Hello everybody, it's Zach here from realestatelicensewizard.com. Today we're doing a full real estate exam crash course. on fair housing. Fair housing and fair lending is a massive portion of the real estate exam, so it's essential you understand it come exam day. Now fair housing as a whole covers a wide variety of topics.
Luckily in this video we're going to go over every single essential that you need to know. We will go over fair housing law, fair lending law, antitrust law, all the important amendments, exemptions, protected classes, violations, and more. This is going to be your ticket to completely understanding this section of the real estate exam and crushing your test. Now a couple quick things I want to go over.
before we get started. One, these are topics that will be featured on the national portion of the exam. So yes, guys, this video is good in all 50 states.
Two, all this information is located on our website, realestatelicensewizard.com. There, if you want to study at your own pace, check out our highly rated prep course, our free practice exam, all that stuff, check it out, link down below. And then lastly, three, if you're new to the channel, please consider subscribing. If you really want to pass your exam, this is the number one place to do so. All right, without further ado, let's get started.
All right, so let's start with the basics. So Fair housing is an important topic on the real estate exam. Real estate professionals, including agents, brokers, property managers, are required to adhere to fair housing laws and regulations to ensure they do not engage in discriminatory practices in their work.
Therefore, understanding fair housing law and their application is critical for passing the real estate exam and for practicing real estate ethically and professionally. Moreover, fair housing laws are an essential component of the real estate industry, and real estate professionals must be knowledgeable about these laws. to avoid violating them. Violating fair housing laws can lead to serious consequences, including legal action, losing your license, and even potentially jail time.
Thus, the real estate exam includes fair housing questions to test a candidate's understanding of these laws and their significance in real estate practice. To understand fair housing, we have to understand where it all began, and that is with the Civil Rights Act of 1866. The Civil Rights Act of 1866 declared that all persons born in the United States States are created equal by the law. This civil rights bill protected the rights of freed slaves, ensuring that they had full and equal benefits of the same laws as white people.
African Americans could no longer face discrimination because of their race, color, or previous slavery or involuntary servitude. But to which personal freedoms did black citizens finally gain access to? Well, most notably, the Civil Rights Act of 1866 said that recently, slave people had the right to do these four things. One, make and enforce contracts, two, sue and be sued, three, give evidence in court, and then four, purchase, lease, sell, hold, and convey real and personal property. Now, among the many benefits of this act, one of the most important was that any person born in the United States could own property regardless of their color or race.
This new law greatly impacted the real estate world, opening the door for conversations about fair housing and housing discrimination. In many ways, the Civil Rights Act of 1860 1866 was revolutionary. The national government finally recognized African Americans as citizens who deserved equal rights. But in terms of real estate specifically, the ramifications of this act was enormous.
The decision that former slaves could own property was not only a step in racial equality, but equality for all types of minorities who fair housing laws would later protect. Unfortunately, the passage of this civil rights bill did not immediately ensure peace and equality for all. Sure, black citizens could finally own property in the United States, but racial discrimination and segregation were still rampant.
It's also worth noting the laws created in the Civil Rights Act of 1866 were not always adequately enforced, so housing discrimination was still a massive issue. Even when black citizens could access housing opportunities, many white citizens were less than welcoming to their neighbors. To make matters worse, black citizens were also fighting voter suppression.
Their ability to to vote for more stringent fair housing laws was compromised, as they were intimidated at polling places and turned away. Considering all of this, it's safe to say that African Americans received only nominal freedom due to the 1866 Act. It's also important to note that this Act was primarily focused on ending discrimination against formerly enslaved people. In terms of housing, there were still other groups being discriminated against, including women and minorities with different religions. The Civil Rights Act of 1866 was groundbreaking, breaking for its time, but it was clear that there was still a long way to go.
Nearly a century after the first, President Johnson signed the Civil Rights Act of 1964. Like the Civil Rights Act of 1866, the bill ensured protection for people of all races and colors but added a few other categories into the mix, creating something called a protected class. The Civil Rights Act of 1964 prohibited Discrimination against the following protected classes, race, color, national origin, religion, and sex. This was a good start for discrimination, but some improvements were still needed.
