NAR Real Estate Law & Ethics 3 ā Questions and Answers
Question 1: The Real Estate Settlement Procedures Act (RESPA) primarily governs:
- State licensing requirements for real estate agents
- Settlement costs and procedures for federally related mortgage loans (Correct answer)
- Zoning regulations for residential properties
- Environmental disclosures required at closing
Correct answer: Settlement costs and procedures for federally related mortgage loans
RESPA governs settlement costs, disclosures, and prohibited practices for federally related mortgage loan transactions.
Question 2: Under the Equal Credit Opportunity Act (ECOA), a lender may NOT deny credit based on:
- The borrower's debt-to-income ratio
- The borrower's marital status or receipt of public assistance (Correct answer)
- The borrower's credit score below a set threshold
- Insufficient collateral value
Correct answer: The borrower's marital status or receipt of public assistance
ECOA prohibits discrimination in lending based on marital status, receipt of public assistance, and other protected characteristics.
Question 3: A dual agency arrangement occurs when:
- Two separate agents from different firms represent buyer and seller
- One agent or brokerage represents both buyer and seller in the same transaction (Correct answer)
- A transaction involves two listing agreements simultaneously
- Both parties hire attorneys to negotiate on their behalf
Correct answer: One agent or brokerage represents both buyer and seller in the same transaction
Dual agency exists when a single agent or brokerage represents both the buyer and seller in the same transaction.
Question 4: When a contract contains an 'AS IS' clause, the seller:
- Has no obligation to make any disclosures about the property
- Is still required to disclose known material defects (Correct answer)
- Is released from all liability after closing
- Cannot accept offers contingent on inspections
Correct answer: Is still required to disclose known material defects
An 'AS IS' clause does not eliminate a seller's legal duty to disclose known material defects; it only means the seller won't make repairs.
Question 5: Article 17 of the NAR Code of Ethics requires REALTORSĀ® to:
- Submit all disputes with other REALTORSĀ® to arbitration rather than litigation (Correct answer)
- File complaints against unlicensed practitioners immediately
- Report all contract disputes to the state licensing board
- Mediate all client disputes within 30 days
Correct answer: Submit all disputes with other REALTORSĀ® to arbitration rather than litigation
Article 17 obligates REALTORSĀ® to arbitrate contractual and specific non-contractual disputes with other REALTORSĀ® rather than pursuing litigation.
Question 6: The doctrine of 'caveat emptor' in real estate means:
- The seller must disclose all known defects
- The buyer purchases property at their own risk and should inspect it (Correct answer)
- The agent is liable for undisclosed property conditions
- Buyers have a right to rescind after closing
Correct answer: The buyer purchases property at their own risk and should inspect it
Caveat emptor ('let the buyer beware') places the burden on the buyer to investigate property condition, though modern disclosure laws have significantly limited this doctrine.
Question 7: A REALTORĀ® who makes a false or misleading statement in an advertisement violates which Article of the Code of Ethics?
- Article 1
- Article 12 (Correct answer)
- Article 6
- Article 16
Correct answer: Article 12
Article 12 requires REALTORSĀ® to be honest and truthful in all advertising and marketing communications.
NAR Real Estate Law & Ethics 3
The Real Estate Settlement Procedures Act (RESPA) primarily governs: