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Definition
| is the chance of losing something. its two dimensions are the probability of occurrence and the extent of exposure to monetary or non-monetary consequences |
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Term
| Four well-established strategies for managing risk are: |
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Definition
avoidance (elimination)
reduction (mitigation, sharing)
transference (outsourcing, insuring)
retention (acceptance and budgeting) |
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Term
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Definition
Transference means passing the risk to another party, by contract or other means. An insurance policy is the common example, but sometimes the wording of a sales or personal services contract can transfer risk without resorting to insurance.
In the real estate business, transference is typically and most successfully accomplished by means of an errors and omissions (E&O) insurance policy, either on the individuals in a firm or on the firm itself. State law may require such insurance. |
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Term
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| Retention of risk means entering into an activity in spite of known risks and taking full responsibility for the consequences. This is, in effect, self-insurance, the only strategy left when risk cannot be reduced or transferred and one has decided not to avoid it because of the desirability of the potential benefits. |
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Term
| Required disclosures usually include: |
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agency relationships
· property condition
· duties and obligations
· personal interest in the transaction
· personal interest in referrals |
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Term
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Definition
State laws require licensees to document transactions. Firms are required to keep written records of all real estate transactions for a number of years (usually three to five) after closing or termination. Required records typically include:
· listing agreements
· offers
· contracts
· closing statements
· agency agreements
· disclosure documents
· correspondence and other communication records
· notes and any other relevant information |
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Term
| there is the requirement to maintain written accounting of escrow funds. For each transaction, property, and principal, escrow records will include: |
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Definition
depositor
· date of deposit
· date of withdrawal
· payee
· other information deemed pertinent by the real estate commission |
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Term
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Definition
| General liability insurance provides coverage for risks incurred by a property owner when the public or a licensee enters the owned property (public liability). The insurer pays the covered claim and legal fees, costs, and expenses, including medical expenses, resulting from owner negligence or other causes. This type of insurance does not cover professional liability, for which an Errors & Omissions policy is necessary. |
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Term
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Definition
Professional liability is of two general types:
Unprofessional conduct – a claim that one has failed to carry out fiduciary duties and provide an acceptable standard of care
Breach of contract – a claim that one has failed to perform services under the terms of a contract in a timely manner |
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Term
| A standard E&O policy provides coverage for |
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Definition
“damages resulting from any negligent act, error or omission arising out of Professional Services.” A standard policy does NOT cover:
violations of law
fraudulent, dishonest, criminal or malicious acts
mishandling of escrow moneys, earnest money deposits, or security deposits
antitrust violations
sexual harassment
Fair Housing violations
licensee-owned properties
environmental violations
failure to detect or disclose environmental conditions, including mold
acts committed prior to licensure or after termination of active status
activities as an appraiser if licensing other than a real estate license is required
E&O insurance, in short, covers “mistakes” but not crimes. |
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Term
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Definition
| coverage against losses resulting from criminal or negligent acts of an employee |
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Term
| When opening a new brokerage, what should the managing broker write to minimize risk? |
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Definition
| A policy manual and a procedures manual |
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Term
| What is E&O insurance? What does it cover? |
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Definition
| Errors and Omissions insurance. It covers damages resulting from any negligent act, error or omission arising out of professional services. E&O insurance does not cover crimes or license law violations. |
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Term
| The risks of agency will occur in one of two areas: |
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Definition
the requirement to inform and disclose
the requirement to carry out an agency duty. |
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Term
| Disclosure requirements. A licensee may be acting in a transaction as facilitator, agent, subagent, designated agent, single agent, dual agent, non-agent or in some capacity. Regardless of status, the licensee must follow state disclosure requirements. These are, typically, to: |
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Definition
disclose status verbally to other licensees on initial contact
disclose status verbally to buyer and seller before providing real estate services
confirm the disclosure in writing before signing a listing agreement or presenting a purchase offer (to an unrepresented seller) or before preparing a purchase offer (to an unrepresented buyer)
get a signed receipt indicating the written disclosure has been made |
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Term
| Carrying out the duties of agency also require disclosures of: |
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Definition
personal interest the agent has in a transaction (such as owner or buyer)
personal benefit the agent will derive from a service referral
required property and market information
information about customers a client is entitled to have |
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Term
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Definition
| coverage for specific risks, such as theft, vandalism, burglary, illness and accident, machinery damage |
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Term
| consequential loss, use, and occupancy |
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Definition
| coverage for the business losses resulting from a disaster, such as loss of rent and other revenue, when the property cannot be used for business |
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Term
| Describe the duty of obedience. |
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Definition
| Obedience means to act on the principal’s requests regarding the transaction as long as they are legal. |
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Term
| What are the two areas of agency risks? |
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Definition
| The requirement to inform and disclose; the requirement to carry out an agency duty. |
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Term
| List some common agency conflicts of interest. |
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Definition
| Undisclosed dual agency, vendor referrals, broker-owned listings, licensees buying for their own account, the fact that the licensee is only paid if the transaction is completed, and property management subcontracting of services. |
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Term
| true or false:A licensee may be punished for using any real estate listing agreement form, sales contract form, or offer to purchase form that lacks a definite termination date. |
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Definition
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Term
| true or false: The parties should identify as included in or excluded from the transfer any ambiguous items. Unwritten agreements between the parties are a source of later dispute and trouble. |
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Definition
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Term
| true or false: The time period for completing contingencies such as inspections is specific and limited. Failure to meet or waive a condition may terminate the contract. A “time is of the essence” clause in the standard agreement makes the time period for contingencies critical. |
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Definition
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Term
| true or false: It is also illegal for real estate licensees who are not lawyers to give legal advice or interpret contract language. Licensees, however, may express opinions. For instance, if a licensee believes that a party has grasped the meaning of a contract, it is permissible to say something like, “Though I am not an attorney, in my opinion your understanding of this contract is correct.” It would be questionable to make a definitive statement like, “That’s correct.” |
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Definition
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Term
| Before entering into a listing agreement, a licensee should explain that it is necessary to comply with fair housing laws and obtain the potential client’s acknowledgment and agreement. The licensee should make it clear that the agent will |
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Definition
reject the use of terms indicating race, religion, creed, color, national origin, sex, handicap, age or familial status to describe prospective buyers.
