Law of Agency - review
SELLER'S DISCLOSURE NOTICE REQUIREMENTS- PAGE 67
(a) A seller of residential real property comprising not more than one dwelling unit located in this state shall give to the purchaser of the property a written notice as prescribed by this section or a written notice substantially similar to the notice prescribed by this section which contains, at a minimum, all of the items in the notice prescribed by this section. (b) The notice must be executed and must, at a minimum, read substantially similar to the following: (c) A seller or seller's agent shall have no duty to make a disclosure or release information related to whether a death by natural causes, suicide, or accident unrelated to the condition of the property occurred on the property or whether a previous occupant had, may have had, has, or may have AIDS, HIV related illnesses, or HIV infection. Section 5.008 of the Texas Property Code requires that a seller of a residential property disclose all material facts relating to the condition of the property.
CLIENT VS. CUSTOMER- ROLE OF THE AGENT- PAGE 36
-A customer is someone who is making a buying decision. A buying decision is a process of evaluating the benefits of making a purchase. -must disclose to the customer whom they are representing in a real estate transaction. -must provide customers with required notices and disclosures. -Customers are not entitled to representation. A salesperson or broker cannot make any decisions, no matter how beneficial they may be, on behalf of a customer. The client is being represented. Everything is in the client's best interest. You can share your opinions.
IRS INDEPENDENT CONTRACTOR STATUS RULES- PAGE 153
-Commissions must compensate for the sales agents. There are to be no advances against their commissions. -There may be policies and procedures manual provided but there may not be mandatory compliance with the policies. It is only a suggested procedure manual. -The sales agent shall pay his own business expenses. -The sales agent cannot be made to attend sales meetings. -The sales agent cannot be made to attend training seminars. -The sales agent cannot be made to work set hours. A broker can require that the agent be "full time," but cannot dictate set work hours. -Sales agents should not be offered participation in the broker's insurance or retirement program.
REQUIREMENTS FOR INDEPENDENT CONTRACTOR STATUS- PAGE 154
-Commissions must compensate the sales agents. There are to be no advances against their commissions. -There may be a policies and procedures manual provided but there may not be mandatory compliance with the policies. It is only a suggested procedure manual. -The sales agent shall pay his own business expenses. -The sales agent cannot be made to attend sales meetings. -The sales agent cannot be made to attend training seminars. -The sales agent cannot be made to work set hours. A broker can require that the agent be "full time," but cannot dictate set work hours. -Sales agents should not be offered participation in the broker's insurance or retirement program.
DUAL AGENCY VS INTERMEDIARY- PAGE 125
-Dual agency is a practice that allows a real estate firm to represent both sides of a transaction (buyer and seller, landlord and tenant) at the same time. In dual agency, the broker represents both parties with their written permission. While there are differences from one state to another, all dual agency laws deal with the conflict that is created when the broker has an agency duty to both sides of a transaction. A dual agency broker may appoint a designated agent to represent the buyer or the seller. Complying with the duties of representation is difficult in a dual-agency situation. The easiest duty of the dual agent is accounting. In all other areas, the parties are likely to have conflicting interests. In Texas, we must use Intermediary instead of Dual Agency. -Intermediary is a process that makes it possible to bring client buyers and sellers together while at the same time representing their best interests. When this type of transaction occurs, the broker becomes the Intermediary. Since the broker has a personal duty to represent both sides, it is only appropriate that the broker remain neutral and avoid negotiating for either party. The broker cannot do anything that would give an advantage to one client at the expense of the other.
ELEMENTS OF A VALID LISTING AGREEMENT- PAGE 87
-Exclusions: items to be excluded for the sale. - Owners' Association: If an owners association fee must be paid, it is a mandatory association. -Listing Price: should be based upon a careful analysis of the market. -Term: All listing agreements must have a definite termination date. Should be long enough to market the property under market conditions at the time. Broker's fee: Usually a fixed percentage of the sale price. Could be a lat fee such as a fixed $ amount. -Earned: According to B(1), the broker is due a fee even if the seller sells the property. The fee is also earned when the broker procures a ready, willing, and able buyer who is willing to purchase the property. Payable: the fee is payable upon the closing funding of a sale of the property, but there are exceptions. If the broker met the requirements, the fee would be immediately payable if the seller refused to sell.
DISCLOSURE REQUIREMENTS FOR THE AGENT TO CUSTOMERS AND CLIENTS- PAGE 108
-Honest Dealing — An agent may not deceive, defraud, or otherwise dishonestly deal with a customer. -Reasonable Care and Skill in Performance — This means that an agent will be held to the standards of knowledge, expertise, and ethics that are spelled out in the Texas Real Estate License Act. -Disclosure of all Material Facts — The license holder must disclose all facts that he or she knows or should reasonably be expected to know that materially affect the value of or desirability of the property. Facts include disclosure of agency, property condition, and environmental hazards.
INTERMEDIARY- APPOINTED ASSOCIATES- DUTIES AND REQUIREMENTS- PAGE 125
-Intermediary is a process that makes it possible to bring client buyers and sellers together while at the same time representing their best interests. When this type of transaction occurs, the broker becomes the Intermediary. Since the broker has a personal duty to represent both sides, it is only appropriate that the broker remain neutral and avoid negotiating for either party. The broker cannot do anything that would give an advantage to one client at the expense of the other. -In order to practice Intermediary, the broker must have the written consent of both parties. The written consent must state the source of any anticipated compensation. We most often obtain written consent from the seller when they sign a listing agreement. We most often obtain written consent from the buyer when they sign a buyer/tenant representation agreement. In that written consent, the seller is giving the broker permission to show his or her property to buyers whom the broker also represents. Likewise, the buyer is giving the broker has written consent to show him or her properties listed with the firm. -The appointed associates will give advice and opinions (which means to negotiate) to their respective parties. The broker must make the appointments, most likely by using the Intermediary Relationship Notice. Sue and Bill do not become appointed associates until the appointments are made.
