreement.

Although the majority of buyer's agents act as such without a written contract, when working with buyers it is advisable and recommended to enter into a written agency agreement. The California Association of REALTORS® (C.A.R.) uses the following three forms: Buyer Representation Agreement - Exclusive (C.A.R. Form CalBRE) Buyer Representation Agreement - Non-Exclusive (C.A.R. Form BRNE) Buyer Representation Agreement - Non-Exclusive/Not for Compensation (C.A.R. Form BRNN) When you act as a buyer's agent, you must: Provide fiduciary duties to the buyer. Hold confidential all information received from the buyer that, if revealed, would weaken the buyer's negotiating position, including information about the buyer's financial position or willingness to pay more for a property. Treat both the buyer and seller with honesty, fair dealing, and good faith. Exercise reasonable skill and care to both the buyer and seller when performing your agent duties. Disclose to both the buyer and seller all the material facts you know about the property that might affect the transaction.

Standard 12-5 requires approval from the principal broker for all advertisements.

Any advertising offered through a real estate firm must have the approval of its principal broker and must include the name of the company as it is known by the public. Standard of Practice 12-5 requires the firm's name to be in every advertisement. That requirement does not exclude the use of an agent's name. It ensures that an agent's name is not used without the name of the real estate firm. Agents cannot do anything solely in their own names concerning properties listed by their firm. These advertising rules disclose to the public the name of the responsible party on every advertisement. This Standard was amended in 2011 to allow for exceptions when online or other formats don't allow enough space to disclose the firm name (such as a Twitter tweet or thumbnail). However, in these cases, the ad or other promotion must link to a page that contains this information.

Arbitrations involve a hearing panel.

Arbitrations are forums where parties and counsel, if desired by the parties, present their positions before an impartial hearing panel that renders a specific award. The award is generally "all or nothing," with one broker receiving all monies and the other receiving nothing. The prevailing broker will have his initial arbitration fee returned, but the association performing arbitration retains the losing broker's fee. Numerous arbitration providers exist, such as the American Arbitration Association, private attorneys, private arbitrators, and REALTOR® Associations. Before filing for arbitration, settlement must occur. REALTOR®'s firms cannot have a dispute over funds until the funds have been paid by the transaction. Typically, the arbitration procedure calls for the filing of a complaint or petition describing the dispute. The respondent has an opportunity to respond. A hearing panel convenes at which the parties present evidence and make arguments. The hearing panel renders an award. The prevailing party may seek to enforce the award as a judgment by requesting that a court of law do so. You may appeal arbitration awards on procedural or due process grounds.

Article 13: "Thou shalt not practice law" (unless thou art a licensed attorney!)

Article 13 reads, "REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it." Always avoid drafting new language in real estate contracts, contract provisions, or any other legal document that could be construed as practicing law. You may need to assist clients in completing the standard contract forms and you may help clients by educating them on each of the clauses in the contract. Advise clients to seek proper legal counsel if the contract extends beyond the standard form, if they wish to have a custom agreement drafted, or if their questions go beyond your level of expertise. Use only standard forms in the exercise of your duties—forms that have been reviewed and approved by real estate attorneys who advise the local and /or state associations. Use extreme caution when adding new language (such as clauses) to these standard forms. Agents step over the "practicing law without a license" line when they start explaining consequences of actions. We are allowed to summarize, but not predict consequences.

Article 14 requires cooperation with investigations.

Article 14 concerns the obligation of a REALTOR® to cooperate with any request from a professional standards panel or investigation, whether "charged with unethical practice or asked to present evidence." Professional conduct requires you to comply with such a request and to provide any information that is pertinent to the request. You are also prohibited from taking any action that would obstruct the panel's purpose or an investigative process. Standard of Practice 14-1 This Standard states that you will not have to face more than one hearing relating to the same violation(s) connected to the same "transaction or event," even if you hold a membership in multiple associations. Standard of Practice 14-2 This Standard reminds you to refrain from discussing information or events that pertain to any hearing concerning professional standards or arbitration. Standard of Practice 14-3 This Standard directs you not to obstruct an investigation by "threatening to institute actions for libel, slander or defamation." Again, these actions cannot interfere with witnesses, arbitration, or professional standard's hearings. Standard of Practice 14-4 This Standard states that you will not file multiple ethics complaints regarding the same transaction with the purpose of hindering or obstructing an investigation or hearing.

Lesson 7: Duties to REALTORS® Articles 15 and 16shh Article 15 prohibits false or misleading statements about other real estate professionals.

Article 15 REALTORS® shall not knowingly or recklessly make false or misleading statements about other real estate professionals, their businesses, or their business practices. (Amended 1/12) Just as the NAR Code of Ethics strives to protect the public, it also seeks to protect you and your fellow agents. Article 15 requires you to use integrity regarding your behavior toward other real estate professionals. When you spread falsehoods about a competitor, you may feel that you only harm that competitor or competitor's agency. However, engaging in such untrustworthy behavior may make others skeptical of your services as well as the honesty of your industry. Everyone suffers when lies prevail. Standard of Practice 15-1: REALTORS® shall not knowingly or recklessly file false or unfounded ethics complaints. (Adopted 1/00) Standard of Practice 15-2: The obligation to refrain from making false or misleading statements about other real estate professionals, their businesses and their business practices includes the duty to not knowingly or recklessly publish, repeat, retransmit, or republish false or misleading statements made by others. This duty applies whether false or misleading statements are repeated in person, in writing, by technological means (e.g., the Internet), or by any other means. (Amended 1/12) Standard of Practice 15-3: The obligation to refrain from making false or misleading statements about other real estate professionals, their businesses, and their business practices includes the duty to publish a clarification about or to remove statements made by others on electronic media the REALTOR® controls once the REALTOR® knows the statement is false or misleading. (Amended 1/12) Should you find that you have made a statement you genuinely believed true and found later to be false, Standard of Practice 15-3 provides an expectation that you publish a clarification in an effort to rectify the falsehood portrayed.

Article 16 prohibits interference with client relationships.

Article 16 might be informally called the "No Sign Crossing" Article, because it pertains to protecting the exclusive contractual relationships between a REALTOR® and client. It is the longest article with 20 Standards of Practice. It reads: REALTORS® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other REALTORS® have with clients. (Amended 1/04) Because it is one of the less frequently cited Articles in complaints to the Grievance Committee, we will summarize the 20 Standards here.

Lesson 8: Article 17 - Mediation and Arbitration

Article 17 refers to mediation and arbitration as dispute resolution techniques. Article 17 addresses your obligation to mediate or arbitrate monetary disputes between brokers and cooperating brokers when they represent sellers/landlords and/or buyers/tenant. Mediation and arbitration are alternative dispute resolutions provided in the Code of Ethics as an alternative to litigation. Some key aspects of Article 17 include the following: If your local board of REALTORS® requires that disputes go to mediation first rather than arbitration, you must abide by this requirement. However, mediation is not required if all parties inform the board that they choose not to mediate the matter. Article 17 also requires that a REALTOR® mediate or arbitrate a dispute with a client if the client requests the mediation or arbitration and agrees to be bound by the decision. Mediation differs from arbitration in that the mediator does not decide the matter. Instead, the mediator guides the parties to a fair solution. Arbitration is binding on all parties. Unless there is evidence of procedural error, it is not subject to further review or appeal. In other words, the parties have to accept the hearing panel's decision. Mediation, on the other hand, is simply a form of negotiation. None of the parties can be forced to accept a settlement.

Lesson 3: Duties to Clients and Customers, Articles 2 and 3magic Article 2 is all about disclosur

Article 2 states: "REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license, or to disclose facts which are confidential under the scope of agency or non-agency relationships as defined by state law" (Amended 1/00). Article 2 is one of the most frequently cited articles in ethics complaints. As stated, the pertinent facts may have to do with the property and/or the transaction. It is imperative that you keep your clients up to date on all things that may have impact. This Article also outlines a fine line of balance of disclosure. As disclosure and confidentiality weigh against each other, carefully study what you should ethically tell your clients or others and what information you should guard. In many ways, you as the broker/agent guide the flow of information between parties in a transaction. Make sure that you advise correctly as to this flow of information. However, while you discuss with your clients and others various aspects of a transaction and the details of relationships formed, take care not to dispense legal advice. Instead, refer your clients to an attorney when they have legal questions.

Article 3 requires cooperation when it is in the client's best interest.

Article 3 reads, "REALTORS® shall cooperate with other brokers except when cooperation is not in the client's best interest. The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise compensate another broker" (Amended 1/95). Professional business practices dictate that you should maintain positive professional relationships with other brokers and real estate agents. You will constantly work with other brokers and agents to meet your client's needs. As you demonstrate courteous service and cooperation, you will be more likely to receive the same treatment in return. You will also build bridges to meet future client's needs when you maintain positive networks of cooperation with other brokers. The main consideration is that cooperation must provide for the best interests of your client. If cooperating with another broker does not promote the best interests of your client, you do not have to engage in the relationship with the other broker or cooperate with their requests.

Article 6 prohibits secret compensation.

Article 6 reads, "REALTORS® shall not accept any commission, rebate, or profit on expenditures made for their client, without the client's knowledge and consent. When recommending real estate products or services (e.g., homeowner's insurance, warranty programs, mortgage financing, title insurance, etc.), REALTORS® shall disclose to the client or customer to whom the recommendation is made any financial benefits or fees, other than real estate referral fees, the REALTOR® or REALTOR®'s firm may receive as a direct result of such recommendation." (Amended 1/99) Standard of Practice 6-1 requires disclosure when referring a client or customer to a business in which the REALTOR® has any direct interest. In general, any undisclosed compensation is also federal taboo under the Real Estate Settlement Procedures Act (RESPA). Licensees cannot accept any fees, rebates, commissions, or any financial benefit outside the real estate transaction without the knowledge and consent of the client. Written consent is recommended. For instance, you may not accept a referral from a home inspection company for recommending them to a client unless you disclose the arrangement beforehand and obtain written consent from the client. You are prohibited from profiting from any recommendation made to the client without the client's prior knowledge of and consent to the compensation. This profit may benefit you or your firm directly. For example, you may recommend a particular home warranty company or settlement agent with whom the firm has a referral relationship. In some cases, a referral fee may be paid directly to the firm and then shared by the agent or may be paid directly to the agent. No problem exists with such an arrangement as long as it has been agreed to and acknowledged in writing by the client. This disclosure is often handled through the use of an Affiliated Business Arrangement disclosure form.

Article 7 requires disclosure and informed consent for non-client compensation.

Article 7 reads, "In a transaction, REALTORS® shall not accept compensation from more than one party, even if permitted by law, without disclosure to all parties and the informed consent of the REALTOR'S® client or clients" (Amended 1/93). This article requires you to disclose to all parties involved in a transaction if there is any compensation from any source other than from your client. Informed consent is required from your client. According to the Real Estate Settlement Procedures Act (RESPA), consumers are entitled to accurate and timely information about the actual costs of settling or closing a transaction. Disclosure protects clients from kickbacks and referral fees that could end up inflating the costs of settlements. As a licensee, you cannot accept fees, commissions, or compensation of any kind related to a real estate transaction from anyone except your principal broker. The only exception is if you have written permission from your broker. An example would be if your company has listed a builder's new residential construction project and the builder has asked your broker and received written permission to compensate you directly. A licensee is also not allowed to pay a commission (or split a commission), referral fee, or compensate directly or indirectly any person who does not hold a real estate license. All monies must flow through the broker. The broker in this case would always be the firm's principal broker. In most states, the real estate regulations outline the circumstances under which compensation may or may not be accepted.

Article 8 requires trust funds to be kept in a separate account.

Article 8 reads, "REALTORS® shall keep in a special account in an appropriate financial institution, separated from their own funds, monies coming into their possession in trust for other persons, such as escrows, trust funds, clients' monies, and other like items." When your real estate firm receives an earnest money deposit, you should deposit the money into a special trust account in a federally insured financial institution, unless specific agreements provide otherwise. You should identify the name of the account by the words "Trust Account" or "Escrow Account." Funds may also be deposited with the settlement agent to be held in trust if the settlement agent agrees. All funds received for this transaction, including earnest money deposits, must be deposited into the escrow accounts and cannot be used for any other purpose. The principal broker holds the responsibility for on-time and proper deposits and proper handling of the funds. The firm's broker must report the status of all funds received for or on behalf of any principal to a transaction. State laws also strictly forbid commingling such monies with your personal or business funds. If you use any of the money entrusted to you for personal or business use, it is called conversion. Conversion is the practice of using entrusted funds as your own money. This is against the law. Also prohibited is mismanagement of trust funds, meaning a failure to keep detailed records of client fund transactions and escrow account statements. These records must be retained for the requisite number of years, after conclusion of the transaction, required by law. California requires three years from the time of closing. You can review the Trust Fund unit of this course for more detailed information about proper handling of trust funds.

Article 9 requires agreements to be in writing.

Article 9 states, "REALTORS®, for the protection of all parties, shall assure whenever possible that all agreements related to real estate transactions including, but not limited to, listing and representation agreements, purchase contracts, and leases are in writing in clear and understandable language expressing the specific terms, conditions, obligations and commitments of the parties. A copy of each agreement shall be furnished to each party to such agreements upon their signing or initialing." Written agreements will reduce the risk of misunderstanding and are critical to the overall success of any transaction. Standard of Practice 9-1 requires you to keep all of your documents up to date and current, and use amendments and extensions when you need to extend the time involved for contingencies or settlement. Standard of Practice 9-2 requires you to explain the nature and disclose the specific terms of any contractual relationship being established prior to it being agreed to by the contracting party.

Implied agency includes fiduciary duties and responsibilities

As a licensed real estate agent in the state of California, you legally become a client's "agent" when you start acting in the capacity of a real estate agent for the client with whom you have more than a casual relationship. Implied agency relationships require you to adhere to the fiduciary duties and responsibilities of utmost care, integrity, honesty, and loyalty. Because of your responsibility to provide fiduciary duties to your client, either express or implied, you must be very careful of your actions. If you create an implied agency relationship and it is found that you did not provide fiduciary duties, you can be held liable for any damages incurred. CS CASE STUDY: Implied Agency Relationship Example Andrew is the seller of a three-bedroom, two-bath ranch-style home and has hired Wayne to represent him. Andrew signs a listing agreement with Wayne's brokerage firm. As part of his fiduciary duties to Andrew, Wayne discusses the conditions of the home. Neither Andrew nor Wayne is aware that there is a crack in the foundation of the home. Wayne meets Hanna at a social function. Hanna tells Wayne that she is interested in purchasing a three-bedroom, two-bath ranch-style home and Wayne tells Hanna about the property he listed. Hanna is excited and wants to see it. Wayne arranges a viewing. Wayne does not do anything else for Hanna, since she does not sign a buyer's agreement or a dual agency agreement. Wayne does give Hanna the proper property disclosures. Hanna later purchases the home. Six months later, the crack in the foundation causes the side of the home to collapse. Hanna sues Wayne, claiming that he was her agent and should have advised her to get a property inspection before purchasing the home. Because Wayne did perform acts for Hanna as her agent, the court could find that Wayne did have an implied agency relationship and owed Hanna the fiduciary duties outlined in the law. This arrangement would have been an undisclosed dual agency arrangement. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

disclosers

As an agent, you must disclose all known material facts, even if you learned of the material facts during a confidential conversation. You may be liable if you either fail to disclose or hide material facts about a property. You are required to disclose all known information that will help your client make an informed decision. You must disclose all facts that might affect the value of the property or the buyer's desire to purchase the property. Disclose all known material facts obtained through the normal course of business to your client. As a listing or seller's agent, you have a duty to do a complete visual inspection of the property. REALTORS® can document findings on the Agent Visual Inspection Disclosure (C.A.R. Form AVID). You must complete a written disclosure statement. REALTORS® can use the form Real Estate Transfer Disclosure Statement (C.A.R. Form TDS). note NOTE: These forms are limited to Residential 1 to 4 unit Single Family Homes. The use of these forms is not required for commercial properties, except in the sale of a property consisting of both 1 to 4 residential units and commercial use. In this situation, licensees are advised to complete the TDS regarding the residential portion of the property. note NOTE: Agent's Responsibility to Disclosure You have a duty to disclose any material facts you know about a property to your client. More information on the disclosure process is included in Unit 3 of this course. You and/or your broker may face disciplinary action for failing to disclose known material facts. In addition, your broker can be liable for any damages that occur because of your actions

You have the duty of disclosure.

As an agent, you must disclose all known material facts, even if you learned of the material facts during a confidential conversation. You may be liable if you either fail to disclose or hide material facts about a property. You are required to disclose all known information that will help your client make an informed decision. You must disclose all facts that might affect the value of the property or the buyer's desire to purchase the property. Disclose all known material facts obtained through the normal course of business to your client. As a listing or seller's agent, you have a duty to do a complete visual inspection of the property. REALTORS® can document findings on the Agent Visual Inspection Disclosure (C.A.R. Form AVID). You must complete a written disclosure statement. REALTORS® can use the form Real Estate Transfer Disclosure Statement (C.A.R. Form TDS). note NOTE: These forms are limited to Residential 1 to 4 unit Single Family Homes. The use of these forms is not required for commercial properties, except in the sale of a property consisting of both 1 to 4 residential units and commercial use. In this situation, licensees are advised to complete the TDS regarding the residential portion of the property. note NOTE: Agent's Responsibility to Disclosure You have a duty to disclose any material facts you know about a property to your client. More information on the disclosure process is included in Unit 3 of this course. You and/or your broker may face disciplinary action for failing to disclose known material facts. In addition, your broker can be liable for any damages that occur because of your actions.

Best practices for first meetings.

Best practices for first meetings. It's highly recommended that agents meet prospects in the office prior to going out on a showing or tour—and make sure the prospect is introduced to someone else in the office. Also, before going out to a first appointment for a listing or to meet with the owner of a FSBO, there are similar best practices you can incorporate. In the interests of your personal safety, you can perform a range of quick-checks to verify that the name and phone number you have been given are a match. Referencing back to the case studies you reviewed, reflect on how often business was done on the equivalent of a handshake: agents trusted people when they were given a name and phone number, only to learn later that the perpetrator of the crime played the odds that the agent would not do a verification of the information provided. Also, there was one unusual case in which an agent approached a FSBO. Only, the FSBO sign was used to lure in women agents. Criminals go to great lengths to create opportunities to make others a victim, so it's critical that you do what you can to stay a step ahead. Information to obtain includes: Driver's license: Ask for a copy of the prospect's driver's license, and verify it that the information you're getting isn't false, as some criminals have given an identification that later turned out to be a fake. To learn what to look for, go on the Virtual Field Trip below for tips to help you verify what you're reviewing. Car make and model and license plate number: Make a note of the make and model of the car of the prospect and the license plate number and pass that information along to someone in your office. Phone number: If a prospect contacts you directly, their number should be captured on your caller I.D. Make a note of it, and the name if it accompanies the number. Employer: Ask a prospect, "Where do you work?" If the prospect has called you, it's very easy to call the employer and confirm that they actually work where they've said they work—look up the number yourself. vft VIRTUAL FIELD TRIP: Want to know what to look for to recognize whether or not you've been handed a fake I.D.? Click here for security features you can see at a glance.

NAR and the Fair Housing Act require real estate professionals to treat all people ethically.

Ethical conduct with respect to Fair Housing extends to any activity relating to the sale or rental of a residential property. Standards of Practice 10-1 and 10-2 discuss practices that are prohibited because they could result in blockbusting or steering. Blockbusting can occur when an agent uses a substantial demographic shift within a specific area to exploit the fears of homeowners. For instance, an agent may encourage homeowners within a given neighborhood to sell their homes immediately, because a different minority is "taking over" the area. Prompting this type of quick home sales can reduce property values in the neighborhood. Steering is another prohibited action. As a real estate professional, you may have found yourself in a position to steer a home seeker toward or away from a particular neighborhood or area. This is a dangerous business practice. All affordable homes must be made available to the home seeker, without exception. Standard of Practice 10-1 specifies that when you are involved in the sale or lease of a residence, you can't volunteer information regarding the racial, religious, or ethnic composition of any neighborhood or engage in any activity that may cause panic selling. Per Standard of Practice 10-2, if you are not involved in the sale or lease, you can provide specific demographic information that may be needed to complete a professional assignment. However, this information must remain consistent with Article 10 and be from a reliable, impartial source.

Article 16 allows for some exceptions.

General marketing to the public not targeted to another REALTOR®'s clients. Disagreements over compensation. Contacting another's clients to offer differing services (though it is unethical to gather these names from the MLS). Inquiring when an exclusive listing or buyer agreement will expire, if the prospect's current representative refuses to provide this information. Entering into an agreement with a prospect who is under an exclusive agreement, provided the effective start date is after the expiration of the existing agreement. Soliciting the former clients of another REALTOR®, provided the contact information is not gathered from the MLS.

Good news: clients also have duties

Good news: clients also have duties! When working under an agency relationship, clients also have duties and responsibilities. Sellers are ultimately responsible for any representations or disclosures they know about and that are given to you, your broker, buyers, buyer's agents, or third parties about a property, except in cases where there is agent fraud. Sellers are responsible and liable for any actions taken by a real estate licensee on their behalf, such as: Listing the property Advertising and marketing the property Showing the property Negotiating a transaction with a third party Buyers and sellers are both obligated to abide by the terms of their agreements. Every agreement will have different terms and requirements. Clients are obligated to pay the agreed upon compensation. It is in everyone's best interests to have the agreements in writing and signed by all parties. Unit Quizzes and the minimum req

Example of a safety mindset.

Here's an example where an industry has long adopted a safety mindset. Let's say you walk into a car dealership. You wouldn't be able to point to a car and say "I want to take that out right now and give it a spin," and expect the dealer to say, "Here are the keys!" and you zip off. Or, you wouldn't expect that if you were to call a dealership and say, "Bring the black Ferrari out to 123 Tipton Lane so I can test drive it," that the dealer would say, "Sure—I'll be right out!" Nor would a dealer jump in a car along with a stranger off the street and give them a test ride. Before a car can leave the lot, you would be required to show a valid driver's license, at the very minimum. Some dealers may have even more stringent requirements before they let you drive off, such as proof of insurance. They don't do business out the gate with just a handshake, or take your word about your identity just because you give a name and say that you are licensed to drive, or because you pulled up in a nice car or dress in high-end clothes. If a dealer did that and someone stole a car, you would probably shake your head and say, "That dealer should have known better!" Instead, the car industry has trained us all as to what to expect: you provide them with proof of your identity, they excuse themselves with a smile and go verify that proof, and you wait patiently until they have worked through their procedure—the same procedure they use with everyone. Once they have gone through their steps, only then can you test drive. Are you angry? More than likely not: you know the dealership is protecting itself from the types of people who would come in, give false information, and drive off into the sunset with a car. You don't fault a dealer for being cautious because again, persons with criminal intent don't walk in with a sign advertising those intentions. They tend to look like any other prospective buyer. A real estate professional's life is worth incalculably more than a car, and yet many are hesitant to require anything of a stranger calling to see a property.

Implied agency includes fiduciary duties and responsibilities

Implied agency includes fiduciary duties and responsibilities. As a licensed real estate agent in the state of California, you legally become a client's "agent" when you start acting in the capacity of a real estate agent for the client with whom you have more than a casual relationship. Implied agency relationships require you to adhere to the fiduciary duties and responsibilities of utmost care, integrity, honesty, and loyalty. Because of your responsibility to provide fiduciary duties to your client, either express or implied, you must be very careful of your actions. If you create an implied agency relationship and it is found that you did not provide fiduciary duties, you can be held liable for any damages incurred. CS CASE STUDY: Implied Agency Relationship Example Andrew is the seller of a three-bedroom, two-bath ranch-style home and has hired Wayne to represent him. Andrew signs a listing agreement with Wayne's brokerage firm. As part of his fiduciary duties to Andrew, Wayne discusses the conditions of the home. Neither Andrew nor Wayne is aware that there is a crack in the foundation of the home. Wayne meets Hanna at a social function. Hanna tells Wayne that she is interested in purchasing a three-bedroom, two-bath ranch-style home and Wayne tells Hanna about the property he listed. Hanna is excited and wants to see it. Wayne arranges a viewing. Wayne does not do anything else for Hanna, since she does not sign a buyer's agreement or a dual agency agreement. Wayne does give Hanna the proper property disclosures. Hanna later purchases the home. Six months later, the crack in the foundation causes the side of the home to collapse. Hanna sues Wayne, claiming that he was her agent and should have advised her to get a property inspection before purchasing the home. Because Wayne did perform acts for Hanna as her agent, the court could find that Wayne did have an implied agency relationship and owed Hanna the fiduciary duties outlined in the law. This arrangement would have been an undisclosed dual agency arrangement.

How Ethics and Real Estate Collided

In 1908, the face of the real estate industry changed. In this year, a group of real estate professionals, fed up with the cutthroat dishonesty that identified most of the real estate industry, founded the National Association for Real Estate Exchanges, now known as the National Association of REALTORS® (NAR). Their mission was to establish ethical standards of conduct to guide real estate professionals. In the early years of real estate, buyers and sellers had no fair representation. Land speculation and consumer exploitation commonly occurred. NAR revolutionized the industry by piecing together a constitution of sorts, called The Rules of Conduct, initially adopted in 1913. The Rules of Conduct were renamed the Code of Ethics and were made a mandatory condition of membership in 1924.

Lesson 1: Agency Means Representation agency Agency involves representation.

James Bond is an agent for Her Majesty's Secret Service, does that mean he can sell real estate? Well, not unless he's passed his real estate exam. So what makes both you and James Bond an "agent?" California civil code defines it this way: "An agent is one who represents another, called the principal, in dealings with third persons. Such representation is called agency." (Section 2295). It's like this: You are an agent (licensed to sell real estate, not to kill). The seller (or buyer) is the principal that you represent. The buyer (or seller) is the third person. It is an agency agreement that creates this agency relationship. Because the concept of agency is so integral to the practice of real estate, and to the services clients expect, a full and complete understanding of agency law, and full disclosure of "who represents whom" is vital to providing optimum service, maintaining your professional standing, and staying out of regulatory trouble.

Lesson 3: Duties of Agency

Lesson 3: Duties of Agency Agency comes with duties and responsibilities. When you engage in an agency relationship, you have certain duties and responsibilities to your clients and to the third parties with whom you interact. Agency duties and responsibilities ensure that the salesperson and the broker operate within the guidelines of their fiduciary responsibilities. Agent responsibilities require you to: Communicate and transact business with third parties on behalf of your client. Comply with all legal client requests that pertain to the real estate transaction. Comply with California state laws regarding trust accounting.

Lesson 4: Agency Authority

Lesson 4: Agency Authority As an agent, you are imbued with certain general authority.clients When you are acting as a licensed real estate agent, California law permits you to act in the best interests of your client first and your agency second when transacting real estate business. You are given certain authority to take the actions required to complete transactions successfully. Under general authority guidelines, you may: Take appropriate steps to market a property for a seller or locate a property for a buyer Negotiate the purchase or sale price for clients. Do what you need to do to meet the goals of your client and your agency, as long as you are acting within the law. This includes disobeying instructions from the principal if necessary. lr LEGAL REFERENCE: California Civil Code - Sections 2319 - 2324 2319. An agent has authority: To do everything necessary or proper and usual, in the ordinary course of business, for effecting the purpose of his agency; and, To make a representation respecting any matter of fact, not including the terms of his authority, but upon which his right to use his authority depends, and the truth of which cannot be determined by the use of reasonable diligence on the part of the person to whom the representation is made. 2320. An agent has power to disobey instructions in dealing with the subject of the agency, in cases where it is clearly for the interest of his principal that he should do so, and there is not time to communicate with the principal. 2321. When an authority is given partly in general and partly in specific terms, the general authority gives no higher powers than those specifically mentioned. 2322. An authority expressed in general terms, however broad, does not authorize an agent to do any of the following: a) Act in the agent's own name, unless it is the usual course of business to do so. b) Define the scope of the agency. c) Violate a duty to which a trustee is subject under Section 16002, 16004, 16005, or 16009 of the Probate Code. 2323. An authority to sell personal property includes authority to warrant the title of the principal, and the quality and quantity of the property. 2324. An authority to sell and convey real property includes authority to give the usual covenants of warranty.

Lesson 4: Agency Authority

Lesson 4: Agency Authority Lesson 4: Agency Authority As an agent, you are imbued with certain general authority.clients When you are acting as a licensed real estate agent, California law permits you to act in the best interests of your client first and your agency second when transacting real estate business. You are given certain authority to take the actions required to complete transactions successfully. Under general authority guidelines, you may: Take appropriate steps to market a property for a seller or locate a property for a buyer Negotiate the purchase or sale price for clients. Do what you need to do to meet the goals of your client and your agency, as long as you are acting within the law. This includes disobeying instructions from the principal if necessary. lr LEGAL REFERENCE: California Civil Code - Sections 2319 - 2324 2319. An agent has authority: To do everything necessary or proper and usual, in the ordinary course of business, for effecting the purpose of his agency; and, To make a representation respecting any matter of fact, not including the terms of his authority, but upon which his right to use his authority depends, and the truth of which cannot be determined by the use of reasonable diligence on the part of the person to whom the representation is made. 2320. An agent has power to disobey instructions in dealing with the subject of the agency, in cases where it is clearly for the interest of his principal that he should do so, and there is not time to communicate with the principal. 2321. When an authority is given partly in general and partly in specific terms, the general authority gives no higher powers than those specifically mentioned. 2322. An authority expressed in general terms, however broad, does not authorize an agent to do any of the following: a) Act in the agent's own name, unless it is the usual course of business to do so. b) Define the scope of the agency. c) Violate a duty to which a trustee is subject under Section 16002, 16004, 16005, or 16009 of the Probate Code. 2323. An authority to sell personal property includes authority to warrant the title of the principal, and the quality and quantity of the property. 2324. An authority to sell and convey real property includes authority to give the usual covenants of warranty.

Lesson 5: Types of Agency Relationships contract

Lesson 5: Types of Agency Relationships contract "Express Agency" means that you and your client have a written agreement in place. Express agreements are the ideal way to establish an agency relationship because they provide, in writing, the duties and responsibilities for both the agent and the client. You and your client know the expectations for each party. You and your client may enter into an "agency agreement," also known as an "employment agreement." REALTORS® may use any of the forms listed below. The forms are available to REALTORS® members through the California Association of REALTORS®. Seller Clients Residential Listing Agreement - Exclusive (C.A.R. Form RLA) This standard residential listing Agreement describes the Broker's and Seller's duties, and the terms of the listing. The Broker is guaranteed a commission if the property sells within the life and scope of the agreement, even if the seller finds a buyer on his/her own. Residential Listing Agreement - Agency (C.A.R. Form RLAA) Standard residential listing agreement similar to Residential Listing Agreement - Exclusive with the exception that the listing broker is not entitled to compensation if the seller finds a buyer on his/her own and without the use of a real estate agent. Residential Listing Agreement - "Open" (C.A.R. Form RLAN) The seller's agent completes a written agreement with the seller, but has no mutual promises for any period of time. The seller can work with multiple agents at the same time and then compensate the brokerage firm who sells the property. If the seller finds a buyer on his/her own, no agent receives compensation.

Types of Agency Relationships

Lesson 5: Types of Agency Relationships contract "Express Agency" means that you and your client have a written agreement in place. Express agreements are the ideal way to establish an agency relationship because they provide, in writing, the duties and responsibilities for both the agent and the client. You and your client know the expectations for each party. You and your client may enter into an "agency agreement," also known as an "employment agreement." REALTORS® may use any of the forms listed below. The forms are available to REALTORS® members through the California Association of REALTORS®. Seller Clients Residential Listing Agreement - Exclusive (C.A.R. Form RLA) This standard residential listing Agreement describes the Broker's and Seller's duties, and the terms of the listing. The Broker is guaranteed a commission if the property sells within the life and scope of the agreement, even if the seller finds a buyer on his/her own. Residential Listing Agreement - Agency (C.A.R. Form RLAA) Standard residential listing agreement similar to Residential Listing Agreement - Exclusive with the exception that the listing broker is not entitled to compensation if the seller finds a buyer on his/her own and without the use of a real estate agent. Residential Listing Agreement - "Open" (C.A.R. Form RLAN) The seller's agent completes a written agreement with the seller, but has no mutual promises for any period of time. The seller can work with multiple agents at the same time and then compensate the brokerage firm who sells the property. If the seller finds a buyer on his/her own, no agent receives compensation.

Lesson 6: Eight Ways to Terminate an Agency Relationship

Lesson 6: Eight Ways to Terminate an Agency Relationship terminate There are eight ways in which an agency relationship may be terminated. The client's goals were met during the term of the agency agreement (i.e., the sale is completed). The specified term in the agency agreement expires. The client and agent mutually agree to dissolve the relationship. The client or agent becomes incapacitated or dies. The property is destroyed for any reason, making the property unmarketable. The client or broker files for bankruptcy. The client revokes the agreement prior to the agreement's expiration date. A client can revoke an agency relationship with no penalty if he or she lacks confidence in the agency or believes the agency to be untrustworthy. If the client revokes the agreement for no specific reason or without good cause, the client may be in breach of contract. The agent renounces the agreement prior to the agreement's expiration date. This is similar to the client's ability to revoke the agreement. It should not be done without good cause. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Article 8 Case Study from NAR

Let's take a look at a case study reprinted from the NAR Code of Ethics and Arbitration Manual to further illustrate the importance of Article 8. Note that the names have been added for teaching purposes, and don't reflect the actual names of the individuals involved in this case. REALTOR® Jerry, a listing broker, obtained a signed offer to purchase, along with Buyer Monica's check for $5,000 as an earnest money deposit. Monica's offer was subject to the sale of her current residence. REALTOR® Jerry presented the offer to Seller Hans, who accepted it. REALTOR® Jerry then inadvertently deposited the earnest money check into his personal checking account. Since Monica's offer was contingent on the sale of her current home, Hans's house remained on the market. A week later, REALTOR® Jerry received another offer to purchase Hans's house from another broker and presented it to Hans as a back-up offer. Buyer Monica was informed about this new offer and reluctantly concluded that she would be unable to waive the sale contingency or proceed with the purchase of Hans's house. She then asked Jerry to return her $5,000 check. Jerry explained that he had mistakenly deposited Monica's check in his personal bank account, and he was temporarily unable to refund the deposit to her.

Industry hesitancy.

Many real estate professionals—especially those who have been the victims of an assault—are often surprised by just how difficult it is to get attitudes in the industry to change. Here are some sample comments that represent some of the prevailing viewpoints: "We're in a relatively safe area of the country..." "We tend to trust people here in this area..." "We've always done things this way..." "Everyone knows everyone around here..." These comments—random quotes from real people pulled from news articles—show complacency, the thought that what has always been, will always be. Complacency does not allow for the unusual, the out of character, or the out of place. It's easy to think crimes against real estate professionals only happen in the "Big City"—that maybe only New York City agents would experience this sort of thing. But think back to the case studies you reviewed: they were a representative example of every part of the United States—there was no promise of assault immunity because the prevailing attitude was, "Can't happen here." Assaults take place in million-dollar properties, on rural properties, and in homes nestled in quiet suburbs. Think back to the safety study in which an analysis determined there was no pattern, no specific trend: the crimes against real estate professionals were random. One thing you can count on is that perpetrators of crime play on law-abiding people's expectations of safety, trust, and complacency.

Challenge your own assumption

One of the biggest challenges to a safety mindset is your own assumptions about what a "criminal" looks like. If you want to see how this works, here's a simple experiment you can perform. Do you know a young child? Ask them what a "bad person" looks like. It may be eye-opening. Kids are inclined to repeat what they see in cartoons and movies: a man wearing a trench coat with an evil gleam in his eye. As an adult, you may hold some of those fictionalized concepts of what a person with bad intentions looks like. Consider the case study in which the agent was presented with a prospect who looked the right part: nice car, nice clothes, nice job. Most people's assumptions would be the same: this person couldn't possibly be a criminal—why would they need to be when they obviously have so much going for them? This is why the same safety policies should be used for everyone with whom you work, and if someone gives you a funny feeling, don't ignore it. Those feelings could be a survival response.

One victim's experience in promoting change.

One victim of an assault was Joan Malone—you read about her horrific experience in the case study in which the assailant hit her so hard in the jaw, it knocked her to the floor, and then she was stabbed and left for dead, her own vehicle the perpetrator's get-away car. After recovering, Ms. Malone returned to the real estate profession and also tried to find someone who would draft legislation requiring prospective clients to submit to criminal background checks before they can be shown a property. She is quoted in a Realty Times article as saying, "I don't seem to be able to drum up any support for this. I'm told, 'We've done it this way for years. Why should we change?'" While a criminal background check is probably a huge step for the real estate industry to take, there hasn't been much in the way of changes made except in individual offices. Consider this: the article in which Ms. Malone's quote appears was published in 1997. vft VIRTUAL FIELD TRIP: Realty Times published a four-part series called "Every Realtors Nightmare." If you are interested in reading it, click here.

Other types of authority include express, implied, and apparent authority.

Other types of authority include express, implied, and apparent authority. Aside from the general authority given to you as a licensed real estate agent in the state of California, there are other types of authority that may apply in your agency relationships with clients. These include: Express authority: Authority that is explicitly defined in writing. Implied authority: Actions that are not explicitly defined in writing but which are reasonable to take in order to achieve the principal's goal. Apparent authority: Authority that a third party perceives you to have as a principal's agent. These are described in the table below. You should seek the advice of a knowledgeable real estate attorney for further clarification. Express Authority Implied Authority Apparent Authority (Ostensible Authority by Estoppel) Express authority is created by an agency agreement that specifically outlines what the client authorizes you to do on his/her behalf. Express authority is somewhat limiting due to the level of specificity. Since express authority is limited, implied authority may be used to satisfy the terms of an agency agreement. To determine if you have implied authority, you must determine whether an act is reasonably necessary to achieve the client's objective, even if it is not specified under express authority. Apparent authority (aka ostensible authority by estoppel) occurs when a client, either by their words or conduct, leads a third party to believe that you are their agent. The following must occur for apparent authority to exist: You must initiate an agency relationship with the client. The client must take no steps to deny the agency relationship. A third party must rely upon this authority. note NOTE: Principals May or May Not Be Bound by Agent's Acts Principals (clients) are bound by the results of your actions if: The client gives you the authority to act on their behalf, and You act within the parameters of your authority. The principal is not bound by the result of your actions if you: Act without the appropriate authority, or in excess of your authority, or Act outside your designated authority. In addition, you may be liable for any damages that occurred due to the breach of your authority. note NOTE: Agent's Authority in Emergencies During an emergency, your authority to act in the best interests of your client extends beyond the type of authority designated in your agency agreement. For example, you would be obligated to protect a property if any type of health or safety issue occurred on the property. For example, you would contact the police if a neighbor informed you that someone broke into the home and the owner was not available.

Other types of authority include express, implied, and apparent authority. Aside from the general authority given to you as a licensed real estate agent in the state of California, there are other types of authority that may apply in your agency relationships with clients. These include: Express authority: Authority that is explicitly defined in writing. Implied authority: Actions that are not explicitly defined in writing but which are reasonable to take in order to achieve the principal's goal. Apparent authority: Authority that a third party perceives you to have as a principal's agent. These are described in the table below. You should seek the advice of a knowledgeable real estate attorney for further clarification. Express Authority Implied Authority Apparent Authority (Ostensible Authority by Estoppel) Express authority is created by an agency agreement that specifically outlines what the client authorizes you to do on his/her behalf. Express authority is somewhat limiting due to the level of specificity. Since express authority is limited, implied authority may be used to satisfy the terms of an agency agreement. To determine if you have implied authority, you must determine whether an act is reasonably necessary to achieve the client's objective, even if it is not specified under express authority. Apparent authority (aka ostensible authority by estoppel) occurs when a client, either by their words or conduct, leads a third party to believe that you are their agent. The following must occur for apparent authority to exist: You must initiate an agency relationship with the client. The client must take no steps to deny the agency relationship. A third party must rely upon this authority. note NOTE: Principals May or May Not Be Bound by Agent's Acts Principals (clients) are bound by the results of your actions if: The client gives you the authority to act on their behalf, and You act within the parameters of your authority. The principal is not bound by the result of your actions if you: Act without the appropriate authority, or in excess of your authority, or Act outside your designated authority. In addition, you may be liable for any damages that occurred due to the breach of your authority. note NOTE: Agent's Authority in Emergencies During an emergency, your authority to act in the best interests of your client extends beyond the type of authority designated in your agency agreement. For example, you would be obligated to protect a property if any type of health or safety issue occurred on the property. For example, you would contact the police if a neighbor informed you that someone broke into the home and the owner was not available. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

uties to Clients and Customers, Articles 4 through 9 bullhorn Article 4 requires disclosure of personal interest when purchasing.

Personal interest means a licensee's own interest, or the interest of another with whom the licensee has a personal relationship such as an immediate family member. Article 4 reads, "REALTORS® shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms or any member thereof, or any entities in which they have any ownership interest, on any real property without making their true position known to the owner or the owner's agent or broker. In selling property they own, or in which they have any interest, REALTORS® shall reveal their ownership or interest in writing to the purchaser or the purchaser's representative." (Amended 1/00) Standard of Practice 4-1 advises that any such disclosures be in writing: "For the protection of all parties, the disclosures required by Article 4 shall be in writing and provided by REALTORS® prior to the signing of any contract." (Adopted 2/86) NAR's definition of "immediate family" includes spouse, siblings, parents, grandparents, children (by birth or adoption), grandchildren and other descendants.

Procuring cause is a frequently disputed topic.

Procuring cause is a frequently disputed topic. When a dispute constitutes a voluntary arbitration situation, you need not wait to first request arbitration and have that request denied before you may choose to pursue litigation or take the dispute before another non-judicial dispute-resolving forum (Professional Standards Policy Statement #30). Procuring cause is an unbroken chain of events that has brought a purchaser to the point where he/she is able to make the decision to purchase. Arbitrations most commonly occur over a disagreement about which firm procured the cause of a sale and, therefore, have earned the commission. All firms who participate in arbitration agree to submit to the decision of the arbitration panel. This usually entails an "all or nothing" decision and is considered to be an adversarial experience by those who have gone through the procedure.

The obligation to mediate or arbitrate is further defined in the Standards of Practice. Standard of Practice 17-1

Remember that Article 17 requires REALTORS® to arbitrate their disputes. If you file suit against a REALTOR® when a properly arbitrable matter exists and refuse to withdraw the suit and participate in arbitration when requested, you may be subject to disciplinary action. Standard of Practice 17-2 This Standard of Practice provides an exception to the requirement that you mediate or arbitrate disputes. If all parties acknowledge in writing that they will not mediate the dispute, the dispute will go to arbitration. If all parties acknowledge in writing that they will not arbitrate, the requirement to resolve the dispute through arbitration before the board is removed. Standard of Practice 17-3 When you act as a principal to a real estate transaction, such as selling your own house or buying a property for yourself, it means that you are representing yourself. If you take no action as an agent, but act only as a principal to a transaction, you have no obligation to mediate or arbitrate any disputes that may arise with another REALTOR®, unless you receive a statement in writing dictating the contrary. Standard of Practice 17-5 You are bound to arbitrate even if the complainant is out of state if the complainant agrees to travel to your Board and submit to arbitration conducted by your Board.

Undisclosed Agency is prohibited.

Remember the law that says you can engage in dual agency as long as you obtain the written consent of both parties? "Undisclosed agency," also known as "divided agency," occurs when one agent represents both the buyer and seller in the same transaction without proper disclosure and consent. In an undisclosed agency situation, both the buyer and seller, or one of the parties, does not know that the agent represents both parties. Undisclosed agency is illegal in California. To avoid entering into an undisclosed agency relationship, ensure that both parties receive appropriate disclosure and both give proper consent. Both the buyer and seller must consent to dual agency prior to your acting on either party's behalf. REALTORS® can use the form Disclosure Regarding Real Estate Agency Relationship (C.A.R. Form AD).

Restrictions on authority exist to protect the interests of all parties in a real estate transaction

Restrictions on authority exist to protect the interests of all parties in a real estate transaction. No authority allows you to transact business that would result in fraud for your client. Unless specifically authorized or, in your usual course of business, you cannot transact business in your own name. You do not have the authority to modify or cancel a contract of sale after it has been made. You may find a buyer, but you are not authorized to enter into a contract to convey title of the property on behalf of your client. If you have authority to collect money on behalf of your client, you may endorse a negotiable instrument received as payment only if it is necessary for you to do so in order to perform your duties and if your client specifically grants you the authority to endorse negotiable instruments. If you are authorized to collect money for your client, you may accept a valid check. Your receipt of the check on behalf of the client may be considered payment to the client.

September is REALTOR® Safety Mont

September is REALTOR® Safety Month. This fact was especially poignant after the disappearance of real estate agent Beverly Carter while she was showing a home on September 25th, 2014. Beverly Carter was later found murdered. This tragic incident spotlights the importance of addressing safety practices throughout the year so that real estate agents can avoid becoming complacent about the potential for workplace violence. It also demonstrates the importance of reviewing safety strategies that can help agents better protect themselves from being victimized by those who would prey on them. It's difficult to know someone's ill intentions. In the case of Beverly Carter, the person charged with her murder gave his motives as being "she was just a woman that worked alone—a rich broker." It is chilling testimony that this agent was targeted because 1) she was a woman working by herself, doing her job and 2) she was perceived to be a rich broker. Premeditated or crime of opportunity, there are safety practices that may help dissuade such senseless targeting of professionals who are engaging in the practice of finding homes for individuals and families. While brokerage firms, real estate commissions and associations continue to promote safety awareness, taking safety precautions is ultimately up to each individual. The goal is for real estate professionals to take a proactive stance rather than only reacting once a crisis touches close to home. Do you pay close attention to the people at an open house? Do you turn your back on clients when showing a property? Do you trust your gut instincts? Do you know the least safe day of the week for showings? Do you verify information given to you by prospects before you work with them? Do you advertise using a glamor shot and mention your sales success? Do you feel safe because you live in a small town? Do you know what to do when a new client will not come by the office, but insists on meeting at the Do you know what "move in ready" translates to for criminals? Do you know who walks down the stairs first, you or your client? By the end of this course you will know the best answers for these questions, and your knowledge could save your life, or at the very least keep you safe from criminals who prey on real estate professionals.

Showings

Showings. for sale The real estate business depends on showing properties—it's highly unlikely that a buyer will put in an offer for a home they've only seen from a magazine ad or through an online tour. Buyers need to be shown the property so they can get a feel for it: it helps them build an emotional connection to the property that may prompt the desire to make an offer. However, showings are a time of vulnerability for an agent, so there are recommended best practices for handling this important aspect of the profession while keeping yourself safe.

Standards of Practice 1-12 through 1-16.

Standard of Practice 1-12 provides that REALTORS® entering into listing contracts must advise their sellers/landlords of policies regarding cooperation and compensation offered to subagents, loyalty of buyer agents toward buyers, even when compensated by the listing brokers, and any potential for the listing broker to act as a disclosed dual agent. Standard of Practice 1-13 lists five subjects that REALTORS® must explain to potential clients: Their company policies regarding cooperation The amount of compensation to be paid by the client The potential for additional or offsetting compensation from other brokers or parties Any potential for the agent to act as a dual agent The possibility that sellers or sellers' representatives may not treat an offer as confidential; in other words, the seller may discuss all aspects of any offer received as desired. Standard of Practice 1-14 states that fees for preparing appraisals or other valuations may not be contingent on the amount of the appraisal or valuation. Standard of Practice 1-15 states that it is acceptable for a REALTOR® representing a seller, with the seller's approval, to disclose the existence of other offers on the property, and, when doing so, to disclose, if asked, whether the listing agent or a broker from the listing agent's firm represents the buyers for any such offers. Standard of Practice 1-16 states, "REALTORS® shall not use, or permit or enable others to use, listed or managed property on terms or conditions other than those authorized by the owner or seller."

Standards of Practice 1-3 through 1-8.

Standard of Practice 1-3 states that REALTORS® must never deceive a potential seller regarding the market value of the seller's property. Standard of Practice 1-4 states that REALTORS® must not mislead buyers or tenants as to savings or other benefits that might be realized through use of their services. Standard of Practice 1-5 allows you to perform disclosed dual agency only with informed consent of all parties. Check with CalBRE and CAR for specific information related to dual agency. Standard of Practice 1-6 states that offers and counter-offers must be submitted objectively and as quickly as possible. Standard of Practice 1-7 states that REALTORS® acting as listing agents must continue to submit offers and counter-offers until closing unless the seller has waived this obligation in writing; they need not continue to market the property after an offer has been accepted, however. In addition, they should advise clients to consult legal counsel before accepting a subsequent offer after already accepting an initial offer. Standard of Practice 1-8 states that REALTORS® acting as agents or brokers of buyers/tenants shall submit to buyers/tenants all offers and counter-offers until acceptance but have no obligation to continue to show properties to their clients after an offer has been accepted unless otherwise agreed in writing.

Standards of Practice 1-9 through 1-11.

Standard of Practice 1-9 states that REALTORS® must maintain confidentiality, and not use confidential information of clients to the disadvantage of the client or for the advantage of the REALTOR® or other parties unless the client consents after full disclosure or the REALTOR® is required to by court order, or to prevent a crime, or to defend a REALTOR® or REALTOR® associates against an accusation of wrongful conduct. Information concerning latent material defects is not considered confidential information under this Code of Ethics. Standard of Practice 1-10 states that REALTORS® must competently manage property of clients with due regard for the rights, safety and health of tenants and others lawfully on the premises. Standard of Practice 1-11 relates to property management and states that, In compliance with serving the best interests of your client, you should work to protect your client's property against "foreseeable contingencies and losses." The Standard states that you will use "reasonable efforts" and act in a timely manner in order to help protect and serve your client. Example: Ethical duties when managing property Paul had the duty to maintain a client's property, and received notice from a tenant of a water leakage problem on the property. Acting in a timely manner may prevent further or more extensive damage to the property. In this case, proper ethics dictate that Paul act to fix the problem or notify the owner to prevent further problems.

Standards of Practice 11-2 and 11-4 further clarify competent service.

Standard of Practice 11-2 states that in real estate disciplines other than appraisal, you're expected to comply with the standards of competence that clients reasonably require to protect their rights and interests. Standard of Practice 11-3 discusses REALTORS® who provide "consultative services." If you are providing consultative services to clients that involve advice or counsel for a fee (not a commission), provide your advice objectively and don't make your fee contingent on the substance of the information provided. Now, if you're providing brokerage or transaction services in addition to your consultative services, then a separate compensation can be paid, as long as there's a prior agreement between you and your client. Standard of Practice 11-4 serves as a reminder that the competency expected of you relates to services contracted between you and your customer/client, the duties addressed by the Code of Ethics, and the duties imposed by law and regulation.

Lesson 5: Duties to the Public: Article 10 and Fair Housing Article 10 requires non-discrimination in services.

The Code of Ethics continues to be updated in this area to include more protected classes, similar to the California state fair housing laws. This article prohibits REALTORS® from denying professional services, discriminating against, or planning or agreeing to discriminate against anyone in a protected class. As of 2014, the classes that NAR specifically includes are: Race Color Religion Sex Handicap Familial status National origin Sexual orientation Gender identity

The Code of Ethics is a living document

The Code of Ethics is a living document. The Code of Ethics and Standards of Practice is updated annually, with a new version appearing in January of each year. Of course, crucial revisions can be made at any time, so it's important to stay current on industry changes and guidelines. However, the basic principles of the Code have been consistently supported. The real estate profession depends on consumer confidence and on REALTORS® living the Code on a daily basis. ho HANDOUT: You can view or download a version of the 2015 Code of Ethics and Standards of Practice here. Activities and exams contain many examples drawn from the Articles, Standards of Practice, and Case Interpretations. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

The Hearing Panel agreed with REALTOR® Audrey's reasoning in their decision.

The NAR Hearing Panel pointed out that Article 12, as interpreted by Standard of Practice 12-7, provides that cooperating brokers (selling brokers) may claim to have "sold" the property and that such claims may be made by either the listing broker or the cooperating broker or by both of them upon acceptance of a purchase offer by the seller. The panel also noted that REALTOR® Audrey could have shown that she had "participated in" or had "cooperated in" these transactions and also met her ethical obligations. The panel's decision also indicated that during the existence of any listing, the cooperating broker's rights to advertise and market flow from the listing broker. However, claims of this nature were not advertisements of the properties but rather were advertisements of the broker's services. The only limitation on the ability of a cooperating broker to claim or to represent that a property had been "sold" was that the listing broker's consent would be required before a "sold" sign could physically be placed on the seller's property prior to closing.

Many activities are prohibited under Article 16.

The Standards provide the following guidelines to prevent agency interference. Before entering into an agreement with a prospect, a REALTOR® must "make reasonable efforts" to determine whether the prospect is already under an exclusive agreement with another real estate professional. REALTORS® must disclose their status as a buyer or tenant representative or broker to seller/landlord representatives or brokers and For Sale By Owners at first contact, and provide written confirmation of that disclosure no later than the execution of a purchase agreement or lease. Exclusive agreements must be honored; all communications should be with the client's representative or broker, not the client, except with the consent of the client's representative or broker or when the communication is initiated by the client. In cooperative transactions compensation must be paid through the broker, and not directly to the licensee. REALTORS®, acting as subagents or buyer/tenant representatives or brokers, may not insert their own request for a commission change into the purchase or lease agreement. This would be interfering with a contract and an agency relationship as any commission agreement is between the landlord or seller and the broker/representative for the landlord or seller. REALTORS® may not place signs on property without the owner's consent. REALTORS® may not "poach" clients of their firm who are under contract with their firm when transferring firms. However, many brokerages do allow departing agents to take their listings with them, but that decision is up to the broker of the company where the listings were originally signed.

Five scenarios call for mediation or arbitration.

There are five specific non-contractual disputes that are subject to arbitration described in Standard of Practice 17-4. Per the Code: Where a listing broker has compensated a cooperating broker and another cooperating broker subsequently claims to be the procuring cause of the sale or lease. Where a buyer or tenant representative is compensated by the seller or landlord, and not by the listing broker, and the listing broker, as a result, reduces the commission owed by the seller or landlord and, subsequent to such actions, another cooperating broker claims to be the procuring cause of sale or lease. Where a buyer or tenant representative is compensated by the buyer or tenant and, as a result, the listing broker reduces the commission owed by the seller or landlord and, subsequent to such actions, another cooperating broker claims to be the procuring cause of sale or lease. Where two or more listing brokers claim entitlement to compensation pursuant to open listings with a seller or landlord who agrees to participate in arbitration (or who requests arbitration) and who agrees to be bound by the decision. Where a buyer or tenant representative is compensated by the seller or landlord, and not by the listing broker, and the listing broker, as a result, reduces the commission owed by the seller or landlord and, subsequent to such actions, claims to be the procuring cause of sale or lease.

Standard of Practice 11-1 establishes guidelines providing property values.

These opinions are often referred to as BPO'S, or Brokers Professional/Price Opinions. Standard 11-1 states that when REALTORS® prepare opinions of real property value or price they must: Be knowledgeable about the type of property being valued, Have access to the information and resources necessary to formulate an accurate opinion, and Be familiar with the area where the subject property is located. If you don't have the above information, you should disclose this to the requesting party in advance. Standard 11-1 goes on to specify that when an opinion of value or price is prepared other than in pursuit of a listing or to assist a potential purchaser in formulating a purchase offer, the opinion must include the following, unless the party requesting the opinion requires a specific type of report or different data set: Identification of the subject property Date prepared Defined value or price Limiting conditions, including statements of purpose(s) and intended user(s) Any present or contemplated interest, including the possibility of representing the seller/landlord or buyers/tenants Basis for the opinion, including applicable market data If the opinion is not an appraisal, a statement to that effect Disclosure of whether and when a physical inspection of the property's exterior was conducted Disclosure of whether and when a physical inspection of the property's interior was conducted Disclosure of whether the REALTOR® has any conflicts of interest For example, when Chuck's client, Tim, approached him and asked for an appraisal, Chuck told him that he would gladly provide Tim with a Broker Price Opinion, but also commented that the price opinion would not help Tim receive financing. Chuck completed the BPO and made sure to include the obligatory disclosure at the bottom of the paperwork that the BPO was not an appraisal. Tim appreciated Chuck's honesty, and his assessment.

Lesson 6: Duties to the Public: Articles 11 through 14 diligent Article 11 requires a REALTOR® to provide competent service to members of the public.

This Article describes an ethical standard of professional competence and the areas in which a REALTOR® is expected to be able to provide such competent service, such as real estate brokerage, property management, and other areas of real estate specialization. However, it also explicitly prohibits REALTORS® from providing services that are outside their field of competence. If you are not licensed or competent in an area that a client requests or requires, you must engage the assistance of someone who is capable. You must also inform the client about your actions and what the person you hired is engaged to do. This Article supplies you with two good guidelines. First, it provides a list of appropriate areas of expertise that you may have as an agent. Second, the article indicates that you must have competency in the area of expertise as well. Simply holding a license does not make you ethically able to handle any real estate responsibility if you do not have the capacity, training, or experience to handle a situation with competence. Evaluate yourself carefully, and seek cooperation from others when necessary.

hen working as a seller's agent, you should have a written agreement.

To become a seller's agent, you should enter into a written agency agreement. For example, the California Association of REALTORS® (C.A.R.) uses the following three forms: Residential Listing Agreement (C.A.R. Form RLA) Residential Listing Agreement - Agency (C.A.R. Form RLAA) Residential Listing Agreement - "Open" (C.A.R. Form RLAN) Under California's Statute of Frauds, a brokerage could not sue for compensation without a written contract. When you act as a seller's agent, you must: Provide fiduciary duties to the seller. Hold confidential all information received from the seller that, if revealed, would weaken the seller's negotiating position, including information about the seller's financial position or willingness to accept less for a property. Treat both the buyer and seller with honesty, fair dealing, and good faith. Exercise reasonable skill and care to both the buyer and seller when performing your agent duties. Disclose to both the buyer and seller all the material facts you know about the property that might affect the transaction. Remember that you are not required to withhold known material facts about the condition of the seller's property from the buyer, or to misrepresent the property's condition, even if requested by the seller to hold this information confidential.

Dual agency involves inherent conflicts of interest.

Use caution if you decide to engage in a dual agency relationship. You owe the same fiduciary duties to both the buyer and seller, and it can be difficult to remain loyal to both parties and avoid disclosing confidential information. California law allows brokerage firms to engage in dual agency representation as long as the firm complies with disclosure requirements and obtains the written consent of both parties (Business and Professions Code section 10176(d)). Dual agency is considered a conflict of interest if a brokerage firm enters into a dual agency agreement without providing appropriate disclosure agreements and obtaining written consent. cs Case Study: Example of how to handle a difficult situation Cathy's neighbors asked her to list their stylish house. At a busy open house, a buyer couple seemed very interested and asked Cathy several questions. The husband of the couple later phoned Cathy to say they were interested in having her write an offer, but wanted to see if Cathy would "throw in some of her commission" so they could get the house at a lower price. Cathy was put off by the suggestion, and decided it would be best to refer the buyers to another agent and take a referral fee rather than represent both parties - one that she felt allegiance to, and one that she did not.

Article 9 is the source of more actual violations than any other article.

Violations range from simply not providing a copy of documents initialed or signed to not keeping a contract alive by providing the necessary addendum to extend or change a critical date, such as the settlement date. The use of electronic media, including the Internet and email, has become commonplace. To respond to this, the NAR Code of Ethics was amended to advise professionals that when electronic media is used to enter into a contractual agreement with a client, the client must be provided with the same disclosures, and have the nature of the agreement explained prior to the client accepting the agreement. For example, you cannot send an email with, or have on your web site, a link that automatically binds a customer who clicks on it to a listing, exclusive right to represent, or leasing listing agreement. The disclosures and explanations must be made in advance of any contractual obligation. Consider this example: REALTOR® Wyatt loved his website. He felt that it was simple for his clients to navigate, and it brought in a lot of business while making his job easier. After bragging about his website at the office, a fellow agent named Sara decided to look up his site. Wyatt had simple buttons that, once a visitor chose to click, automatically entered them into a listing contract with Wyatt. While this may present an easy way to do business for Wyatt, Sara knew that such Internet contracts did not protect the public and could be entered into accidentally. Sara further knew that these links violated the NAR Code of Ethics. Sara filed a report the next morning, so that someone would address these issues.

Procuring cause is a frequently disputed topic.

When a dispute constitutes a voluntary arbitration situation, you need not wait to first request arbitration and have that request denied before you may choose to pursue litigation or take the dispute before another non-judicial dispute-resolving forum (Professional Standards Policy Statement #30). Procuring cause is an unbroken chain of events that has brought a purchaser to the point where he/she is able to make the decision to purchase. Arbitrations most commonly occur over a disagreement about which firm procured the cause of a sale and, therefore, have earned the commission. All firms who participate in arbitration agree to submit to the decision of the arbitration panel. This usually entails an "all or nothing" decision and is considered to be an adversarial experience by those who have gone through the procedure.

Lesson 3: Duties of Agency Agency comes with duties and responsibilities

When you engage in an agency relationship, you have certain duties and responsibilities to your clients and to the third parties with whom you interact. Agency duties and responsibilities ensure that the salesperson and the broker operate within the guidelines of their fiduciary responsibilities. Agent responsibilities require you to: Communicate and transact business with third parties on behalf of your client. Comply with all legal client requests that pertain to the real estate transaction. Comply with California state laws regarding trust accounting. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

You have the duty of disclosure.

You have the duty of disclosure. As an agent, you must disclose all known material facts, even if you learned of the material facts during a confidential conversation. You may be liable if you either fail to disclose or hide material facts about a property. You are required to disclose all known information that will help your client make an informed decision. You must disclose all facts that might affect the value of the property or the buyer's desire to purchase the property. Disclose all known material facts obtained through the normal course of business to your client. As a listing or seller's agent, you have a duty to do a complete visual inspection of the property. REALTORS® can document findings on the Agent Visual Inspection Disclosure (C.A.R. Form AVID). You must complete a written disclosure statement. REALTORS® can use the form Real Estate Transfer Disclosure Statement (C.A.R. Form TDS). note NOTE: These forms are limited to Residential 1 to 4 unit Single Family Homes. The use of these forms is not required for commercial properties, except in the sale of a property consisting of both 1 to 4 residential units and commercial use. In this situation, licensees are advised to complete the TDS regarding the residential portion of the property.

You have the duty of loyalty.

You have the duty of loyalty. As an agent, you must remain loyal to your client, putting their needs above your own interests and your broker's interests. For instance: You cannot engage in real estate activities with anyone whose interests conflict with your client's interests in a transaction. You cannot use confidential information obtained through an agency relationship to gain an advantage over your client. You must avoid competing with your client personally in a real estate transaction unless authorized in writing by your client. You must avoid profiting secretly from a real estate transaction.

You may delegate certain duties.

You may delegate certain duties. Civil Code Section 2349 outlines the types of tasks associated with duties that you, as an agent, may delegate. lr LEGAL REFERENCE: CIVIL CODE SECTION 2349 An agent, unless specially forbidden by his principal to do so, can delegate his powers to another person in any of the following cases, and in no others: 1. When the act to be done is purely mechanical; 2. When it is such as the agent cannot himself, and the sub-agent can lawfully perform; 3. When it is the usage of the place to delegate such powers; or, 4. When such delegation is specially authorized by the principal. You may only delegate the tasks associated with the duty, not the duty itself. Make certain to only delegate tasks to competent, trustworthy people, such as associate licensees, transaction coordinators, or office managers. Regardless of whom you choose for delegation, the ultimate responsibility for each duty lies with you. If the duty requires a license, then the person doing the task must also have an active license.

Standards 12-1 through 12-3 define how the word "free" may be used in giftadvertisements

everal Standards of Practice dictate various stipulations of the use of the word "free" in advertisements or the use of promotions in your advertisements: Standards of Practice 12-1 states that, "REALTORS® may use the term 'free' and similar terms in their advertising and in other representations provided that all terms governing availability of the offered product or service are clearly disclosed at the same time" (Amended 1/97). Standards of Practice 12-2 states that, "REALTORS® may represent their services as 'free' or without cost even if they expect to receive compensation from another source other than their client provided that the potential for the REALTOR® to obtain a benefit from a third party is clearly disclosed at the same time" (Amended 1/97). Standards of Practice 12-3 requires that REALTORS® offering premiums, prizes "or other merchandise discounts or inducements" to list, sell, purchase, or lease, must exercise care and candor so that the recipient will have a clear, advance understanding of all terms of the offer. Any time you use the word "free" in your advertisements, you must clearly define what you mean and any contingencies, limitations, and cost disclosures regarding your services. If you truly offer something free and represent this in an advertisement, you must mention any terms governing or limiting the availability of the product or service. Make sure that you represent yourself honestly. You may advertise a free service for which you receive compensation from another source, as long as full disclosure of your compensation and the source are clearly disclosed at the same time the free service is offered.

Standard of Practice 1-1

explains that if you act as a principal to any transaction, all aspects of the Code of Ethics still apply to you and your transaction. For example, when you are buying a property or selling a home for yourself, you are still obligated to behave according to the Code of Ethics. Standard of Practice 1-2 states that the Code of Ethics includes all real estate related activities "whether conducted in person, electronically, or through any other means." The Standard also defines key terms within the Code of Ethics, such as: Client: someone "with whom the REALTOR® or a REALTOR'S® firm has an agency or legally recognized non-agency relationship." Customer: "a party to a real estate transaction who receives information, services, or benefits but has no contractual relationship with the REALTOR® or the REALTOR'S® firm." Prospect: "purchaser, seller, tenant, or landlord who is not subject to a representation relationship with the REALTOR® or REALTOR'S® firm." Someone with whom the agency issue has not been resolved. Agent: "a real estate licensee (including brokers and sales associates) acting in an agency relationship as defined by state law or regulation." Broker: "a real estate licensee (including brokers and sales associates) acting as an agent or in a legally recognized non-agency capacity."

Eight Ways to Terminate an Agency Relationship

here are eight ways in which an agency relationship may be terminated. The client's goals were met during the term of the agency agreement (i.e., the sale is completed). The specified term in the agency agreement expires. The client and agent mutually agree to dissolve the relationship. The client or agent becomes incapacitated or dies. The property is destroyed for any reason, making the property unmarketable. The client or broker files for bankruptcy. The client revokes the agreement prior to the agreement's expiration date. A client can revoke an agency relationship with no penalty if he or she lacks confidence in the agency or believes the agency to be untrustworthy. If the client revokes the agreement for no specific reason or without good cause, the client may be in breach of contract. The agent renounces the agreement prior to the agreement's expiration date. This is similar to the client's ability to revoke the agreement. It should not be done without good cause.

