Proven mnemonics — built specifically for the real estate licensing exam.
COAL
COAL: Care, Obedience, Accounting, Loyalty — fiduciary duties to a client
COAL
The four fiduciary duties an agent owes to their client
Care: exercise reasonable skill and care. Obedience: follow all lawful instructions. Accounting: account for all funds. Loyalty: put client's interests above all others including your own. Some states add Disclosure and Confidentiality — making it COALD or OLD CAR.
Three agency relationships — and which party each agent represents
Seller's agent (listing agent): represents the seller, owes fiduciary duties to seller. Buyer's agent: represents the buyer. Dual agency: represents both buyer and seller in the same transaction — legal in most states but requires informed written consent from both parties. Transaction broker: facilitates without full fiduciary duties.
The seven federally protected classes under the Fair Housing Act of 1968
Federal law prohibits discrimination in housing based on: Race, Color, National origin, Handicap (disability), Sex, Familial status (children under 18), Religion. Many states add additional protected classes (sexual orientation, age, source of income, marital status). Exemptions are very narrow.
R
Race
C
Color
N
National origin
H
Handicap — disability
S
Sex
F
Familial status — families with children
D
Religion — creed
Steering and Blockbusting
Steering: directing buyers toward or away from neighborhoods based on protected class — illegal
Steering and Blockbusting
Two specific Fair Housing violations every agent must know
Steering: guiding buyers to or away from certain neighborhoods based on race, religion, or other protected class. Blockbusting (panic peddling): inducing homeowners to sell by suggesting a protected class is moving into the neighborhood. Both are federal violations even if done subtly.
Valid Contract Requirements
Contract elements: COLE — Competent parties, Offer and acceptance, Lawful object, Exchange of consideration
Valid Contract Requirements
Four elements every valid real estate contract must have
Competent parties: legal age and mental capacity. Offer and acceptance (mutual agreement/meeting of minds): one party offers, other accepts without changes. Lawful object: contract purpose must be legal. Consideration: something of value exchanged by both parties (money, promise, services).
C
Competent parties — legal capacity
O
Offer and acceptance — mutual agreement
L
Lawful object — legal purpose
E
Exchange of consideration — something of value
Void vs Voidable Contracts
Void vs Voidable: Void = never valid (illegal). Voidable = valid until one party cancels (minor signed).
Void vs Voidable Contracts
Two types of defective contracts — very different legal consequences
Void contract: has no legal effect from the beginning — as if it never existed. Example: contract for an illegal purpose. Voidable contract: valid and enforceable UNLESS the disadvantaged party chooses to cancel. Examples: contract signed by a minor (minor can cancel), contract signed under duress, fraud.
Statute of Frauds
Statute of Frauds: real estate contracts must be IN WRITING to be enforceable
Statute of Frauds
Why all real estate contracts must be in writing
The Statute of Frauds requires certain contracts to be in writing and signed to be enforceable. Real estate contracts always fall under this. Includes: purchase agreements, listing agreements, leases over one year, buyer representation agreements. Verbal agreements for real estate are generally unenforceable.
Contract Contingencies
Contingencies: conditions that must be met or buyer can walk. Financing, inspection, appraisal most common.
Contract Contingencies
Conditions that must be satisfied for the contract to proceed
Financing contingency: buyer can cancel if they can't get the loan. Inspection contingency: buyer can negotiate or cancel based on inspection findings. Appraisal contingency: protects buyer if property appraises below purchase price. Sale of buyer's home contingency. Removing contingencies makes offers stronger.
Earnest Money
Earnest money: good faith deposit showing buyer is serious. Held in escrow. Forfeited if buyer defaults.
Earnest Money
The good faith deposit and what happens to it
Buyer deposits earnest money (typically 1-3% of purchase price) into escrow when offer is accepted. If buyer defaults without valid reason: seller may keep earnest money as liquidated damages. If seller defaults: buyer gets earnest money back plus may sue for specific performance.
Specific Performance
Specific performance: court orders the party to complete the real estate transaction
Specific Performance
The unique legal remedy available in real estate
Because every piece of real estate is unique, money damages are often inadequate remedy for breach. Courts can order specific performance — compelling the party to go through with the sale. More commonly sought against sellers (who have unique property) than buyers.
Antitrust in Real Estate
Antitrust: agents cannot agree on commission rates with competitors — price fixing is illegal
Antitrust in Real Estate
Federal antitrust law applies to real estate commissions
Sherman Antitrust Act prohibits competitors from conspiring to fix prices. Real estate agents cannot: agree with other brokers on commission rates, agree to divide markets (allocation), agree to boycott certain brokers. Commissions are ALWAYS negotiable between broker and client.
Listing Agreement Types
Listing agreement types: Exclusive right to sell (agent gets paid regardless), Exclusive agency (agent gets paid unless owner sells), Open listing (multiple agents, only selling agent paid)
Listing Agreement Types
Three types of listing agreements — key exam topic
Exclusive right to sell: listing broker gets commission even if owner finds the buyer. Most protective for broker. Exclusive agency: broker gets commission UNLESS seller finds buyer directly. Open listing: non-exclusive, any broker who brings buyer earns commission, broker who sells gets paid.