terminate the listing if the seller uses race, religion, creed, color, national origin, sex, handicap, age, or familial status in the consideration of an offer.
inform the broker if the seller makes any attempt to discriminate illegally. |
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Term
| Federal law requires sellers of houses built before what year to make a lead-based paint disclosure? |
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Definition
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Term
| Why have net listings been outlawed in most states? |
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Definition
| Net listings are illegal because they violate the requirement that a valid listing agreement must specify a selling price and the agent’s compensation. Net listings generally do not benefit the seller. |
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Term
| Can real estate licensees create their own forms and contracts? |
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Definition
| No, unless the licensee is also an attorney. Licensees can fill in the blanks of contracts created by lawyers. |
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Term
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Definition
| makes illegal all contracts, agreements, and conspiracies among competitors that would unfairly restrict interstate trade by fixing prices, rigging bids, or other means. An unlawful monopoly is created when one company becomes the only supplier of a product or service by getting rid of competition via secret agreements with other companies. |
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Term
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Definition
| prohibits mergers or acquisitions that are likely to lessen competition and increase prices to consumers. The Act also prohibits certain other business practices that under certain circumstances may harm competition. Private parties injured by an antitrust violation may sue in federal court for three times their actual damages, plus court costs and attorneys' fees. |
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Term
| Federal antitrust laws are enforced in three main ways: |
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Definition
the Antitrust Division of the Department of Justice (DOJ) brings criminal and civil enforcement actions
the FTC brings civil enforcement actions
private parties bring lawsuits claiming damages |
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Term
| Agent Bert failed to present every written offer for a property as is required by Oklahoma. What will most likely happen to Bert? |
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Definition
| Bert’s license will most likely be revoked or suspended by the Oklahoma Real Estate Commission. |
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Term
| Intentional misrepresentation is better known as? |
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Definition
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Term
| true or false: Single-family and owner-occupied housing that is otherwise exempt from the Fair Housing Act is subject to this prohibition against discriminatory advertising. |
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Definition
| true; indicating a limitation or preference based on race, color, national origin, religion, sex, familial status, or handicap in any advertisement or communication. |
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Term
| The Real Estate Settlement and Procedures Act (RESPA) |
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Definition
stipulates that the parties to certain purchase transactions must be given accurate information reflecting their closing costs. It also prohibits certain business practices that are not considered to be in the consumer’s best interest.
The licensee’s risks regarding RESPA primarily relate to
failing to ensure that the consumer is informed about his or her rights under the law
giving or receiving an illegal kickback |
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Term
| RESPA currently requires lenders to: |
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Definition
give a copy of the booklet, “Your home loan toolkit” to every person at the time of application for a loan.
provide a Loan Estimate of settlement costs at the time of loan application or within three business days of application.
use the Closing Disclosure form to detail all financial particulars of a transaction. The Closing Disclosure must be delivered to the borrower at least three days before closing. The actual time frame is based on the method of delivery. The settlement agent must also provide the seller with the Closing Disclosure, which may be done at consummation. |
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Term
| Commingling and conversion |
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Definition
| Mixing of personal or company funds with client funds is grounds for the revocation or suspension of a real estate license. Depositing client funds in a personal or business account, or using them for any purpose other than the client’s business, is also grounds for suspension or revocation of a license. It is important for the broker to remove commissions, fees or other income earned by the broker from a trust account within the period specified by law to avoid committing an act of commingling. |
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Term
| What does RESPA stand for and what does the law require? |
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Definition
| The Real Estate Settlement and Procedures Act states that a transaction’s parties must be given accurate closing cost information. |
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Term
| Is it legal for a home inspection company to pay agent Susan $100 for every client she refers to them? |
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Definition
| No, RESPA prohibits these sort of agreements. |
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Term
| Depositing trust account funds with business account funds is known as? |
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