NAR Real Estate Law & Ethics 2 — Questions and Answers
Question 1: Under the NAR Code of Ethics, Article 1, a REALTOR® representing a buyer must:
- Disclose all offers received to every cooperating broker
- Protect and promote the interests of their client while treating all parties honestly (Correct answer)
- Refuse to show properties listed by competing firms
- Require the buyer to sign an exclusive agreement before showing any property
Correct answer: Protect and promote the interests of their client while treating all parties honestly
Article 1 requires REALTORS® to protect and promote the interests of their client while treating all parties honestly.
Question 2: A property owner tells their listing agent not to show the home to buyers of a particular national origin. The agent should:
- Follow the seller's instructions since the property is theirs
- Withdraw from the listing if the seller won't remove the restriction (Correct answer)
- Show the property only to approved buyers as instructed
- Document the instruction but comply to avoid losing the listing
Correct answer: Withdraw from the listing if the seller won't remove the restriction
REALTORS® must not discriminate and must withdraw from any listing that requires violation of fair housing laws.
Question 3: Which document grants an agent the legal authority to represent a buyer in a transaction?
- A verbal agreement confirmed by email
- A buyer representation agreement signed by both parties (Correct answer)
- An MLS showing authorization form
- A pre-approval letter from a lender
Correct answer: A buyer representation agreement signed by both parties
A signed buyer representation agreement is the legally recognized document establishing agency authority for buyer representation.
Question 4: The ethical duty of 'confidentiality' under the NAR Code requires a REALTOR® to:
- Share client financial details with cooperating agents to facilitate a deal
- Keep client information confidential even after the agency relationship ends (Correct answer)
- Disclose all client motivations to get the best possible offer
- Reveal seller concessions to competing buyers
Correct answer: Keep client information confidential even after the agency relationship ends
Confidentiality survives the termination of the agency relationship and is a continuing duty under the Code of Ethics.
Question 5: Under RESPA, a real estate broker who owns a title company and refers clients to it must:
- Refuse all referrals to avoid conflicts of interest
- Disclose the affiliated business arrangement and provide an estimate of charges (Correct answer)
- Charge only what competitors charge so there is no advantage
- Only refer clients if the title company offers the lowest price
Correct answer: Disclose the affiliated business arrangement and provide an estimate of charges
RESPA requires disclosure of affiliated business arrangements (AfBA) and an estimate of charges before referral.
Question 6: A REALTOR® receives a gift card from a mortgage lender for every referral sent. This practice:
- Is acceptable if the gift card is under $50 in value
- Violates RESPA's prohibition on kickbacks and unearned fees (Correct answer)
- Is permitted if both parties consent in writing
- Is allowed only when disclosed to the client
Correct answer: Violates RESPA's prohibition on kickbacks and unearned fees
RESPA Section 8 prohibits kickbacks and referral fees between settlement service providers regardless of dollar amount.
Question 7: A seller's agent learns the seller recently had a major roof repair that is not visible. Under the duty of disclosure, the agent must:
- Keep it confidential as it is the seller's private financial matter
- Disclose it to prospective buyers as a material fact (Correct answer)
- Only disclose it if asked directly by a buyer
- Disclose only if the repair was valued over $10,000
Correct answer: Disclose it to prospective buyers as a material fact
Material facts that affect property value or desirability must be disclosed to prospective buyers regardless of whether asked.
NAR Real Estate Law & Ethics 2
Under the NAR Code of Ethics, Article 1, a REALTOR® representing a buyer must: