Ethics California Real Estate Exam

ongratulations! You successfully passed your quiz. Click below to return to the Table of Contents and continue your course. 1. Conversion, in real estate, means _______________. A. only accepting agents of the broker`s same religious faith. B. using your skills to convert renters to buyers. C. using trust funds for the general management expenses of the firm. Congratulations, this is the correct answer! D. flipping properties. 2. Which of the following would be an example of commingling when handling client funds? A. Using funds from a client escrow account to buy doughnuts for the office. This was your answer, which is incorrect. B. Depositing client funds into a separate escrow account. C. Neglecting to keep records on a client escrow account. D. Depositing client funds into the general business account. This is the correct answer Feedback: Commingling is combining client funds with personal or business funds. 3. You are selling a home to your wife`s sister. Since she is not related to you by blood, you _______________. A. must disclose the relationship in writing Congratulations, this is the correct answer! B. do not need to disclose the relationship in writing C. must disclose the relationship verbally to all parties D. must make sure the offer is accepted before any relationship is disclosed 4. As a real estate professional, you must apply the _______________ to every real estate transaction, including those in which you play a principal role. A. Pledge of Allegiance B. Code of Directions C. Ethical Considerations D. Code of Ethics Congratulations, this is the correct answer! 5. A crack on the underside of a water heater would be considered _______________. A. a material defect B. a latent defect C. both a material defect and a latent defect Congratulations, this is the correct answer! D. neither a material defect nor a latent defect 6. Which of the following is NOT considered a REALTOR?`s duty to a client, as outlined in Article 1? A. It is not a REALTOR?`s duty to protect the interests of the client. B. It is not a REALTOR?`s duty to practice dual agency, even if asked. Congratulations, this is the correct answer! C. It is not a REALTOR?`s duty to present offers and counteroffers as quickly as possible. D. It is not a REALTOR?`s duty to treat all parties honestly. 7. You must cooperate with other brokers _______________. A. when it is in the best interests of your client Congratulations, this is the correct answer! B. upon the request of a cooperating broker C. upon the request of your employing broker D. upon request of any party to a transaction 8. When does a REALTOR? have no obligation to present offers to his/her client? A. A REALTOR? has no obligation to present offers to the client if the client has authorized him or her to reject certain offers and the REALTOR? has made sure that all the appropriate paperwork to fulfill such authorization has been filed and annotated. However, the REALTOR? would be wise to make the client aware of all offers, regardless of the instruction. This is the correct answer B. A REALTOR? has no obligation to present offers if he or she knows that the client will not accept the offer anyway. C. The REALTOR? has an obligation to present all offers to his or her client. This was your answer, which is incorrect. D. The REALTOR? may rely on the proposed buyer`s broker to present offers to his or her clients. Feedback: SOP 1-6 states that REALTORS? "shall submit offers and counteroffers objectively?" In the case that the client has authorized an agent to reject certain offers the agent must take care to file all appropriate paperwork with the necessary annotations. 9. A licensee may do which of the following? A. Accept commissions from more than one party with the informed consent of the client. This is the correct answer B. Accept fees from an appraiser for referring the appraiser a client. C. Accept money from any principal broker. This was your answer, which is incorrect. D. Accept money from any real estate licensee. Feedback: Article 7 provides that REALTORS? must disclose to all parties and have the informed consent of their client in order to accept monies from more than one party. 10. John of ABC Realty wanted to procure as many buyers/clients as soon as possible. He routinely told them he could guarantee they would always save at least 10 percent on the price of a home purchased through him. Which of the following statements is true? A. This practice is an innovative business practice and a good way to find buyers/clients. B. This practice is not allowed as it is misleading to buyers. No one can guarantee savings by using a specific agent`s services. Congratulations, this is the correct answer! C. This practice would be fine as long as the buyer/client signed a waiver. D. This practice is allowed if it is approved by John`s broker. 11. Confidential information includes all of the following EXCEPT A. the client`s investment portfolio. B. the client`s pending divorce. C. the fact that foreclosure proceedings will begin if the house doesn`t sell in the next 60 days. D. the published list price. Congratulations, this is the correct answer! 12. When an agent has presented two offers at the same price, the agent should advise the seller to: A. accept the offer with the earliest closing date. B. defer to the agent`s knowledge of the parties. C. consider all aspects of the offer, not simply the price. Congratulations, this is the correct answer! D. accept the offer that was made first. 13. Misrepresentation may be excusable _______________. A. if it is in the best interests of the client B. if the sponsoring broker authorizes the misrepresentation C. under no circumstances Congratulations, this is the correct answer! D. under any circumstances 14. A record of every deposit/receipt should include all of the following EXCEPT: A. when the deposit or withdrawal was made. B. who the deposit was from or who the withdrawal was to. C. how often deposits are regularly made from the account. Congratulations, this is the correct answer! D. the amount of each deposit and withdrawal. 15. Jennie, a broker, is in need of some quick cash for a trip she is planning. She decides to use some extra funds that have been entrusted to her brokerage to pay for her plane tickets; she will put the money back in the account within a few days. What is this called? A. Conversion Congratulations, this is the correct answer! B. Smart C. Real estate borrowing D. Accounting 16. Mary, a REALTOR?, lives in a small town and inherited a five percent interest in a shopping center. Pete, her neighbor, saw a sale sign and wants her to make an offer on the property. Mary considers the interest to be too minor to bother disclosing. Is this an ethical violation? A. Yes; Mary must disclose any interest she holds in a property. Congratulations, this is the correct answer! B. No; Mary need not disclose unless she holds at least a 10 percent interest in a property. C. No; Mary need not disclose unless she holds at least a 15 percent interest in a property. D. Yes; Mary must disclose to all parties to the transaction, including others holding a share in the shopping center, that the buyer is her neighbor. She does not need to disclose her interest, since it is so small. Retake Exam Continue Course Unit Quizzes and the minimum required study time must be met to unlock

Bernadette, Congratulations! You successfully passed your quiz. Click below to return to the Table of Contents and continue your course. 1. Conversion, in real estate, means _______________. A. only accepting agents of the broker`s same religious faith. B. using your skills to convert renters to buyers. C. using trust funds for the general management expenses of the firm. Congratulations, this is the correct answer! D. flipping properties. 2. Which of the following would be an example of commingling when handling client funds? A. Using funds from a client escrow account to buy doughnuts for the office. This was your answer, which is incorrect. B. Depositing client funds into a separate escrow account. C. Neglecting to keep records on a client escrow account. D. Depositing client funds into the general business account. This is the correct answer Feedback: Commingling is combining client funds with personal or business funds. 3. You are selling a home to your wife`s sister. Since she is not related to you by blood, you _______________. A. must disclose the relationship in writing Congratulations, this is the correct answer! B. do not need to disclose the relationship in writing C. must disclose the relationship verbally to all parties D. must make sure the offer is accepted before any relationship is disclosed 4. As a real estate professional, you must apply the _______________ to every real estate transaction, including those in which you play a principal role. A. Pledge of Allegiance B. Code of Directions C. Ethical Considerations D. Code of Ethics Congratulations, this is the correct answer! 5. A crack on the underside of a water heater would be considered _______________. A. a material defect B. a latent defect C. both a material defect and a latent defect Congratulations, this is the correct answer! D. neither a material defect nor a latent defect 6. Which of the following is NOT considered a REALTOR?`s duty to a client, as outlined in Article 1? A. It is not a REALTOR?`s duty to protect the interests of the client. B. It is not a REALTOR?`s duty to practice dual agency, even if asked. Congratulations, this is the correct answer! C. It is not a REALTOR?`s duty to present offers and counteroffers as quickly as possible. D. It is not a REALTOR?`s duty to treat all parties honestly. 7. You must cooperate with other brokers _______________. A. when it is in the best interests of your client Congratulations, this is the correct answer! B. upon the request of a cooperating broker C. upon the request of your employing broker D. upon request of any party to a transaction 8. When does a REALTOR? have no obligation to present offers to his/her client? A. A REALTOR? has no obligation to present offers to the client if the client has authorized him or her to reject certain offers and the REALTOR? has made sure that all the appropriate paperwork to fulfill such authorization has been filed and annotated. However, the REALTOR? would be wise to make the client aware of all offers, regardless of the instruction. This is the correct answer B. A REALTOR? has no obligation to present offers if he or she knows that the client will not accept the offer anyway. C. The REALTOR? has an obligation to present all offers to his or her client. This was your answer, which is incorrect. D. The REALTOR? may rely on the proposed buyer`s broker to present offers to his or her clients. Feedback: SOP 1-6 states that REALTORS? "shall submit offers and counteroffers objectively?" In the case that the client has authorized an agent to reject certain offers the agent must take care to file all appropriate paperwork with the necessary annotations. 9. A licensee may do which of the following? A. Accept commissions from more than one party with the informed consent of the client. This is the correct answer B. Accept fees from an appraiser for referring the appraiser a client. C. Accept money from any principal broker. This was your answer, which is incorrect. D. Accept money from any real estate licensee. Feedback: Article 7 provides that REALTORS? must disclose to all parties and have the informed consent of their client in order to accept monies from more than one party. 10. John of ABC Realty wanted to procure as many buyers/clients as soon as possible. He routinely told them he could guarantee they would always save at least 10 percent on the price of a home purchased through him. Which of the following statements is true? A. This practice is an innovative business practice and a good way to find buyers/clients. B. This practice is not allowed as it is misleading to buyers. No one can guarantee savings by using a specific agent`s services. Congratulations, this is the correct answer! C. This practice would be fine as long as the buyer/client signed a waiver. D. This practice is allowed if it is approved by John`s broker. 11. Confidential information includes all of the following EXCEPT A. the client`s investment portfolio. B. the client`s pending divorce. C. the fact that foreclosure proceedings will begin if the house doesn`t sell in the next 60 days. D. the published list price. Congratulations, this is the correct answer! 12. When an agent has presented two offers at the same price, the agent should advise the seller to: A. accept the offer with the earliest closing date. B. defer to the agent`s knowledge of the parties. C. consider all aspects of the offer, not simply the price. Congratulations, this is the correct answer! D. accept the offer that was made first. 13. Misrepresentation may be excusable _______________. A. if it is in the best interests of the client B. if the sponsoring broker authorizes the misrepresentation C. under no circumstances Congratulations, this is the correct answer! D. under any circumstances 14. A record of every deposit/receipt should include all of the following EXCEPT: A. when the deposit or withdrawal was made. B. who the deposit was from or who the withdrawal was to. C. how often deposits are regularly made from the account. Congratulations, this is the correct answer! D. the amount of each deposit and withdrawal. 15. Jennie, a broker, is in need of some quick cash for a trip she is planning. She decides to use some extra funds that have been entrusted to her brokerage to pay for her plane tickets; she will put the money back in the account within a few days. What is this called? A. Conversion Congratulations, this is the correct answer! B. Smart C. Real estate borrowing D. Accounting 16. Mary, a REALTOR?, lives in a small town and inherited a five percent interest in a shopping center. Pete, her neighbor, saw a sale sign and wants her to make an offer on the property. Mary considers the interest to be too minor to bother disclosing. Is this an ethical violation? A. Yes; Mary must disclose any interest she holds in a property. Congratulations, this is the correct answer! B. No; Mary need not disclose unless she holds at least a 10 percent interest in a property. C. No; Mary need not disclose unless she holds at least a 15 percent interest in a property. D. Yes; Mary must disclose to all parties to the transaction, including others holding a share in the shopping center, that the buyer is her neighbor. She does not need to disclose her interest, since it is so small.

Broker Cooperation and Compensation - Continued Standard of Practice 3-4: Dual or Variable Rate Compensation 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. If a cooperating broker inquires, you should also disclose the differential that applies in the case that someone other than your brokerage procures a buyer/lease. You may provide this information in a percentage or a dollar amount. If the cooperating broker actually represents the buyer/tenant, the cooperating broker should disclose these facts to their client before the client extends an offer. This knowledge would allow the buyer client to make an offer comparable to the one submitted through the listing broker. This offer may need to be higher in order to compensate for the differential credited by the listing agent, or the buyer agent may be asked to offer the same credit to the seller. The buyer agent has no obligation to modify the terms of his representation agreement with the buyer. Standard of Practice 3-5 Should you act in the capacity of a subagent, 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. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Bernadette, Congratulations! You successfully passed your quiz. Click below to return to the Table of Contents and continue your course. 1. Once closed or terminated, a listing left on a firm`s website for advertising purposes must be removed within _______________. A. a reasonable time This is the correct answer B. two business days of closing C. one month of closing This was your answer, which is incorrect. D. six months of closing Feedback: SOP 12-8 states that REALTORS? must make a "reasonable effort" to make sure the information on their websites is up to date. 2. Which of the following is true regarding the names that must appear on any real estate advertisement? A. The name of the brokerage firm must appear on advertisements. Congratulations, this is the correct answer! B. The name of the brokerage does not need to appear on an advertisement, just the name of the individual who placed the advertisement. C. If the advertisement is online, only the name of the agent need appear. D. The name of the brokerage must appear on the advertisement with the same prominence as the name of the agent. 3. An agent in your office is generating record listings by telling sellers that market trends are showing that their neighborhood is becoming increasingly minority owned. Is this considered a discriminatory practice? A. This is an illegal discriminatory practice called blockbusting. Congratulations, this is the correct answer! B. This is not a discriminatory practice if what the agent is telling people is true. C. If what the agent is tell people is true, then the agent is not discriminating. The people selling their property are discriminating. D. This is a discriminatory practice because it deals with sexual orientation. 4. You are listing a property for a client and you have no interest in the property. Which of the following statements is true? A. You can begin advertising the property on your website even before you have the proper signed consent, since you have received verbal consent. B. You can put out a sign that says, "For Sale by Owner." C. You can advertise on your website once you receive signed consent from the seller. Congratulations, this is the correct answer! D. You can post advertisements on the Internet without including the name of your brokerage, in order to make it appear that the property is "For Sale by Owner." 5. Rudolph`s client calls him in Midland from Montreal, and asks him to place a sign on an investment property he owns and sell it as soon as possible. What should Rudolph do? A. Immediately place the sign on the property B. Place the sign and prepare property information, but wait to post other advertising until the client returns C. Secure a written listing agreement before placing the sign Congratulations, this is the correct answer! D. Until he has a signed agreement, he should post no signs, but should alert agents in the immediate area of the listing 6. Frank has a current listing agreement with BDL Realty, which expires at the end of the month. He has become very upset with the way his listing has been handled and would like to switch over to MBT Realty. What would be the best solution that would allow Frank to do this? A. With MBT Realty`s help, Frank should cancel the listing agreement with BDL Realty immediately, and then sign the listing agreement with MBT Realty. B. Frank should file a complaint with the state`s real estate board, and use that as evidence to cancel the listing with BDL Realty. C. Frank should just sign the listing agreement with MBT Realty. It`s okay to have two. D. Frank should confer with an attorney before making any move prior to the expiration of the listing agreement with BDL Realty. Congratulations, this is the correct answer! 7. The ADA stands for _______________. A. American Dodge Association B. Automobile Disposal Act C. American with Disabilities Act Congratulations, this is the correct answer! D. Adult Dwelling Addition

Broker Cooperation and Compensation - Continued Standard of Practice 3-2 The wording of Standard of Practice 3-2 was amended in 2014 and addresses a REALTOR®'s ability to unilaterally modify compensation after an offer has been submitted. It states: "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." (Amended 1/14) 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.

Broker Cooperation and Compensation - Continued Standard of Practice 3-3 Standard of Practice 3-2 does not preclude the listing broker and cooperating broker from entering into an agreement to change cooperative compensation. 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. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Lesson 3: Client Confidentiality - Continued "Information concerning latent material defects is not considered confidential information under this Code of Ethics" (Standard of Practice 1-9 Adopted 1/93, Amended 1/01). A "latent defect" is one that is hidden and not easily discoverable with the naked eye. The statement in Standard of Practice 1-9 concerning latent material defects serves as a protection from claims against REALTORS® who have disclosed latent defects and were accused of breaching confidentiality. The Code of Ethics does not require disclosure of latent defects, so REALTORS® should check with their state laws regarding disclosure requirements and how and when these must be disclosed. Consider this example: Jamal's colleague, Jill, faced charges of violating the NAR Code of Ethics. Jamal knew that certain confidential information he was aware of could exonerate her. He turned to the NAR Code of Ethics to figure out what to do. Jamal acknowledged that keeping confidences remained critical to maintaining his own ethical standing as an agent. Then Jamal read Standard of Practice 1-9. He found the exception to disclosing confidential information if it would defend an associate against a wrongful accusation. Jamal felt relieved knowing that he could help Jill without compromising his own ethics. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Check for Understanding Question: An agent, John, listed a property, and an offer was accepted with a home inspection contingency. The home inspection revealed that there was a cracked heat exchanger in the gas furnace. Other minor problems were discovered and, in the end, the contract was not completed and a release was signed. The listing agreement expired, and the property was not relisted. Several months later, the first listing agent, John, drove by the property and noticed that it had been relisted with another company. John called the new listing agent to inquire if there was a new furnace, remarking that the original one had a cracked heat exchanger. The current listing agent had no knowledge of a new furnace. He asked the owner of the property, and the owner was furious, declaring that confidentiality had been breached, because the information had come to light during the first listing period and should have been kept confidential.

Duties to the Client: Buyer - Continued Standard of Practice 1-13 Standard of Practice 1-13 requires agents entering into buyer representation agreements to make additional disclosures to their buyer clients. You must explain your firm's policies on cooperation, the amount of compensation a client must pay for services, and whether or not the potential exists for "additional or offsetting compensation;" as well as whether or not the buyer's agent might work as a disclosed dual agent and how an offer proceeds once it leaves the buyer agent's hands. Clients must understand that a seller, or anyone representing a seller, may choose not to keep the existence, terms, or conditions of an offer confidential unless confidentiality remains protected by law, regulation, or by a pre-existing confidentiality agreement.

Client Confidentiality Client confidentiality encompasses one of the most important aspects in the ethical treatment of clients, as clarified in Standard of Practice 1-9. Confidential information may include anything (personal or financial) that the client deems as confidential. REALTORS® must maintain confidentiality during and after the brokerage relationship agreement. Confidentiality is to be maintained forever, except under specific circumstances outlined in the Code of Ethics Standard of Practice 1-9. Standard of Practice 1-9 Your obligation to preserve your client's confidential information (as defined by state law) during any agency relationship or non-agency relationship continues even after the termination of your professional agency or non-agency relationship. You must never knowingly: "Reveal confidential information of clients; or Use confidential information of clients to the disadvantage of clients; or Use confidential information of clients for the REALTORS® advantage or the advantage of third parties unless: a. Clients consent after full disclosure; or b. REALTORS® are required by court order; or c. It is the intention of a client to commit a crime and the information is necessary to prevent the crime; or d. It is necessary to defend a REALTOR® or the REALTOR'S® employees or associates against an accusation of wrongful conduct." Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

heck for Understanding Question: An agent, John, listed a property, and an offer was accepted with a home inspection contingency. The home inspection revealed that there was a cracked heat exchanger in the gas furnace. Other minor problems were discovered and, in the end, the contract was not completed and a release was signed. The listing agreement expired, and the property was not relisted. Several months later, the first listing agent, John, drove by the property and noticed that it had been relisted with another company. John called the new listing agent to inquire if there was a new furnace, remarking that the original one had a cracked heat exchanger. The current listing agent had no knowledge of a new furnace. He asked the owner of the property, and the owner was furious, declaring that confidentiality had been breached, because the information had come to light during the first listing period and should have been kept confidential. The owner brought an ethics complaint against John. What do you think the outcome of this case was? Congratulations! That's the correct answer! A. The cracked heat exchanger was obvious, so there is no violation of confidentiality. B. The cracked heat exchanger was a latent defect, so there is no violation of confidentiality. C. The cracked heat exchanger was a latent defect, so it is a confidential matter. D. The listing agreement had expired, so there is no expectation of confidentiality. Feedback: The ethics committee found that there was no violation, because the cracked heat exchanger was a latent defect (in addition to being a health hazard), and it was not, under the Code of Ethics, considered confidential information.

Client Confidentiality - Continued Standard of Practice 1-13 "When entering into buyer/tenant agreements, REALTORS® must advise potential clients of: The REALTOR'S® company policies regarding cooperation; The amount of compensation to be paid by the client; The potential for additional or offsetting compensation from other brokers, from the seller or landlord, or from other parties; Any potential for the buyer/tenant representative to act as a disclosed dual agent, e.g. listing broker, subagent, landlord's agent, etc., and The possibility that sellers or sellers' representatives may not treat the existence, terms, or conditions of offers as confidential unless confidentiality is required by law, regulation, or by any confidentiality agreement between the parties" (Adopted 1/93, Renumbered 1/98, Amended 1/06). Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Client Confidentiality - Continued Standard of Practice 1-13 Standard of Practice 1-13 requires that you advise prospects, who may become buyer clients, of certain things. Buyer clients should understand that once an offer leaves the hands of the selling side of the transaction, the buyer agent has no control and can provide no expectation of confidentiality as to the contents or terms of the offer. This Standard provides for an exception: a confidentiality agreement, which would precede and be signed prior to the presentation of an offer to the listing side of the transaction. The company policy and business practices prevalent in your area will usually dictate the use of a confidentiality agreement. Please check with your broker to see if this applies to you.Client Confidentiality - Continued Case Study 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 1. Note that the names have been added for teaching purposes, and don't reflect the actual names of the individuals involved in this case. Seller Shania listed her home for sale with REALTOR® Bryan. The property was priced reasonably, and Bryan was confident it would sell quickly. The listing agreement included the seller's authorization for publication in the MLS and authority to disclose the existence of offers to prospective purchasers. Within days, Bryan had shown the property to several prospective purchasers, and one of them, Carlos, wrote a purchase offer at close to the asking price.

Client Confidentiality - Continued Standard of Practice 1-15 This Standard saw a slight revision in 2010. With the seller's approval, you have always answered the inquiries from buyers or cooperating brokers regarding the existence of an offer on a property. However, in the past, this inquiry required that you, with permission, also disclose whether any existing offer came from the listing licensee, another licensee in the listing firm or by a cooperating broker. As of 2010, though, an inquiry as to the existence of an offer does not necessitate that you disclose the origin of any existing offer. Instead, you may provide this information if asked for it specifically and if authorized by the seller. This Standard of Practice is illustrated by the following NAR Case Interpretation.lient Confidentiality- Continued Case Study (Continued) REALTOR® Bryan called Shania, the seller, to make an appointment to present the offer. After hanging up with Shania, Bryan received another call, this time from REALTOR® Aaron. Aaron explained that he represented a buyer who was interested in making an offer on Shania's property. Aaron explained that while his buyer-client was quite interested in the property, price was also a concern. He asked Bryan if there were other offers on the property, indicating that his buyer-client would likely make a higher offer if there were competing offers on the table. Bryan responded telling Aaron, "That's confidential information. Please tell your client to make his best offer."

Client Confidentiality - Continued Case Study (Continued) Taken aback by REALTOR® Bryan's comments, REALTOR® Aaron shared them with his buyer-client, who chose not to make an offer and instead pursued other properties. Later that evening, Shania, the seller, accepted the offer of Carlos, the first buyer. Sometime later, the transaction closed. Several months afterward, seller Shania and REALTOR® Aaron met at a social event. Aaron told Shania about his conversation with REALTOR® Bryan. Shania asked Aaron if he thought that his buyer-client would have made an offer on her home, absent Bryan's refusal to disclose whether there were other offers pending. Aaron responded that it was impossible to tell for certain, but his buyer-client had certainly not been impressed by Bryan's response to a seemingly routine question.

Client Confidentiality - Continued Case Study (Continued) Shania, the seller, subsequently filed an ethics complaint against REALTOR® Bryan, alleging violation of Article 1 as interpreted by Standard of Practice 1-15. She noted that she had clearly authorized Bryan to disclose to buyers and cooperating brokers the existence of pending offers and that his arbitrary refusal to share information he was authorized to share could have been the reason, or part of the reason, why REALTOR® Aaron's client had chosen not to make an offer on her home. Bryan defended his actions, indicating that while he agreed that he had an obligation to promote Shania's interests, his obligation to Aaron and to Aaron's buyer-client was simply to be honest. He had not, in any fashion, misrepresented the availability of Shania's property. Rather, he had simply told Aaron to encourage his client to make her best offer. "I'm not required to turn every sale into an auction, am I?" he asked rhetorically. "I feel that I treated all parties honestly and fairly," he concluded.

Disclosure of Licensee Interest in Property - Continued Article 5 "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 would result if you were to 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 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. Disclosure of Licensee Interest in Property - Continued Case Study (Continued) At the hearing, Seller Anthony also brought in a witness who stated that he had heard Buyer Brenda say that she had made a good buy in purchasing Seller Anthony's building, because Seller Anthony's appraiser was her (Buyer Brenda's) property manager. Buyer Brenda, appearing as a witness for REALTOR® Charles, disputed this and protested that she had paid a fair price. She substantiated REALTOR® Charles's statement that management of the building formerly owned by Seller Anthony was never discussed between them until after she had purchased it.

Disclosure of Licensee Interest in Property - Continued Case Study 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 Standard of Practice 5-1. Note that the names have been added for teaching purposes, and don't reflect the actual names of the individuals involved in this case. Seller Anthony and Buyer Brenda were negotiating the sale of an apartment building, but couldn't agree on the price. Finally, they agreed that each would engage an appraiser, and they would accept the average of the two appraisals as a fair price. Seller Anthony engaged REALTOR® Charles as his appraiser, and Buyer Brenda engaged REALTOR® Danya. Both REALTORS® were informed of the agreement of the principals. The two appraisal reports were submitted. The principals averaged the two valuations and made the transaction at the price determined. Six months later, it came to the attention of Seller Anthony that REALTOR® Charles was managing the building that he had appraised. Upon making further inquiries, Anthony learned that for several years REALTOR® Charles had managed five other buildings owned by Buyer Brenda, and that he had been Buyer Brenda's property manager at the time he accepted the appraisal assignment from Anthony. At this point, Anthony engaged REALTOR® Edward to make an appraisal of the building in question. REALTOR® Edward's valuation was approximately 30% higher than that arrived at six months earlier by REALTOR® Charles. Seller Anthony filed a complaint against REALTOR® Charles to the local Board of REALTORS®. The complaint charged that since REALTOR® Charles was an agent of Buyer Brenda; since he managed all of Buyer Brenda's properties; since he had become manager of the property he had appraised for Seller Anthony in connection with a sale to Buyer Brenda; and since he had not disclosed his relationship to Buyer Brenda, he had acted unethically, and, in the interest of his major client, had placed an excessively low valuation on the property he had appraised for Anthony.

Articles 4 and 5 and the Licensee's Interest in Properties Lesson 1: Disclosure of Licensee Interest in Property Article 4 "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, 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).

Disclosure of Licensee Interest in Property - Continued NAR Code of Ethics requires REALTORS® to disclose any personal relationships with anyone involved in the transaction or who might have financial interests impacting your clients. For instance, if you represent the seller and your brother-in-law is an interested buyer, or if you represent the buyer and someone from your firm is the seller, then you are required to disclose those facts in writing to your client, and you need to do so before your client enters into a contract. As an example, a court case involved a real estate broker acting as a dual agent in which the broker failed to disclose to the seller that the buyer was his mother-in-law. The seller subsequently sued the broker. The court held that the broker was obligated to disclose the relationship in that the broker could be indirectly acquiring an interest in the property and as such is a material fact. The representation of clients who are "immediate family" must be made in writing in the listing agreement and in any sale or lease contract. NAR has 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 your firm, disclosure must be made, because it would be presumed that the client might be given preferential treatment in the transaction. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Duties to the Client: Seller - Continued Standard of Practice 1-12 "When entering into listing contracts, REALTORS® must advise sellers/ landlords of: the REALTOR'S® company policies regarding cooperation and the amount(s) of any compensation that will be offered to subagents, buyer/tenant agents, and/or brokers acting in legally recognized non-agency capacities; the fact that buyer/tenant agents or brokers, even if compensated by listing brokers, or by sellers/landlords may represent the interests of buyers/tenants; and any potential for listing brokers to act as disclosed dual agents, e.g., buyer/tenant agents" (Adopted 1/93, Renumbered 1/98, Amended 1/03). Since not all clients understand the intricacies of your duties, following these ethics guidelines will help protect them and provide them the better understanding they need to better work and achieve their goals. Understanding expectations will help you and your client to avoid misunderstandings and provide an avenue for better communication. Standard of Practice 1-14 "Fees for preparing appraisals or other valuations shall not be contingent upon the amount of the appraisal or valuation." (Adopted 1/02) Standard of Practice 1-16 In 2012, a new Standard of Practice was adopted to further protect client interests. Standard of Practice 1-16 states: "REALTORS® shall not access or use, or permit or enable others to access or use, listed or managed property on terms or conditions other than those authorized by the owner or seller." (Adopted 1/12)

Duties to the Client: Buyer Representing buyers' (and tenants') interests is an important part of the real estate equation. However, until the early 1990s, the vast majority of real estate agents represented the seller in real estate transactions, even if they were "working with" the buyer. This concept is call "sub-agency." California has opted out of this, and today generally works under a concept of "cooperating brokers" with the Listing Office wherein the Listing Contract also compensates the buyer's broker. Since the 1990s, brokers frequently enter into contractual relationships with potential buyers, becoming buyer representatives. In the early '90s, many brokers advertised themselves as exclusively buyers' agents. Some real estate firms now exclusively represent buyers. Just as you have legal and ethical obligations to sellers if you are the listing agent engaged in a written brokerage agreement, you have similar obligations when you represent buyers by entering into a written representation agreement. Although not as common as a Seller's Listing Employment Agreement, the industry is moving toward written Buyer/Broker Agreements to protect both you and your client.

Duties to the Client: Buyer - Continued Standard of Practice 1-13 "When entering into buyer/tenant agreements, REALTORS® must advise potential clients of: the REALTOR'S® company policies regarding cooperation; the amount of compensation to be paid by the client; the potential for additional or offsetting compensation from other brokers, from the seller or landlord, or from other parties; any potential for the buyer/tenant representative to act as a disclosed dual agent, e.g. listing broker, subagent, landlord's agent, etc., and the possibility that sellers or sellers' representatives may not treat the existence, terms, or conditions of offers as confidential unless confidentiality is required by law, regulation, or by any confidentiality agreement between the parties" (Adopted 1/93, Renumbered 1/98, Amended 1/06)

Duties to the Client: Buyer - Continue Standard of Practice 1-8 "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. REALTORS®, acting as agents or brokers of buyers/tenants, shall recommend that buyers/tenants obtain the advice of legal counsel if there is a question as to whether a pre-existing contract has been terminated." (Adopted 1/93, Amended 1/99) In many ways this Standard mirrors Standard of Practice 1-7, but instead of referring to your obligations as a listing agent, it applies to a purchase or rental transaction. This Standard means that you remain under obligation to present offers until the buyer or tenant: Accepts an offer, or Waives, in writing, the obligation to present offers. In addition, you should advise your clients to consult legal counsel regarding any questions concerning any real estate sales or lease contracts. Standard of Practice 1-10 You should respect the health and safety of all parties involved in an agreement. For this reason, whenever you act as an agent or enter into a property management agreement, you must see beyond the needs of just your client and competently manage the property of your client with "due regard for the rights, safety, and health of tenants and others lawfully on the premise." You may not simply ignore a health hazard, because your client does not wish to address or disclose it. Of course, your obligations do not extend beyond those that correspond with the terms and conditions of your real estate licensure and any property management agreement.

Duties to the Client: Buyer - Continued The NAR Code of Ethics, Article 1, outlines some of the ethical standards for a Buyer's agent: Standard of Practice 1-4 "REALTORS®, when seeking to become a buyer/tenant representative, shall not mislead buyers or tenants as to savings or other benefits that might be realized through use of the REALTOR'S® services" (Amended 1/93). To indicate to any client, or potential client, that you will provide benefits that you either cannot or will not in reality provide, violates the Article 1 mandate to deal honestly with all parties to any transaction. Your integrity reflects upon your profession as a whole, so it is important to do your part to maintain all ethical standards in your work. Simply put: don't make promises you can't keep. Standard of Practice 1-6 "REALTORS® shall submit offers and counter-offers objectively and as quickly as possible" (Adopted 1/93, Amended 1/95).

Duties to the Client: Buyer - Continued The NAR Code of Ethics, Article 1, outlines some of the ethical standards for a Buyer's agent: Standard of Practice 1-4 "REALTORS®, when seeking to become a buyer/tenant representative, shall not mislead buyers or tenants as to savings or other benefits that might be realized through use of the REALTOR'S® services" (Amended 1/93). To indicate to any client, or potential client, that you will provide benefits that you either cannot or will not in reality provide, violates the Article 1 mandate to deal honestly with all parties to any transaction. Your integrity reflects upon your profession as a whole, so it is important to do your part to maintain all ethical standards in your work. Simply put: don't make promises you can't keep. Standard of Practice 1-6 "REALTORS® shall submit offers and counter-offers objectively and as quickly as possible" (Adopted 1/93, Amended 1/95).

Duties to the Client: Seller - Continued Standard of Practice 1-5 "REALTORS® may represent the seller/landlord and buyer/tenant in the same transaction only after full disclosure to and with informed consent of both parties" (Adopted 1/93). This Standard allows you to perform disclosed dual agency with informed consent of all parties. Most states that permit dual agency require that parties give informed consent in writing.

Duties to the Client: Seller - Continued Standard of Practice 1-6 "REALTORS® shall submit offers and counter-offers objectively and as quickly as possible" (Adopted 1/93, Amended 1/95). This Standard charges you with presenting all offers, implying both written and oral, "as quickly as possible." If the client has instructed you to wait to present offers until a prescribed time or date, you should still acknowledge the existence of an offer to the client. Consider this example: REALTOR® Luke, a broker representing a seller, was totally exhausted at the end of a very long day. Just before crashing into bed, an agent called and asked Luke to relay an offer. Luke mumbled his agreement and then sank into bed. The next day Luke awoke late and rushed off to work, forgetting all about his phone call the night before. Three days later, the agent called back to inquire what the response was to the offer he had been given. Luke realized that he had unintentionally violated Article 1, supported by the direct reference of expectation in the Standard of Practice 1-6. Luke apologized and worked to make amends. Furthermore, Luke recommitted to better fulfilling his duties to his clients and placed a notepad and pen next to the phone so that he could take notes, helping him to execute all tasks necessary to fully living up to the NAR Code of Ethics.

uties to the Client: Seller - Continued Standard of Practice 1-7 "When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a contract/lease unless the seller/landlord has waived this obligation in writing. REALTORS® shall not be obligated to continue to market the property after an offer has been accepted by the seller/landlord. REALTORS® shall recommend that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract or lease" (Amended 1/93). This Standard means that you are obligated to present all offers: Until closing unless the seller has waived this obligation in writing; Until a contract is executed and unless the seller has waived this obligation in writing, and/or Until this listing agreement has expired. In addition, you should advise your clients to consult legal counsel before accepting an offer after already accepting an initial offer.

Duties to the Client: Seller - Continued Standard of Practice 1-11 "REALTORS® who are employed to maintain or manage a client's property shall exercise due diligence and make reasonable efforts to protect it against reasonably foreseeable contingencies and losses" (Adopted 1/95). This Standard identifies one of your responsibilities in the event that you maintain or manage a client's property. 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. Consider this example: REALTOR® Carol 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 Carol act to fix the problem or notify the owner to prevent further losses. If the leakage was so severe as to be considered a violation of California Civil Code Section 1941.1 (required standard characteristics necessary for habitation as a dwelling), not only could Carol's client be cited for a code violation but the tenant could have considered Carol's failure to respond to be "constructive eviction" under California Civil Code Section 1942. This measn the tenant could abandon the dwelling unit and no longer be responsible for the terms of the lease or rental agreement. Carol certainly would have violated her fiduciary duties to her client under agency.

Introduction to the Code - Vocabulary Understanding the following terms will help you as you complete this course: Ethics: Moral principles that govern human interaction, more than just right or wrong. Articles: For ordering and organizational purposes, most of the Code of Ethics is ordered into Articles, or sections, pertaining to specific information or specific areas of information. Standards of Practice: The Standards of Practice specifically address the concerns of the modern real estate industry by further clarifying the articles in the NAR Code of Ethics. Case Interpretations: The Articles and Standards of Practice can be difficult to understand. REALTORS® Case Interpretations are published and may be used for reference by Grievance Committees and in Professional Standards Hearings as examples when similar fact patterns occur. The Case Interpretations are based on different Standards of Practice and are used for guidelines, not as precedents. The Structure of the Code of Ethics Articles: Broad statements of ethical principles. Standards of Practice: Support, interpret, and amplify the Articles under which they are stated.

History of the Code - Continued To regulate all of this, NAR revolutionized the industry by piecing together a constitution of sorts, called The Rules of Conduct, initially adopted in 1913. Development of the NAR took place nine years before the first state regulations on real estate licensing or standards of conduct ever passed. The Rules of Conduct were renamed the Code of Ethics and made a mandatory condition of membership in 1924. In the end, the National Association of Real Estate Exchanges solidified real estate brokerage as a respectable profession. With the regulated set of behaviors for members of the National Association of Real Estate Exchanges, their consumers no longer feared the industry. No longer should the "buyer beware," but instead, the "buyer [could] be safe," with the help of a qualified, licensed broker, working for them, and on their behalf. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

Lesson 1: Broker Cooperation and Compensation - Continued Standard of Practice 3-6 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 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. Note that this Standard was amended in 2011 to include new language that's more encompassing and requires you to disclose a relationship, even if it is not a formal representational situation. Standard of Practice 3-8 You can't misrepresent the availability of access to show or inspect a listed 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.

Lesson 1: Broker Cooperation and Compensation - Continued Standard of Practice 3-9 Standard of Practice 3-9 ensures that you follow the instructions and wishes given to you by your client. You may not provide access to a property on any other terms than those expressed by the owner or the listing broker. Since the owner still owns the property, you must follow the owner's instructions regarding access to the property. Many properties (short sales, foreclosures) 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 This Standard 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.

heck for Understanding Question: The NAR Code of Ethics is based on which of the following? Congratulations! That's the correct answer! A. Buyer Beware B. The Golden Rule C. Federal Law D. State Law

Lesson 3: Structure of the Code There are four sections in the NAR Code of Ethics. The first of these sections is called the Preamble. Preamble The Preamble 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®

Lesson 3: Structure of the Code There are four sections in the NAR Code of Ethics. The first of these sections is called the Preamble. Preamble The Preamble 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®

Lesson 3: Structure of the Code - Continued The COE begins with the Preamble, followed with Articles that are organized into three sections: Duties to Clients and Customers Duties to the Public Duties to REALTORS® These sections help consumers and REALTORS® find and understand the information included in the Code.

Material and Latent Facts about Property Condition - Continued As a real estate professional, your understanding of material adverse facts and latent defects affects your ability to represent your client well. Once again, take care not to advise your client outside the areas of your expertise. You may need to assist your client in determining the difference between material adverse facts and latent defects and help them understand what the impact of both types of facts will have on the purchase/sale of the property. Make sure any information you convey to your client comes from a reliable source, one that specifically applies to the problem in question. In many states, you receive protection if the information obtained comes from a person or source licensed in that field or in a position of authority to give you that information. For example, you hold no liability if an employee of the state department of transportation provides you with information concerning the widening of the road running in front of the subject property, and you pass that information on to your client. In the case that this information proves false, and the client relied upon the faulty information resulting in injury, most states would give some protection to the licensee.

Material and Latent Facts about Property Condition - Continued 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 on the people who will reside in it. If you represent the seller, California requires that you advise the client of their responsibilities to disclose material adverse facts. Perhaps the best way to think about a material fact is to think of its opposite: immaterial. 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. 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. NAR Code of Ethics Standard of Practice 2-1

Lesson 1: Introduction to the Code In a world where the housing market always seems to be in flux, a clear and concise set of standards for real estate professionals provides a key component that adds confidence and stability in an already unsure marketplace. The National Association of REALTORS® relies on its Code of Ethics to ensure that all REALTORS® are conducting business in an honest manner and with the highest degree of integrity. Based on the "Golden Rule" (Do unto others, as you would have others do unto you), the Code of Ethics spells out clearly the fundamental principles of honest real estate practice. The code intends to clearly outline the behaviors and actions that are expected of REALTORS® and protects the consumer. As you internalize the "Golden Rule" in your professional duties, you will benefit in many ways. By maintaining the best interests of your clients, your reputation will remain spotless and hopefully clients will recommend their friends and family to you. Above all, incorporating the "Golden Rule" into your professional life is the right thing to do.

Over time, as the industry evolves and changes, the National Association of REALTORS® keeps the Code of Ethics under constant scrutiny and care. The Code is a living document that constantly changes to keep up with the changing industry. Over the years, NAR has amended the Code to keep it as current and up to date as possible. In today's industry, the National Association of REALTORS® holds fast to the Code and considers it: A Practical Guide for Operation. A Standard of Performance for all REALTORS®. A Criterion of Excellence. The "Golden Thread" that keeps the REALTOR® family together istory of the Code In 1908, the face of the real estate industry changed. 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. During that time, buyers and sellers had no fair representation. Land speculation and consumer exploitation commonly occurred. In essence, buyers had to fend for themselves in an industry where "Buyer beware, public be damned" was the only piece of advice that one would receive.

Your score: 75% Bernadette, Congratulations! You successfully passed your quiz. Click below to return to the Table of Contents and continue your course. 1. How many articles are found in the Code of Ethics? A. 12 B. 20 C. 17 Congratulations, this is the correct answer! D. 36 2. The Code of Ethics is considered to be all of the following EXCEPT: A. a criterion for excellence. B. a practical guide. C. unchangeable. This is the correct answer D. a standard of performance. This was your answer, which is incorrect. Feedback: The Code of Ethics is all of these except unchangeable; it is looked at as a living document that may be modified as the need arises. 3. Which of the following is not a section of the Code of Ethics? A. Duties to other REALTORS? B. Duties to Related Businesses Congratulations, this is the correct answer! C. Duties to Clients and Customers D. Duties to the Public 4. The Golden Rule states that _______________. A. those who obey the law do better in business B. you should treat others as you wish to be treated Congratulations, this is the correct answer! C. "He who has the gold rules." D. "Wishing doesn`t make it so."

The Code of Ethics is considered to be all of the following EXCEPT: C. unchangeable. This is the correct

Sam wants to sell his home. Krista approaches Sam and asks him if he is working with another agent. Sam says he had an agreement with ABC Realty, but it has expired. Krista checks and confirms that the agreement is expired. Which of the following it true? A. Krista cannot enter into a listing agreement, since there was a prior agreement on the property. B. Krista can enter into a listing agreement, since the prior agreement has expired. Congratulations, this is the correct answer! C. Krista must receive consent from the old listing agent in order to sign a new agreement with the client. D. Krista should be wary wondering why the client would want to sign with a new agent. 2. You meet a prospective client for the first time. Which of the following questions would be good to ask in order to meet your ethical obligations regarding representation? A. Is your house currently on the market? B. Do you have any current offers on your property? C. Are you currently working with another real estate agent or broker, and have you signed a representation agreement? Congratulations, this is the correct answer! D. Do you want to list your house with me? 3. Who may NOT receive commissions from a real estate transaction? A. Licensed real estate brokers B. Licensed selling agents C. Unlicensed assistants Congratulations, this is the correct answer! D. Licensed listing agents 4. Michele is a broker. In speaking with her neighbor, Matt, whose house is listed, Michele learns that Matt has an exclusive listing with another agent. Because they already know one another, Michele wants to bring offers directly to Sam. Which of the following is true regarding this statement? A. Michele must bring any offers for Sam to his listing agent. She is not allowed to deal directly with someone else`s client. Congratulations, this is the correct answer! B. Michele should advise her neighbor as to how to legally break his exclusive listing agreement. C. Michele can help Sam, and Sam may claim to have sold the property himself. Michele will receive no compensation. D. If Michele helps Sam sell the property directly, then Sam should pay Michele directly. Retake Exam Continue Course

Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 nextback Unit 5: Quiz Results Your score: 83% Bernadette, Congratulations! You successfully passed your quiz. Click below to return to the Table of Contents and continue your course. 1. Which of the following is true regarding mediation? A. Mediation allows a judge to determine necessary awards, but without the costs of a formal court. B. Both parties to a mediation hearing must agree to mediate. Congratulations, this is the correct answer! C. Mediators are able to give legal counsel to help you ensure that your interests are protected. D. Mediators are mandated to have legal expertise in the area of your conflict. 2. Interpretation and changes to the Code of Ethics take place: A. at local levels. B. at state levels. C. on a case-by-case basis. D. only at the national level. Congratulations, this is the correct answer! 3. The _______________ of the local associations provide additional support in enforcement of the Code of Ethics. A. Grievance Committees Congratulations, this is the correct answer! B. Standard Enforcement Committees C. Arbitration Committees D. Mediation Committees 4. A disciplinary action by a Professional Standards Hearing Panel might include all of the following EXCEPT: A. a fine. B. a reprimand. This was your answer, which is incorrect. C. a license suspension. This is the correct answer D. a membership revocation. Feedback: If an agent is found to be in violation of the Code of Ethics, the results of a Professional Standards hearing will be sent to the Board of Directors of the association. They will make the final determination and implement the sanction(s). The sanction(s) might include a combination of any of these disciplinary actions except license suspension. 5. The ______________ provide(s) the primary enforcement of the Code of Ethics through hearings for both professional standards and arbitration. A. state associations B. local associations Congratulations, this is the correct answer! C. Division of Real Estate D. Federal Government 6. You may be subject to disciplinary action if you _______________. A. fail to provide copies of any document to the person who signed the document, within a real estate transaction Congratulations, this is the correct answer! B. fail to inspect the house which your client intends to sell C. fail to express racially discriminatory views of your client D. fail to accept additional commissions or rebates for referring your client to another company for services Retake Exam Continue Course

Preamble The Preamble states the overall purpose of the NAR Code of Ethics. The Preamble, which begins with the words "Under all is the land," allows all who read it to know what the public, customers, clients, and other REALTORS® should expect from REALTORS®. The Preamble discusses the broader perspectives of how widespread property ownership is good for the country, stating: 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. The Preamble also summarizes the philosophies and goals that drive the Code of Ethics. According to NAR, the aspirational goals include: Becoming and staying informed of federal, state, and local laws, as well as of industry policies and procedures Staying informed on current market conditions Maintaining and improving the standards of the profession Sharing the responsibility for the integrity and honor of the profession Identifying and eliminating practices that damage the public or might discredit or bring dishonor to the profession Properly handling requests for opinions and unsolicited criticism Actively participating in the enforcement of laws, regulations, and the Code of Ethics Seeking and honoring agreements related to the exclusive representation of clients Sharing knowledge and experience with others Refraining from taking an unfair advantage over competitors noteNOTE: The Preamble may not be used as the basis for disciplining REALTORS®.

reamble - Continued The Preamble also supports the notion of fairness. According to the Code of Ethics Preamble, REALTORS® are encouraged to do unto others what they want done unto them, stating: REALTORS® can take no safer guide than that which has been handed down through the centuries, embodied in the Golden Rule. It's important to note though, that while the Code itself outlines principles and standards that encourage fair and honest practices, it does not expressly mandate "fairness," because the concept of what is fair is, itself, open to so much subjectivity. That said, the Code's Preamble states: The term "REALTOR®" has come to connote competency, fairness, and high integrity resulting from adherence to a lofty ideal of moral conduct in business relations. No inducement of profit and no instruction from clients ever can justify departure from this idea. To further encourage fairness and honesty, the preamble specifically states that REALTORS® who have direct personal knowledge of conduct that may violate the Code should bring the matter to the attention of the Board.

Articles 6 and 7 and Licensee Compensation Lesson 1: Compensation from More than One Source Compensation is negotiable and is based on the brokerage agreement that is signed with the client. Compensation can come in the form of commissions from the sale of properties or from brokerage fees negotiated with a buyer/client. Common business practices include this compensation coming from a percentage of the sales price of the property, a flat fee, or an hourly rate. Whatever the form, the amount of compensation must be clearly spelled out in the brokerage agreements. You must ensure that everyone agrees on and understands the compensation as the formal brokerage agreement is developed.

