Real Estate Real Estate Law & Regulations 1 — Questions and Answers
Question 1: Blockbusting is an illegal practice in which real estate agents:
- Purchase foreclosed properties in bulk
- Induce homeowners to sell by suggesting minority groups are moving in, causing property values to decline (Correct answer)
- Block new developments from being built
- Refuse to show properties in certain areas
Correct answer: Induce homeowners to sell by suggesting minority groups are moving in, causing property values to decline
Blockbusting (panic peddling) involves inducing white homeowners to sell cheaply by implying that minority residents moving in will lower property values — a Fair Housing Act violation.
Question 2: Steering in real estate refers to an agent's illegal practice of:
- Directing buyers toward or away from neighborhoods based on protected class characteristics (Correct answer)
- Recommending a specific lender to a buyer
- Negotiating the price on behalf of clients
- Driving clients to property showings
Correct answer: Directing buyers toward or away from neighborhoods based on protected class characteristics
Steering is the illegal act of channeling prospective buyers or renters toward or away from certain neighborhoods based on their race, religion, national origin, or other protected characteristics.
Question 3: Redlining is an illegal discriminatory practice in which lenders:
- Charge higher rates to investors
- Deny or limit loans in minority neighborhoods based on race or national origin (Correct answer)
- Require higher down payments for new construction
- Refuse to lend on properties below a minimum value
Correct answer: Deny or limit loans in minority neighborhoods based on race or national origin
Redlining is the discriminatory practice of refusing to extend credit or insurance to residents in specific geographic areas based on racial or ethnic composition.
Question 4: The primary role of a title company in a real estate transaction is to:
- Appraise the property's market value
- Search title records, issue title insurance, and facilitate closing (Correct answer)
- Provide mortgage financing
- Manage the property after sale
Correct answer: Search title records, issue title insurance, and facilitate closing
A title company searches public records to verify clear title, identifies any defects or encumbrances, and issues title insurance to protect buyers and lenders.
Question 5: Owner's title insurance protects the:
- Lender against title defects
- Buyer's equity against title claims arising from pre-existing defects (Correct answer)
- Seller against post-closing claims
- Title company against errors
Correct answer: Buyer's equity against title claims arising from pre-existing defects
Owner's title insurance protects the buyer's equity and ownership interest against title defects, liens, or encumbrances that existed prior to the purchase.
Question 6: Which federal law prohibits discrimination in residential real estate transactions based on race, color, national origin, religion, sex, familial status, and disability?
- Equal Credit Opportunity Act
- Americans with Disabilities Act
- Fair Housing Act of 1968 (Correct answer)
- Community Reinvestment Act
Correct answer: Fair Housing Act of 1968
The Fair Housing Act of 1968, as amended in 1988, is the primary federal statute prohibiting discrimination in the sale, rental, or financing of housing.
Real Estate Real Estate Law & Regulations 1
Blockbusting is an illegal practice in which real estate agents: