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California Real Estate Chapter 16

Terms in this set (169)

California's Real Estate Law (also known as the license law) is contained in sections 10000 to 10580 of the Business and Professions Code.

The purpose of the law is to regulate the real estate profession and protect the public from incompetent, unethical, or dishonest real estate agents.

The Real Estate Law is administered by the Department of Real Estate (DRE), which is a division of the California Business, Transportation, and Housing Agency.

The law is enforced by the chief officer of the DRE, the Real Estate Commissioner.

The Real Estate Commissioner's job is to implement and enforce the provisions of the Real Estate Law in a way that will provide the maximum protection possible to members of the public who deal with real estate licensees.

The Commissioner is given many broad powers to accomplish this end.

The Commissioner has the power to adopt, amend, or repeal regulations necessary to enforce the Real Estate Law.

These regulations have the force and effect of law.

The Commissioner's regulations can be found in sections 2705 to 3109 of Title 10 in the California Code of Regulations.

The Commissioner also has the authority to:

-investigate non-licensees alleged to be performing activities for which a license is required;

-screen and qualify applicants for a license;

-investigate complaints against licensees; and

-regulate some aspects of the sale of subdivisions, franchises, and real property securities.

In addition, the Commissioner may:

-hold formal hearings to determine issues involving a licensee, a license applicant, or a subdivider and, after such a hearing, suspend, revoke, or deny a license or stop sales in a subdivision;

-bring actions for injunctions and claims for restitution on behalf of those injured by licensees who violate the Real Estate Law; and

-bring actions to stop trust fund violations

The Real Estate Commissioner is advised on legal matters by the state attorney general.

County district attorneys are responsible for prosecuting violations of the Real Estate Law that occur in their county.

The Real Estate Commissioner is appointed by the governor and serves at his or her pleasure.

To qualify for the position of Real Estate Commissioner, a person must have been a real estate broker actively engaged in business for five years in California, or must have related experience associated with real estate activity in California for five of the previous ten years.

The Commissioner and DRE employees are prohibited from engaging in professional real estate activities, and from having an interest in any real estate firm.
(California's real estate license law)
(License law)

The law that requires real estate agents to be licensed and that regulates their activities.

A California statute that governs the licensing and business practices of real estate agents.

Contained in sections 10000 to 10580 of the Business and Professions Code.

The purpose of the law is to regulate the real estate profession and protect the public from incompetent, unethical, or dishonest real estate agents.

The license law is made up of state statutes and administrative regulations issued by the Department of Real Estate.

-The fundamental purpose of the license law is to protect buyers and sellers in real estate transactions.

The license law is an exercise of the state's police power.

The license law regulates the professional activities of real estate agents.

It also establishes disciplinary procedures to penalize agents who engage in dishonest practices or who otherwise break the rules.

The first part of this lesson describes who administers the license law and discusses licensing requirements.

It covers the activities for which a real estate license is required, the different types of licenses, and license expiration and renewal.

The second part of this lesson discusses the regulation of business activities.

We'll discuss grounds and procedures for disciplinary action, as well as regulations concerning trust accounts, recordkeeping, and advertising.

Finally, in the last part of the lesson, you'll learn about antitrust laws.

Administration of License Law
Real Estate Licenses
-When Required
-Types
-Expiration & Renewal

Rules & Regulations
-Disciplinary Action
-Business Practices
-Antitrust Laws
The Commissioner grants or denies licenses, issues rules governing licenses, and enforces the license law.

The Real Estate Commissioner is appointed by the Governor.

The Commissioner may not engage in real estate activities or have any interest in a real estate firm.

To qualify to be Commissioner, a person must have been a real estate broker actively engaged in business for five years in California.

The Real Estate Commissioner's job is to implement and enforce the provisions of the Real Estate Law in a way that will provide the maximum protection possible to members of the public who deal with real estate licensees.

The Commissioner is given many broad powers to accomplish this end.

The Commissioner has the power to adopt, amend, or repeal regulations necessary to enforce the Real Estate Law.

These regulations have the force and effect of law.

The Commissioner's regulations can be found in sections 2705 to 3109 of Title 10 in the California Code of Regulations.

The Commissioner also has the authority to:

-grant and deny licenses,

-issue rules and regulations,

-enforce the license law,

-regulate some aspects of the sale of subdivisions and business opportunities,

-investigate non-licensees alleged to be performing real estate activities, and

-hold disciplinary hearings on license law violations

-investigate non-licensees alleged to be performing activities for which a license is required;

-screen and qualify applicants for a license;

-investigate complaints against licensees; and

-regulate some aspects of the sale of subdivisions, franchises, and real property securities.

In addition, the Commissioner may:

-hold formal hearings to determine issues involving a licensee, a license applicant, or a subdivider and, after such a hearing, suspend, revoke, or deny a license or stop sales in a subdivision;

-bring actions for injunctions and claims for restitution on behalf of those injured by licensees who violate the Real Estate Law; and

-bring actions to stop trust fund violations

The Real Estate Commissioner is advised on legal matters by the state attorney general.

County district attorneys are responsible for prosecuting violations of the Real Estate Law that occur in their county.

The Real Estate Commissioner is appointed by the governor and serves at his or her pleasure.

To qualify for the position of Real Estate Commissioner, a person must have been a real estate broker actively engaged in business for five years in California, or must have related experience associated with real estate activity in California for five of the previous ten years.

The Commissioner and DRE employees are prohibited from engaging in professional real estate activities, and from having an interest in any real estate firm.
Charging or collecting an advance fee to promote the sale or lease of real property or a business opportunity (by advertising or listing it, by obtaining financing, or in some other way).

Are also considered trust funds.

These are fees that a client may pay a broker in advance to defray anticipated costs, such as the advertising expenses associated with a listing, or as upfront compensation for services the broker will provide.

While funds collected upfront for appraisal fees or credit report fees are not considered advance fees, they still must be treated as trust funds.

Other types of funds in a broker's possession, such as general operating funds, earned real estate commissions, or rent from the broker's own real estate, aren't trust funds, because the broker isn't holding them on behalf of someone else.

-An advance fee is money that a real estate broker collects from a client in advance to cover expenses she expects to incur on the client's behalf, or as upfront compensation for services she has yet to provide.

Advance fees must be handled in compliance with the trust funds rules we've discussed so far.

They must not be commingled with the broker's own funds, and they must be deposited into the broker's trust account within three days after receipt.

Before collecting advance fees in connection with any services, however, a broker must submit all of the materials she's planning to use in advertising or promoting those services to the Department of Real Estate for approval, along with the advance fee agreement she will be entering into with her clients.