The Civil Rights Act of 1968 expanded on previous acts and notably prohibited discrimination concerning the sale, rental, and financing of housing. This was introduced by the Civil Rights Title VIII of the Act, also known as the Fair Housing Act of 1968. The Fair Housing Act of 1968 protects buyers and renters from discrimination when looking for housing. When the Fair Housing Act was first enacted, it included the following protected classes, race, color, national origin, and religion.
Since 1968, more protected classes have been added to the list, and a few have had their definition expanded upon. Today, there are seven protected classes which include the following, race, color, national origin, religion, sex, including sexual orientation, gender identity, familiar status, and disability. Now, it's essential to know when these highlighted classes were added and why.
Sex was added by the housing and community. Community Development Act of 1974. The Housing and Community Development Act amends the Fair Housing Act by adding sex as a protected characteristic and provided funding to low income families. Before 1974, housing providers could legally discriminate against and deny housing to women. Since 1974, the definition of sex has expanded to include sexual orientation and gender identity.
This means that same-sex couples and transgender individuals are now protected under the Fair Housing Act. But what about familiar status? and disability. Well, it took 14 years to get those added to the list.
They did this by amending the Fair Housing Act, creating the Fair Housing Amendments Act of 1988. The Fair Housing Amendments Act of 1988 strengthened the original Fair Housing Act and extended its protection to two additional groups. Thanks to this amendment, the federal government had more power to enforce anti-discriminatory laws and combat discriminatory housing practices. This act also gave power to more homebuyers and renters than the first. FHA, as its safety net covered families with children and individuals with disabilities. To this day, real estate professionals and landlords are required to abide by the Fair Housing Act or the Fair Housing Amendment Act of 1988. And that gave us our seven protected classes.
And here's the list. Now, it's worth mentioning states and cities have their own housing laws, many of which are not backed by the Fair Housing Act. Some of these include age, citizenship status.
lawful occupation, source of income, marital status, partnership status, status as a veteran or military service member, status as a domestic violence or stalking victim, and more. If any of these protected classes are facing housing discrimination, the Federal Fair Housing Act does not cover them, but your state-specific fair housing law may. So it's essential as a real estate professional to understand your state-specific fair housing law.
So why is all this so important, while fair housing is important for several reasons? First, it promotes equal opportunity and helps to eliminate discrimination in housing, which is a basic human right. Secondly, it helps to create diverse and inclusive communities, which can lead to greater social cohesion and stronger neighborhoods.
Third, it benefits the real estate industry by promoting professionalism and ethical behaviors among real estate agents, landlords, and lenders. Finally, fair housing laws help to ensure that people are able to access safe and affordable housing. Today we covered the Fair Housing Act, its amendments, and protected class.
classes, we have to talk about what the FHA specifically covers. The Fair Housing Act protects most housing types for home seekers with protected characteristics. These examples would include single-family homes, multi-family homes, apartments, condos, mobile homes, and even nursing homes. Essentially, if a property constitutes a dwelling or place of residence, there's a strong chance that interested buyers and renters are protected under the FHA.
So who does the FHA not protect? Well, the Fair Housing Act in its... its amendments does cover a lot of ground, but it's important to note that this act doesn't cover all housing types. So some examples not covered by the FHA would include apartment buildings with less than five units, single family homes sold without a real estate agent, housing for religious organizations, hotels and motels, and even private clubs.
Now real estate professionals must understand which behaviors violate the Fair Housing Act and contribute to housing discrimination. That's why I put up a list. and you can see it right here, of an example of FHA violations.
So maybe refusing to show minorities houses in a certain neighborhood, charging renters with children additional fees, refusing to repair a tenant's unit because of their sexuality, suggesting that minorities live in an area with other minorities, harassing a homebuyer because of their religious beliefs, and more. Now, within these violations, There's a few specific ones that we must cover for the exam. Blockbusting, steering, and redlining.
Students miss these up all the time, so listen up. Redlining is the denial of goods or services to people of a protected class. Redlining in real estate commonly involves lending, which is where its origin actually began. During the 1920s, banks would literally draw red lines on maps, defining safe and unsafe areas to invest or grant loans.
The majority of these red areas that they would not allow people to get loans in were in minority areas. Now it's worth mentioning that redlining for the real estate exam will likely refer to the discrimination in the lending industry by not granting loans to people of a protected class. Now steering is a illegal practice of guiding or steering someone to purchase or rent a home in a specific area or community based on their race, religion, gender, or really any protected class. Steering is a form of redlining in that you deny a service to someone based on their race. on their race, religion, or protected class.
So that's the difference there. Blockbusting is another form of discrimination, but slightly different than steering and redlining. Blockbusting involves convincing sellers that the socioeconomic areas of an area is quote-unquote changing or maybe moving in an unfavorable direction, therefore enticing them into selling their homes.
It can be as obvious as telling someone that minorities are moving into a neighborhood, and if they don't sell now, that property values will decrease. This is also known as panic selling. Now understanding these violations is essential. Also remember that these practices were made illegal by the Fair Housing Act, so that's why there's all this relation to this.
Now let's cover penalties for violating the Fair Housing Act. So why should a future real estate professional such as yourself avoid violating the FHA? Well according to the Department of Housing and Urban Development, penalties for violating the FHA include a $16,000 first-time violation fine, $500 fine if previous violations have occurred in the last five years, and then $65,000 if two previous violations have occurred in the last seven years.
In cases where home providers use force or threat force to violate the FHA, penalties are even more serious and can include possible time in prison. So who enforces these acts and laws? Well, the FHA is enforced by the U.S. Department of Housing and Urban Development, HUD, which investigates complaints of housing discrimination and takes legal action against violators.
HUD also provides education outreach programs to promote fair housing awareness and compliance among housing providers and consumers. Additionally, HUD funds state and local agencies that enforce fair housing laws that are substantially equivalent to the FHA. Now we must discuss fair housing exemptions.
The Fair Housing Act has certain exemptions where housing providers can actually discriminate. The three exemptions to the Fair Housing Act that you need to know for the real estate exam are one, One, the Mrs. Murphy exemption. Two, the single family home exemption. And then three, affinity housing.
So what is the Mrs. Murphy exemption? Well, the Mrs. Murphy exemption states that if an owner-occupied dwelling has four or fewer rental units, it is exempt from the Fair Housing Act. That means that if a property owner lives in a home with three other rented rooms, they can technically discriminate against certain protected classes. The Mrs. Murphy exemption works differently now than it did way back in the day. For example, Mrs. Murphy said the world can only be a place where a person can live longer discriminate based on race because of the Civil Rights Act.
However, property owners who fall under this exemption can still discriminate based on sex, religion, familiar status, and disabilities. If Mrs. Murphy prefers renting to female tenants or fellow widows to support her limited income, this exemption gives her the right to turn down other applicants. If you think this exemption sounds problematic, you're not alone. Many fair housing groups have called for its repeal. These organizations argue that Mrs. Murphy exemption encourages housing discrimination, by denying equal opportunities to protected classes.
Some states even have systems that limit or completely override this discriminatory loophole, but still you need to be aware of this exemption no matter what state you're in. Now what is the single family home exemption? Well, the single family home exemption states that any single family dwelling sold without an agent is exempt from the FHA.
This means single family homeowners can be more discriminatory when selling their homes themselves. What classifies as a single family home? Well, a single family home is a residential property not attached to any other units.
These homes are for only one family to live in at a time. So some examples of non-single family homes would be apartments, townhouses, condos, duplexes, mobile homes, things like that. The single family exemption does not cover multifamily homes and other property types.
Homeowners selling multifamily homes must follow all fair housing laws. Now there are five conditions that need to be met in order to use the single family home exemption. And they are, I'll put them on the screen. One, the homeowner is not using a licensed real estate agent or broker. Two, the homeowner owns fewer than three other single family homes.
Three, the homeowner is not living on the property during the sale. Four, no discriminant advertising is used for the sale. And then five, the exemption.
has not been used in the previous 24 months. The sale or rental of the home must meet all of these conditions for it to be exempt from fair housing laws. So when does this act specifically not applied?
Well, it doesn't allow homeowners to to discriminate based on race. They can only discriminate against characteristics such as sex, religion, or familiar status. In fact, there is no exemption to the Federal Fair Housing Act that allows housing providers to discriminate racially.
This is all thanks to the Civil Rights Act. This act asserts that citizens must be treated equally regardless of race. So hopefully you understand that exemption. It can be a little bit confusing, but essentially an example of how this would work is let's say there's a family that they're super religious. And maybe they, you know, they feel obligated to sell their home, their family home to that same religion or some member of their like religious community.
You know, maybe there's multiple offers, but maybe they go with the one in the religious community because they feel like they're obligated to do that. But yeah, that's that's kind of how it works. And essentially, again, you know, we have to remember it is not when a real estate agent is included. It is only only if they're doing a for sale by owner. So you as an.
an agent, if you come in and someone's like, hey, I only want to sell to like A, B, or C, you cannot do that. You cannot, because again, you're an agent, you have your own code of ethics, completely different. The single family home exemption is only applied for for sale by owners. Yeah, so just remember that.
Next is affinity housing. Affinity housing is another exemption to the Fair Housing Act. This type of housing allows protected classes to live in exclusive communities. The purpose of these communities is to create a safe space where tenants with shared culture can live. cultures can live together.
Examples of affinity housing include black affinity communities on college campuses, same-sex dormitories on college campuses, senior housing communities, housing for religious organizations, or even private clubs offering housing as amenities. Affinity housing is not housing discrimination because it's purely optional. Protected classes do not have to live in affinity communities.
If they did, that would be segregation. Affinity communities only exist to give marginalized groups. groups, the option to live among like-minded tenants.
So those are your three FHA exemptions that you need to know for the real estate exam. So hopefully now you understand those and we can move forward. Now there's one other fair housing law that I wanted to cover before we move into fair lending. It's not part of the Fair Housing Act, but it's also super important to know.
It's called the American with Disabilities Act of 1990. The American with Disabilities Act, or ADA, protects people with disabilities against discrimination in housing. This federal law states that housing providers must provide equal opportunities for persons with physical or mental impairments. The American Disabilities Act 1990 plays a significant role in real estate.
Under this act, housing providers must make reasonable accommodations and modifications to ensure disabled people they can live comfortably in their units. If such accommodations are not made, housing providers can face severe legal repercussions. Now, what type of property is not covered by the ADA?
Well, Well, the ADA doesn't cover residential properties, religious organizations, or private clubs. This means that privately owned homes, churches, and clubs do not have to comply with the ADA. Now, obviously, that doesn't mean that they shouldn't comply with the ADA. Obviously, they can, but it just means that they're not legally obligated to at this time.
Now, the ADA was expanded in 2008, and it created the ADA Amendments Act of 2008. The ADA Amendments Act of 2008 empowered the ADA to protect more people. disabilities. Before this amendment, the Supreme Court had interpreted the definition of disability very narrowly.
This meant that individuals with certain disabilities were not winning their cases against housing discrimination. The ADA Amendments Act expanded the definition of disability so that more people with physical or mental impairments were protected under the law. Now that we've covered the specific Fair Housing Act and everything that accompanied with it, we have to talk about fair lending, which is a significant chunk of fair housing.
So what is fair lending? Well, fair lending covers a wide variety of things as well, like all of these topics. But pretty much it starts with the individual laws that pretty much promote fair lending.
And that's going to start us with the Truth in Lending Act. The Truth in Lending Act protects consumers against unfair and predatory lending practices from credit companies. This act, passed in 1968, requires that lenders fully explain to consumers the terms and conditions of their loans. The Truth in Lending Act prohibits unfair credit practices that are designed to put more money in mortgage brokers'pockets. This act protects consumers from the effects of the pandemic on their health and safety.
consumers who are taking out home mortgage loans and home equity lines of credit. The Truth in Lending Act ensures that lenders provide consumers with a closing disclosure explaining all mortgage loan details. And these are the details that must be included. Loan terms, purchase price, monthly payment amount, closing costs, and other fees.
Now there are penalties for violating the Truth in Lending Act. If a creditor violates the Truth in Lending Act for any reason, they may be fined $5,000, face one year of imprisonment, or both. in severe cases.
Now, there are a few amendments to the Truth in Lending Act throughout the years that we need to know. Now, there was a Fair Credit Billing Act. While the Truth in Lending Act played a massive role, the Fair Credit Billing Act took it a step further. Enacted in 1974, the FCBA amends the TILA by ensuring creditors cannot negatively impact an individual's credit before an investigation is done.
The Fair Credit Billing Act allows consumers to dispute credit billing errors. errors, including unauthorized charges, finance charges with incorrect amounts, incorrect dates, charges for items or services that were not delivered, and even questionable charges. Furthermore, the FCBA demands a fair and timely resolution for credit billing disputes so that the offering lenders right their wrongs as soon as possible.
As long as borrowers dispute credit billing errors within 60 days from the time they receive their bill, the FCBA has their back and will protect their credit. Next is the Dodd-Frank Truth in Lending Act. Now, this is another notable act that you need to know that amended the Truth in Lending Act.
The Dodd-Frank Truth in Lending Act, enacted in 2010, requires the following extra protections from lending companies. One, mortgage loan officers need a license to offer credit loans. Two, lenders must adjust the dollar threshold for exempt consumer credit annually.
And then three, lenders must make reasonable determinations of a consumer's ability to pay back the credit for a home. The last amendment listed is among the most important, as it means creditors cannot give out loans to borrowers who cannot repay them. We know that credit checks are now required to determine a borrower's ability to repay, but this was not always the case before acts like the Dodd-Frank Truth in Lending Act were enacted.
Now that we cover the Truth in Lending Act and its amendments, we need to talk about another essential fair lending act, the Equal Credit Opportunity Act. The Equal Credit Opportunity Act, or the ECOA, prohibits discrimination against borrowers applying for home loans. Per the ECOA, lending institutions cannot treat protected classes differently than anyone else.
So who are the protected classes under the ECOA? Well, I'm going to put them on the screen for you. It's race, color, religion, national origin, sex, including gender identity and sexual orientation, age, receipt of income from a public assistance program, and the applicant's exercise of any right under the Credit Consumer Protection Act. So what is that last one?
What is the Consumer Credit Protection Act? Well, this protects consumers from abusive lending practices. This act encompasses encompasses the Equal Credit Opportunity Act or Title VII.
So what housing loans does the ECO cover? Well, under the Consumer Credit Protection Act, the ECO covers mortgage loans, home improvement loans, and home equity loans. So why is this act important?
How is it applied? How was it applied? And how is it applied today? Well, we have to kind of take a step back a little bit and we have to talk about why the Equal Credit Opportunity Act was passed in the first place. So women back then were regularly facing discrimination from mortgage lenders before the ECOA.
These lenders often refused to... considered a married woman's income when giving out loans. They also denied credit loans to single women more often than other applicants. The Equal Credit Opportunity Act was created to prohibit this type of discrimination based on sex and marital status. However, it wasn't very long after that that Congress amended the act to include the other protected classes that I talked about before.
Now, there are penalties for the ECOA, and they are as follows. Actual damages, punitive damages of up to $10,000 for individual lawsuits, and then $500,000 for individual lawsuits. or 1% of their net worth for class action lawsuits. Now, another essential fair lending act you need to understand for the real estate exam is the Real Estate Settlement Procedures Act. So what is the Real Estate Settlement Procedures Act?
Well, RESPA, or the Real Estate Settlement Procedures Act, requires that lenders and mortgage brokers provide homebuyers with disclosures regarding the real estate settlement process. This act, also known as Regulation X, protects homebuyers from predatory lending agreements. So what do real estate settlement services do? If you guys don't know, obviously you need to know to understand this.
Well, a real estate settlement service helps homebuyers with the closing process after purchasing a home. These organizations generally provide title insurance or offer escrow services. Before RESPA, there were very few laws regulating these types of services. This meant that lenders could get away with abusive behaviors, including doling out predatory loan terms.
That's why RESPA was passed in 1974 to protect borrowers from these practices and support a fair housing market. So what does RESPA do to protect homebuyers? Well, it protects homebuyers from unjust practices and surprise fees and mortgage loans. Under RESPA, lenders have to be upfront about the costs of their real estate settlement services. They must disclose a good faith estimate of how much the borrower will pay.
This allows consumers to make informed decisions and shop for the best deal. RESPA also prohibits mortgage companies from adding kickbacks and referral fees to the costs of the real estate settlement service. This saves homebuyers money by ensuring they only have to pay for the cost of the actual work being done.
Finally, RESPA allows homebuyers to seek help if a mortgage company overcharges or takes advantage of them. If a lender includes hidden fees in a home loan, homebuyers are protected under federal law and will not have to pay these charges. So what specifically does RESPA cover?
Well, RESPA covers all federally related mortgage loans for one to four family properties. A federally related mortgage loan is a loan for a residential property that is not subject to a mortgage loan. insured by the government.
So this would include home loans, home improvement loans, refinances, equity lines of credit, reverse mortgages, and lender-approved assumptions. Now, examples of loans that RESPA does not apply to would be extensions of credit from the government, loans for businesses, loans for commercial purposes, and even loans for agricultural purposes. Now, RESPA prohibits predatory lending tactics that force home buyers to pay more for real estate settlement services.
Examples of RESPA violations include Offering kickbacks and referral fees, requiring large escrow account balances, inflating costs of services, bribing in exchange for referrals, and not disclosing good faith estimated settlement costs, and then demanding title insurance. Now, I want to highlight violations on this list, specifically kickbacks and usury. What is a kickback? Well, kickback is when a real estate agent receives financial benefits or items of value for referring clients to a business or service.
This practice is called a kickback because it kicks some of the profit gained from referrals back to the agent who helped them get it. Kickbacks are illegal because real estate agents are responsible for being transparent with their clients. When an agent only refers a business to homebuyers because they are incentivized to, it's a conflict of interest.
Real estate agents should make referrals based on the best options for homebuyers, not themselves. The second one I wanted to talk about is usury. Usury is the act of lending money at unreasonably high interest rates.
Usury laws protect homebuyers from taking out home loans with exorbitant interest rates. States each have their own usury laws that set a maximum interest rate limit for lenders to follow. These laws prohibit discriminatory lending practices and ensure that homebuyers pay interest at a reasonable rate.
State usury laws vary, so real estate professionals need to be familiar with their own maximum interest rate for their estate. So now, who enforces fair lending laws like the Truth in Lending Act, the ECOA, and RESPA? Well, there's really three different agencies enforcing fair lending laws and safeguarding consumers from corrupt creditors. These agents are the FTC, the Federal Trade Commission, the Consumer Protection Financial Bureau, and then the Office of Comptroller of the Currency.
Now that we've covered fair housing and fair lending, we need to cover antitrust laws. Like fair lending, antitrust laws encompass fair housing. And that all starts with the Sherman Antitrust Act.
So the Sherman Antitrust Act is the first... federal law prohibiting contracts, conspiracies, or agreements that restrain trade. Antitrust laws are a collection of federal and state government laws that regulate the conduct and organization of business corporations. These laws typically aim to promote fair competition for the benefit of consumers.
There are three major antitrust laws, the Sherman Antitrust Act, the Clayton Act, and the Federal Trade Commission Act. But you might ask, why are there multiple antitrust laws? Well don't worry.
