Real Estate Salesperson Licensing Exam Fair Housing, License Law, and Ethics Syllabus

What is the primary purpose of a state Real Estate Commission?

To protect the public by licensing, regulating, and disciplining real estate licensees and enforcing license law.

What is the difference between a real estate salesperson and a broker?

A salesperson must work under a sponsoring broker; a broker can operate independently, supervise salespersons, and hold escrow funds.

Name three core activities that require a real estate license when done for others for compensation.

Listing/selling/buying real estate, leasing or renting property, and negotiating real estate transactions (also auctioning and property management for others).

Name two parties typically exempt from needing a real estate license.

Property owners selling their own property and attorneys acting within their legal practice (also court-appointed trustees, executors, and employees managing their employer's property).

What is required of a licensee handling client funds (earnest money)?

They must deposit and hold the funds in a separate trust/escrow account and may never mix them with personal or business funds.

Define 'commingling' as a license law violation.

Mixing a client's trust/escrow funds with the broker's own personal or operating funds.

Define 'conversion' in real estate license law.

The illegal use of a client's trust funds for the licensee's own personal benefit (more serious than commingling).

What are the typical grounds for disciplinary action against a licensee?

Fraud, misrepresentation, commingling/conversion, dishonest dealing, criminal conviction, license law violations, and breach of fiduciary duty.

List common disciplinary sanctions a Real Estate Commission can impose.

License revocation, suspension, censure/reprimand, fines, probation, and required additional education.

What due process is a licensee entitled to before discipline is imposed?

Notice of the charges and an administrative hearing before the Commission, with the right to present evidence and appeal.

What is a property condition disclosure statement?

A seller-completed form disclosing known material defects in the property (e.g., roof, foundation, systems) to prospective buyers.

What is a 'material fact' that must be disclosed in a real estate transaction?

Any fact that could affect a reasonable buyer's decision to purchase or the price they would pay (e.g., structural defects, flooding, code violations).

What federal disclosure is required for homes built before 1978?

Lead-based paint disclosure under Title X, including the EPA pamphlet and a 10-day inspection opportunity for the buyer.

What is a 'stigmatized property' and how is it generally treated for disclosure?

A property psychologically impacted by events (death, crime, alleged haunting); many states do not require disclosure of these non-physical facts.

What is the difference between latent and patent defects?

A latent defect is hidden/not readily observable and must be disclosed; a patent defect is obvious and visible upon ordinary inspection.

Define 'misrepresentation' in real estate.

A false statement of a material fact that a party relies on to their detriment; it may be innocent, negligent, or fraudulent.

What is the difference between fraud and innocent misrepresentation?

Fraud involves intentional deception (knowing falsehood with intent to deceive); innocent misrepresentation is an unintentional false statement made without knowledge of its falsity.

What is 'puffing' and is it legally actionable?

Exaggerated opinion or sales talk (e.g., 'best view in town'); it is generally not actionable as long as it is opinion, not a false statement of fact.

Define 'fraudulent concealment' (deceit by silence).

Deliberately hiding or failing to disclose a known material defect to deceive a buyer; it is a form of fraud.

What is Errors and Omissions (E&O) insurance for real estate licensees?

Professional liability insurance covering claims of negligence, mistakes, or unintentional errors made in performing professional duties.

Does E&O insurance cover intentional fraud or criminal acts?

No. E&O covers unintentional errors and negligence; it excludes intentional misconduct, fraud, and criminal acts.

What is the purpose of a Code of Ethics for real estate professionals?

To set standards of professional conduct beyond legal minimums, protecting clients, customers, and the public and promoting fair dealing.

Under the REALTOR Code of Ethics, what is the duty of 'honesty' owed to all parties?

Article 1 duty to protect/promote the client's interests while treating all parties honestly and not misleading anyone.

What federal law governs antitrust compliance in real estate?

The Sherman Antitrust Act, which prohibits agreements that restrain trade such as price-fixing and group boycotts.

What is 'price-fixing' in real estate and why is it illegal?

Competing brokers agreeing to set commission rates or fees; it is a per se antitrust violation because commissions must be set independently and negotiable.

Define a 'group boycott' as an antitrust violation.

Two or more competitors conspiring to exclude or refuse to deal with another competitor or business, illegally restraining trade.

What is 'market allocation' (division) under antitrust law?

Competitors agreeing to divide territories, customers, or property types among themselves, which is an illegal restraint of trade.

What does the 'Do Not Call' Registry require of real estate agents?

Agents must not make telemarketing solicitation calls to numbers on the National Do Not Call Registry and must scrub their call lists regularly.

What consumer-protection law governs unsolicited fax and email marketing relevant to agents?

The CAN-SPAM Act (commercial email opt-out requirements) and the TCPA/Junk Fax rules restricting unsolicited fax advertisements.

What is a licensee's general data-privacy duty regarding client personal information?

To safeguard confidential and personal client information (financial, identity data), use it only for the transaction, and not disclose it without authorization.