The DRE will review the materials to make sure that they give a full description of the services to be provided; state the total amount of the advance fee and when it must be paid; specify a termination date for the agreement; do not contain deceptive guarantees; and are not otherwise misleading.

Once placed in a broker's trust account, advance fees generally can't be withdrawn until they're actually expended for the client's benefit or until five days after an accounting has been sent to the client.

(This may be either a quarterly accounting or a final accounting after the agency has ended.)
Real estate brokers may not engage in the activities listed in (Mortgage loan brokerage.

Soliciting borrowers or lenders for or negotiating loans secured by liens on real property or business opportunities, or collecting payments or performing other services in connection with such loans), in connection with residential mortgage loans, unless the Department of Real Estate has added a special mortgage loan originator endorsement to their real estate license.

The requirements for obtaining an MLO endorsement include obtaining a license through the Nationwide Mortgage Licensing System and Registry.

An MLO endorsement will involve separate prelicense and continuing education requirements, apart from those required for a real estate broker's license.

In addition, a real estate broker isn't allowed to accept compensation from a lender or a mortgage loan originator in a transaction involving a residential mortgage loan unless the broker has an MLO endorsement.

That restriction applies even if the broker provides only real estate brokerage services, not mortgage loan brokerage services.

A real estate broker may still take certain steps, like providing an application form and collecting information needed to process a loan application, without triggering the MLO endorsement requirements; the MLO requirements apply only to brokers who offer or negotiate loans for compensation.

For the purposes of these MLO rules, a residential mortgage loan is a loan primarily for personal, family, or household use that is secured by a dwelling with up to four units

-As the list indicates, real estate licensees may engage in mortgage loan brokerage activities.

However, licensees are no longer allowed to act as residential mortgage loan brokers unless they have a mortgage loan originator endorsement added to their license.

The requirements for the MLO endorsement include being licensed through the Nationwide Mortgage Licensing System and Registry.

Unless she has an MLO endorsement, a real estate broker can't accept compensation from a lender or other loan originator in a transaction involving a mortgage loan.

This is true even if she only provides real estate brokerage services.

If she isn't being compensated, the broker may still take certain steps, like helping fill out a loan application form, without needing the MLO endorsement.
For a salesperson's license, the applicant must be at least 18, be honest and trustworthy, complete the required education, and pass the salesperson's exam.

A salesperson is one who works for a broker and performs these same activities under the broker's supervision.

A person who is licensed to work for and represent a broker in real estate transactions.

A real estate salesperson is a person hired by a broker to do one or more of the acts listed in the broker definition given above.

A salesperson's license permits real estate activity only while under the control and supervision of a broker.

A salesperson can't act directly for a principal in a real estate transaction.

Furthermore, a salesperson may receive compensation only from his own broker.

Neither clients nor cooperating brokers may pay the salesperson directly.

Instead, they are required to pay the salesperson's broker, who then pays the salesperson.

"An MLO endorsement is required for salespersons (as well as brokers) who engage in residential mortgage loan brokerage activities.

-A salesperson is someone who engages in the activities listed in the broker definition, but only as a broker's representative.

-Works with and represents broker

-Can't represent client directly without a broker

-A salesperson must always receive compensation directly from her broker.

-A salesperson may never receive compensation from a cooperating broker or a client.

-The cooperating broker or client must pay the employing broker, and the broker then pays the salesperson.
There are numerous exemptions from the real estate licensing requirements.

The exemptions generally cover those who are acting on their own behalf, those who are regulated by another agency (such as securities brokers), and those who are performing functions that don't require expertise.

All of the following, among others, are exempt:

1. Those acting on their own behalf with respect to their own property.

2. A corporate officer acting on behalf of a corporation, or a general partner acting on behalf of a partnership, with respect to property owned, leased, or to be purchased or leased by the corporation or partnership.

3. A person acting under a properly executed power of attorney from the owner of the property.

4. An attorney at law providing legal services to a client.

5. A person acting under court order (for example, a receiver in bankruptcy or a trustee).

6. A trustee under a deed of trust.

7. With respect to mortgage loan activities, an employee or representative of a financial institution, insurance company, pension fund, federally approved housing counseling service, or cemetery authority; a licensed finance lender; or a licensed residential mortgage lender or servicer.

8. With respect to activities related to business opportunities, mortgage loans, or real property securities, a licensed securities broker-dealer.

9. A person performing clerical functions and not discussing the price, terms, or condition of property.

10. A manager of a hotel, motel, or trailer park, or employees of the manager.


11. A resident apartment manager, who manages the apartment complex in which she lives, or employees of the resident manager.

12. An employee of a property management company who is supervised by a real estate licensee working for the company.

13. Film location representatives, who negotiate for the use of property for photographic purposes.
For a broker's license, the applicant must be at least 18, be honest and trustworthy, pass the broker's exam, have two years' experience, and complete all the required education.

To obtain a broker's license, an applicant must:

1. have two years of full-time experience as a real estate licensee within the past five years;

2. be at least eighteen years old;

3. be honest and truthful;

4 .pass the licensing exam;

5. apply on the prescribed form;

6. pay the license fee;

7. be fingerprinted;

8. provide his social security number to the DRE;

9. submit proof of legal presence (documentation showing that he is in the United States legally); and

10. complete 24 semester units (eight courses) of education, including:

A. five required courses:

-Real Estate Practice;
-Real Estate Appraisal;
-Legal Aspects of Real Estate;
-Real Estate Financing;

and either

-Real Estate Economics or
-Accounting;

and three other courses chosen from this list:

-Advanced Legal Aspects of Real Estate;
-Advanced Appraisal;
-Advanced Financing;
-Real Estate Principles;
-Property Management;
-Escrow;
-Business Law;
-Real Estate Office Administration;
-Mortgage Loan Brokering and Lending;
-Common Interest Developments; or
-Computer Applications in Real Estate.

A broker's license applicant who takes both Real Estate Economics and Accounting has to complete only two additional elective courses, not three.

The experience requirement (item one on the list above) may be waived if the applicant either has the equivalent of two years of general real estate experience, or has a degree from a four-year college or university in a course of study that included specialization in real estate.

To obtain a waiver, an applicant must submit a written petition to the DRE.
A real estate broker can conduct business under a fictitious business name, as long as it is the name he is licensed under.

However, the Commissioner may refuse to issue a license under a fictitious business name if the name is confusing, misleading, or fraudulent.

A fictitious business name statement must be filed with the clerk of the county where the business is located.

Notice of the fictitious business name must also be published in a newspaper at least once a week for four weeks, and an affidavit verifying publication must be filed with the county clerk.