I'll cover that. So the Sherman Antitrust Act prohibits several behaviors that compromise a fair housing market, including price fixing, bid rigging, group boycotting, market allocation, and tie-in arrangements. These are all examples of antitrust violations in real estate. They show up on the exam all the time, which is why we're talking about them. But I really want to highlight these because, again, a common question that is seen all the time, and after you guys take the test, you can come back and comment on this video.
if you had a question like this, but essentially they'll ask you what this antitrust violation is and they'll essentially explain it. And then you have to say, yep, this was price fixing or yep, this was group boycotting and things like that. Anyways, let's take a look at these. So price fixing is the practice of setting the price of good or service to make a particular price, a standard, any agreement, even if just implied with other brokerages to set a standard commission rate violates antitrust law. One example of price fixing would be maybe.
two brokers getting together and agreeing to offer their clients the same price or commission rate. This interferes with a fair market and means that clients will have to pay higher prices. Next is bid rigging. Bid rigging is an illegal practice where competitors agree in advance.
on who will win on a bid on a property. This creates higher pricing that would normally have occurred under a free market, effectively cheating consumers into paying more. For example, if two competing real estate agents agree to take turns being the lowest bidder to drive up the price on a home sale, that would be considered bid rigging. Next would be group boycotting.
Group boycotting is when two or more people conspire against another business by no longer working or supporting it. For example, if two brokers agree to take turns being the lowest bidder to agreed never to conduct business with a third broker to have less competition. That would be a clear violation of the Sherman Antitrust Act.
Next is market allocation. Market allocation is when real estate brokers divide the market amongst themselves so they don't have to compete with each other. This behavior is considered engaging in monopolistic practices and violates antitrust laws. One example of market allocation is if brokers decide to split up their area into different regions, designating a different real estate agent for each spot. This means that within each region, there is no competition and home buyers will end up having to pay more.
Then there's tie-in arrangements. A tie-in arrangement is when a seller requires the purchase of another separate product or service for the sale of the first. An example of a tie-in arrangement would be if a real estate agent agreed to sell a property, but only if the buyer agrees to list the property with their firm. So what are the penalties for violating antitrust laws?
Well, today, penalties for breaking antitrust laws include hefty fees and even jail time. Now, But back in the day, many people didn't really pursue legal action against offenders, as the cost and time that went into a court case were not really deemed worth it. So why wasn't it worth the trouble? Well, the Supreme Court severely limited the power of the Sherman Antitrust Act.
Many consumers didn't feel they could win antitrust cases against big businesses. New acts have been since created to uphold antitrust legislation and ensure fair business competition. This brings us to the new and improved version of the Sherman Antitrust Act. Act, the Clayton Act.
The Clayton Act, like the Sherman Antitrust Act, was designed to break up monopolies and ensure fair competition in the market. Now, what does the antitrust law offer that the Sherman Act didn't? Well, the Clayton Act strengthened the original antitrust law, explicitly listing business practices that would compromise a fair market. No longer could businesses find loopholes around the Sherman Act. These new antitrust laws were clear and final.
In fact, we still operate under these these laws today. And then, of course, there was the Federal Trade Commission Act or the FTC, and essentially that enforced the Clayton Act and ensured fair business practices in all markets, including housing. Any real estate business must ensure they're meeting the legal standards of the FTC by not breaking antitrust laws.
The FTC Act also declared that strikes, boycotts and labor unions would be legal under federal antitrust laws. This gave consumers even more power as big businesses couldn't take advantage of them without the threat of repercussions. If a company were unethical in some way, consumers could stop buying its goods and support the competition instead.
If a business wasn't treating its employees well, it could organize within its labor union and go on strike. Essentially, acts like the Clayton Act and the Federal Trade Commission Act are the new and improved versions of the Sherman Antitrust Act. And that's everything you need to know for the real estate exam about fair housing.
We covered a lot. hopefully it was informative to you. Hopefully you enjoyed. Hopefully maybe you had a little bit of fun.
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