STIGMATIZED PROPERTIES- CONDITIONS AND DISCLOSURE REQUIREMENTS- PAGE 72
-Murder on the premises - a great many buyers object to living in a property where a murder has been committed. The impact on the desirability and value of the property is proportionate to the amount of time that has elapsed and the severity of the crime. -Death on the property - some buyers will pass on the opportunity to buy a property in which anybody has died for any reason. This may be problematic for homes that are quite old, as death at home was the norm prior to the early 20th century. -Suicide - suicide is in much the same category as death on the property. Some ascribe more importance to suicide as it is thought by some to "infect" the property with negative energy. -Infectious disease - some buyers will shy away from a property if it is known that it was occupied by somebody with an infectious disease. -Criminal activity - the common criminal activity would include meth labs, drug distribution operations, gang activity, illicit gambling operations, and other undesirable business enterprises. Potential purchasers are concerned that the operators or patrons of the criminal activity might return to the property, not knowing that it has new occupants. -Property condition issues - damage to a property, including flood, foundation repair, fire, toxic waste, etc., even if cured, can result in the stigma that reduces the value of the property. -Paranormal activity - a property that is believed to be haunted is avoided by most potential buyers.
DISCLOSURE OF REPRESENTATION- HOW AND WHEN- PAGE 107
-Regardless of representation, all buyers should be provided with an oral or written disclosure of representation at first contact. That disclosure is normally done orally when the buyer first calls or visits the office. Whatever the method of contact, personal visit, phone, fax, or e-mail, the notice of representation should be given. -When the agent and the buyer have a substantive discussion about real estate, the buyer must be provided the Information About Brokerage Services. -If the buyer is interested in a property that is owned by the listing broker, agent, parent, child, or spouse, that relationship must also be disclosed. Likewise, if the buyer is an agent, parent, child, or spouse of the agent, that relationship must be disclosed as well.
DTPA- PAGE 205
-The DTPA lists over 30 practices that are considered unlawful under the act in order to protect the consumer from unethical and unfair sales practices. -To better understand how to license holders became a party to the DTPA, the following definitions may help: -Goods - are defined as tangible chattels (real property is tangible when purchased or leased. Under DTPA, the sale of a house is considered a good). -Services - means work, labor, or repair of goods. Brokerage is a service. -Consumer - an individual, corporation, partnership, or government source who seeks to acquire or purchase goods or services. Any consumer can bring an action against a provider of services when the consumer can prove that the servicer was the producing cause of any of the following: -use or employment by any person of a false, misleading, or deceptive act or practice that is specifically identified in the act. -breach of an express or implied warranty. -any unconscionable action or course of action by any person. -the use or employment by any person of an act or practice in violation of the Texas Insurance Code. Producing cause requires proof that the act or omission was a significant factor in bringing about the injury.
FIVE SOURCES OF ETHICAL STANDARDS AND WHAT INCLUDES- PAGE 179
-The Utilitarian Approach - Ethical action produces the greatest balance of good over harm to those who are affected. -The Rights Approach - Individuals have the right to have their moral rights protected and respected, and the right to be told the truth, and not to be injured. -The Fairness or Justice Approach - Ethical action is equal for all, or if not, then fair for some, based on some defensible standard. -The Common Good Approach - Ethical standards and actions embrace common conditions that are important to the welfare (common good) of all. -The Virtue Approach - Ethics are habits that enable us to act accordingly as persons who are truthful, honest, courageous, compassionate, generous, tolerant, and possess integrity, fairness, self-control, and prudence.
DUTIES OF THE AGENT AND EXPIRATION OF THOSE DUTIES- PAGE 49
-The duties of the agent do not end with the termination or expiration of an agency relationship. The duty of confidentiality extends forever into the future. The client is reasonable in expecting confidential information will be kept confidential.
ELEMENTS OF A VALID LISTING AGREEMENT- PAGE 81
-The signatures of all of the owners and the listing agent -A legal description of the property, including the street address -The list price of the property as set by the seller -A definite starting (commencement) and ending (termination) date -The agreement to pay a stated commission (compensation) to the broker, usually a percentage of the sales price A complete listing package helps to avoid misunderstanding between buyer, seller, and agents regarding the critical elements of a transaction.
TERMINATION OF AGENCY RELATIONSHIPS- PAGE 48
-When the purpose of the relationship is completed. -The expiration of the period stated in the listing contract. The License Act requires that listing agreements must have a definite termination date that is not subject to prior notice: *Sec. 1101.652. Grounds for Suspension or Revocation of License. (a) The commission may suspend or revoke a license issued under this chapter or take other disciplinary action authorized by this chapter if the license holder: *(12) fails to specify a definite termination date that is not subject to prior notice in a contract, other than a contract to perform property management services, in which the license holder agrees to perform services for which a license is required under this chapter; -At any time by mutual agreement. The parties are certainly free to terminate the agreement. -Death or incapacity of either party. If the broker or client dies or is determined to be insane, the agency agreement is terminated. Note that, because the parties to an agency agreement are the client and broker, the death or incapacity of a sponsored license holder has no legal effect on the agreement. -Condemnation or destruction of the property. Condemnation or destruction of the property would make its sale impossible, resulting in termination. -The bankruptcy of either party. -Operation of law. -Revocation of the broker's license. If the broker's license is revoked, all agency agreements with buyers and sellers are terminated. -Abandonment by the agent. -Revocation of the agreement at any time by the principal. -Termination of the agreement at any time by the broker.
TYPES OF DECEPTIVE OR MISLEADING ADVERTISING PRACTICES- PAGE 228
A license holder may not place an advertisement that • implies a sales agent is responsible for the brokerage business, or • causes someone to believe a person not authorized to conduct brokerage is engaged in brokerage. Deceptive or misleading advertisements may include: • an advertisement that is inaccurate in any material way or misrepresents any property, terms, values, services, or policies; • advertising another broker's listing without permission and without disclosing the name of the listing broker; • failing to remove an advertisement about a listing within a reasonable time after it ends; • an advertisement that identifies a sales agent as a broker; or• an advertisement that creates confusion about the permitted use of a property.
STIGMATIZED PROPERTIES AND CONDITIONS- PAGE 72
A property is stigmatized when some adverse event occurs on-site, or some people believe that a past event or condition is affecting it. A property that is stigmatized psychologically or physically can be challenging to sell. An example of a psychological stigma would be the belief among some that a house is haunted. Events on a property such as murder, death, and infectious disease can also create psychological stigma.
TYPES OF AUTHORITY AND THE DEFINITIONS- PAGE 26
A written listing agreement or buyer representation agreement is evidence that the agency relationship exists, and provides the agent with EXPRESS AUTHORITY. Express authority also comes from the specific oral instructions given to the agent by the principal. Agency authority, or rights, may also be a result of "the norm," or what is considered customary in the business. For example, a homeowner can expect the listing agent to make appointments to show the property, not only during business hours but also on weekends and in the evenings. This is standard practice in residential real estate, and this authority is defined as IMPLIED AUTHORITY. A commercial owner, on the other hand, would probably not expect the property to be shown on weekends or in the evenings.
BUYER AGENCY ONLY AND SELLER AGENCY ONLY FIRMS- ADVANTAGES AND DISADVANTAGES- PAGE 148
ADVANTAGES OF BUYER AGENCY ONLY AND SELLER AGENCY ONLY (NO INTERMEDIARY) • Firms that practice Buyer Agency Only or Seller Agency Only do not have to worry about unintentional dual representation. -Brokers do not have to act as intermediaries or make appointments. -Agents are only responsible for giving advice and opinion to the buyer or seller, avoiding conflicts of interest that may occur when representing both sides of a transaction. DISADVANTAGES OF BUYER AGENCY ONLY AND SELLER AGENCY ONLY • Many buyers do not want to sign a Buyer's Representation Agreement because they do not want to pay a commission to a Buyer's Agent. • Agents can only list properties for sellers, or have buyers sign Buyer's Representation Agreements, limiting the firm to either the selling side only or listing side only commission.
TYPES OF AUTHORITY FOR AGENTS-PAGE 26
AGENCY BY ACTUAL AUTHORITY exists when an individual grants express authority to the agent to perform some act. The authority granted may be in oral or written form. Actual, written authority is given to a broker when a seller signs a listing agreement. An example of actual oral authority is when a buyer and agent enter into an unwritten buyer representation agreement. Actual, oral authority is often granted to the agent after the client enters into a written agreement. A common example would be a seller asking that the agent hold an open house. OSTENSIBLE AGENCY exists when actions lead another person to assume that one is an agent. For example, a license holder might falsely make public statements that he or she is representing a commercial property owner as a leasing agent or property manager. If the property owner learned of the misrepresentation and made no effort to correct it, ostensible agency may be created because it is reasonable for others to believe the license holder. AGENCY BY RATIFICATION occurs when an agent acts without prior authorization, and the principal accepts it upon learning of the action. For example, a seller, relocating to another state, has left the house vacant and listed with a local real estate agent. The agent has found a buyer, and the seller accepts the offer. At closing, the seller is surprised to learn that he will receive one week's rent in addition to the sales price. Although the agent had no authority to do it, the seller's agent authorized the buyers to move in one week before closing. This behavior on the part of the agent was extremely risky and unprofessional. The seller accepts this action on the part of the agent and receives rental income in addition to the sales price. By accepting the rent payment, this seller has ratified the unauthorized action of the agent. Another type of agency authority is AGENCY BY ESTOPPEL, which is created when a principal inadequately supervises an agent. The agent takes on powers that go beyond the scope of authority given by the principal. If this activity causes a third party to believe the agent has these powers, agency by estoppel has been created. Finally, we may have AGENCY COUPLED with an interest. When a broker is the owner of a property that is being sold, or when a broker is interested in buying a property, we have agency coupled with an interest. A real estate license holder is obligated to advise a property owner as to the license hold- er's opinion of the market value of a property when negotiating a listing or offering to purchase the property for the license holder's account as a result of contact made while acting as a real estate agent.
TEAM NAME REGISTRATION RULES- PAGE 229
All team names must end with a team or group and must not include the terms brokerage, company, or associates. A new team name that meets the requirements of the new rules will have to be registered with TREC by your broker before you use that team name in advertising. A form to register team names, Notice of Team Name for a Broker's License A team name is a name used by one or more license holders sponsored by or associated with the same broker that is not the broker's name or an assumed business name of the broker. Team names must end with the terms team or group. Team names cannot contain terms that imply that the team is offering brokerage services independent of the broker. Some prohibited terms are brokerage, company, and associates. The terms realty or real estate are acceptable as part of a team name as long as the team name ends with the terms team or group. Keep in mind that the ad must still contain the name of the broker. Before you use a team name in an ad, the broker must register the team name with TREC.
THE CONCEPT OF AGENCY RELATIONSHIPS- PAGE 9
An agency relationship exists when one person, the agent, acts for or on behalf of another person, the principal, who is also known as the client. This relationship is fiduciary, meaning that it is a relationship based on trust. While treating all others honestly, the agent places the interests of the principal or client first. The agent must always remain loyal to the principal.
DUTIES OF THE PRINCIPAL AND THE DEFINITIONS OF THOSE DUTIES- PAGE 19
C- Compensation: refers to the fact that the agent should be paid on the completion of the agency. The payment of a commission by a seller is contingent on the broker securing a buyer and completing a transaction. The buyer may be obtained by the listing broker, or in cooperation with another broker. The seller may be further obligated to pay a fee if he or she defaults on the terms of the listing agreement. Buyer/Tenant representation agreements provide that a com- mission be paid when a suitable property is located for the buyer. The Buyer/Tenant representation agreement may also provide for the payment of a fee if the buyer defaults on the agreement. R- Reimbursement: refers to the fact that the agent should be reimbursed by the principal for expenses incurred on behalf of the principal, above and beyond the expenses related to the sale itself. For example, if the agent paid for a house to be cleaned or a lawn mowed, reimbursement would be expected, assuming the client authorized the expenditure. The prudent agent gets all authorizations in writing from the client. I- Indemnification: means that the principal will protect the agent from suffering a loss due to the agent's reliance on information received from the principal. For example, if a seller gave a broker false information, which the broker passed on to a prospective buyer, the broker would be justified in expecting indemnification from the seller. For example, if the seller misrepresented the property in a Seller's Disclosure, the agent will be indemnified if the agent was unaware of the misrepresentation. P- Performance: means the principal is expected to perform as promised in the agency agreement. If, for example, you have listed a property, it is reasonable to expect the property to be available to be shown. The principal must cooperate with the agent to help meet their goals.
SETTING COMMISSION RATES- VIOLATIONS - PAGE 108
Commission rates and any other means by which sellers and buyers compensate brokers are always negotiable between the parties. Any attempt by a group of brokers to set the commission rates in their area or between a group of brokerage firms would be considered illegal price-fixing. The federal laws that have the most significant impact in this area are the Sherman Anti-Trust Act and the Clayton Act. The Sherman Anti-Trust Act is very specific concerning this violation. All commissions are negotiable between the broker and his or her client and are not set by any Board of REALTORS® or between competitors, or by TREC. Any attempt to fix prices would be a violation of federal law. Any agreement to limit competition by assigning market areas would also be a violation. Likewise, boycotting of discount brokers is also a violation of federal law.
WHAT IS AN ETHICAL DILEMMA- PAGE 179
Everyone has heard of an "ethical dilemma." Most people have been faced with one or more during their professional or personal lives. What then, is an ethical dilemma? The term "ethical dilemma" is defined as a situation in which individuals may find themselves when they: • do not know the right course of action• have difficulty doing what they consider to be right • find the wrong choice very tempting
CANONS OF PROFESSIONAL ETHICS- PAGE 182-183
FIDELITY A real estate broker or sales agent, while acting as an agent for another, is a fiduciary. Special obligations are imposed when such fiduciary relationships are created. They demand: -That the primary duty of the real estate agent is to represent the interests of his or her client, and his or her position, in this respect, should be clear to all parties concerned in a real estate transaction, that however, the agent, in performing his or her duties to the client, shall treat other parties to a transaction fairly; -That the real estate agent be faithful and observant to trust placed in him or her and be scrupulous and meticulous in performing his or her functions; -That the real estate agent place no personal interest above that of his or her client. INTEGRITY A real estate broker or sales agent has a special obligation to exercise integrity in the discharge of his or her responsibilities, including employment of prudence and caution so as to avoid misrepresentation, in any way, by acts of commission or omission COMPETENCY It is the obligation of a real estate agent to be knowledgeable as a real estate brokerage practitioner. He or she should: -be informed on local market issues and conditions affecting real estate in the geographic area where a license holder provides services to a client; be informed on national, state, and local issues and developments in the real estate industry; -exercise judgment and skill in the performance of brokerage activities; and -be educated in the characteristics involved in the specific type of real estate being brokered for others. CONSUMER INFORMATION Each real estate inspector or active real estate broker licensed by the Texas Real Estate Commission shall display Consumer Protection Notice CN 1-2 in a prominent location in each place of business the broker maintains. See the end of this section for a copy of the form. DISCRIMINATORY PRACTICES No real estate license holder shall inquire about, respond to or facilitate inquiries about, or make a disclosure which indicates or is intended to indicate any preference, limitation or discrimination based on the following: race, color, religion, sex, national origin, ancestry, familial status, or handicap of an owner, previous or current occupant, potential purchaser, lessor, or potential lessee of real property. TREC COMPLAINTS A person may file a complaint with TREC against a real estate license holder if the person believes the license holder violated the Texas Real Estate License Act (TRELA). If TREC has jurisdiction over the complaint, it will typically investigate the allegations by interviewing the parties and witnesses and gathering relevant information.
FIDUCIARIES AND THE FIDUCIARY RELATIONSHIP- PAGE 26
Fiduciaries are held to the highest amount of good faith, are required to exclude all selfish interest, are prohibited from putting themselves in positions where personal interest and representative interest will conflict and must, in any direct dealing with the principal, make full disclosure of all relevant facts and give the latter an opportunity to obtain independent advice.
TYPES OF AGENT- GENERAL VS. SPECIAL- PAGE 28
General Agent- has less authority than the Universal Agent. As a general agent, an individual has the right to represent his or her principal in a particular type of transaction or business. One common example is a property manager. This agents activities include: - Securing tenants - Collecting rents - Caring for the premises - Budgeting and controlling expenses - Hiring and supervising employees - Keeping proper accounts - Making periodic reports to the owner Be knowledgable and competent regarding the law relating to property management. Special Agent- is the most limited of all the agency relationships. Sometimes it is called "limited agency". The agent may perform only limited duties for the principal. Not able to bind (obligate) the principal because he or she is not allowed to sign or accept any terms or conditions on behalf of the principal. must simply follow the instructions of the principal. The listing agreement establishes a special agency between the broker and the seller. A buyer rep agreement will also create one.
INTERMEDIARY WITH AND WITHOUT APPOINTMENTS- PAGE 125
INTERMEDIARY WITH APPOINTMENTS -Notice that our in-house sale involves two agents of Broker Bob - Sue with the seller and Bill with the buyer. In this situation, Broker Bob will most likely appoint Sue to represent the seller, and Bill to represent the buyer. This is referred to as intermediary with appointments. -The appointed associates will give advice and opinions (which means to negotiate) to their respective parties. The broker must make the appointments, most likely by using the Intermediary Relationship Notice. Sue and Bill do not become appointed associates until the appointments are made. INTERMEDIARY WITHOUT APPOINTMENTS In some instances, an agent will have the opportunity to sell his or her own listing. When this happens, it is known as Intermediary Without Appointments. Under Intermediary rules, Agent Sue can go ahead and complete the transaction, but can- not give advice and opinions to either party. This process is called intermediary without appointments. Much like the broker, Sue cannot negotiate for one client to the detriment of the other client. When the Intermediary process begins, the Intermediary Relationship Notice (TXR-1409) must be filled out by members of the NAR. In this case, there will be no appointments because there is only one agent in the transaction.
TRUST ACCOUNTS, COMMINGLING AND CONVERSION- PAGE 32
If any funds are held for a client or a customer, these funds are said to be held in trust and must be placed in a separate account set up for this purpose. Commingling is mixing clients' funds with the business, operating, or personal funds of a broker, and is prohibited by the License Act. A more serious offense would be conversion. When a broker spends his or her client's funds without authorization, that broker is guilty of conversion. Both commingling and conversion are serious violations of TRELA.
BUYER REPRESENTATION AGREEMENTS- PAGE 110
In a typical buyer rep agreement, you are going to have several common elements. This would be the agreement between the brokerage company and a buyer or tenant. Part of that agreement would include information about brokerage services that would be initiated and dated, instead of listing a specific property we are going to list the general characteristics of a property search area which is defined as the market area that they have hired our company to hire us within a certain area. It discusses both of our obligations. The obligations of the buyer and the obligations of the broker. The term of the agreement would be stated. Starting date, definite termination date, but it could be for a very little time. Even for as little as one day. VS. a residential listing where we want to have enough time to market the property to generate a contract with a buyer representation agreement sometimes we get the term of the agreement to get the buyer to sign the agreement. We limit the term so that they are encouraged to sign it. We also have to explain our duties to clients and our duties to customers. We would need to get consent for the broker to serve as the intermediary. There is a provision for compensation. Consent for the broker to be representing more than one buyer at the same time that they are representing the buyer. There's fair housing language in some notices. A place for signatures for parties. There is a script that we can use or modify. We need to explain to them that unless there is an agreement then they are basically on their own. That everybody would be working in the seller's best interest and nobody would be working in the buyer's best interest. We need to know how they are permitting us to work upfront, so we know how to book appointments, we know how to treat them and what information we are allowed to provide to them because there is the only basic information that we can provide them if they are not represented. If you are represented then we can assist you at a different level. It will always be in your best interest if they allow our company to represent them.
INFORMATION ABOUT BROKERAGE SERVICES- IABS- PURPOSE AND CONTENT-PAGE 147
Information About Brokerage Services (IABS) Texas law requires all brokers and sales agents to provide written notice regarding information about brokerage services at the first substantive communication with prospective buyers, tenants, sellers, and landlord concerning specific real property.
APPOINTED ASSOCIATES UNDER INTERMEDIARY AND THE ROLE OF THE BROKER- PAGE 126
Intermediary is a process that makes it possible to bring client buyers and sellers together while at the same time representing their best interests. When this type of transaction occurs, the broker becomes the Intermediary. Since the broker has a personal duty to represent both sides, it is only appropriate that the broker remain neutral and avoid negotiating for either party. The broker cannot do anything that would give an advantage to one client at the expense of the other. In order to practice Intermediary, the broker must have the written consent of both parties. The written consent must state the source of any anticipated compensation. We most often obtain written consent from the seller when they sign a listing agreement. We most often obtain written consent from the buyer when they sign a buyer/tenant representation agreement. In that written consent, the seller is giving the broker permission to show his or her property to buyers whom the broker also represents. Likewise, the buyer is giving the broker has written consent to show him or her properties listed with the firm.
DUTIES OF AN AGENT- PAGE 30
O- Obedience: an agent is obligated to follow all of the lawful instructions of a client. L- Loyalty: This means putting the interests of a client first. Loyalty is working to assist the client in all phases of the transaction to arrive at the best possible result for the client, exercising maximum effort for the client's benefit. D- Disclosure: an agent has a duty of full disclosure of all information relating to the property and the other parties in the transaction. This would include such things as the broker's opinion in value, negotiation strategies, or techniques to assist the client. Full disclosure to the client is required. C- Confidentiality: any confidential information learned about a client must be kept confidential forever, and may not be disclosed without the written consent of the client. A- Accounting: if any funds are held for a client or a customer, these funds are said to be held in trust and must be placed in a separate account set up for this purpose. R- Reasonable Care: a requirement that an agent exhibit competence and expertise, keep clients informed, and take proper care of their property. -guiding the seller to arrive at a reasonable listing price - advising the seller-client to accept a reasonable purchase price -making reasonable efforts to sell the property, such as open houses, MLS, advertising... -making available properties that meet the buyer's purchasing objectives -affirmatively discovering relevant facts and disclosing these facts to the client
TYPES OF LISTINGS AND CHARACTERISTICS OF TYPES OF LISTINGS- PAGE 82
OPEN LISTING The open listing gives the seller the right to list the property with multiple competing brokers and to sell the property personally without liability for payment of a commission. Some sellers believe that an open listing best serves their interest - that listing with several brokers produces more prospects than does a single listing company. EXCLUSIVE AGENCY In an exclusive agency listing, the seller agrees to list the property with only one broker during the listing term, with the provision that the seller can sell the property himself or herself, without payment of a commission. Perhaps the biggest risk to the broker in an exclusive agency listing is that the seller will not fully cooperate with the efforts of the broker if the seller thinks that he or she has a prospect to sell to and avoid paying a fee. EXCLUSIVE RIGHT TO SELL Real estate brokers recommend this listing, which grants an exclusive right to sell the property during the listing term. A commission is paid even if the property is sold by the owner. It is worth noting that the listing agreement most brokers prefer is the exclusive right to sell listing agreement, as it affords the broker the greatest degree of protection in earning a commission during the listing term, and provided the broker performs as promised, from executing a sales contract through to closing and funding. NET LISTINGS Under a net listing, the seller establishes a minimum net amount for his/her proceeds at closing. The real estate broker's commission is the difference between the minimum net established by the seller and the actual seller's net. The seller could receive less than he/she would normally receive. Depending on the details of the transaction, the broker could earn more than the seller or, perhaps, nothing at all. Because of potential ethical and legal issues, these types of listings are outlawed in many states. In states where the practice is still legal, net listings are discouraged and subject to considerable scrutiny.
WHO CAN LEGALLY EARN A COMMISSION/SUE FOR A COMMISSION/SHARE A COMMISSION -PAGE 108
Only a broker may earn a commission, and only a broker may sue to collect a commission. The broker may sue a seller who has defaulted on a listing agreement or a buyer who has defaulted on a buyer's representation agreement.
TYPES OF LISTINGS AND COMMISSIONS OWED UNDER EACH- PAGE 82
Open Listings- The open listing gives the seller the right to list the property with multiple competing brokers and to sell the property personally without liability for payment of a commission. Some sellers believe that an open listing best serves their interest - that listing with several brokers produces more prospects than does a single listing company. -First, the owner may be subject to commission claims by more than one broker. It is not always possible to easily determine who was responsible for the sale, and controversy over this point may lead to expensive litigation. Secondly, brokers are concerned that because the commission is paid to the broker who first finds the buyer, an open listing does not protect the broker who diligently advertises the property. In fact, who was the procuring cause of the sale? The open listing has resulted in many lawsuits between brokers, each claiming commission. These actions are known as procuring cause lawsuits. -Because of the possibility the property may be sold without notice by others, brokers are unwilling to spend time and effort on a property for which they have no commission protection Net Listings- Under a net listing, the seller establishes a minimum net amount for his/her proceeds at closing. The real estate broker's commission is the difference between the minimum net established by the seller and the actual seller's net. The seller could receive less than he/she would normally receive. Depending on the details of the transaction, the broker could earn more than the seller or, perhaps, nothing at all. Because of potential ethical and legal issues, these types of listings are outlawed in many states. In states where the practice is still legal, net listings are discouraged and subject to considerable scrutiny. Multiple Listing Services (MLS)- The exclusive right to sell and exclusive agency listing agreements usually call for the broker to place the listing into one or more multiple listing services (MLS). In the multiple listing service, member firms share their listings. Sharing listings increases the inventory of properties for sale among mem- ber brokers.
DUTIES OF AN AGENT -PAGE 105
Our public responsibilities- deal with them honestly, not deceptive or misleading. We have a duty to use care in doing our job as an agent and we have a duty under common law to disclose any material facts about the property or the area itself, flooding issues or things of that nature- those things have to be disclosed to everyone. Even customers. Using reasonable care also means we will handle their money with care.
HOW MOST REAL ESTATE AGENTS ARE PAID- PAGE 153
People are most familiar with the relationship that exists between an employer and an employee. This type of relationship (master-servant) involves a high degree of control by the employer over the employee, including the type of job done, the methods used to complete the task, and the time and location at which the task is completed.
SHERMAN ANTI-TRUST ACT AND COMMISSION RATES- PAGE 181
Prevents any combination in restraint of trade. Commission rates must always be a matter of negotiation between the broker and the client.
DISCLOSURE OF REPRESENTATION VS DISCLOSURE OF AGENCY- WHEN AND HOW- PAGE 145
Representation Disclosure, a license holder who represents a party in a proposed real estate transaction shall disclose, orally or in writing, that representation at the time of the license holder's first contact with: • Another party to the transaction; or • Another license holder who represents another party to the transaction. DISCLOSURE POLICY: A real estate brokerage firm must have a clear policy regarding minimum levels of disclosure to all potential buyers, sellers, landlords, and tenants. The firm will have an active and standardized risk management function that includes an audit of each transaction file to ensure that the license holder complies with the disclosure policy. A disclosure policy begins with compliance with TRELA.
TEAM NAMES- REQUIREMENTS- ACCEPTABLE AND UNACCEPTABLE WORDS- PAGE 59
Rule §535.155 lists the requirements that license holders must follow for all advertising materials. Certain pieces of identifying information must be included in all advertisements: The name of the license holder or brokerage team placing the advertisement The sponsoring broker's name. TREC requires that the broker's name be at least 1/2 the size of the largest contact information on the advertisement. Must use: Team, Group May use: Realty (followed by team or group) Do not use - Misleading: Company, Brokerage, Associates
SUBAGENCY- PAGE 85
Subagency is defined as "when a license holder is not associated with the seller's broker but is representing the seller through a cooperative agreement with the seller's broker." While this is undoubtedly a concise definition, the definition of subagency is better understood by practical example.
TREC RULES FOR ADVERTISING AND SIGNS- PAGE 227
TREC Advertising Rules state that an associated broker or sales agent may not place an advertise- ment that in any way implies that the associated broker or the sales agent is the person responsible for the operation of a real estate brokerage business or causes a member of the public to believe that a person not authorized to conduct real estate brokerage is personally engaged in real estate brokerage. This rule is intuitive because the sponsoring broker is always responsible for the brokerage and its operations. TREC rules provide that an advertisement must contain the name of the broker (either the individual name or the entity's name). If the broker uses an assumed name, the use of the assumed name in the advertisement meets this requirement (provided the broker has registered the assumed name with TREC). Additionally, if the assumed name or the corporate name of the broker contains the name of a sales agent, the advertisement should also include the name of the broker or another assumed name of the broker that does not contain the sales agent's name, or name of the designated officer if the sponsoring broker is a corporation. Definitions The definition of advertisement is broad and includes all types of media including • publications, stationery, business cards;• signs, billboards;• radio, television, electronic media; and • the Internet, e-mail, text messages, social networking websites. The definition of an advertisement does not include • communication from the license holder to the client, or • information in a virtual office. Disclosures • Each page on a website is an advertisement and must include required disclosures. • Advertisements by e-mail, discussion groups, text messages, and social networking must include required disclosures. If space is limited, the broker can include a link to the completed disclosures ("TREC DISCLOSURE"). Deceptive Advertising A license holder may not place an advertisement that • implies a sales agent is responsible for the brokerage business, or • causes someone to believe a person not authorized to conduct brokerage is engaged in brokerage. Deceptive or misleading advertisements may include: • an advertisement that is inaccurate in any material way or misrepresents any property, terms, values, services, or policies; • advertising another broker's listing without permission and without disclosing the name of the listing broker; Trade Names -Advertising may not include a copyrighted trade name without the authority to do so. -Include Broker's Name A license holder's advertisement must clearly and conspicuously contain the broker's name (either a business entity or an individual license holder's advertisement). -Assumed Names
REALTOR- THE MEANING OF THE TERM AND HOW/WHEN IT IS USED- PAGE 186
The National Association of REALTORS®, founded in 1908, is America's largest trade association, representing 1 million members. Its membership is composed of residential and commercial REAL- TORS® who are brokers, sales agents, property managers, appraisers, counselors, and others engaged in the real estate industry. Members belong to one or more of some 1,400 local associations/boards and fifty-four state and territory associations of REALTORS®. They pledge to follow a strict Code of Ethics and Standards of Practice. The term REALTOR® is a registered collective membership mark, identifying a real estate professional as a member of the National Association of REALTORS® who subscribes to its strict Code of Ethics. The Code of Ethics is so highly regarded as a model for ethical conduct, that it became the basis for real estate license laws in many cases.
TREC- CREATION/PURPOSE/AUTHORITY- PAGE 10
The Texas Real Estate License Act (TRELA) was passed in 1939. The Texas Real Estate Commission was created to enforce and administer the act in 1949. The purpose of the act is to protect the public against unscrupulous brokers and sales agents. Since it went into effect, it has been unlawful for anyone to "act in the capacity of, engage in the business of, or advertise or hold himself out as engaging in or conducting the business of a real estate broker or a real estate sales agent within this state without first obtaining a real estate license from the Texas Real Estate Commission." It is also unlawful for an individual licensed as a sales agent to engage in the business unless he or she is associated with a licensed broker.
TREC WEBSITE REQUIREMENTS FOR LINKS TO THE IABS FORM- PAGE 145
The contact information is required to be filled in at all times. It is a violation to provide a blank IABS without the contact information. License holders must provide a link to the IABS form in a readily noticeable place on the homepage of their business website, in at least 10-point font, and labeled "Texas Real Estate Commission Information About Brokerage Services." A sales agent or broker must also provide the form at the first substantive communication with a prospective client by one of the following four methods: (1) by personal delivery; (2) by first class mail or overnight com- mon carrier delivery service; (3) in the body of an email; or (4) as an attachment to an email, or a link within the body of an email, with a specific reference to the IABS Form in the body of the email.
TREC ADVERTISING RULES AND FONT REQUIREMENTS- PAGE 65
The license holder's name or team name and the broker's name in at least 1/2 the size of the largest contact information in the advertisement are still required, but they may be located on a separate page or the account or user's profile page if the separate page is: • readily accessible by a direct link from the social media or text advertisement • readily noticeable on the separate page or in the account user profile The broker's logo does not usually count as the broker's name unless the logo contains either the broker's licensed name or assumed business name (DBA) in full (not a shortened version of it) and the printed name is 1/2 the size of the largest contact information in the ad. It is important to make a distinction between the size of the logo and the size of the text. The size of the logo does not count. -Facebook, Twitter, and Instagram If a sales agent is using Facebook, Twitter, or Instagram to post listings, he/she must ensure that his/her name, registered alternate name, or team name, and sponsoring broker's name or DBA is on every posting that is an advertisement. This rule applies to the re-posting of listings from the agent's business page to his/her personal Facebook page.
CMA'S- PAGE 83
The shared information is also used by agents to prepare a comparative market analysis (CMA). The agent uses sales information from the MLS data to show a seller the market value of the property. The agent bases this analysis on properties that have recently sold that are most similar to the seller's property. If possible, the agent should use data from sales that have closed within the last six months - the more recent the sales data, the better. The agent will also show on the CMA, prop- erties currently listed that are similar to the subject property. The listing agent will show expired properties like the subject property on the CMA as well if that data is available. A rule of thumb is three (3) each of, recently sold, recently listed, and recently expired properties that are similar to the subject property the agent desires to list. Appraisers also have access to MLS for their use in preparing appraisal reports.
DEFAMATION OF CHARACTER- WRITTEN OR SPOKEN- PAGE 226
What can a license holder do if someone publishes a defamatory statement about the license holder? First, the license holder should ask the publisher to remove the statement or ask for a correction or retraction in a printed document. If the publisher does not remove the statement or take other actions, then the license holder may have the legal right to sue the publisher for defamation if the false statement is injurious. Defamation is the act of harming the reputation of another person by making a false statement to a third party either by slander (spoken words) or libel (printed words). Usually, a defamation claim requires evidence of: • a false statement, • a statement made to someone other than the person who is allegedly defamed, and • the damage to the person allegedly defamed (either by intention or reckless disregard for the truth). Defamation, per se, occurs when a person publishes a false statement of such a significant matter that the law does not require proof of harm. A license holder who intends to use a statement that could potentially harm another should consult an attorney before publishing the statement in order to avoid allegations of defamation.
DEFAMATION- DEFINITION/EXPLANATION/EXAMPLES- PAGE 226
What can a license holder do if someone publishes a defamatory statement about the license holder? First, the license holder should ask the publisher to remove the statement or ask for a correction or retraction in a printed document. If the publisher does not remove the statement or take other actions, then the license holder may have the legal right to sue the publisher for defamation if the false statement is injurious. Defamation is the act of harming the reputation of another person by making a false statement to a third party either by slander (spoken words) or libel (printed words). Usually, a defamation claim requires evidence of: • a false statement, • a statement made to someone other than the person who is allegedly defamed, and • the damage to the person allegedly defamed (either by intention or reckless disregard for the truth). Defamation, per se, occurs when a person publishes a false statement of such a significant matter that the law does not require proof of harm. A license holder who intends to use a statement that could potentially harm another should consult an attorney before publishing the statement in order to avoid allegations of defamation.
DTPA- STEPS FOR AN AGENT TO HELP AVOID LAWSUITS- PAGE 206
• A license holder should always disclose any defects or information that a prospective buyer would want to know about the property. -Use the Seller's Disclosure Notice form, either from the Texas REALTORS® or TREC. Give the seller-completed form to the buyer prior to placing an offer to buy. -Recommend that an inspection be done on the property. The Texas Real Estate Commission licenses inspectors in Texas. Inspectors must use TREC-promulgated forms for residential inspections. -Give a list of at least 3 inspectors to the buyer and have the buyer choose the inspector. Have the inspector talk directly to the buyer about the outcome of the property inspection. The agent should not be the middleman interpreter of an inspection report. -Have the buyer reinspect the property to conclude that repairs were done properly. If the buyer is not willing to have an inspection, then have the buyer initial next to a written statement that you, the agent, highly recommend that an inspection be performed on the property, but the buyer declined. -Stay clear of giving your personal opinion on the condition of the property. -Keep copious notes on all aspects of the transaction from the first face-to-face meeting through closing and funding of the sale. Remember that you are always building a paper trail in the event that you need one.
DUTIES OF THE PRINCIPAL- PAGE 18
• Compensation • Reimbursement • Indemnification • Performance
UNLICENSED ASSISTANTS AND PERMITTED ACTIVITIES- PAGE 157
• Manage an office 1. Answer phone calls 2. Register prospects 3. Greet prospects and give general information about the area 4. Type correspondence 5. Schedule appointments for a license holder to show the property 6. Tele-market if not soliciting for listings or buyers - Accompany a license holder on showings and to open houses -Train and motivate license holders -Act as an on-site apartment manager (on-site means that the office is located on the property); the manager does not have to live on-site -Assist in arranging financing at the direction of a license holder in an administrative way - assist a buyer in obtaining forms or information to apply and qualify for a loan -Place for-sale signs on the property, accompany an inspector, place advertisements as directed by the license holder
THE IABS- WHEN AND HOW IT IS USED- PAGE 149
• Presenting the IABS at the wrong time. Presenting the IABS as the buyer is about to write an offer is too late. It must be presented at the first substantive discussion. • Disclosing representation at any time later than at the first contact. • Assuming that the Broker Information form suffices as an agency disclosure. • Preparing and having the buyer sign a buyer/tenant representation agreement just prior to preparing an offer to purchase.