(An affidavit is a written statement sworn before a notary public. The person making the sworn statement is called the affiant.)

A fictitious business name statement expires five years after it was filed.

A real estate broker may obtain a license under a fictitious business name, unless the name:

-is misleading or would constitute false advertising;

-implies a partnership or corporation that does not exist;

-includes the name of a real estate salesperson;

-violates certain statutory provisions; or

-is the name formerly used by a licensee whose license has been revoked

There are also some restrictions on fictitious business names that include the word "escrow" or imply that the broker provides escrow services.

A fictitious business name statement must be filed with the clerk of the county where the business is located.

In addition, the statement must be published at least once a week for four weeks in a newspaper in the county.

An affidavit (a written statement sworn before a notary public) indicating that the publication requirement has been fulfilled must also be submitted to the county clerk.

The statement expires five years after it was initially filed.
The sale or lease of a business, including inventory, fixtures, and goodwill, is referred to as a business opportunity.

An agent involved in a business opportunity transaction generally must have a real estate license, but no special permit is required.

A business opportunity is the sale or lease of a business, typically including inventory, fixtures, lease assignments, and goodwill.

As a general rule, listing a business opportunity or representing the buyer of a business opportunity requires a real estate license, even if there's no real property involved.

If shares of stock in a corporation are involved in the sale, the agent may also need a securities license.

One common type of business opportunity is a franchise agreement, where the purchaser (franchisee) buys the right to sell goods under a brand name and marketing system offered by the franchisor in exchange for a franchise fee.

A franchise may be sold by a real estate licensee, a securities licensee, or any person registered for that purpose with the California Corporations Commissioner.

Business opportunity transactions typically involve the transfer of personal property (such as furniture and equipment used in the business), so the seller gives the buyer a bill of sale.

The bill of sale must contain the names of the transferor and transferee, the location of the business, and a description of the personal property, including any trade fixtures and equipment and the trade name.

If the sale also involves real property, two purchase agreements might be used, one for the real property and one for the personal property.

There will often be two separate escrows for the real property and the "personal property.

And, of course, the seller will give the buyer a deed as well as a bill of sale.

-A business opportunity is the sale or lease of a business, including inventory, fixtures, lease assignments, and goodwill.

The sale or lease of a business opportunity does not require a special permit, but it does require a real estate license, even if there is no real property involved in the transaction.

If shares of stock in a corporation are transferred as part of the transaction, a securities license may be necessary.

When a business opportunity is sold, a bill of sale is typically used, because the transaction almost always involves the transfer of personal property.

The bill of sale must contain the names of the transferee and the transferor (the buyer and the seller), the location of the business, and a description of the personal property being sold, including the trade name and any fixtures and equipment.

If the sale also involves real property, two purchase agreements might be used, one for the real property and one for the personal property.

There may also be separate escrows for the real property and the personal property.
The sale of a business opportunity may include the transfer of an alcoholic beverage license, or liquor license.

Before a license is transferred, the Department of Alcoholic Beverage Control must investigate and approve the applicant and the proposed business location.

Liquor sales are strictly regulated, and state law limits the number of licenses that can be issued in a given county based on its population.

As a general rule, an existing liquor license may be transferred from person to person or from premises to premises, subject to approval from the Department of Alcoholic Beverage Control (ABC).

To obtain approval, the seller and the buyer must submit an application to ABC and post a public notice concerning the application on the premises.

ABC will investigate the buyer and the proposed location before approving the transfer.

The rules governing issuance and transfer of liquor licenses vary depending on the type of establishment, the type of license, and other factors.

There are several different types of liquor licenses, and many rules governing their issuance and transfer.

For instance, the law generally prohibits issuance of a license to a private club that has existed for less than one year.

And when a liquor license is transferred, there may be a limit on how much the seller is allowed to charge the buyer for the license, depending on what type of license it is and how long ago it was issued.

Ex. If a certain type of license is transferred within five years after it was issued, the seller isn't allowed to charge the buyer more than the fee originally paid to obtain the license.
The grounds for suspending, revoking, or denying a license are set forth in the Real Estate Law; the main list can be found in Sections 10176 and 10177 of the Business and Professions Code.

While licensing and license renewal requirements attempt to ensure the licensees minimum competence, it is this list of acts or omissions that sets the standard for the licensees day-to-day behavior.

The grounds for disciplinary action include all of the following actions and conduct:

1. Making a substantial misrepresentation (deliberately or negligently making a false statement of fact, or failing to disclose a material fact to a principal).

2. Making a false promise that is likely to persuade someone to do or refrain from doing something.

3. Embarking on a continued and flagrant course of misrepresentation or false promises.

4. Acting as a dual agent without the knowledge or consent of all of the parties involved.

5. Commingling your own money or property with money or property you received or are holding on behalf of a client or customer (trust funds).

6. Failing to put a definite termination date in an exclusive listing agreement.

7. Receiving an undisclosed amount of compensation on a transaction (a secret profit).

8. If you have a listing agreement that includes an option to purchase the listed property, exercising the option without revealing to the principal in writing the amount of profit to be made and obtaining the principals written consent.

9. Acting in any way, whether specifically prohibited by statute or not, that constitutes fraud or dishonest dealing.

10. Getting a purchasers written agreement to buy a business opportunity property and to pay a commission, without first obtaining the written authorization of the property owner (a listing agreement).

11. As a lender or mortgage broker, failing to disburse funds in accordance with a mortgage loan commitment.

12. Intentionally delaying the closing of a mortgage loan for the sole purpose of increasing the borrowers interest rate or other charges.

13. In connection with a residential short sale (debt forgiveness sale), generating an inaccurate opinion of the propertys value in order to manipulate the lender into rejecting the proposed sale, or to acquire a listing or other financial or business advantage.

14. Failing to comply with the law that requires a real property transfer disclosure statement in certain transactions.

15. Acquiring or renewing a license by fraud, misrepresentation, or deceit.

16. Being convicted of (or pleading not guilty or no contest to) a felony charge, or a crime that is substantially related to the qualifications, functions, or duties of a real estate licensee.

17. False advertising, such as a material false statement about property offered for sale, or a misrepresentation of the licensees credentials.

18. Willfully disregarding or violating the Real Estate Law or the Commissioners regulations.

19. Willfully using the term Realtor® or any trade name of a real estate organization that you are not actually a member of.

20. Having a real estate license denied, revoked, or suspended in another state for actions that would be grounds for denial, revocation, or suspension in California.

21. Performing activities requiring a real estate license negligently or incompetently.

22. As a broker, failing to exercise reasonable supervision over the activities of your salespersons.

23. Using government employment to gain access to private records, and improperly disclosing their confidential contents.