Lesson 6: Eight Ways to Terminate an Agency Relationship

here are eight ways in which an agency relationship may be terminated. The client's goals were met during the term of the agency agreement (i.e., the sale is completed). The specified term in the agency agreement expires. The client and agent mutually agree to dissolve the relationship. The client or agent becomes incapacitated or dies. The property is destroyed for any reason, making the property unmarketable. The client or broker files for bankruptcy. The client revokes the agreement prior to the agreement's expiration date. A client can revoke an agency relationship with no penalty if he or she lacks confidence in the agency or believes the agency to be untrustworthy. If the client revokes the agreement for no specific reason or without good cause, the client may be in breach of contract. The agent renounces the agreement prior to the agreement's expiration date. This is similar to the client's ability to revoke the agreement. It should not be done without good cause.

The Code of Ethics has four components.

hese four components are: The Preamble, which states the overall purpose of the NAR Code of Ethics. It lets all who read it know what the public, customers, clients, and other REALTORS® should expect from REALTORS®. The 17 Articles which very concisely outline the expected duties and behaviors of REALTORS®. These standards were designed to protect consumers when they call on a real estate professional for help. The 17 Articles are organized into three sections: Duties to Clients and Customers Duties to the Public Duties to REALTORS® Standards of Practice accompany each Article in order to clarify the intent of the Article with more specific descriptions. More than 70 Standards of Practice are included in the Code. Case Interpretations - because the Standards of Practice are concise, REALTORS® Case Interpretations are published for reference to be used during Grievance Committees and in Professional Standards Hearings as examples for when similar events occur. They provide guidelines, not precedents. A member of the National Association of REALTORS® can't be found guilty of violating a Standard of Practice, only the Article on which it is based. cs CASE STUDY: Marissa faced charges of violation of the NAR Code of Ethics. The article she allegedly violated only posed a general description of expectations, and Marissa felt that the room for interpretation would absolve her of the charge. However, although the charges only named the Article, one of the Standards of Practice almost mirrored Marissa's actions. Based on the fact that written Standards of Practice advised against Marissa's choices as a violation of the Article upon which they were based, Marissa was found guilty of violating the Article and then a discipline was imposed for the violation.

Whether you're a buyer's agent or a seller's agent, be proud, say it loud.

hether you're a buyer's agent or a seller's agent, be proud, say it loud. Now that you're an agent and you've got an agency relationship, you need to act on behalf of your principal. This is going to be a bit different depending on if your principal is a seller or a buyer. It is vital that you differentiate your role as a "buyer's agent" from that of a "seller's agent." Until relatively recently, virtually all real estate agents represented the seller in real estate transactions, even if they were "working with" the buyer. In the past, common practice was for the agent "working with the buyer" to become a sub-agent of the seller's agent. By contract, the listing agent was authorized by the seller to market to other agents and then compensate those agents in a manner that is disclosed to the seller. Current practice, however, is for residential real estate brokerages to enter into agency relationships with potential buyers, thereby becoming true buyer's agents. Hence the need to differentiate your role.

Standards of Practice help 3-6 through 3-10. Standard of Practice 3-6

provides that, whenever a broker comes to you seeking cooperation, you must disclose to the broker the existence of any accepted offers on a property, including offers with unresolved contingencies. Standard of Practice 3-7 requires brokers making inquiries to disclose information on their status. When you're seeking information about a listing from another agent, you must disclose your REALTOR® status and whether your interest is personal or on behalf of a client and, if on behalf of a client, your relationship with the client. Are you acting as a transaction broker? Are you a buyers' agent? Whatever the case, this professional relationship must be disclosed to the other party. Standard of Practice 3-8 reads, "REALTORS® shall not misrepresent the availability of access to show or inspect a property." Now this might seem like an obvious one. You want to sell the property; why would you misrepresent the availability of access. Well, let's say you get a call from a potential buyer who wants to see the property tomorrow morning. You already have plans for that time, so what do you do? You can't lie and say that the property isn't available to show then. You have to tell the potential buyers that you are unavailable to show the property at that time. You can then offer to show it at a different time, or refer the buyers to a different agent who can show the property at the requested time. If you imply that the property isn't available, you could open yourself up to trouble. Standard of Practice 3-9 reads, "REALTORS® shall not provide access to listed property on terms other than those established by the owner or the listing broker." (Adopted 1/10). Many properties are marketed using combination lockboxes, which are usually not addressed or included in a listing agreement. The problem with that is that if the seller accepts responsibility for liability, vandalism, damage, etc., to the property during the listing period, this may be invalidated by the use of a combination lockbox when a more secure lockbox (i.e., electronic ) is referenced in the listing agreement. This is a huge problem, and agents may find that in using an unauthorized lockbox for access to the property, their Error and Omission Insurance may not look favorably on them, if there is a problem at the property. Any access provided by a broker must be reflected in the listing agreement. Standard of Practice 3-10 clarifies that the duty to cooperate established in Article 3 relates to the obligation to share information on listed property, and to make property available to other brokers for showing to prospective purchasers/tenants when it is in the best interests of sellers/landlords.

Advertising is further clarified in Standards of Practice 12-4 through 12-13.

tandards of Practice 12-4 states that you must never offer a property for sale or lease or advertise a property without express approval from the owner. Never quote a price different from that which was agreed upon by the owner or landlord. You must represent your clients only with their permission and according to their direction. Standard of Practice 12-5 You must disclose the name of the firm in all advertising. This Standard was amended in 2011 to allow for exceptions when online or other formats don't allow enough space to disclose the firm name (such as a Twitter tweet, or a thumbnail). However, in these cases, the ad or other promotion must link to a page that contains this information. Standard of Practice 12-6 requires disclosure of license status when advertising for sale or lease a property in which the REALTOR® has an ownership interest. Standard of Practice 12-7 allows only the listing broker and selling broker of a transaction to claim to have "sold" a property. Standard of Practice 12-8 requires REALTORS® to keep their websites current. Standard of Practice 12-9 requires disclosure of the firm name and state of licensure on REALTOR® websites. Standard of Practice 12-10 prohibits deceptive techniques online including deceptive SEO (search engine optimization) techniques. Standard of Practice 12-11 requires disclosure from REALTORS who intend to use consumer information gathered online. Standard of Practice 12-12 prohibits REALTORS® from registering or using deceptive domain names. Standards of Practice 12-13 prohibits REALTORS® from advertising any professional designations they do not possess. Taking a class does not allow use of the associated designation without paying the dues. A licensee who continues to use the designation without paying the dues would be guilty of false advertising.

10 Standards of Practice help define Article 3.

tandards of Practice 3-1 describes compensation for cooperation. The amount, if any, and terms are established by the broker of the seller/landlord. Cooperating brokers cannot assume compensation, and terms for compensation, if any, should be determined beforehand. Standard of Practice 3-2 states that, "Any change in compensation offered for cooperative services must be communicated to the other REALTOR® prior to the time that REALTOR® submits an offer to purchase/lease the property. After a REALTOR® has submitted an offer to purchase or lease property, the listing broker may not attempt to unilaterally modify the offered compensation with respect to that cooperative transaction." The wording of Standard of Practice 3-2 was amended in 2014. While the first sentence previously was included, the latter half of this Standard is new. This addition ensures that listing REALTORS® can't go in after an offer has been submitted and change the amount of compensation that's been offered as it pertains to the cooperative transaction. You must receive notice or give notice regarding any changes in compensation before the extension of an offer to purchase or lease a property. Standard of Practice 3-3 states that, "Standard of Practice 3-2 does not preclude the listing broker and cooperating broker from entering into an agreement to change cooperative compensation." (Adopted 1/94) Note the following points: If a change occurs in the offer of compensation, the listing firm must make certain that the cooperating firms understand this change. Cooperating firms must receive notification before the selling firm enters into a cooperative transaction by submitting an offer. If the selling broker is not satisfied with the compensation offered, Standard of Practice 3-3 permits a renegotiation of the compensation offered. The listing broker has no obligation to change the compensation offered, if asked to do so. Standard of Practice 3-4 states that, when acting as a listing broker, you must disclose any dual or variable rate of commission agreements. These contracts exist when you, as a listing broker, receive one amount of commission if your firm finds someone to buy/lease the property listed, but also provides a different commission if the sale/lease of the property results from the efforts of the seller/landlord or a cooperating broker. You must, "as soon as practical", disclose the existence of this form of contract to any potential cooperating brokers. Standard of Practice 3-5 discusses your obligations when working in the capacity of a subagent. In this situation, make sure to follow through on the disclosure of all "pertinent" facts to the principal's agent in a transaction before and after the execution of a contract.

Standard of Practice 1-1

xplains that if you act as a principal to any transaction, all aspects of the Code of Ethics still apply to you and your transaction. For example, when you are buying a property or selling a home for yourself, you are still obligated to behave according to the Code of Ethics. Standard of Practice 1-2 states that the Code of Ethics includes all real estate related activities "whether conducted in person, electronically, or through any other means." The Standard also defines key terms within the Code of Ethics, such as: Client: someone "with whom the REALTOR® or a REALTOR'S® firm has an agency or legally recognized non-agency relationship." Customer: "a party to a real estate transaction who receives information, services, or benefits but has no contractual relationship with the REALTOR® or the REALTOR'S® firm." Prospect: "purchaser, seller, tenant, or landlord who is not subject to a representation relationship with the REALTOR® or REALTOR'S® firm." Someone with whom the agency issue has not been resolved. Agent: "a real estate licensee (including brokers and sales associates) acting in an agency relationship as defined by state law or regulation." Broker: "a real estate licensee (including brokers and sales associates) acting as an agent or in a legally recognized non-agency capacity."

Broker Survey Real Estate Exam

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