Real Estate Law in a Nutshell
Real Estate Law in a Nutshell
With so many federal laws and regulations governing real estate activities, it’s all too easy to forget one or two in the heat of a sale. Here’s an easy-to-use cheat sheet for some major laws affecting real estate.
Laws: The Telephone Consumer Protection Act of 1991 and related Federal Trade Commission regulations, The CAN-SPAM Act
- Prohibits businesses—other than charities, pollsters, and political organizations—from calling individuals whose names appear on the National Do Not Call Registry (http://www.fcc.gov/cgb/donotcall/).
- Allows calls to existing customers (those with whom you’ve done business in the last 18 months). Lists used for calling must be updated monthly.
- Allows you to call FSBOs only if you have a buyer for their homes but doesn’t allow you to solicit FSBOs for a listing.
- Provides a safe harbor from prosecution for inadvertently calling someone on the do-not-call list if your company has written procedures on calling, provides training on do-not-call regulations, has accessed the national registry within the last three months, and maintains a company-specific list of numbers not to call.
- Allows real estate practitioners to send out commercial e-mail soliciting business if the e-mail is clearly labeled as a solicitation for business and allows recipients to opt out of future mailings.
More resources: NAR Field Guide to Anti-solicitation Laws, NAR’s National Do-not-call Tool Kit Updates, and REALTOR® Association Executive’s “Spam’s New Rules: Your Association’s Duties Under the New Law”
Law: The Residential Lead-Based Paint Hazard Reduction Act of 1992
- Applies to houses and apartments built before 1978.
- Requires owners and their agents to disclose the known presence of lead-based paint on properties being sold or leased and to provide any available reports pertaining to lead-based paint hazards.
- Requires owners’ agents to give all prospective buyers or renters a copy of the federal pamphlet, Protect Your Family from Lead in Your Home. It’s available in several languages at the EPA Web site (www.epa.gov).
- Makes salespeople responsible for obtaining a signed acknowledgement that the pamphlet was received and for keeping that acknowledgment for three years as proof of compliance.
- Gives buyers 10 days to have an inspection of the property for lead paint.
- Does not require that owners test for the presence of lead paint.
More resources: The Environmental Protection Agency, the National Lead Information Center, REALTOR® University’s course “Lead Paint Disclosure: It’s the Law”
Law: Real Estate Settlement Procedures Act of 1974 and U.S. Department of Housing and Urban Development regulations
- Prohibits real estate practitioners from receiving referral fees or anything else of value from service providers unless the salespeople actually perform a service that justifies the fee. Fees just for referring business are illegal.
- Prohibits practitioners or homebuilders from requiring buyers to purchase title insurance from a particular provider.
- Requires lenders to provide good faith estimates of closing costs and use the HUD-1 closing document.
More resources: “RESPA-permitted fees” (REALTOR® Magazine, August 2002), and HUD’s RESPA information
Law: Federal Fair Housing Act of 1968 and its amendments
- Makes it unlawful to discriminate in the sale or leasing of housing based on race, color, religion, national origin, sex, familial status, or handicap. Note that handicaps include physical and mental impairments, AIDS or HIV, alcoholism, or prior drug addiction. Some state laws also protect other classes, such as sexual orientation, from discrimination.
- Exempts housing for the elderly, dwellings operated by religious organizations, and rentals in owner-occupied properties of four or fewer units (with the exception of racial discrimination, for the latter).
- Prohibits salespeople from providing information about an area that addresses its racial, religious, or ethnic composition as a way to restrict a buyer’s or renter’s choices.
- Makes it unlawful to refuse information on available financing to persons in a protected class.
- Prohibits advertising that indicates a preference for or against any protected group (see page 24). Note that this advertising exception applies even to owner-occupied properties with four or fewer units.
More resources: REALTOR® Magazine Online’s Fair Advertising Practices Sales Meeting and Risk Management Tool Kit (Fair Housing Risks), NAR’s Field Guide to Fair Housing, U.S. Department of Justice, and U.S. Department of Housing and Urban Development Fair Housing Guidelines