24. Violating the terms of a restricted license.

25. Using blockbusting tactics: soliciting business on the basis of statements regarding race, color, sex, religion, ancestry, marital status, or national origin.

26. Violating the Franchise Investment Law, the Corporate Securities Law, or regulations of the Commissioner of Corporations.

27. Violating the laws governing the sale of real property securities.

28. When selling property in which you have a direct or indirect ownership interest, failing to disclose the nature and extent of that interest to a buyer.

29. Violating any provision of RESPA, TILA, or HOEPA, or any regulations implementing those federal laws.

30. Having a final judgment entered against you in a civil suit for fraud, misrepresentation, or deceit in regard to a real estate transaction.

31. As a broker, failing to notify the Commissioner in writing of the discharge of a salesperson based on her violation of the Real Estate Law or the Commissioners regulations.

32. Committing fraud in an application for the registration of a mobile home, failing to provide for the delivery of a properly endorsed certificate of ownership of a mobile home from the seller to the buyer, or participating in the sale or disposal of a stolen mobile home.

33. Failing to indicate in an advertisement that you are a real estate licensee, or failing to include your license number in a purchase agreement or in solicitation materials such as business cards and advertising flyers.

34. As a broker, failing to notify the buyer and the seller, in writing, of the propertys selling price within one month after the sale closes, unless escrow issues a closing statement.

35. Employing or compensating an unlicensed person for an act that requires a license.

36. Failing to give a copy of a contract to a party who has just signed it.

37. Accepting compensation for referring a customer to any of these types of companies: escrow, pest control, home warranty, or title insurer.

38. Undertaking to arrange financing for a transaction in which you're already acting as a real estate agent, or vice versa, without disclosing that dual role in writing to all parties within 24 hours.

In addition, Section 10087 of the Business and Professions Code authorizes the Commissioner to suspend a licensee or debar him from any position of employment, management, or control for up to 36 months if the licensee:

-knew or should have known that he was violating the Real Estate Law or the Commissioners regulations, or has caused material damage to the public; or

-was convicted of or pleaded no contest to a crime, or was held liable in a civil action or administrative proceeding, if the matter involved dishonesty, fraud, deceit, or any other offense reasonably related to the qualifications, functions, or duties of a real estate licensee.
In a sale, lease, or exchange transaction, conduct such as the following may result in license discipline under Sections 10176 or 10177 of the Business and Professions Code:

1. Knowingly making a substantial misrepresentation of the likely value of real property to:

A. Its owner, either for the purpose of securing a listing or for the purpose of acquiring an interest in the property for the licensees own account.

B. A prospective buyer, for the purpose of inducing the buyer to make an offer to purchase the real property.

2. Representing to an owner of real property when seeking a listing that the licensee has obtained a bona fide written offer to purchase the property, unless at the time of the representation the licensee has possession of a bona fide written offer to purchase.

3. Stating or implying to an owner of real property during listing negotiations that the licensee is precluded by law, by regulation, or by the rules of any organization, other than the broker firm seeking the listing, from charging less than the commission or fee quoted to the owner by the licensee.

4. Knowingly making substantial misrepresentations regarding the licensees relationship with an individual broker, corporate broker, or franchised brokerage company or that entitys/persons responsibility for the licensees activities.

5. Knowingly underestimating the probable closing costs in a communication to the prospective buyer or seller of real property in order to induce that person to make or to accept an offer to purchase the property.

6. Knowingly making a false or misleading representation to the seller of real property as to the form, amount and/or treatment of a deposit toward the purchase of the property made by an offeror.

7. Knowingly making a false or misleading representation to a seller of real property, who has agreed to finance all or part of a purchase price by carrying back a loan, about a buyers ability to repay the loan in accordance with its terms and conditions.

8. Making an addition to or modification of the terms of an instrument previously signed or initialed by a party to a transaction without the knowledge and consent of the party.

9. Making a representation as a principal or agent to a prospective purchaser of a promissory note secured by real property about the market value of the securing property without a reasonable basis for believing the truth and accuracy of the representation.

10. Knowingly making a false or misleading representation or representing, without a reasonable basis for believing its truth, the nature and/or condition of the interior or exterior features of a property when soliciting an offer.

11. Knowingly making a false or misleading representation or representing, without a reasonable basis for believing its truth, the size of a parcel, square footage of improvements or the location of the boundary lines of real property being offered for sale, lease or exchange.

12. Knowingly making a false or misleading representation or representing to a prospective buyer or lessee of real property, without a reasonable basis to believe its truth, that the property can be used for certain purposes with the intent of inducing the prospective buyer or lessee to acquire an interest in the real property.

13. When acting in the capacity of an agent in a transaction for the sale, lease or exchange of real property, failing to disclose to a prospective purchaser or lessee facts known to the licensee materially affecting the value or desirability of the property, when the licensee has reason to believe that such facts are not known to nor readily observable by a prospective purchaser or lessee.

14. Willfully failing, when acting as a listing agent, to present or cause to be presented to the owner of the property any written offer to purchase received prior to the closing of a sale, unless expressly instructed by the owner not to present such an offer, or unless the offer is patently frivolous.

15. When acting as the listing agent, presenting competing written offers to purchase real property to the owner in such a manner as to induce the owner to accept the offer which will provide the greatest compensation to the listing broker without regard to the benefits, advantages and/or disadvantages to the owner.

16. Failing to explain to the parties or prospective parties to a real estate transaction for whom the licensee is acting as an agent the meaning and probable significance of a contingency in an offer or contract that the licensee knows or reasonably believes may affect the vacating of the property by the seller or its occupancy by the buyer.

17. Failing to disclose to the seller of real property in a transaction in which the licensee is an agent for the seller the nature and extent of any direct or indirect interest that the licensee expects to acquire as a result of the sale.

(The licensee should disclose to the seller: prospective purchase of the property by a person related to the licensee by blood or marriage; purchase by an entity in which the licensee has an ownership interest; or purchase by any other person with whom the licensee occupies a special relationship where there is a reasonable probability that the licensee could be indirectly acquiring an interest in the property.)

18. Failing to disclose to the buyer of real property in a transaction in which the licensee is an agent for the buyer the nature and extent of a licensees direct or indirect ownership interest in such real property:

Ex. The direct or indirect ownership interest in the property by a person related to the licensee by blood or marriage; by an entity in which the licensee has an ownership interest; or by any other person with whom the licensee occupies a special relationship.

19. Failing to disclose to a principal for whom the licensee is acting as an agent any significant interest the licensee has in a particular entity when the licensee recommends the use of the services or products of such entity.
When soliciting, negotiating or arranging a loan secured by real property or the sale of a promissory note secured by real property, conduct such as the following may result in license discipline:

1. Knowingly misrepresenting to a prospective borrower of a loan to be secured by real property or to an assignor/endorser of a promissory note secured by real property that there is an existing lender willing to make the loan or that there is a purchaser for the note, for the purpose of inducing the borrower or assignor/endorser to utilize the services of the licensee.

2. Knowingly making a false or misleading representation to a prospective lender or purchaser of a loan secured directly or collaterally by real property about a borrower's ability to repay the loan in accordance with its terms and conditions.

3. Failing to disclose to a prospective lender or note purchaser information about the prospective borrower's identity, occupation, employment, income and credit data as represented to the broker by the prospective borrower.

4. Failing to disclose information known to the broker relative to the ability of the borrower to meet his or her potential or existing contractual obligations under the note or contract, including information known about the borrower's payment history on an existing note, whether the note is in default or the borrower in bankruptcy.

5. Knowingly underestimating the probable closing costs in a communication to a prospective borrower or lender of a loan to be secured by a lien on real property for the purpose of inducing the borrower or lender to enter into the loan transaction.

6. When soliciting a prospective lender to make a loan to be secured by real property, falsely representing or representing without a reasonable basis to believe its truth, the priority of the security, as a lien against the real property securing the loan, i.e., a first, second or third deed of trust.

7. Knowingly misrepresenting in any transaction that a specific service is free when the licensee knows or has a reasonable basis to know that it's covered by a fee to be charged as part of the transaction.

8. Knowingly making a false or misleading representation to a lender or assignee/endorsee of a lender of a loan secured directly or collaterally by a lien on real property about the amount and treatment of loan payments, including loan payoffs, and the failure to account to the lender or the assignee/endorsee of a lender as to the disposition of such payments.

9. When acting as a licensee in a transaction for the purpose of obtaining a loan, and in receipt of an advance fee from the borrower for this purpose, failing to account to the borrower for the disposition of the advance fee.

10.Knowingly making a false or misleading representation about the terms and conditions of a loan to be secured by a lien on real property when soliciting a borrower or negotiating the loan.

11. Knowingly making a false or misleading representation or representing, without a reasonable basis for believing its truth, when soliciting a lender or negotiating a loan to be secured by a lien on real property, about the market value of the securing real property, the nature and/or condition of the interior or exterior features of the securing real property, its size or the square footage of any improvements on the securing real property.

As you can see, there are many grounds for disciplinary action in California.

These provisions are the state's attempt to prevent unscrupulous behavior by real estate licensees.

But suspending a real estate license after the fact doesn't help someone who lost money because of a licensee's unlawful actions.

The injured party can take the licensee to court, but what if the licensee has no money or other assets?

In that case, a judgment would be worthless.

Under those circumstances, the state has provided an additional means of redress, through the Real Estate Fund.
The Recovery Account is used to compensate people injured by the actions of a real estate licensee who can't collect a judgment against the licensee.

If funds are paid out of the Recovery Account because of a licensee, his license is suspended until he can reimburse the Recovery Account for the full amount, plus interest.

All license fees (including exam fees, application fees, renewal fees, and so on) are placed in the state treasury's Real Estate Fund.

A portion of this money is distributed to the Education and Research Account, to advance real estate education and research.

Another portion of the fund is distributed to the Recovery Account.

Monetary penalties collected by the Commissioner also go into the Recovery Account.

The Recovery Account is used to help compensate parties who have been injured by the actions of a real estate agent and have obtained a judgment against the agent.

For the Recovery Account to kick in, the licensee must not have any funds or assets that could be seized to pay the judgment.

Ex. The Chans buy a home from Broker Houlihan only to discover that Houlihan made a secret profit from the transaction.

They get a judgment against Houlihan, but Houlihan has transferred all his assets to a foreign country.

Since they can't collect their judgment from Houlihan, the Chans could apply to the Recovery Account for compensation.

The Recovery Account will pay up to $50,000 for any one transaction and up to $250,000 for any one licensee.

When the Recovery Account makes a payment to an injured party, the license of the erring real estate agent is automatically suspended until the account is completely repaid, with interest.



An account funded by license fees, used to compensate members of the public injured by the unlawful acts of real estate licensees, when other compensation isn't available.

A portion of real estate license fees is put into an account to protect the geneeral public when a judgement or arbitration award against a licensee is uncollectable.

Recovery is limited to $20,000. Per transaction, $100,000 per licensee.
"When a real estate broker accepts trust funds from a client or customer, she must deposit them into:

1. a neutral escrow account,

2. the hands of the principal, or

3. a trust account maintained by the broker in a bank or other recognized depository

Which of these alternatives is the appropriate one depends on the circumstances and on the broker's instructions.

In any case, however, the trust funds must be deposited no later than three business days following receipt of the funds.

If the funds are deposited into escrow or the hands of the principal rather than into the broker's trust account, the transfer must be noted in the broker's trust fund records.

If trust funds are given to a salesperson instead of directly to the broker, the salesperson must immediately deliver the funds to the broker, or, if so directed by the broker, to one of the three places listed above.

There is one exception to these rules.

When a broker receives a good faith deposit check from a buyer, the broker can hold the check uncashed before the buyer's offer is accepted, if:
the check isn't negotiable by the licensee, or the buyer has given written instructions that the check isn't to be deposited or cashed until the offer is accepted; and
the seller is informed (before or when the offer is presented) that the check is being held.

Once the offer is accepted, the broker can continue to hold the uncashed deposit check only if he receives written authorization from the seller to do so.

Trust funds must stay in the trust account until their owner directs otherwise.

While the owner of the trust funds is usually easy to identify, it should be noted that the ownership of trust funds may change as the real estate transaction progresses.

Ex. The ownership of a good faith deposit varies depending on whether or not the buyer's offer has been accepted.

Before acceptance, the funds belong to the buyer and must be handled according to her instructions.

After acceptance, however, ownership isn't so clear-cut, and the funds must be handled as follows:

-A check held uncashed by the broker before acceptance of the offer may continue to be held uncashed only on written authorization from the seller.

-The check may be given to the seller only if both parties agree to that in writing.

-No part of the deposit money can be refunded without the express written permission of the seller.

If a transaction falls through after the good faith deposit has been deposited into escrow or a broker's trust account, there may be a dispute over the money; the buyer and the seller may each feel entitled to it.

In this situation, the escrow agent or broker who holds the funds in trust may file an interpleader action, turning the matter over to a court.

The court will decide which party is the rightful owner of the funds.
In California, every broker must maintain one or more trust accounts, to keep trust funds separated from the broker's own money.

This makes it less likely that the broker will accidentally or intentionally use clients' funds for her own purposes. It also protects the trust funds from the broker's creditors, in case the broker dies or is sued.

A broker's trust accounts must be in a recognized financial institution located in this state.

The accounts should be opened in the broker's name (as it appears on her license) and should be specifically designated as trust accounts.

A bank account that a broker uses to keep trust funds segregated from the broker's personal or business funds.

The primary reason for maintaining a separate account for trust funds is to avoid commingling.

Commingling means mixing trust funds with personal funds.

A broker must never put trust funds into his general account.

Likewise, the broker must never put his own funds into a trust account.

This is true even if careful records are kept of the deposits and withdrawals.

Commingling shouldn't be confused with conversion, which is the actual misappropriation of a party's funds for the broker's own purposes.

Conversion is a basis for theft charges under the California penal code.

(Theft also includes wrongfully removing a piece of real or personal property, or defrauding another person of money, labor, or real or personal property.)

The prohibition against commingling makes it more difficult for a broker to "borrow" trust funds.

The prohibition also protects trust funds from any legal action that might be taken against the broker.

Ex. Suppose a broker dies, or is sued by a client.

The broker's general account could very well be frozen during the course of the probate or lawsuit.

If trust funds were kept in the broker's general account, they would be unavailable to the owners of those funds until the probate was completed or the lawsuit concluded.

Also, if trust funds were placed in the broker's general account, a judgment creditor might be able to seize those funds along with the broker's own funds
Brokers must keep their clients' trust funds separate from their own money.

Mixing personal or business funds with trust funds is called commingling, and it is a violation of the license law.

There's one exception to this rule against commingling: a broker may keep $200 of her own funds in a trust account to pay bank service charges.

No funds other than trust funds may be maintained in a broker's trust account.

The broker should not put any of her own money into the trust account.

Nor should she put trust funds into her personal account or general business account.

Illegally mixing trust funds with personal funds is called commingling.

Commingling should not be confused with conversion, which is actually misappropriating a client's funds for the broker's own purposes.

One important exception to the prohibition against commingling is that a broker may keep up to $200 of his own funds in a trust account in order to pay the account's service charges.

And if a broker is owed a commission from trust funds, he may withdraw that amount directly from the trust account.

However, a broker can never pay business or personal expenses out of a trust account, even if the broker treats the payments as a draw against a commission.

Rather, the broker must withdraw the commission amount from the trust account, deposit it into a business or personal account, and then use the funds to pay expenses.

Mixing trust funds with broker's personal funds or business funds.

A broker must never put trust funds into his general account.

Likewise, the broker must never put his own funds into a trust account.

This is true even if careful records are kept of the deposits and withdrawals.

Commingling shouldn't be confused with conversion, which is the actual misappropriation of a party's funds for the broker's own purposes
Since a broker can't put his own funds into a trust account or use trust funds for his own purposes, the trust account balance must always equal the broker's total trust fund liability.

Either a shortage or an overage in a trust account is a violation of the license law.

Generally, a trust account cannot be an interest-bearing account.

This is true unless the owner of the trust funds requests that the funds be placed in an interest-bearing account.

The broker must pay the service fees for the account and disclose information about how the interest is to be calculated and disbursed.

None of the interest from such an account can accrue to the broker.

The total amount of funds in the trust account must always equal the broker's aggregate trust fund liability.

The process of comparing the trust fund balance to the sum of individual transactions is called reconciliation.

When reconciled, the trust account balance must equal the total of the balances due to individual clients and customers.

If the trust account balance is less than the total liability, there is a trust fund shortage. Such a shortage is a violation of the Real Estate Commissioner's regulations.

If the trust account balance is greater than the total liability, there is a trust fund overage.

This is also a violation of the regulations, since non-trust funds can't be commingled with trust funds.

A broker should always make sure that a check deposited into the trust account has cleared before disbursing any funds against the check.

If funds are disbursed and the check hasn't cleared, or the check bounces, a trust fund shortage will occur.
A broker is required to keep detailed trust account records.

He should balance his trust account records against the bank balance on a monthly basis. This process is known as reconciliation.

Trust account records can take one of two forms: simple columnar records or records from a general accounting system.

Regardless of the method chosen, the broker must keep records of all of the following:

1. all trust fund receipts and disbursements in chronological order;

2.the daily balance of each trust account;

3. all receipts and disbursements affecting each client or customer's account in chronological order; and

4. the balance owing to each client or customer.

Trust account records are subject to inspection by the Commissioner and must be kept for at least three years, beginning with the date of closing (or the date of the listing, if the deal doesn't close).

Advance fees are funds given to a broker by a client to cover expenses that will be incurred on the client's behalf, such as unusual marketing expenses.

Advance fees must be handled like trust funds: they cannot be commingled with the broker's funds, and must be deposited within three days after receipt.

In addition, advance fees generally can't be withdrawn until they've actually been expended for the client's benefit, or until five days after an accounting has been sent to the client.

Transaction records:

A variety of other documents connected with a transaction must also be available for inspection for three years after the closing date (or listing date, if the transaction never closed).

These documents include:

-listings and buyer agency agreements...

-purchase agreements

-rent collection receipts

-bank deposit slips

-canceled checks

-supporting papers

-agency disclosure statements

-transfer disclosure statements

-property management agreements

-mortgage loan disclosure statements

-real property security statements

Mortgage loan disclosure statements and real property security statements must be kept for four years, not three.

A broker may opt to use an electronic storage system for records.

One condition of using such a system, though, is that the broker must be able to produce, upon the Department of Real Estate's request, paper copies of any documents at the broker's expense.

The records only need to be stored for three years, as with paper records, but they must be stored using a non-erasable medium.

It's very important to keep proper records of all trust funds, including trust fund checks that are held uncashed, trust funds that are sent directly to escrow, and trust funds that have been released to the owner.

Thorough trust fund records enable the broker to prepare accurate accountings for clients, to calculate the amounts owed to clients at any given time, and to see if there's an imbalance in the trust account.

The broker should reconcile his trust account records on a monthly basis.

A broker can use one of two types of accounting systems to keep track of trust funds:

1. a simple columnar system or

2. an alternative system that complies with general accounting practices.

Regardless of which method is used, the accounting system must show the following:

1. all trust fund receipts and disbursements with pertinent details in chronological order;

2. the balance of each trust account based on all recorded transactions;

3. all receipts and disbursements affecting each client or customer's account in chronological order; and

4. the balance owing to each beneficiary based on recorded transactions.
Real estate licensees' advertisements for mortgage loan products or the resale of promissory notes are also regulated by the Commissioner.

