Real Estate Sales Exam Real Estate Sales Fair Housing and Ethics 1 — Questions and Answers
Question 1: A real estate agent tells a white couple that a neighborhood is 'changing' and suggests they look elsewhere to protect their investment. This practice is best described as:
- Blockbusting (Correct answer)
- Redlining
- Steering
- Commingling
Correct answer: Blockbusting
Blockbusting (also called panic peddling) occurs when an agent induces homeowners to sell by suggesting that the entry of a protected class into the neighborhood will cause property values to decline. It is prohibited under the Fair Housing Act.
Question 2: Under the Fair Housing Act, which of the following is NOT a protected class at the federal level?
- Religion
- Familial status
- Sexual orientation (Correct answer)
- National origin
Correct answer: Sexual orientation
The seven federally protected classes under the Fair Housing Act are race, color, national origin, religion, sex, disability, and familial status. Sexual orientation is not a federally protected class under the Fair Housing Act, though many states and localities have added it.
Question 3: A property manager refuses to rent to a family because they have two young children. Under fair housing law, this is most likely:
- Permissible if the building has fewer than four units
- A violation of the familial status protected class (Correct answer)
- Legal because landlords can set reasonable occupancy limits
- Permissible if the lease was signed before 1988
Correct answer: A violation of the familial status protected class
Familial status was added as a protected class under the Fair Housing Amendments Act of 1988. Refusing to rent to families with children under 18 constitutes illegal discrimination based on familial status, with limited exceptions for qualifying senior housing communities.
Question 4: Under the REALTOR Code of Ethics, an agent who represents a buyer has a duty to disclose to that buyer:
- The seller's motivation for selling
- Material facts about the property that could affect the buyer's decision (Correct answer)
- The seller's bottom-line acceptable price
- Competing offers on the property
Correct answer: Material facts about the property that could affect the buyer's decision
Article 2 of the REALTOR Code of Ethics requires agents to avoid exaggeration, misrepresentation, or concealment of pertinent facts. An agent must disclose material facts that could affect a buyer's decision, but is not obligated to disclose confidential information about the seller such as motivation or minimum acceptable price.
Question 5: A lender refuses to issue mortgage loans for properties located in a minority-majority neighborhood regardless of applicants' creditworthiness. This practice is known as:
- Steering
- Redlining (Correct answer)
- Blockbusting
- Puffing
Correct answer: Redlining
Redlining is the illegal practice of denying loans or insurance to people based on the racial or ethnic composition of a neighborhood rather than individual qualifications. It violates both the Fair Housing Act and the Equal Credit Opportunity Act.
Question 6: A REALTOR represents both the buyer and seller in the same transaction without disclosing this dual agency arrangement to either party. According to the Code of Ethics, this is:
- Acceptable if both parties are sophisticated investors
- A violation requiring disclosure to both parties prior to entering the agreement (Correct answer)
- Permissible as long as the agent treats both parties fairly
- Legal in all states because agents owe duties only to the party who pays them
Correct answer: A violation requiring disclosure to both parties prior to entering the agreement
Article 9 and Standard of Practice 1-5 of the REALTOR Code of Ethics require that dual or variable rate commission arrangements and any potential conflicts of interest be disclosed to all parties. Undisclosed dual agency is an ethical violation and may also violate state license law.
Real Estate Sales Exam Real Estate Sales Fair Housing and Ethics 1
A real estate agent tells a white couple that a neighborhood is 'changing' and suggests they look elsewhere to protect their investment.
This practice is best described as: