Unit 16 Q&A: Ethics and Fair Housing in Real Estate
Fundamentals of Ethics and Professional Standards
- Definition of Ethics: Ethics is defined as a system of rules and standards that goes beyond the literal letter of the law.
- National Association of REALTORS (NAR): * The National Association of REALTORS is the organization responsible for formulating the Code of Ethics specifically for real estate licensees. * The National Association of REALTORS Code of Ethics is binding strictly on its members.
Civil Rights and Fair Housing Legislation
- Civil Rights Act of 1866: * Prohibits housing discrimination based exclusively on Race. * Complaints related to the Civil Rights Act of 1866 are handled by being taken directly to federal court. * Under this act, an aggrieved person may file a discrimination suit in federal court specifically because of racial discrimination. * Case Scenario: If an owner of a two-unit building resides in the downstairs unit and refuses to rent to an African American male but subsequently rents to a white male, the rejected applicant has grounds to allege discrimination under the Civil Rights Act of 1866.
- The Fair Housing Act: * This act is enforced by the Department of Housing and Urban Development (HUD). * Protected Class (Family): According to HUD, an example that meets the definition of "family" as a protected class is a single parent with a foster child aged and a son aged .
Illegal and Prohibited Real Estate Practices
- Blockbusting: This illegal practice involves making statements to homeowners such as "I hear they're moving in. There goes the neighborhood! Better put your house on the market before values drop!" to induce selling based on fear of a protected class moving into the area.
- Redlining: This occurs when a lender refuses to lend money for homes located in predominantly minority neighborhoods. It is strictly illegal for a lender to refuse a residential real estate loan in a specific area based solely on the physical location of the property.
The Americans with Disabilities Act (ADA)
- Primary Impact: The Americans with Disabilities Act has its greatest impact on office buildings.
- Required Action: The act mandates that reasonable accommodations must be provided to individuals with disabilities.
- Legal Provisions Regarding Modifications: It is considered legal for a landlord or property owner to require a person with a disability to establish an escrow account to cover the costs of restoring a property to its original condition after it has been modified for accessibility.
Lending and Credit Regulations
- Lending Decisions Based on Age: * A lender is permitted to consider an applicant's age only if the applicant's income is expected to drop due to retirement. * A creditor may legally refuse to make a loan to an applicant who is considered too young to legally sign a binding contract.
- Loan Application Timelines: Once a completed loan application has been submitted, the lender must accept or reject the application within a period of days.
Pennsylvania State-Specific Regulations
- Pennsylvania Human Relations Act: This state legislation applies to both housing accommodations and commercial property.
- Consumer Notice: In the state of Pennsylvania, real estate licensees are required to present a document known as the Consumer Notice to all prospective sellers.
Questions and Discussion
- Q: A system of rules and standards that goes beyond the letter of the law is called what? * A: Ethics.
- Q: When may a lender consider age when making a lending decision? * A: If the applicant's income will drop due to retirement.
- Q: What action is required by the Americans with Disabilities Act? * A: Reasonable accommodations must be provided to people with disabilities.
- Q: How are complaints relating to the Civil Rights Act of 1866 handled? * A: They are taken directly to federal court.
- Q: The National Association of REALTORS Code of Ethics is binding on whom? * A: Its members.
- Q: A lender refuses to lend money for homes in predominantly minority neighborhoods. What is this called? * A: Redlining.
- Q: Which example meets HUD's definition of family as a protected class? * A: A single parent with a foster child age and a son age .
- Q: Which action would be considered legal regarding a person with a disability? * A: Requiring a person with a disability to establish an escrow account for the costs to restore a property after it has been modified.
- Q: The Americans with Disabilities Act has the greatest impact on what? * A: Office buildings.
- Q: The Civil Rights Act of 1866 prohibits housing discrimination based on what? * A: Race.
- Q: "I hear they're moving in. There goes the neighborhood! Better put your house on the market before values drop!" is what illegal practice? * A: Blockbusting.
- Q: Which agency enforces the Fair Housing Act? * A: The Department of Housing and Urban Development (HUD).
- Q: The Pennsylvania Human Relations Act applies to what? * A: Housing accommodations and commercial property.
- Q: It is illegal for a lender to refuse to make a residential real estate loan in a particular area only because of what? * A: The physical location of the property.
- Q: After a completed loan application is submitted, the application must be accepted or rejected within how long? * A: days.
- Q: In Pennsylvania, what document must real estate licensees present to all prospective sellers? * A: Consumer Notice.
- Q: Which organization formulated a Code of Ethics for real estate licensees? * A: National Association of REALTORS.
- Q: An owner of a two-unit building lives downstairs and refuses to rent to an African American male but later rents to a white male. The rejected applicant may allege discrimination under what law? * A: Civil Rights Act of 1866.
- Q: A creditor may refuse to make a loan to an applicant who is what? * A: Too young to legally sign a contract.
- Q: A discrimination suit may be filed in federal court by whom? * A: An aggrieved person because of racial discrimination.