← Ethics & Disclosure – Florida Real Estate Salesperson Exam

Florida Real Estate Salesperson Exam Study Guide

Key concepts, definitions, and exam tips organized by topic.

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Ethics & Disclosure – Florida Real Estate Salesperson Exam

Comprehensive Study Guide


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Overview


Ethics and disclosure form the legal and moral backbone of Florida real estate practice. Florida Statute 475 governs licensee conduct, while the NAR Code of Ethics sets professional standards for REALTORS®. Mastery of fiduciary duties, required disclosures, and prohibited practices is essential for both the exam and a successful real estate career.


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Fiduciary Duties


The OLDCAR Framework


When a licensee acts as a single agent, they owe the highest level of fiduciary duty to their principal. These six duties are remembered using the acronym OLDCAR:


| Letter | Duty | Core Meaning |

|--------|------|--------------|

| O | Obedience | Follow all lawful instructions of the principal |

| L | Loyalty | Place the principal's interests above all others, including the agent's own |

| D | Disclosure | Reveal all known relevant information to the principal |

| C | Confidentiality | Protect the principal's private information from disclosure |

| A | Accounting | Safeguard and properly handle all funds and property entrusted by the principal |

| R | Reasonable Care | Use professional skill and diligence in all tasks |


Key Definitions


  • • Principal – The party (buyer or seller) whom the single agent legally represents
  • • Single Agent – A licensee who represents only one party in a transaction, owing full fiduciary duties
  • • Fiduciary – A relationship of trust in which one party is legally obligated to act in another's best interest

    • Applying the Duties: Common Scenarios


  • • Loyalty in action: An agent cannot recommend that their principal accept a lower offer simply because it benefits the agent's timeline or commission.
  • • Confidentiality in action: An agent cannot tell a buyer that the seller is desperate to sell or will accept $20,000 less than the listing price — even if true — without the seller's explicit permission.
  • • Accounting in action: Earnest money deposits must be properly placed in escrow and tracked; commingling client funds with personal funds is a serious violation.

    • Key Terms

  • • Fiduciary duty
  • • OLDCAR
  • • Principal
  • • Single agent
  • • Commingling (mishandling of funds — a violation of Accounting duty)

    • ⚠️ Watch Out For

    > - Do not confuse the duties owed by a single agent (all six OLDCAR duties) with those owed by a transaction broker (limited duties only).

    > - The duty of confidentiality does NOT mean withholding material facts from the other party — it means protecting the principal's private motivations and strategy.

    > - Loyalty applies to the principal's interests, not to the broker or the agent's personal gain.


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    Agency & Representation Disclosure


    The Three Relationship Types in Florida


    | Relationship | Duties Owed | Represents |

    |---|---|---|

    | Single Agent | Full fiduciary (OLDCAR) | One party exclusively |

    | Transaction Broker | Limited duties | Neither party; facilitates the deal |

    | No Brokerage Relationship | Minimal (honest dealing, disclosure of known material facts, accounting) | No one |


    Default Relationship


    > Transaction broker is the default (presumed) relationship in Florida when no other agency relationship has been established in writing.


    Timing of Disclosure Requirements


    Under Florida Statute 475, the required disclosure must be provided:

  • • Before entering into a listing agreement, OR
  • • Before showing the property
  • • Whichever comes first

    • Transaction Broker Limited Duties


    A transaction broker owes both parties the following limited duties:

    1. Dealing honestly and fairly

    2. Accounting for all funds

    3. Using skill, care, and diligence

    4. Disclosing all known material facts

    5. Presenting all offers and counteroffers in a timely manner

    6. Limited confidentiality (not disclosing motivation, acceptable price, or terms without permission)

    7. Any additional duties agreed to in writing


    Transitioning from Single Agent to Transaction Broker


  • • The licensee must obtain written, informed consent from the client before making this transition.
  • • This cannot be done unilaterally by the licensee.

    • Key Terms

  • • Single agent disclosure
  • • Transaction broker disclosure
  • • No brokerage relationship notice
  • • Default relationship
  • • Written informed consent

    • ⚠️ Watch Out For

    > - Disclosure is required before showing property, not after. Timing errors are a common exam trap.

