Law of Agency

Not Required to Disclose Information:

(1) a previous or current occupant of real property had, may have had, has, or may have AIDS, an HIV-related illness, or an HIV infection as defined by the Centers for Disease Control and Prevention of the United States Public Health Service; or (2) a death occurred on a property by natural causes, suicide, or accident unrelated to the condition of the property.

Types of Listings

1. Exclusive Right to Sell: Provides the greatest amount of protection on a commission. 2. Exclusive Agency: Allows sellers to reserve the right to sell the property themselves and not owe a broker a commission. 3. Open Listing: Allows the owner and any other license holder to sell the property and only pay the commission to whomever sells the property. The listing broker is not the exclusive agent in this type of listing agreement.

1985 Amendment

1. The Commission was required to collect a fee of $15 for a transcript evaluation. 2. The registration of real estate inspectors was replaced with a licensing process calling for the following: a. Successful completion of not less than ninety classroom hours of core real estate inspection courses; b. Payment of fees not to exceed amounts set forth in the Act; c. Passing of an appropriate licensing examination. 3. The Commission was authorized to take disciplinary action against inspector licensees and to administer a real estate inspection recovery fund. 4. Persons registered under the previous inspector law were given until January 1, 1986 to comply with the new Act

Dual Agent

A disclosed dual agent (this is when the sales agent sells their own listing) represents both the buyer and the seller in the same real estate transaction. In such relationships, dual agents owe limited fiduciary duties to both buyer and seller clients. Because of the potential for conflicts of interest in a dual-agency relationship, all parties must give their informed consent. Disclosed dual agency is legal in most states, but often requires written consent from all parties. In Texas, this is known as intermediary with the permission of the broker, seller and buyer in writing. Full disclosure is a must.

General Duties of Honesty and Fairness

A duty of honesty and fairness is owed to other brokers and their clients, customers, and third parties. All parties are entitled to complete disclosure regarding the property.

General Agency

A general agent has more limited authority than a universal agent but is usually authorized to manage some or all of the principal's affairs in certain specified areas. A sales person or a broker associate can take listing agreements, contracts, leases, buyer representation agreements in the broker's name.

Lesson 1

Agency Concepts

Agency by Ostensible Authority

Agency by ostensible authority is also called an agency by estoppel for agency by apparent authority. It is the classic creation of the agency relationship without the agent even knowing it. This occurs when the conduct on the part of the principal would lead a reasonably prudent purchaser to believe that the license holder had the authority he or she purports to exercise. In these situations, the agency relationship and all its liability is created as the agency relationship arises. In order to establish an agency by estoppel, two elements must be established: 1. The principal must have held the license holder out in other instances, or in the particular transaction as possessing authority to be an agent, or he or she must have knowingly acquiesced in the license holder's authority; and 2. The person dealing with the license holder must have relied on the conduct of the principal to the third party's detriment.

How are agency relationships created?

An agency relationship is created by the mutual consent of both parties with the client delegating authority to the broker to act on his or her behalf. Both parties must consent for the agency relationship to be legal. A good business practice is to get the consent in writing. An agency relationship does not need to be a contract with the elements of offer, acceptance, and consideration.

Lesson 2

Basic Agency Relationships, Disclosures and Duties to the Client

Reasonable Care

Common sense prevails. If you do not have common sense, you cannot practice reasonable care. You cannot protect your clients from legal issues, only what you are licensed to do and what you are authorized to do by your broker and principal

Obedience

Compliance with a listing agreement, buyer agreement, lease, property management agreement, verbal request or law or submission to another's (principal) authority.

Lesson 3

Duties and Disclosures to third parties

Actual Authority

Express agreements and some implied agreements grant actual authority to the agent.

Failure to Disclose to Non-Principals

Failure to disclose who you represent can result in a multitude of misunderstandings, liability and errors. There is little training on disclosure and it is probably one of the most important steps in agency. The examples of when disclosure takes place will help to clarify it. The last thing you want is a member of the public thinking you represent them by your actions and conduct.

Lead Based Paint Disclosures

Federal law requires that properties that were built before 1978 disclose the possibility that the property has lead based paint in the home. Congress passed the Residential LeadBased Paint Hazard Reduction Act of 1992, also known as Title X, to protect families from exposure to lead from paint, dust, and soil. Section 1018 of this law directed HUD and EPA to require the disclosure of known information on lead-based paint and lead-based paint hazards before the sale or lease of housing built before 1978.

Zone Marketing

First, you have to decide what type of listings you want. There are many ways to get listings, but first you have to decide on a target market by zone marketing. In the 20th century, we called it farming and then decided since we are not farmers. It is now the 21st century, so it's time to put technology at the forefront.

The Principal

In a real estate sales transaction, the principals are the buyer and seller. In an agency relationship, the principal is the client who authorizes the license holder in writing to act on his or her behalf.

The Agent

In the context of real estate, the agent is a licensed representative of the seller, buyer, landlord or tenant and facilitates the sale, negotiates, fills in contracts, exchanges or leases of real property for others. They are known as the license holder

Lesson 4

Seller Agency

Express Actual Authority

Some actions within the scope of the agent's authority are express actual authority, which means they are those duties that the principal specifically tells the agent to do.

Apparent Authority

Sometimes, the actions or words of a principal can convince a third party that the agent has authority when in fact the agent has no authority. In such a situation, the person who acts as an agent has apparent authority

MLS Rules and Regulations

The Other Participant shall disclose clearly to the Listing Participant whether the Other Participant is acting as an owner's subagent or as a buyer's agent at the first contact with the Listing Participant, whether by telephone, written communication or by face to face contact. If the Other Participant fails to make such disclosure as set forth in the preceding sentence, the Listing Participant should request the Other Participant to make such disclosure prior to concluding such first contact. The failure of the Listing Participant to make such request of the Other Participant shall not waive or release the Other Participant from any obligation to furnish timely the agency disclosure set forth in this section.

The Agency Relationship

The agent works for the principal and works with, but not for, the third party.

Listing Agreements

The seller generally hires the real estate broker to act as his or her license holder through a written listing agreement. The listing agreement is the written contract between the owner of real property and the license holder representing the owner in the marketing and sale of a specific property. We will use the Texas Association of REALTORS® listing agreement to discuss a listing agreement that adheres to Texas law. Look for inserts from the Texas Real Estate License Act, Texas Real Estate Commission Rules, The REALTOR® Code of Ethics, and MLS Rules and Regulations.

What is the Protection Period?

This is how you protect the commission. You write in the listing agreement the number of days after the listing expires the owner(s) still owe you a commission if any of the buyers you have submitted in writing try to buy the property by contacting the owner(s) directly after the listing expires for the purpose of cutting out the listing broker. The caveat is the listing broker must submit the name of those buyer/tenants in writing to the owner(s) of the property.

Accountability

This is really communication to the principal about what is happening during the duration of the listing or a sale. Be accountable to your principals by keeping them informed.

Disclosure

You must know what you can disclose and what you cannot disclose. For example, what : Homeowner's Association documents must be disclosed to the buyer or tenant? What you can disclose depends on who you represent. Disclosure is more than property defects; it is a list of specific items for each transaction.

Confidentiality

You must not reveal confidential information without the client's permission. For example: A customer calls and asks you "why a seller is selling?" You cannot give this information unless the seller authorized you to do so. Another would be "will the seller take less than the list price?" This is confidential information. Make a list of items you cannot share so you know what and how to handle confidential information.

1979 Amendments

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1983 Amendment

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1989 Amendment

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1991 Amendment

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1997 Amendment

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2001 Amendment

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2003 Amendment

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2007 Amendment

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2008 Amendment

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2011 Amendment

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Trust Account

means an account managed by one party for the benefit of another in a banking institution authorized to do business in Texas

Trust Money

means client's money, earnest money, rent, unearned fees, security deposits, or any money held on behalf of another person.

1971 Amendments

provided for the establishment of a Real Estate Research Center in the Department of Agriculture at Texas A&M University.

1963 Amendments

required applicants for broker licensure either to have been a licensed salesman for one year or to have successfully completed 30 classroom hours of study in basic real estate courses approved by the Commission.

1955 Amendments

required applicants for original licensure to pass a written examination as one step in qualifying for licensure and required each licensee to post a bond for the protection of the public

September 1, 1995 Amendment =)

the Act increased the fees collected by the Commission for the Texas Real Estate Research Center from $15 to $20 for broker renewals and original applications and from $7.50 to $17.50 for salesman renewals and original applications. The amendment separated these fees from the filing fees collected by the Commission and required the Commission to transmit the fees to the Research Center quarterly.

July 1st, 1991

the authority to certify real estate appraisers was transferred from the Commission to the Texas Appraiser Licensing and Certification Board, an independent subdivision of the Commission. Section 22 of the Act was repealed. The Commission provides administrative support and assistance to the new board which has sole responsibility for the licensing and certification of appraisers for federally related transactions.

State Laws

• Agency • Deceptive Trade Practice • Fair Housing • Texas Real Estate Licensing Act • Property Code • Property Inspections • Auctions • Due Process • Common Laws • Property Management • Mineral Rights • Water Rights

Sub Agent

A sub-agent owes the same fiduciary duties to the seller as the listing agent. Sub-agency usually arises when a cooperating sales associate from another brokerage, who is not the buyer's agent, shows property to a buyer. The sub-agent works with the buyer to show the property but owes fiduciary duties to the listing broker and the seller. Although a subagent cannot assist the buyer in any way that would be detrimental to the seller, a buyer customer can expect to be treated honestly and fairly by the sub-agent.

Agency Defined

An agent is one who represents another, called a client or principal, in transactions with third parties. The principal delegates the authority to act on his or her behalf. The relationship between a broker and a client is called special or limited representation. The agency only exists for one specific transaction. A special or limited agent is not authorized to make decisions for or sign anything that binds the client.

Implied Agreement

An implied agency relationship arises when a party assumes consent to the relationship based solely upon inferences formed from communication with the other party—it is created by the actions, conduct and words of the parties. With implied agency, the principal and agent may never explicitly state the nature or terms of the relationship, but both parties will be held to the duties of an agency relationship. This is used in a court of law when there is a lawsuit filed by a consumer. The judge or the jury will decide who is at fault by implied actions, conduct and the process. Again, all real estate transactions should be in writing to reduce liability.

Avoid Stating Personal Opinions

Be careful when stating personal opinions to anyone about the property. Make sure that you have a source for any fact or opinion you state about the property. Watch words and phrases like "Original", "New", "Finest quality", "No problem" or "This problem will only need a small repair". A consumer could make a lawsuit out of those seemingly innocent phrases under the Deceptive Trade Act It is the license holder's responsibility to provide known facts about the property, not opinions. If an opinion is asked of the license holder, he or she should refer the consumer to a specialist (property inspector, attorney, licensed vendor, plumber, etc.) who can provide unbiased and informed assistance to the consumer.

Compettency

It is the obligation of a real estate agent to be knowledgeable as a real estate brokerage Practitioner. The agent should: (1) be informed on market conditions affecting the real estate business and pledged to continuing education in the intricacies involved in marketing real estate for others; (2) Be informed on national, state, and local issues and developments in the real estate Industry; and (3) Exercise judgment and skill in the performance of the work.

Implied Actual Authority

Other actions within the scope of the agent's authority fall under implied actual authority, which means actions that are necessary to complete the duties that were expressly authorized. These are generally actions that are customary for the business.

Designated Agency (Illegal in Texas)

The practice in Texas is intermediary. Intermediary replaced dual agency and designated agency. Designated agency is a brokerage practice that allows the managing broker to designate which licensees in the brokerage will act as an agent of the seller and which will act as an agent of the buyer. Designated agency avoids the problem of creating a dual agency relationship for licensees at the brokerage. The designated agents give their clients full representation, with all of the attendant fiduciary duties. The broker still has the responsibility of supervising both groups of licensees.

Broker-Sales Agent Agency

The relationship between a sponsoring broker and sales agents is called a general agency relationship. You have duties required by the sponsoring broker that are spelled out in the Broker's Policy and Procedures Manual. The sales agents and broker associate take have duties to the broker and principal. At no time does the sales agent or broker associate make decisions outside of the law of agency and the sponsoring broker's policy and procedures.

Special Agency

The special agent has the most limited authority of any type of license holder. The special agent can be known as a limited agent. Usually, the special agent only has authority in one specific transaction. An example is a listing agreement. You have specific duties and can only perform what is authorized in writing.

The Third Party

The third party is also known as the customer. This individual may be a prospective seller, purchaser, landlord or tenant who expresses real interest and is prepared to and capable of completing a contract toward the sale, purchase or rental of real property. Examples could be a buyer agent's buyer, a listing broker's seller, the other agent or the tenant or landlord.

Universal Agency

The universal agent has a great deal of authority in his or her principal's affairs. This agent can do anything on behalf of the principal that is allowed by law, such as enter into contracts for the principal. A legal guardian, for example, has all of the power of a universal agent.

Transaction Broker

This is a non-agency arrangement other-wise known as a facilitator or transaction broker, but not in Texas. Some states permit a real estate licensee to have a type of non-agency relationship with a consumer. These relationships vary considerably from state to state, both as to the duties owed to the consumer and the name used to describe them. The duties owed to the consumer in a non-agency relationship are less than the complete, traditional fiduciary duties of an agency relationship

National Laws

• Antitrust • Fair Housing • Federal Housing Administration • Housing and Urban Development • Fair Credit Reporting • Federal Trade Commission • Federal Truth and Lending Act • Real Estate Settlements Procedures Act • Consumer Federal Protection Act

Local Laws

• Zoning • Municipal Utility Districts • Homeowner Associations • Permits for construction on property • Ordinances and Regulations

Suspension on Revocation of License or Certificate for acting as an attorney

(1) drafts an instrument, other than a form described by Section 1101.155, that transfers or otherwise affects an interest in real property; or (2) advises a person regarding the validity or legal sufficiency of an instrument or the validity of title to real property.

Property Manager

A property manager, who must have a broker's license, usually has a general agency relationship with the owner of the property, who is the landlord client. The broker is authorized to collect rents, budget expenses for the property, procure tenants, hire employees, and generally run the property on behalf of the owner. There must be specific duties for a sales agent to be involved with a Property Management Department licensed by a broker. The duties must be spelled out in writing.

Associated Licensees

Associated licensees usually also have a relationship of general agency with their supervising brokers; associated licensees and salespersons have the authority to act in the supervising broker's name in real estate transactions. They are known as broker associates.

Non-Fiduciary Duties including honesty and fairness

• All parties are entitled to complete disclosure regarding the property. The Texas Real Estate License Act, Tex. Occ. Code 1101.652(b)(3) and (4) • All parties are entitled to know who the broker is representing. Tex. Occ. Code 1101.652(b)(7) • A broker is obligated to advise all parties to have the abstract examined. Tex. Occ. Code 1101.652(b)(29) • If a broker or agent receives a request for a copy of a document by a person that signed the document, the licensee is obligated to return the document. Tex. Occ. Code 1101.652(b)(28) • All licensees, when engaging in real estate on their own behalf, are obligated to inform anyone in the transaction they are licensed and shall not use their expertise to the disadvantage of any party. TREC Rules 535.144.

Fidelity and Fiduciary Requirements

(1) that the primary duty of the real estate agent is to represent the interests of the agent's client, and the agent's position, in this respect, should be clear to all parties concerned in a real estate transaction; that, however, the agent, in performing duties to the Client, shall treat other parties to a transaction fairly; (2) That the real estate agent be faithful and observant to trust placed in the agent, and be Scrupulous and meticulous in performing the agent's functions; and (3) That the real estate agent place no personal interest above that of the agent's client.

Splitting Fee with Unlicensed Person

(a) Except as otherwise provided by the Act or Rules, a broker or salesperson may not share a commission or fees with any person who engages in acts for which a license is required and is not actively licensed as a broker or salesperson. (b) An unlicensed person may share in the income earned by a business entity licensed as a broker or exempted from the licensing requirements under the Act if the person engages in no acts for which a license is required and does not lead the public to believe that the person is in the real estate brokerage business. (c) A broker or salesperson may not share a commission or fees with an unlicensed business entity created by a license holder for the purpose of collecting a commission or fees on behalf of the license holder

2005 Amendment

1. A fee for attendance at an instructor training program for instructors who wish to teach the TREC required legal and ethics continuing education courses is established. 2. The four-year complaint limitation period also applies to real estate inspectors (persons licensed under Occ. Code Chap. 1102) is clarified. 3. The amendments provide for the issuance of a provisional moral character determination under Section 1101.353. 4. The salesperson education requirements are revised to require 14 semester hours (210 classroom hours) prior to filing an application; revises the salesperson annual education requirements to require 4 additional semester hours (60 classroom hours) for the first renewal; and repeals the salesperson annual education requirements for the subsequent two years; the net requirement of 18 semester hours remains the same. 5. The commission shall automatically approve core courses and State Bar of Texas CLE courses as elective credit courses to satisfy the nine hours of non-legal MCE required by Section 1101.455. 6. A broker who represents a party or who lists real property under an exclusive agreement must inform the party of material information related to the transaction, including the receipt of an offer by the broker; must answer the party's questions and must present any offer to or from the party; a broker who represents a party is prohibited from telling another broker to negotiate directly with the broker's client; for purposes of Section 1101.157, a license holder who has additional authority to bind a party under a power of attorney or a property management agreement is considered a party to the lease or sale; an inquiry to an employee of a builder or developer about contract terms or forms does not violate Section 1101.652(b)(22) if the person does not have authority to bind the employer to the contract; the delivery of an offer to a party does not violate Section 1101.652(b)(22) if the party's broker consents to the delivery and a copy of the offer is sent to the party's broker; provides an exception to the requirement of sending a copy of the offer to the a party's broker if the party is a governmental agency using a sealed bid process that does not allow a copy to be sent to the broker. 7. A broker who agrees to represent both a buyer and a seller must agree to act as an intermediary. 8. TREC obtains enforcement authority over a licensee who engages in misrepresentation, dishonesty or fraud when selling or buying real property in the name of the spouse or a first degree relative of the licensee. 9. A licensee must notify the commission within 30 days of the date of a final conviction of a felony or a criminal offense involving fraud. 10.A person is not eligible for a license under Chapter 1101 until the person has repaid the full amount paid on behalf of the person under the Recovery Trust Account provisions under subchapter M, whether that person's license was revoked or expired. 11.Professional inspectors under a corporate or LLC entity are subject to licensing and renewal requirements under Occupations Code Chapter 1102. 12.Continuing education req

1996 Amendment

1. Mandatory continuing education (MCE) requirements for renewal of an active real estate license will be standardized at 15 hours, eliminating an 8 hour requirement for licenses issued for one year. 3. Additional legal topics will be added to the statutory list of acceptable MCE course topics, and the Commission will be authorized to require a final examination for MCE courses conducted by alternative delivery systems such as computers. 4. A definite termination date will be required in all contracts in which real estate licensees agree to perform services for which a license is required. 5. Negotiating with a buyer or tenant represented on an exclusive basis by another broker will be prohibited. 6. Real estate licensees will be required to disclose their representation of a party to another party or a licensee representing another party at the first contact regarding a transaction. The disclosure may be made orally or in writing. Licensees will be required to provide a party a copy of statutory information concerning the duties of a broker and agency relationships. Brokers may act as intermediaries and appoint licensees associated with the broker to work with the parties with the written consent of the parties. Intermediaries are required to act so as not to favor one party over the other. 7. Residential rental locators will be required to be licensed as a real estate broker or salesman, and the Commission will be required to adopt regulations and establish standards relating to permissible forms of advertising by residential rental locators. 8. The Commission will be authorized by rule to provide a waiver of some or all of the requirements for obtaining a real estate license if the applicant was previously licensed in this state within the five-year period prior to the filing of the application.

2009 Amendment

1. Requires the Commission to adopt rules to charge and collect fees, rather than reasonable fees, in amounts reasonable and necessary to cover the costs of administering this chapter, including a fee for certain actions. 2. Amends Section 1101.152(b) to require TREC to adopt rules to set and collect fees in amounts reasonable and necessary to cover the costs of implementing, rather than reasonable fees to implement, the continuing education requirements for license holders, including a fee for certain applications and activities. 3. Amends Section 1101.153(b) to provide that of the $200 professional fee associated with filing an original application and annual renewal for an individual broker license, $50 is required to be transmitted to Texas A&M University to support, maintain, and carry out the purposes, objectives, and duties of the Texas Real Estate Research Center; $50 is to be deposited to the credit of the foundation school fund; and $100, rather than $150, is to be deposited to the credit of the general revenue fund. 4. Amends Section 1101.154(a) to provide that the fee for the issuance or renewal of a salesperson license is the amount of the fee set under Section 1101.152 (Fees) and an additional $20, rather than $17.50, fee. 5. Amends Section 1101.606 to require an aggrieved person to verify to TREC, if the person is precluded by action of a bankruptcy court from executing a judgment or perfecting a judgment lien as required by Subsection (a), that the person has made a good faith effort to protect the judgment from being discharged in bankruptcy; authorizes TREC by rule to prescribe the actions necessary for an aggrieved person to demonstrate that the person has made good faith effort under Subsection (c) to protect a judgment from being discharged in bankruptcy. 6. Amends Section 1101.652 to authorize TREC to suspend or revoke a license or take other disciplinary action if the license holder enters a plea of guilty or nolo contendere to or is convicted of a felony or a criminal offense involving fraud and the time for appeal has elapsed or the judgment or conviction has been affirmed on appeal, without regard to an order granting community supervision that suspends the imposition of the sentence

1975 Amendments

1. The definition of "real estate broker" was expanded to include salesmen for subdividers and "advance fee" operators. 2. The broad "regular employee" exemption was removed. 3. Commissioners' per diem was increased. 4. Residency requirements to establish eligibility to apply for licensure were increased to six months. 5. The prerequisites for applying for broker licensure were increased to two years of licensure and 180 class hours of study in courses approved by the Commission or certified by accredited institutions of higher education. Also, as a prerequisite to applying for salesman licensure, the applicant must have completed 30 classroom hours of study in courses accepted by the Commission and on the second and third certification of salesman licensure privileges the applicant/licensee must show evidence of completion of an additional 30 classroom hours of study in connection with each certification. Beginning January 1, 1977, an applicant for salesman licensure must have completed 90 classroom hours of study or six semester hours. 6. Real Estate Recovery Fund provisions were put into the Act to replace surety bond requirements. The monies have been invested as reflected in Note 3. 7. Changes were made in the section of the Act concerning violations with a view to raising the level 2 of responsibility required of the licensee when dealing with the public.

1993 Amendment

1. The definition of the term "real estate" was narrowed to exclude an interest given as security for the performance of an obligation. 2. The Commission was authorized to employ a general counsel, attorneys, investigators and support staff. 3. Limited liability companies became subject to licensing requirements if the companies provide real estate brokerage services. 4. A new core real estate course, Law of Agency, was established; the course becomes mandatory for new salesman applicants beginning September 1, 1994. 5. The Commission was authorized to accredit courses of study in real estate inspection. 6. The Commission was authorized to collect a fee for filing a request for a license due to a change of name or return to active status, or for a license history. 7. Requirements for an inactive broker to return to active status were reduced to 15 hours of MCE courses. 8. A 60-day residency requirement for applicants was deleted, and nonresidents who were previously licensed as a Texas real estate salesman or broker are eligible to apply if the application is filed within one year of the expiration of the previous license. 9. The Commission was authorized to issue investigative subpoenas. 10.Specific guidelines were provided for licensees representing more than one party in the same transaction. 11.A provision was added excusing licensees from inquiring about or disclosing death occurring on a property by natural causes, suicide, or accident unrelated to the condition of the property. 12. Section 23 of the Act relating to real estate inspectors was largely rewritten to establish a new three-level provide guidelines for the relative roles of the Commission and the Texas Real Estate Inspector Committee, and to permit previously licensed inspectors to be re-licensed without meeting current requirements.

1987 Amendments

1. The fees for filing an original application for real estate broker licensure and for annual certification of real estate broker licensure status were increased by $110 on a temporary basis, ending August 31, 1989. 2. The Commission was required to deposit $27.50 of the temporary fee increase to the credit of the Foundation School Fund (193) and $82.50 to the credit of the General Revenue Fund (001).

1999 Amendment

1. The legislature increased the penalty for violating the Act or an order of the Commission to a Class A misdemeanor, punishable by a fine of up to $4,000 and up to one year of confinement in the county jail. 2. The Commission's exclusive authority to enforce the Residential Service Company Act, Article 6573b, by bringing an injunctive action was also clarified.

Rules of the Commission

A license holder's relationship with the license holder's principal is that of a fiduciary. A license holder shall convey to the principal all known information which would affect the principal's decision on whether or not to make, accept or reject offers. However, if the principal has agreed in writing that offers are not to be submitted after the principal has entered into a contract to buy, sell, rent, or lease a property, the license holder shall have no duty to submit offers to the principal after the principal has accepted an offer The license holder must put the interest of the license holder's principal above the license holder's own interest. A license holder must deal honestly and fairly with all parties; however, the license holder represents only the principal and owes a duty of fidelity to such principal. A license holder has an affirmative duty to keep the principal informed at all times of significant information applicable to the transaction or transactions in which the license holder is acting as agent for the principal. A license holder has a duty to convey accurate information to members of the public with whom the license holder deals.

Integrity

A real estate broker or sales agent has a special obligation to exercise integrity in the discharge of the license holder's responsibilities, including employment of prudence and caution so as to avoid misrepresentation, in any wise, by acts of commission or omission.

Obligations and Duties to Non-Principals

A real estate broker who represents a seller, buyer, tenant or a landlord is not without any duties or obligations whatsoever to the non-principal (non-represented customer or other broker). A broker's fiduciary obligations to his or her client do not in any way relieve the broker of a duty to treat the opposing party honestly and with fairness. A fiduciary obligation to a seller is never a defense to a tort action brought by a buyer against a real estate broker for misrepresentation. Nor is proof of an agency relationship an element of an action for intentional negligent or misrepresentation

Fiduciary

A relationship that implies a position of trust and confidence wherein one person is usually entrusted to sell, lease or manage for another. The word "fiduciary" describes the faithful relationship owed by the license holder with the duties of obedience, loyalty, disclosure, confidentiality, accountability and reasonable care.

Agency by Ratification

Agency by ratification is created when a principal ratifies or approves of an action that was originally performed without authorization, thereby accepting the benefits associated with the representation. If an agency relationship is created by ratification, the legal consequences are just the same as if the action has been expressly authorized beforehand.

Agency coupled with an Interest

Agency coupled with an interest is a particular type of agency relationship where the license holder has an interest or estate in the property as part or all of his or her compensation. An agency coupled with an interest is generally considered to be irrevocable, all though it may be terminated pursuant to an express agreement between the parties. It may not be terminated by unilateral act on behalf of the principal.

Handling Trust Money

All money must be timely deposited into a properly set up escrow account. The broker must never comingle escrow money with their own funds.

What is Agency

An agency relationship is the fiduciary relationship resulting when one person, called the agent, represents the interests of another person, called the principal, in dealings with others

Duty of Reasonable Care

As set forth in the Rules of the Texas Real Estate Commission, the license holder must conduct real estate transactions with care and diligence, ensuring representation of the principal to the best of the agent's ability and in the best interest of the principal. With this understanding in place, the licensee holder can be held liable for any loss resulting from his or her negligence. The duty of reasonable care generally implies competence and expertise on the part of the licensee. This is required because licensees have been issued a license and permitted to hold themselves out to the public as real estate experts due to their training and experience. The duty of reasonable care includes two components: integrity and competency.

Stigmatized Property

Buyers may not buy stigmatized property because of something that happened there, rather than a property condition. Some of the things that may stigmatize a property are meth labs, drugs, homeless occupants, murder, crime, death in a property, ghosts, ethnic rituals or beliefs, etc. Many times the property sells, but at a lower than market value price. These issues bring up many questions for real estate licensees. In real estate, stigmatized property is property which buyers or tenants may shun for reasons that are unrelated to its physical condition or features. These can include death of an occupant, murder, suicide, serious illness such as AIDS, and belief that a house is haunted. The concept is controversial and subject to personal opinions.

Cooperation with Other Brokers A

First off, your broker will tell you what fees are to be paid to a buyer's agent and a subagent. The sales agent or broker associate do not set fees, the broker of record sets the fees to pay the buyer broker or other broker sub agent. The broker comes up with these fees based on his or her cost of doing business for his or her company. The broker determines his or her expenses and then how much income he or she needs to cover the expenses. The broker then determines how many listing, sales, leases, referral fees, and any additional income to project the amount of business he or she needs to receive to cover business expenses. This is how the broker determines his or her commission fees.

MUD Notice Information

If a property is located within a Municipal Utility District (MUD), the seller is required by the Texas Water Code to provide to a buyer, prior to the buyer's entering into a sales contract, a notice regarding the MUD in which the property is located. The notice provides information regarding the tax rate, bonded indebtedness, and standby fee, if any, of the MUD. A seller will typically know if a MUD is providing service to a property because the MUD assessment will be listed on the tax bill that the county sends to the property owner. The property seller will frequently not, however, have access to the MUD notice required to be given to the buyer and may require the assistance of a real estate licensee to obtain the proper notice. One method you may use to obtain the proper notice is to contact an agent for the MUD and request a copy of the most current notice. The name, address, and phone number of all MUDs in Texas are available through the Texas Commission on Environmental Quality's website.

Obligation to the Vendor

In property management, there may be obligations to a vendor in the transaction. Brokers contract with vendors for service to maintain or repair the properties. Vendors expect to be paid. If the agent works within the scope of their authority and the vendor knows who the owner is, the agent is normally not liable for the debt. If a vendor relied on the fact he believed the agent was acting under authority from the principal/ owner the principal may still be liable to the vendor; however, if the agent was acting outside their scope of authority the owner may have a cause of action against the license holder. If the vendor never knows the identity of the owner, the license holder will probably be liable to the vendor for payment. This is why you need to tell the vendor who you represent.

Background and Notice Required

In some cases, individuals purchase lots for residential or commercial purposes without realizing that the extension of water or sewer services may require additional expense on the individual's part, and that there might be a delay in the utility's ability to provide the services. This is problematic in areas served by private utilities, nonprofit water supply and sewer service corporations, and special utility districts, which typically have service areas outside a municipality's jurisdiction.

1967 Amendments

Increased the prerequisites for applying for broker licensure to one year of licensure and 90 classroom hours of study in courses approved by the Commission or certified by accredited institutions of higher education. It also provided that after one has been licensed as a salesman for one full year, as a prerequisite to that licensure renewal, he must have completed 30 classroom hours of study in courses as aforesaid.

Access to the Property C

Learn the difference between a keybox, lockbox, combination box, etc. There are many types of boxes to put on property to access the key. Your broker will determine what boxes you are to use for occupied and vacant property. At your expense, you will purchase these boxes if your broker does not provide them. Be sure your broker has error and omissions insurance to cover the broker and you if someone enters the property unauthorized resulting in theft, property damage, or personal injury. You must have permission in writing to put a key box or any box that will hold the keys to the property. If there is a tenant in the property, written permission must be in your file stating the seller has received the tenant's permission to access the property. If the tenant does not give permission, the keybox cannot be on the property. Showings would have to be by appointment only. The tenant would have to be there to let the broker, sales agent or broker associate into the property.

Representation Disclosure

License holders have two requirements under Section 1101.558, Representation Disclosure, of The Real Estate License Act: 1. To disclose which party they represent to other parties or license holders who represent another party in a proposed real estate transaction 2. To provide information about brokerage services to prospective buyers, sellers, tenants, and landlords.

Express Agreement

Most agency relationships are formed by express agreement, where a principal appoints an agent, and the agent accepts. This agreement does not have to be written to be valid; oral agreements are held to the same rules of agency relationships as written ones. However, written agreements are generally considered the safest way to outline the expectations and obligations of the parties involved. In the event that problems arise over the course of the agency relationship, this written agreement acts as a record of the defined contractual terms and expressed intentions of the agent and principal.

Disclosing Property Information

One area that has caused litigation in more than one situation is square footage. Your broker will probably not want you to take on the responsibility of measuring the property. Sales agents must be cautious to tell members of the public when they are relying on the information from a third party. Most brokers use the square footage "as per the tax rolls" or "per appraisal". Builder plans should not be used because they are not accurate. It has been proven the building spec-plan square footage is never the same as the finished product. Ask your broker and errors and omission insurance company. The square footage can be a major discrepancy and lead to legal trouble if you quote from a source that should not be used. Always disclose the source of your information when you are relying on the words of other sources (i.e. "The seller says there are hardwood floors under the carpet."). Verify or do not advertise.

Agency Liability

One of the major factors in any agency relationship is the liability that the license holder or the principal impose on each other. Duties for both license holder and principal need to be understood and discussed to reduce as much liability as possible. A license holder should NEVER make decisions, say or imply information without his or her principal's authorization in writing. There are many court cases to prove this analogy. Sometimes, the actions or words of a principal can convince a third party that the agent has authority when in fact the agent has no authority. In such a situation, the person who acts as an agent has apparent authority. Other actions within the scope of the agent's authority fall under agency by implied actual authority, which means actions that, are necessary to complete the duties that were expressly authorized. These are generally actions that are customary for the business as well as what the listing or buyer agreement says.

Texas Real Estate Commission Rules

Paragraph 1 spells out the parties to the listing agreement. The seller's name should be the same name on the title when he or she bought the property. If it is an estate, the name would be the trustee for the property. If the property is owed by the bank, the bank will tell you whose name to use. Also, if this is a sale where an estate is selling the property, you need all signatures of each heir to the listing agreement. The reason is an heir could refuse to sell the property or pay you your commission. Never date your listing agreement until you have all signatures. Under the broker section, you put your broker's name and address with your name next to the broker. Your broker's policy and procedures manual will tell you what name to take the listing in. The broker's name always goes in this part. Not just the agent's name or team name. Commissions can be a percentage of the sales price, a flat fee, or payable up front. The broker determines what commissions are to be paid, how they are paid, and what form of money to be paid. Remember "commissions are negotiable" and you must have your broker's permission to variate from your Broker's Commission Schedule for Listings. All commissions are negotiable

Recommend Inspections

Recommend that the buyer have an inspection performed by a professional property inspector. You can provide a list of qualified inspectors to the prospective buyer, but you should not be present to mediate the conversation between the inspector and the prospective buyer. Make sure that you do not appear to require the buyer to use any particular inspector; this should always be the buyer's choice. If the initial inspection reveals defects in the property and the appropriate repairs are made, encourage the prospective buyer to review the property a second time to ensure that the repairs were done to his or her satisfaction.

Texas Statute of Frauds

Texas has a law known as the "statute of frauds" which requires that some contracts must be written to be valid. In Texas, contracts involving the following are subject to the statute of frauds and, generally, have to be in writing to be enforceable: a. the sale of real estate; loan agreements involving more than $50,000; b. contracts for commissions from certain oil, gas or mineral sales; c. contracts that cannot be performed within one year; d. contracts to pay off someone else's debts; e. leases for more than one year; f. certain medical care contracts; and g. contracts concerning a marriage or non-marital cohabitation must be in writing and signed by the person making the agreement.

Avoiding Disclosure and Misrepresentation

The broker, as the listing agent, has an obligation to use his or her best efforts and diligence to market the property according to the principal's instructions. The broker has the obligation to obtain the best price available for the principal. The broker (and all of the broker's sales agents) owes the principal 100% loyalty. Loyalty also means the agent will not put their own interest ahead of the client's interest. Putting the client's interest first is the essence of the agent's fiduciary responsibility. Brokers who put their own interest above that of the client may face breach of fiduciary duties allegations. Texas Real Estate Commission Rules require that the license holder disclose all known information that may affect the principal's decision to accept or reject offers, or buy or reject the property, and keep the principal informed of all significant information. A broker must ascertain whether a seller knows about any appreciation in value before agreeing to sell the property. If a broker has more than a 10% interest in the entity purchasing the property, it must be disclosed to the seller. If a broker is working on behalf of his spouse, parent or child must be disclosed (Texas Real Estate Commission Rule 535.144 (b)). A broker must exercise competence and skill to protect the client from harm.

Access tot he Property A and B

This is where the seller gives permission to allow access to the property by other brokers, customers, buyers, inspectors, appraisers, and your broker's sales agents and broker associates at reasonable times. Your broker determines reasonable times. The seller/owner(s) give permission to make additional keys and to place a key box on the property. If appointments are going to be made by an outside vendor or scheduling company, you would place their name in paragraph B. Your broker determines who you will use as a scheduling company

Duty of Honesty and Fair Dealing

a) A license holder's relationship with the license holder's principal is that of a fiduciary. A license holder shall convey to the principal all known information which would affect the principal's decision on whether or not to make, accept or reject offers; however, if the principal has agreed in writing that offers are not to be submitted after the principal has entered into a contract to buy, sell, rent, or lease a property, the license holder shall have no duty to submit offers to the principal after the principal has accepted an offer. (b) The license holder must put the interest of the license holder's principal above the license holder's own interest. A license holder must deal honestly and fairly with all parties; however, the license holder represents only the principal and owes a duty of fidelity to such principal. (c) A license holder has an affirmative duty to keep the principal informed at all times of significant information applicable to the transaction or transactions in which the license holder is acting as agent for the principal. (d) A license holder has a duty to convey accurate information to members of the public with whom the license holder deals.