Any ad of this type must be approved by the Department of Real Estate before it can be used.

Potentially deceptive or misleading advertisements will not be approved.

For instance, if an ad is offering a promissory note for resale, it cannot promise a yield or return that is different from the rate specified in the note, unless it also reveals the note rate and the amount of the discount at which the note is being sold.

The discount is the difference between the outstanding note balance and the sales price of the note.

An ad for a loan may not use a term like "guaranteed" without describing to what extent the loan is secured.

And an ad may not imply that a loan can be approved over the telephone, or that any government body has endorsed the lender's activities.

California imposes additional regulations on a licensee's advertisements for loans secured by real property.

Any ad of this type must receive prior approval from the Department of Real Estate before it's published.

Naturally, any ad that is misleading or deceptive won't be approved.

Ads for loans may not use a phrase like "guaranteed" without explaining how the loan is secured.

They also may not imply that a loan can or will be approved over the telephone; that any government agency has endorsed the licensee's business activities; or that loans are available on terms more favorable than those generally available in the community, unless the advertiser can show that those terms would be available without undisclosed restrictions or conditions.

Similar regulations apply to ads concerning the resale of promissory notes.

Ex. An advertisement may not guarantee a yield on a note other than the interest rate specified in the note, unless it also includes the note rate and the amount of the discount.

(The discount is the difference between the outstanding note balance and the sales price of the note.)
Antitrust laws prohibit any agreement that has the effect of an unreasonable restraint of trade.

The main federal antitrust law is the Sherman Act (1890).

The main state antitrust law in California is the Cartwright Act (1907).

Like the license law, federal and state antitrust laws impose restrictions on the business practices and conduct of real estate licensees.

Antitrust laws affect a real estate agent's relationships with clients, customers, and other agents by limiting anticompetitive behavior.

Antitrust laws are based on the idea that free enterprise is an important element of a democratic society, and that competition is good for both the economy and society as a whole.

To promote competition, antitrust laws prohibit agreements that have the effect of an unreasonable restraint of trade.

A restraint of trade is any act that prevents a person or company from doing business in a certain area or with certain people.

When two or more businesses participate in a common scheme that has the effect of creating an unreasonable restraint of trade, it's referred to as a conspiracy in antitrust law.

Antitrust laws have been around for a long time. The preeminent federal law, the Sherman Act, was passed in 1890. California's Cartwright Act was passed in 1907.

Online:

Most people associate antitrust laws with breakups in the oil or telecommunication industries.

However, the United States Supreme Court has held that antitrust laws are applicable to the real estate industry.

In 1950, the Supreme Court decided in a landmark case that mandatory fee schedules established and enforced by a real estate board violated the Sherman Act.

Book:

Picture of man standing in front of government building.

In addition to the Real Estate Law, federal and state antitrust laws impose certain restrictions on a real estate agent's behavior towards clients, customers, and other agents.

At the foundation of antitrust laws is the idea that free enterprise is an important element of a democratic society, and that competition is good for both the economy and society as a whole.

Antitrust laws prohibit any agreement that has the effect of creating an unreasonable restraint of trade.

A restraint of trade is any act that prevents an individual or a company from doing business in a certain area or with certain people.

When two or more business entities participate in a common scheme which has the effect of a restraint of trade, it's called a conspiracy.

Antitrust laws have a long history.

The foremost federal law, the Sherman Antitrust Act, dates back to 1890.

California's main state antitrust law, the Cartwright Act, was passed in 1907.

While antitrust issues are commonly associated with big steel mills, oil companies, and telephone services, in 1950 antitrust laws were held to apply to the real estate industry as well.

In a landmark case, the U.S. Supreme Court held that mandatory fee schedules, established and enforced by a real estate board, violated the Sherman Act (United States v. National Association of Real Estate Boards).

A real estate agent who violates antitrust laws may be subject to both civil and criminal actions.

An individual found guilty of violating the Sherman Act can be fined up to one million dollars and/or sentenced to ten years' imprisonment.

A corporation can be fined up to one hundred million dollars.
Price fixing is defined as the cooperative setting of prices or price ranges by competing firms.

To avoid the appearance of price fixing, real estate agents from different brokerages should never discuss their commission rates.

(It's a discussion between competing brokers or salespersons that could violate the law.

A broker can discuss commission rates with his own affiliated agents, and agents who work for the same broker can discuss rates with each other.)

One exception to this general prohibition is that competing brokers involved in a cooperative sale are allowed to discuss a commission split—the division of the commission between the listing broker and the selling broker.

Even a casual announcement that a broker is planning on raising his commission rates could lead to antitrust problems.

Ex. Broker Wood goes to a dinner given by his local MLS, and he's asked to discuss current market conditions.

In the middle of his speech, he mentions that he's going to raise his commission rates, no matter what anyone else does.

This statement could be viewed as an invitation to conspire to fix prices.

If any other MLS members raise their rates in response to Wood's statement, they could be held to have accepted his invitation to conspire.

Brokers must understand that they don't have to actually consult with each other to be charged with conspiring to fix commission rates.

The kind of scenario described in the previous example is enough to lead to an antitrust lawsuit.

Publications that appear to fix prices are prohibited as well.

A multiple listing service or other real estate association that publishes "recommended" or "going" rates for commissions could be sued.
As a general rule, anyone who acts as a real estate broker or salesperson must have a license.

However, certain people are exempt from the licensing requirement, even though they're engaged in activities that fall within the definition of real estate broker given in the license law.

There are certain exceptions to the rule that anyone acting as or on behalf of a real estate broker must be licensed.

The license law has a list of persons who are exempt from the licensing requirement.

1. A person acting on her own behalf with respect to her own property.

2. A corporate officer or a general partner acting on behalf of a corporation or partnership, with respect to property owned, purchased, or leased by the business.

3. An attorney in fact—someone authorized by a power of attorney to act as another person's agent.

4. An attorney at law, in the performance of his or her duties as a lawyer.

5. Any person acting under court order, including:
-a receiver,
-a trustee in bankruptcy,
-an executor,
-a probate administrator, or
-a guardian.


6. A trustee acting pursuant to the power of sale in a deed of trust.

7. With respect to mortgage loan activities, an employee or representative of a financial institution, insurance company, pension fund, federally approved housing counseling service, or cemetery authority; a licensed finance lender; or a licensed residential mortgage lender or servicer.

8. With respect to activities related to business opportunities, mortgage loans, or real property securities, a licensed securities broker-dealer.

9. A secretary, bookkeeper, accountant, or other real estate office personnel performing purely clerical duties, and not discussing prices, terms of sale, or the condition of property.

10. An employee of a property management company who is supervised by a real estate licensee working for the company.

11. The manager of a hotel, motel, or trailer park, or an employee of the manager.

12. The resident manager of an apartment complex, or an employee of the resident manager.

13. Film location representatives, who negotiate for the use of property for photographic purposes.

In each of the situations we've just listed, the exempt individual is not required to have a real estate license.

This is true even though he or she may be engaging in acts that are included in the definition of a real estate broker.
Here are the requirements an applicant for a salesperson's license has to meet:

1. The applicant must be at least 18 years old.

2. The applicant must be honest and truthful.

3. The applicant must pass the salesperson's examination.

4. Complete application:
The applicant must apply on the prescribed form, pay the license fee, be fingerprinted, and provide the Department of Real Estate with a social security number and proof of legal presence in the United States.

5. Complete 3 courses:
The applicant must complete 3 courses (nine semester units) of education:
-two required courses, real estate principles and real estate practice;
-one elective course chosen from a list of courses approved by the Department of Real Estate.

Naturally, there's no experience requirement for a salesperson's license.

There's also no education requirement, aside from the required real estate courses; it is not necessary to be a high school graduate in order to obtain a salesperson's license.

An applicant for a broker's license must satisfy all of the following requirements.

1. The applicant must be at least 18 years old.

2. He must be honest and truthful.

3. He must pass the qualifying exam.

4. He must apply for the license.

This includes applying on the proper form, paying the license fee, and being fingerprinted.

The applicant also must provide the Department of Real Estate with a social security number and proof of legal presence in the United States.

5. The broker's license applicant must also have at least two years of full-time experience as a real estate licensee within the past five years.

The DRE may waive this requirement if the applicant has either the equivalent of two years of general real estate experience or a degree from a four-year college with a specialization in real estate.

6. The broker's license applicant must successfully complete eight approved real estate courses (24 semester units).

-Five courses are required, including:

-real estate practice,
-appraisal,
-legal aspects of real estate,
-real estate finance, and
-either real estate economics or accounting.

-In addition, 3 elective courses must be chosen from the following list:

-advanced legal aspects of real estate,
-advanced appraisal,
-advanced financing,
-real estate principles,
-property management,
-escrow,
-real estate office administration,
-business law,
-mortgage loan brokering and lending,
-common interest developments, or computer applications in real estate.

(An applicant who takes both real estate economics and accounting is required to take only two additional electives, not three.)
Violating any provision of the license law—including the rules discussed so far in this lesson—is grounds for disciplinary action.

In addition, the license law sets forth a detailed list of specific conduct that is considered grounds for disciplinary action.

Keep in mind that as a licensee, you're subject to disciplinary action even for license law violations that occur when you're buying or selling your own property.

The Commissioner's authority extends to any real estate transaction involving a licensee, not only those in which a licensee is representing another person.

Anyone planning to become a real estate agent should read through the entire list of grounds for disciplinary action.

Grounds for Disciplinary Action

1. Making a substantial misrepresentation: knowingly or negligently making a false statement or failing to disclose a material fact to a principal.

2. Making a false promise that is likely to persuade a party to do something or refrain from doing something.

3. Embarking on a continued and flagrant course of misrepresentations or false promises.

4. Acting as a dual agent without the knowledge and consent of all the parties.

5. Commingling your own money or property with trust funds or property held in trust.

6. Failing to put a definite termination date in an exclusive listing agreement.

7. Receiving an undisclosed amount of compensation from a transaction (a secret profit).

8. If you have a listing with a purchase option, exercising the option without revealing to the principal in writing the amount of profit to be made and without obtaining the principal's written consent.

9. Acting in any way that constitutes fraud or dishonest dealing.

10. Getting a purchaser's written agreement to buy a business opportunity and to pay a commission, without first obtaining a listing agreement.

11. As a lender or mortgage broker, failing to disburse funds in accordance with a loan commitment.

12. Intentionally delaying the closing of a mortgage loan to drive up the borrower's charges.

13. In connection with a residential short sale, generating an inaccurate opinion of the property's value to manipulate the lender into rejecting the proposed sale or to gain a financial advantage.

14. Failing to provide a real property transfer disclosure statement in a transaction in which one is legally required.

15. Acquiring or renewing a license by fraud, misrepresentation, or deceit.

16. Being convicted of or pleading guilty to a felony, or a misdemeanor substantially related to the qualifications, functions, or duties of a real estate licensee.

17. False advertising, such as any material false statement about property offered for sale, or any misrepresentation of the licensee's credentials.

18. Wilfully disregarding or violating the Real Estate Law or the Commissioner's regulations.

19. Representing that you belong to a real estate organization that you are not actually a member of.

20. Having a real estate license denied, revoked, or suspended in another state for actions that would be grounds for denial, revocation, or suspension in California.

21. Performing activities requiring a real estate license negligently or incompetently.

22. As a broker, failing to exercise reasonable supervision over the real estate activities of affiliated licensees.

23. Using government employment to gain access to private records and improperly disclosing their contents.

24. Violating the terms of a restricted license.

25. Discriminating by using blockbusting tactics.

26. Violating the Franchise Investment Law, the Corporate Securities Law, or regulations of the Commissioner of Corporations.

27. Violating the laws governing the sale of real property securities.

28. Failing to disclose your direct or indirect ownership interest in property you're selling.

29. Violating the Real Estate Settlement Procedures Act or the Truth in Lending Act.

30. Having a final judgment entered against you in a civil suit for fraud, misrepresentation, or deceit regarding a real estate transaction.

31. As a broker, failing to notify the Commissioner in writing of the discharge of a licensee based on a violation of the license law or regulations.

32. Misconduct in connection with mobile home transactions.

33. Advertising in any manner without indicating that you are a real estate licensee, or failing to include your license number in a purchase agreement or in solicitation materials such as business cards and flyers.

34. As a broker, failing to give the buyer and the seller written notice of the property's selling price within one month after closing, unless escrow issues a closing statement.

35. Employing or compensating an unlicensed person for any act that requires a license.

36. Failing to furnish a copy of any contract to all those who sign it, at the time it is executed.

37. Accepting compensation for referring a customer to an escrow, pest control, home warranty, or title insurance company.

38. Undertaking to arrange financing for a transaction in which you're already acting as a real estate agent, or vice versa, without disclosing your dual role in writing to all parties within 24 hours.

The Department of Real Estate has also compiled detailed lists of examples of unlawful conduct, in both sales and loan transactions.