Real Estate Fair Housing — Laws, Violations, and Protected Classes

A LISTING AGREEMENT is a bilateral contract between a property owner (principal) and a real estate broker (agent). It: authorises the broker to market and sell the property; defines the agency relationship (broker represents the seller as their fiduciary); specifies the compensation (commission percentage or flat fee); sets the listing period; and describes the property and listing price. Types: EXCLUSIVE RIGHT TO SELL (most common — broker earns commission regardless of who finds the buyer); EXCLUSIVE AGENCY (broker earns commission unless the owner finds the buyer themselves); OPEN LISTING (non-exclusive — seller can list with multiple brokers, pays only the one who finds the buyer). The listing agreement establishes the broker's authority to act on the seller's behalf.

EARNEST MONEY (also called a good-faith deposit or escrow deposit) is a sum the buyer deposits when a purchase contract is signed, demonstrating commitment to the transaction. Key points: HELD IN TRUST by the listing broker, selling broker, or escrow company — not by the seller or agent personally (this is a trust account requirement); NOT the buyer's down payment (that comes at closing); AMOUNT: typically 1-3% of purchase price in most markets; FORFEITURE: if the buyer defaults without contractual justification, the seller may be entitled to the earnest money as liquidated damages (governed by the contract); RETURN: if the sale falls through due to a failed contingency (inspection, financing), the earnest money is typically returned to the buyer.

The federal FAIR HOUSING ACT (Title VIII, 1968, as amended) prohibits housing discrimination based on: RACE; COLOR; NATIONAL ORIGIN; RELIGION; SEX (gender); FAMILIAL STATUS (families with children under 18); DISABILITY (physical or mental). Occupation, income level, occupation type, age (except for age-restricted senior housing exemptions), sexual orientation, and source of income are NOT protected under federal law — though many state and local laws add these protected classes. The exam frequently presents scenarios and asks whether discrimination occurred and whether the protected class applies.

Step 1: Total commission = 6% × $425,000 = $25,500. Step 2: Listing brokerage's share = 50% × $25,500 = $12,750. Step 3: Listing agent's share = 60% × $12,750 = $7,650. Commission calculation questions follow this structure: total commission → broker's split → agent's split. The exam uses various split percentages — know the formula: (sale price × commission rate) × broker split × agent split.

LOAN-TO-VALUE (LTV) = loan amount ÷ property value (appraised or purchase price, whichever is lower). Example: $280,000 loan on a $350,000 property = 80% LTV. Why it matters: RISK ASSESSMENT: Lenders view high LTV as higher risk (less equity cushion); PRIVATE MORTGAGE INSURANCE (PMI): Conventional loans with LTV above 80% require PMI — additional monthly insurance protecting the lender if the borrower defaults; PMI can be cancelled when LTV reaches 80% (by law at 78%); DOWN PAYMENT RELATIONSHIP: 20% down payment = 80% LTV = no PMI; FHA loans allow LTV up to 96.5% (3.5% down) but require MIP (mortgage insurance premium) for the loan's life regardless of LTV; VA loans allow 100% LTV (zero down) with no PMI.