rom which of the following may you accept compensation? A. Any vendor for whom you refer a client B. Any vendor for whom you refer a client as long as your client consents C. Any vendor for whom you refer a client, as long as your client and employing broker consent and all funds move through the employing broker D. You may not accept any compensation for a referral as this is considered an illegal kickback. Congratulations, this is the correct answer! 2. Compensation can come in the form of: A. brokerage fees negotiated with a buyer/client. Congratulations, this is the correct answer! B. referral fees from an appraiser. C. referral fees from a title company. D. any fees from another party without disclosure. 3. Conversion, in real estate, means _______________. A. only accepting agents of the broker`s same religious faith. B. using your skills to convert renters to buyers. C. using trust funds for the general management expenses of the firm. Congratulations, this is the correct answer! D. flipping properties. 4. John of ABC Realty wanted to procure as many buyers/clients as soon as possible. He routinely told them he could guarantee they would always save at least 10 percent on the price of a home purchased through him. Which of the following statements is true? A. This practice is an innovative business practice and a good way to find buyers/clients. B. This practice is not allowed as it is misleading to buyers. No one can guarantee savings by using a specific agent`s services. This is the correct answer C. This practice would be fine as long as the buyer/client signed a waiver. D. This practice is allowed if it is approved by John`s broker. This was your answer, which is incorrect. Feedback: SOP 1-4 states that REALTORS? must not mislead buyers or tenants "as to savings or other benefits that might be realized through use of the REALTOR?`s services." 5. As a real estate professional, you must apply the _______________ to every real estate transaction, including those in which you play a principal role. A. Pledge of Allegiance B. Code of Directions C. Ethical Considerations D. Code of Ethics Congratulations, this is the correct answer! 6. Earnest money deposits __________ required to have a valid contract. A. are B. are not always Congratulations, this is the correct answer! C. are always D. are legally 7. In the situation that your client has fully accepted an offer or lease, which of the following is true? A. Once an offer or lease is fully accepted, no more offers may be presented or considered by the seller/landlord unless the new offer represents a substantial advantage for the seller/landlord. B. Once an offer or lease is fully accepted, no more offers may be presented or considered by the seller/landlord unless the seller/landlord receives an offer for full price when the original offer accepted represents an amount less than the full price. C. Once an offer or lease is fully accepted, no more offers may be presented or considered by the seller/landlord unless the seller/landlord determines not to sell the property at that time, but then re-lists the property a short time later. D. All offers must be presented by the REALTOR? unless the seller/landlord client has given written instruction to the contrary to REALTOR?. Congratulations, this is the correct answer! 8. Misrepresentation may be excusable _______________. A. if it is in the best interests of the client B. if the sponsoring broker authorizes the misrepresentation C. under no circumstances Congratulations, this is the correct answer! D. under any circumstances 9. Which of the following would be an example of conversion when handling client funds? A. Using funds from a client escrow account to buy doughnuts for the office This is the correct answer B. Depositing client funds into the general business account C. Neglecting to keep records on a client escrow account D. Mixing funds This was your answer, which is incorrect. Feedback: Conversion is the use of client funds for purposes outside of the client transaction (personal or business). 10. When does a REALTOR? have no obligation to present offers to his/her client? A. A REALTOR? has no obligation to present offers to the client if the client has authorized him or her to reject certain offers and the REALTOR? has made sure that all the appropriate paperwork to fulfill such authorization has been filed and annotated. However, the REALTOR? would be wise to make the client aware of all offers, regardless of the instruction. This is the correct answer B. A REALTOR? has no obligation to present offers if he or she knows that the client will not accept the offer anyway. C. The REALTOR? has an obligation to present all offers to his or her client. This was your answer, which is incorrect. D. The REALTOR? may rely on the proposed buyer`s broker to present offers to his or her clients. Feedback: SOP 1-6 states that REALTORS? "shall submit offers and counteroffers objectively?" In the case that the client has authorized an agent to reject certain offers the agent must take care to file all appropriate paperwork with the necessary annotations. 11. You must cooperate with other brokers _______________. A. when it is in the best interests of your client This is the correct answer B. upon the request of a cooperating broker C. upon the request of your employing broker D. upon request of any party to a transaction This was your answer, which is incorrect. Feedback: Article 3 requires cooperation only if it is in the best interest of the client. 12. When a buyer extends an offer to purchase a property, the buyer may make a good faith deposit, called a(n) _______________, in order to show that he is serious about the purchase and that his offer is bona fide. A. good faith estimate B. earnest money deposit Congratulations, this is the correct answer! C. closing fee D. actual estimate 13. An appraiser offers you $50 for every client you steer his way. Can you accept this finder`s fee? A. You may accept this finder`s fee if the client consents. B. You may accept this finder`s fee if it is paid first to your employing broker. C. You may not accept this finder`s fee. Congratulations, this is the correct answer! D. You may accept this finder`s fee directly. 14. When an agent has presented two offers at the same price, the agent should advise the seller to: A. accept the offer with the earliest closing date. B. defer to the agent`s knowledge of the parties. C. consider all aspects of the offer, not simply the price. Congratulations, this is the correct answer! D. accept the offer that was made first. 15. Jennie, a broker, is in need of some quick cash for a trip she is planning. She decides to use some extra funds that have been entrusted to her brokerage to pay for her plane tickets; she will put the money back in the account within a few days. What is this called? A. Conversion Congratulations, this is the correct answer! B. Smart C. Real estate borrowing D. Accounting 16. If the broker does not have an escrow account, earnest money may be deposited in the company operating account. Which of the following is true regarding this statement? A. This is true if the money is held there for less than 72 hours, during which time the broker should set up an escrow account. B. You may deposit only a portion of the escrow payment into the company operating account, in order to cover legitimate business expenses incurred on behalf of this client. C. You must take care to never comingle money. This is the correct answer D. You should never deposit the check into any account, but simply hold the check for the client. This was your answer, which is incorrect. Feedback: Article 8 instructs REALTORS? to keep their own monies separate from that of their clients, in a special account such as an escrow or trust account. State laws and real estate regulations will contain specific instructions for the maintenance of such accounts.

Structure of the Code - Continued Standards of Practice The 17 Articles of the Code establish your fundamental ethical duties. To support these articles and provide more explanation and more narrowly focused directives, more than 70 Standards of Practice have been added to the Code. The Standards of Practice more specifically address the concerns of the modern real estate industry by further clarifying the articles in the NAR Code of Ethics. Note You cannot be found guilty of violating a Standard of Practice alone; rather, you can only be found in violation of the Article upon which a Standard of Practice is based. Note, though, that the Standards of Practice can be used during an ethics hearing to further support an allegation of your violation of an Article. Consider this example. Let's say REALTOR® Paula faced charges of violating the NAR Code of Ethics. The Article she supposedly violated only posed a general description of expectations, and Paula felt that the room for interpretation would absolve her of the charge. However, although the charges only named the Article, Standards of Practice were thoroughly discussed in Executive Session by the Hearing Panel. One of the Standards of Practice almost mirrored Paula's questionable actions. Based on the fact that written Standards of Practice advised against Paula's actions, Paula was found guilty of violating the Article. Note In the state of California, the Bureau of Real Estate (BRE) regulates licensing and disciplines licensees regarding ethics violations.

tructure of the Code - Continued Case Interpretations At times, the Articles and Standards of Practice can be difficult to understand. REALTORS® Case Interpretations are published for reference to be used during Grievance Committees and in Professional Standards Hearings as examples when similar fact patterns occur. The Case Interpretations refer to various Standards of Practice and provide guidelines, not precedents. You cannot be found guilty of violating a Case Interpretation, but can only be found in violation of the Article upon which the Case Interpretation is based. Case Interpretations can be used during an ethics hearing to further the understanding of the panel considering the complaint against you.

Article 1 and Duties to Clients Lesson 1: Duties to the Client: Sellers and Landlords This article is cited in more complaints than any other article. NAR Code of Ethics, Article 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. Unit Quizzes and the minimum required study time must be met to unlock Final Exam.

uties to the Client: Seller - Continued Standard of Practice 1-1 If you act as a principal to any transaction, you must understand that all aspects of the Code of Ethics still apply to you and your transaction. Examples of when you may act as a principal include when you sell your own home or when you purchase a property for yourself. Some agents may feel tempted to disregard the Code of Ethics in such cases. However, whether you represent yourself as an agent or not, you must live up to ethical expectations outlined by the Code. Standard of Practice 1-2 "The duties imposed by the Code of Ethics encompass all real estate related activities and transactions whether conducted in person, electronically, or through any other means" (Amended 1/07). This is the first of the many amendments and additions to the Code that reference doing business on the Internet. Later in this Standard, definitions of the following are found: Client: The person(s) or entity(ies) with whom a 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: A purchaser, seller, tenant, or landlord who is not subject to a representation relationship with the REALTOR® or REALTOR®'s firm 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 The Code consistently refers to REALTORS® acting as an "agent or in a legally recognized non-agency capacity," as some states do not recognize agency representation. You should apply the Code of Ethics to any and all real estate transactions and activities you perform. Anything you do relating to real estate must also adhere to the Code of Ethics. Standard of Practice 1-3 Competition and a desire to excel as an agent may tempt you to mislead a potential seller as to the market value of their property in an effort to obtain a listing agreement. Such behavior compromises the total and complete honesty required in your work. Never deceive a potential seller regarding the market value of the seller's property.