    > - The transaction broker does NOT represent either party — they are a neutral facilitator. Do not confuse this with dual agency, which Florida does not recognize in the traditional sense.

    > - Moving from single agent back to transaction broker requires the client's written consent — verbal consent is not sufficient.


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    Material Fact Disclosure


    The Legal Foundation: Johnson v. Davis


    The Florida Supreme Court ruling in Johnson v. Davis established that:


    > Sellers must disclose any known facts that materially affect the value of residential property and are not readily observable or known to the buyer.


    This is the cornerstone of Florida's material fact disclosure law.


    What IS a Material Fact (Must Disclose)


  • • Flood zone status – Affects value and insurability; must be disclosed if known
  • • Structural defects – Foundation issues, roof problems, etc.
  • • Latent defects – Hidden defects not discoverable through ordinary inspection
  • • Environmental hazards – Mold, lead paint, radon, etc.
  • • Zoning or code violations
  • • Known roof leaks, plumbing issues, HVAC problems

    • What is NOT a Required Disclosure (Florida Statute 689.25)


    Florida law explicitly protects certain facts from mandatory disclosure:


    | Non-Disclosable Fact | Legal Basis |

    |---|---|

    | Property was the site of a homicide, suicide, or death | F.S. 689.25 — not a material fact affecting value |

    | Former occupant had HIV/AIDS | F.S. 689.25 — disclosure is actually prohibited |

    | Registered sex offender lives nearby | Not required; buyers should consult the FDLE registry |


    Latent vs. Patent Defects


    | Type | Definition | Example | Disclosure Required? |

    |---|---|---|---|

    | Latent defect | Hidden; not discoverable through ordinary inspection | Water damage hidden behind drywall | Yes — seller must disclose if known |

    | Patent defect | Visible; discoverable through ordinary inspection | Cracked driveway, stained carpet | Buyer can observe; less critical to disclose explicitly |


    Key Terms

  • • Material fact
  • • Johnson v. Davis
  • • Latent defect
  • • Patent defect
  • • Florida Statute 689.25
  • • FDLE (Florida Department of Law Enforcement) registry

    • ⚠️ Watch Out For

    > - A death on the property is not a required disclosure — but many students assume it is. Know F.S. 689.25 cold.

    > - HIV/AIDS disclosure is not only not required — it is prohibited. This is a double-negative trap on the exam.

    > - Flood zone status IS a material fact and must be disclosed. This is frequently tested.

    > - Latent defects create legal liability even after closing if the seller knew and failed to disclose.


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    Fraud & Misrepresentation


    Types of Misrepresentation


    | Type | Definition | Knowledge of Falsity | Actionable? |

    |---|---|---|---|

    | Fraudulent misrepresentation | Knowingly making a false statement to induce a party to act | Yes — intentional | Yes |

    | Negligent misrepresentation | Making a false statement due to lack of reasonable care | Should have known | Yes |

    | Innocent misrepresentation | Making a false statement without knowing it is untrue | No — unintentional | May still be actionable for damages |


    Puffing vs. Fraud


  • • Puffing – Exaggerated, non-factual opinions that no reasonable person would rely on as fact

    • - Example: "This is the most beautiful home in the county!"

    - NOT actionable — it is not a specific false factual claim

  • • Fraud – A specific, false statement of fact made to deceive

    • - Example: "This roof was replaced last year" (when it wasn't)

    - IS actionable — causes real harm based on a false fact


    Concealment


  • • Concealment occurs when a licensee deliberately hides or fails to disclose a known material fact.
  • • This is a form of active fraud, not merely negligence.
  • • Violates Florida Statute 475 and can result in license revocation.

    • Key Terms

  • • Fraudulent misrepresentation
  • • Innocent misrepresentation
  • • Negligent misrepresentation
  • • Puffing
  • • Concealment
  • • Latent defect
  • • Material fact

    • ⚠️ Watch Out For

    > - Puffing is NOT fraud — the key distinction is opinion vs. factual claim. Exam questions will try to blur this line.

    > - Even innocent misrepresentation can result in legal liability (rescission of contract or damages) — being unaware does not always protect you.

    > - Concealment = active fraud. Silence about a known material fact is treated the same as a lie.

    > - A licensee can be disciplined even if the misrepresentation was made by their seller, if the licensee knew and said nothing.


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    Ethics & Professional Standards


    NAR Code of Ethics – Key Obligations


  • • Multiple offers: A REALTOR® must present all offers objectively and as quickly as possible, unless the seller has provided written instructions to the contrary.
  • • Client interests first: REALTORS® must protect and promote the interests of their clients while treating all parties honestly.

    • Personal Financial Interest Disclosure


    Under Florida Statute 475, a licensee must:

  • • Disclose their personal financial interest in writing to all parties before the transaction is completed.
  • • Disclose in writing that they are a licensed real estate professional before entering into any contract when purchasing property for themselves.

    • Fair Housing Violations – Prohibited Practices


    | Practice | Definition | Violation |

    |---|---|---|

    | Steering | Directing buyers toward or away from neighborhoods based on a protected class | Fair Housing Act + Florida law |

    | Blockbusting | Inducing owners to sell by implying protected-class entry will lower property values | Fair Housing Act + Florida law |

    | Redlining | Refusing to provide loans/insurance in certain neighborhoods based on demographics | Fair Housing Act |


    Federal Fair Housing Act – Protected Classes


    The federal Fair Housing Act prohibits discrimination based on:

    1. Race

    2. Color

    3. National Origin

    4. Religion

    5. Sex

    6. Familial Status

    7. Disability (Handicap)


    > Florida adds additional protected classes beyond the federal seven.


    Key Terms

  • • NAR Code of Ethics
  • • REALTOR® (a licensed agent who is also a NAR member)
  • • Steering
  • • Blockbusting
  • • Redlining
  • • Fair Housing Act
  • • Protected class
  • • Personal financial interest disclosure

    • ⚠️ Watch Out For

    > - Steering can be subtle — even recommending a neighborhood because it's "a good fit for your family" based on demographics is illegal.

    > - Blockbusting involves implying future harm from protected-class neighbors — this is distinct from simply discussing neighborhood trends.

    > - A licensee buying property for themselves must disclose their licensee status in writing before signing any contract. Verbal disclosure is not enough.

    > - The NAR Code of Ethics applies only to REALTORS® (NAR members), but Florida Statute 475 applies to all licensees.


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    Quick Review Checklist


    Use this checklist before your exam to confirm mastery of all key concepts:


    Fiduciary Duties

  • • [ ] I can recite and explain all six OLDCAR duties
  • • [ ] I know the difference between single agent duties and transaction broker duties
  • • [ ] I understand that loyalty means principal's interests come first — always

    • Agency & Representation

  • • [ ] I know that transaction broker is the default in Florida
  • • [ ] I know the disclosure must be made before showing or before listing (whichever is first)
  • • [ ] I know that transitioning to transaction broker requires written informed consent

    • Material Fact Disclosure

  • • [ ] I know the Johnson v. Davis standard by heart
  • • [ ] I know that death, HIV/AIDS, and sex offender proximity are NOT required disclosures (F.S. 689.25)
  • • [ ] I know that flood zone status IS a required material fact disclosure
  • • [ ] I can distinguish latent defects from patent defects

    • Fraud & Misrepresentation

  • • [ ] I can distinguish fraudulent, negligent, and innocent misrepresentation
  • • [ ] I know that puffing is NOT fraud (opinion, not fact)
  • • [ ] I know that concealment is active fraud under F.S. 475

    • Ethics & Professional Standards

  • • [ ] I know all seven federal Fair Housing protected classes
  • • [ ] I can define and distinguish steering and blockbusting
  • • [ ] I know a licensee must disclose personal financial interest in writing
  • • [ ] I know a licensee buying for themselves must disclose their license in writing before contract
  • • [ ] I know that the NAR Code of Ethics requires presenting all offers promptly unless seller instructs otherwise in writing

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    Good luck on your Florida Real Estate Salesperson Exam! Focus on the nuances between what MUST be disclosed and what is PROHIBITED from disclosure — these are the highest-frequency exam traps in this section.

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