CFA Legal Compliance & Documentation 2 — Questions and Answers
Question 1: A field agent discovers that a property owner has constructed an addition without a permit. What is the agent's primary obligation?
- Ignore it since the inspection is complete
- Document the unpermitted structure and note it in the report (Correct answer)
- Immediately notify local building authorities on behalf of the client
- Advise the property owner to demolish the addition
Correct answer: Document the unpermitted structure and note it in the report
Field agents must document unpermitted structures in their report as a material finding without taking enforcement action on behalf of any party.
Question 2: Which federal law governs the disclosure of lead-based paint in residential properties built before 1978?
- CERCLA
- RESPA
- Title X of the Housing and Community Development Act (Correct answer)
- The Fair Housing Act
Correct answer: Title X of the Housing and Community Development Act
Title X of the Housing and Community Development Act (1992) requires sellers and landlords to disclose known lead-based paint hazards in pre-1978 housing.
Question 3: When a field agent signs an inspection report, this signature legally represents:
- A guarantee that the property is defect-free
- Certification that the report accurately reflects the agent's professional observations (Correct answer)
- An endorsement of the property's market value
- Personal liability for all future property defects
Correct answer: Certification that the report accurately reflects the agent's professional observations
The agent's signature certifies that the report reflects their honest, professional observations made during the inspection.
Question 4: A client asks a field agent to omit a minor defect from the report to avoid delaying closing. The agent should:
- Omit it if the defect is cosmetic only
- Include it regardless of the client's request (Correct answer)
- Omit it if the client signs a waiver
- Consult an attorney before deciding
Correct answer: Include it regardless of the client's request
Field agents must include all observed defects in the report regardless of client pressure, as omission could constitute fraud.
Question 5: What does E&O insurance protect a field agent against?
- Criminal charges from enforcement agencies
- Claims arising from professional mistakes or negligent omissions in the agent's work (Correct answer)
- Property damage caused during the inspection
- Bodily injury to third parties at the inspection site
Correct answer: Claims arising from professional mistakes or negligent omissions in the agent's work
Errors and Omissions (E&O) insurance covers the agent for professional liability arising from mistakes or omissions in their professional services.
Question 6: Under RESPA, which of the following is prohibited in a real estate transaction?
- Charging for a written inspection report
- Accepting a kickback or referral fee for settlement services (Correct answer)
- Requiring buyers to obtain homeowner's insurance
- Conducting inspections before loan approval
Correct answer: Accepting a kickback or referral fee for settlement services
RESPA Section 8 prohibits kickbacks and unearned fees in connection with federally related mortgage loan settlement services.
Question 7: A field agent observes suspected mold growth. Without proper mold certification, the agent should:
- Collect samples and send them to a lab
- Note the visible condition and recommend evaluation by a qualified mold specialist (Correct answer)
- Declare the property uninhabitable
- Apply bleach solution and re-inspect in 48 hours
Correct answer: Note the visible condition and recommend evaluation by a qualified mold specialist
Agents without mold certification must limit reporting to observable conditions and refer further assessment to a certified specialist.
CFA Legal Compliance & Documentation 2
A field agent discovers that a property owner has constructed an addition without a permit.
What is the agent's primary obligation?