Law of Agency Chapters 9-12
The Code of Ethics is a detailed document that spells out professional responsibilities.
A detailed document that spells out the professional responsibilities of every REALTOR® refers to the __________?
Housing and Urban Development (HUD).
A discrimination complaint can be filed against a licensee with the Department of
A licensee who receives a commission from a service provider must obtain consent from their principal.
A licensee who receives a commission from a service provider must obtain consent from which person?
A licensee will receive a share of the sponsoring broker's commission based on the independent contractor agreement.
A licensee will receive a share of the sponsoring broker's commission based on which agreement?
a foreclosure.
A waiver of rights under DTPA would be needed especially when selling
The arbitration panel will want to determine why the purchaser abandoned the first broker.
If a purchaser seeks assistance from another broker, the arbitration panel will want to determine what?
file a lawsuit AND file a complaint at the same time
If a real estate agent violates DTPA, an attorney can
If an agent had no knowledge of a material defect to the property, a court can award nothing in the way of damages. The agent will not be held responsible for material defects they were unaware of.
If an agent had no knowledge of a material defect to the property, how much can a court award in the way of damages?
If the cost of mediation in a DTPA complaint is under $15,000, the party requesting mediation must pay the costs.
If the cost of mediation in a DTPA complaint is under $15,000, who must pay the costs?
The main focus of the DTPA is to protect consumers against false, misleading, and deceptive business practices, unconscionable actions, and breaches of warranty.
What is the purpose of the DTPA?
The stated purpose of the DTPA is to protect consumers against false, misleading, and deceptive business practices, breaches of warranty, and unconscionable actions, and to provide efficient and economical procedures to secure such protection.
What is the stated purpose of the DTPA?
If a consumer does not file the lawsuit in a timely manner, then the lawsuit cannot be filed. The time frame is two years from the event or the discovery of the event.
What is the statute of limitations under the Deceptive Trade Practices Act?
A licensee shall immediately deliver to the sponsoring broker any trust funds received in connection with a real estate transaction not otherwise deposited with a title company.
What is the time limit given to a licensee to turn over trust funds to their broker?
They must, with the sellers' approval, disclose the existence of offers on the property.
What must REALTORS® do in response to inquiries from buyers or cooperating brokers?
The disclosure form should not be attached to the contract as an addendum, but the form should be retained in the transaction records maintained by the broker as evidence that the disclosure was provided.
What office procedure should be used to handle RSC-1 forms?
Only Articles can be named, never the Preamble. And Standards of Practice may be cited only in support of a named Article.
What part of the Code must be named in any complaint that is filed?
The broker does not withhold any taxes from the commission they pay the independent contractor. If the licensee makes more than $600, the broker must file an IRS Form 1099-MISC for that licensee to report how much they earned for the year.
What percentage in taxes does the broker withhold from the independent contractor's commissions?
If the agent does not receive their share of an earned commission, that agent can sue the broker to get it.
What recourse does an agent have if they do not receive their share of an earned commission from their broker?
The Assignment of Prospects section of the independent contractor agreement gives a licensee the ability to search for clients and for brokers to assign clients to licensees.
What section of an independent contractor agreement gives a licensee the ability to search for clients and for brokers to assign clients to licensees?
An agent should know the buyer's financial capabilities and what features they want in a home.
What should an agent know about buyers before selecting properties to show?
Get the person's name and then call your office immediately so an agent can come to do the showing.
What should you tell a seller to do if someone shows up on the doorstep wanting to see the home?
The person or persons who made the offer or counteroffer must receive notice of the acceptance. The acceptance must be made in a certain manner. None of the terms of the offer can change as a result of the acceptance.
What three things are important when accepting an offer?
That it's up to the salesperson to decide if a broker is worthy of their services. Also, the salesperson needs to remember that choosing a broker is a very important decision.
What type of attitude should a salesperson have when interviewing a broker?
A good filing system is critical and should include cross-referencing and indexing components.
What types of office administration tasks are important for a licensed assistant to perform?
In 1913, the Association adopted the industry's first code of ethical conduct, the Code of Ethics, to protect the public and promote professionalism and integrity of licensees.
What was the purpose of the 1913 adoption of the NAR Code of Ethics?
When an aggrieved party refuses to do what the contract says.
When do problems and the potential for litigation concerning the disposition of earnest money arise?
The Code of Ethics rules apply when a real estate agent is acting as an agent or in legally recognized non-agent capacities, such as transaction broker or facilitator
When do the Code of Ethics rules apply?
When cooperation is not in the clients' best interest.
When is a REALTOR® allowed not to cooperate with another broker?
Changes in compensation offered for cooperative services must be communicated to the other REALTOR® prior to the time that REALTOR® submits an offer to purchase/lease the property.
When must changes in compensation offered for cooperative services be communicated to the other REALTOR®?
review both offers before accepting the first offer.
When presenting two offers on a home, the agent should advise the seller to:
When questioning the seller regarding the property, an agent should use a property condition disclosure form.
When questioning the seller regarding the property, what form should the agent use?
A resume should include previous job history, people skills, education, previous real estate experience - perhaps as an agent, technical skills, and recommendations.
When seeking employment as an assistant, what topics should be included on a resume?
The broker should prepare both presentations with the net proceeds statements to present to the seller. The broker should give no preference to an offer based on the order in which it was received.
When the broker actually has two offers to present, what should the broker do?
Use Written Disclosure Clarify their role in the transaction Use the help of others when needed
Whether a broker represents the seller or the buyer, what three things should the broker make sure the licensees do?
IRS code, Section 3508, allows real estate agents to be classified as independent contractors.
Which IRS code allows real estate agents to be classified as independent contractors?
The Buyer/Tenant Representation Agreements involve a broker representing a buyer to help find and negotiate the purchase of a home.
Which agreement involves a broker representing a buyer to help find and negotiate the purchase of a home?
Arbitration is the form of dispute resolution typically used to resolve problems between broker members of an association.
Which form of dispute resolution is typically used to resolve problems between broker members of an association?
Sharing all visitor comments two weeks before the listing ends
Which of the following actions by an agent would most probably upset the sellers?
In a real estate mediation process the parties meet with a trained third-party called a mediator.
Who do parties meet within a real estate mediation process?
The Texas Attorney General enforces the DTPA in Texas.
Who enforces the DTPA in Texas?
A prospect is purchaser, seller, tenant, or landlord who is not subject to a representation relationship with the REALTOR®.
Who is a prospect?
The seller is the only party to a transaction that has the right to accept, reject, or counter an offer.
Who is the only party to a transaction that has the right to accept, reject, or counter an offer?
Where reasonable cause is found, the parties to the complaint are notified by HUD's issuance of a Determination, as well as a Charge of Discrimination, and a hearing is scheduled before a HUD administrative law judge.
Who presides over a charge of discrimination hearing?
It gives the broker an opportunity to get all their agents together at the same time and share important information, and it also provides an opportunity for agents to get to know other agents in the office.
Why do many brokers schedule weekly sales meetings?
The escrow process can make or break a sale. If inspections are not ordered or completed on time, if there are problems with financing or if other problems are not uncovered and resolved before the closing, escrow can fail. An assistant can talk to the escrow officer to find out what documents have been returned, what documents are outstanding, if all contingencies have been removed and if all conditions have been met.
Why is coordinating escrow so important and how can an assistant help?
They need to know the procedures for handling outstanding commissions at the time of termination.
Why is it especially important for licensees to be clear on conditions for termination of an Independent Contractor Agreement?
It is important for the salesperson working with or for the buyer to suggest that the buyer include an option period in the contract so that if too many things are found wrong in the home inspection report, the buyer has an easy way of withdrawing from the transaction.
Why is it important for a salesperson working with or for the buyer to suggest that the buyer include an option period in the contract?
If the offer is accepted by the seller, it will be a binding contract.
Why is it important for an agent to spend as much time as necessary making sure the buyer understands the provisions and details of the offer contract?
It's a way to raise the sellers' comfort level that they will be selling their home to people who will really appreciate it. Remember that you should never discuss the buyers' race, national origin, religion, disability, or other characteristics that could lead the sellers to discriminatory behavior or be viewed as discriminatory behavior on your part.
Why is it important to give the sellers information about the buyers who are making an offer on the property?
Complaints filed with HUD are investigated by the Office of Fair Housing and Equal Opportunity (FHEO).
The Office of Fair Housing and Equal Opportunity (FHEO) investigates complaints filed by which agency?
The Texas Real Estate Commission has a recovery fund to pay damages to someone who wins a case against a licensee in a court of law and the licensee does not have the funds to pay the judgment.
The Texas Real Estate Commission has a recovery fund for what purpose?
The contract relates to a transaction, a project, or a set of transactions related to the same project involving total consideration by the consumer of more than $100,000. In negotiating the contract the consumer is represented by legal counsel who is not directly or indirectly identified, suggested, or selected by the defendant or an agent of the defendant. The contract does not involve the consumer's residence. All transactions, whether written or not, that have consideration that exceeds $500,000.
There are some exemptions from prohibition against waiver under Section 17.49 (f) to the DTPA law as long as there is a written contract and it meets the certain requirements. List two of those requirements.
The purpose of an RSC-1 form is for the licensee to disclose service fees collected from residential service companies.
What is the purpose of an RSC-1 form?
Social Security Tax
If a licensee joins a company as an independent contractor, which of these will he probably have to pay for on his own?
A Texas licensee can indeed receive a referral fee through their broker from another broker in any state.
A Texas licensee can receive a referral fee through their broker from another broker in any state. True or false?
A broker who owns a franchise is contractually obligated to pay a franchise fee to the franchise company.
A broker who owns a franchise is contractually obligated to pay what type of fee to the franchise company?
This is called a Sphere of Influence list. You should put the seller on this list, as well. This could generate a referral for you.
After closing, the agent should put the new client on a list for future marketing. This list is called what?
The next step is to implement corrective action to reduce or eliminate known risks.
After identifying risks, what is the next step a broker should take?
All advertising for a property is subject to Fair Housing Laws.
All advertising for a property is subject to what laws?
An action under the DTPA must be brought within two years after the date in which the false, misleading, or deceptive act occurred.
An action under the DTPA must be brought within how long after the date in which the false, misleading, or deceptive act occurred?
Tom owes Broker Paul 6% of the home's selling price. He could also owe Broker Alice 6% of the home's selling price if she was not made aware of the protection list of buyers that broker Paul submitted.
Broker Paul listed Tom's home and showed it to Buyer Alan. Their listing agreement specified that Paul would receive a 6% commission, and the safety period was set at six months after the listing expiration. After the listing expired, Tom listed his home with Broker Alice for a 6% commission rate. Alice sold the home to Buyer Alan, who was on the protected list, five months later. What commission does Tom owe and to whom?
Commission means that the licensee did something to cause misrepresentation - such as telling the buyer a home has 3,000 square feet when it actually has 2,000.
Define commission and give an example of an act of commission that could cause misrepresentation.
If a matter is technical and important, you should suggest that the seller bring in expert assistance.
If a matter is technical and important, what should you suggest to the seller?
Discovery of latent defects is not required under the Code of Ethics.
Discovery of latent defects is or is not required under the Code of Ethics?
Yes, to achieve objectives of deterring wrongful conduct, protecting consumers and providing incentives for attorneys to bring a lawsuit, the DTPA permits the recovery of economic damages in addition to actual losses.
Does the DTPA permit the recovery of economic damages in addition to actual losses?
cost of repair or replacement.
Economic damages include:
rules of behavior based on ideas of what is morally good and bad.
Ethics are:
A backup offer is when a buyer wants to make an offer to a seller even though the seller is under contract with another buyer.
Explain backup offers.
Morals are defined as one's standards of behavior or beliefs regarding what is right or wrong.
How are "morals" best defined?
Some assistants are paid per hour, others are paid a salary plus benefits, and others are paid an hourly rate or salary plus a percentage of commissions they helped close. Licensed full-time assistants can expect to work 35-40 hours per week.
How are real estate assistants compensated for their work?
A licensee can give a gift certificate worth not more than $50 to a person who is not licensed. The licensee may not give cash, and the gift certificate may not be exchangeable for cash.
How can a licensee legally share a fee by giving a gift card to an unlicensed person?
Encourage the buyer to take the contract to a lawyer for review. Point out that there will likely be a counteroffer from the seller and until all parties agree to all terms, the contract is not binding.
How can an agent make a buyer feel more comfortable signing a contract?
Agents have a set monthly fee that is due whether or not an agent has any closing for the month.
How do 100% commission offices receive money from agents for overhead and other office fees?
Fees from licensees
How is the TREC Trust Account funded?
There are five professional ethics canons: Fidelity Integrity Competence Consumer Information Form Discriminatory Practices
How many professional ethics canons are in Title 22 of the Texas Administrative Code (TAC) Chapter 531 and what are they?
A licensee is not eligible to receive any funds from the Recovery Fund.
How much money can a licensee receive from the Recovery Fund?
A counteroffer is in effect a rejection of the original offer and the beginning of a new offer.
How would you define a counteroffer?
If a broker does share a commission with an unlicensed person, it's called a kickback.
If a broker shares a commission with an unlicensed person, it's called a what?
the sponsorship form and the independent contractor agreement.
If a conflict comes up between the salesperson and the broker, the salesperson should refer to his or her copy of
Maintain communication with your sellers
If there has been no interest in the property for weeks, what should you do?
In a suit filed under DTPA, if the facts show the conduct of the defendant was committed knowingly, the consumer may also recover damages for mental anguish.
In a suit filed under DTPA, if the facts show the conduct of the defendant was committed knowingly, the consumer may also recover?
The seller required to tell the buyer about the property's condition.
In real estate, what is the seller required to tell the buyer about the property?
Act as an "appointment reminder." Compile files with the appropriate blank documents for the agent to take to listing and selling appointments. Meet with appraisers or inspectors as the agent's representative.
In what three ways can an assistant aid an agent with appointments?
Commission = $15,400 ($220,000 x .07) Jack's share = $12,320 ($15,400 x .80) Broker's share = $3,080 ($15,400 - $12.320)
Jack sells one of his own $225,000 listings for $220,000. The commission is 7%. Jack has an 80% commission split with his broker. What is Jack's share of the commission? What is his broker's share?
Establishing a best practices model for all licensees to follow considering agency compliance. Establishing a section in the broker's company policy manual that strictly deals with agency compliance. Identifying a specific review routine internally for all paper flow including contracts, listing agreements, buyer agency agreements, and any other contractual items needed for review.
List three factors that brokers should consider when analyzing agency compliance.
Are there some agents whose specialty invites greater risk? Does the brokerage list REO properties? While the bank may believe they do not have to disclose known material defects, the agent does in most cases. Does the company have meetings to address some of the ethical issues?
List three questions a broker should ask when identifying risk. See chapter for additional answers.
Remember that the features you like about the property may not be the same ones the buyers like. Try to address any objections at the time the buyers raise them. Emphasize important features, but don't oversell them.
List three tips to keep in mind when showing a property. See chapter for additional answers.
Mediation must be held within 30 days of the request for mediation.
Mediation must be held within how long of the request for mediation?
Changes in real estate laws, rules, and regulations. Changes in marketing principles for listing properties. Updates to training programs offered by associations.
Name three reasons for monitoring sources in real estate.
Notice and settlement practices under DTPA are designed to encourage settlement rather than litigation.
Notice and settlement practices under DTPA are designed to?
To use this defense, the defendant must also show that they gave the consumer reasonable and timely written notice of the defendant's reliance.
One of the few statutory defenses is reliance on written information provided to the defendant by another. To use this defense, the defendant must also show what?
REALTORS® must recommend that sellers/landlords obtain the advice of legal counsel prior to acceptance of a subsequent offer unless the acceptance is contingent on the termination of the pre-existing purchase contract or lease.
REALTORS® must recommend that sellers/landlords obtain what prior to acceptance of a subsequent offer unless the acceptance is contingent on the termination of the pre-existing purchase contract or lease?
Recommending a particular lender, escrow service, or title company when the broker has a significant interest in such company without disclosing this interest when the recommendation is made is considered unethical.
Recommending a particular lender, escrow service, or title company when the broker has a significant interest in such company without disclosing this interest when the recommendation is made is considered what?
The ECOA was designed to prohibit discrimination in any aspect of a credit transaction.
The ECOA was designed to prohibit what types of illegal actions?
The grievance committee will confirm receipt of a complaint within 180 days.
The grievance committee will confirm receipt of a complaint within how many days?
The licensee as a salesperson may not accept a commission from anyone other than their broker.
The licensee as a salesperson may not accept a commission from anyone other than whom?
It does not necessarily include an obligation to share commissions, fees, or compensation.
The obligation to cooperate does not necessary include what?
The plaintiff must give 60 days warning time.
Under DTPA, how much warning time must the plaintiff give the potential defendant about the intention to file and an outline of the complaint and damages?
Have a written agreement. The agreement must be signed by at least the party to pay the commission. The broker must show they had an active license at the time of the transaction. The buyer was told at the time of making the offer that they should have a title search and/or a title insurance policy.
What are the 4 requirements for a judge to hear a case regarding commission not being paid by a client?
Parties
Under the independent contractor agreement, which section lists the names of the broker and licensee involved in an agreement?
Under the present version of the DTPA, harassment alone is also sufficient to support the award of defendants' attorneys' fees.
Under the present version of the DTPA, what alone is also sufficient to support the award of defendants' attorneys' fees?
When cooperation is not in the clients' best interest.
Under what circumstances are REALTORS® not obligated to cooperate with other brokers?
REALTORS® can reveal confidential information: required by court order. to prevent the client from committing a crime. to defend a REALTOR® against an accusation of wrongful conduct.
Under what circumstances may REALTORS® reveal confidential client information?
"Non-material" factors are minor facts not being considered as "pertinent."
What are "non-material" factors?
Training and support Commission schedule Who answers the phone Miscellaneous benefits
What are 4 negotiating factors an agent should consider when deciding on a brokerage and agreeing to a contract?
As the selling agent, you should take time to go over an entire offer with the listing agent to be sure they understand exactly what the buyers are offering. If an agent goes to the presentation meeting, they must disclose their agency status to the sellers.
What are a few of the important points, as the selling agent, while at the presentation meeting?
Agreements between brokers and clients are called employment contracts.
What are agreements between brokers and clients called?
The type of person they work well with. Type of office environment preferred. Does the brokerage have a nicely designed website?
What are some factors a salesperson should consider when choosing a brokerage to work with?
Listing/Landlord Agreement Buyer/Tenant Agreement Property Management Agreement
What are the 3 ways a broker enters into an employment contract with a principal?
REALTORS® must, in response to inquiries from buyers or cooperating brokers, and with the sellers' approval, disclose the existence of offers on the property.
What is the obligation of REALTOR®'s to disclose multiple offers?
The advantages to using a rented broker are the commission splits are less expensive for the agent and an agent could open their own office without having a broker license. The disadvantages include office agents not having access to advice from a broker with years of experience and the possibility that the broker's license may sometime be in jeopardy for not supervising the salespeople they are sponsoring. The broker is only renting out their license, not their expertise.
What are the advantages and disadvantages of renting a broker?
Preamble Duties to Clients and Customers Duties to the Public Duties to REALTORS®
What are the four sections of the Code of Ethics?
Behavioral Financial Type of relationship
What are the three facts that determine the level of control an employer has?
Ombudsman and Mediation are the two forms of informal dispute resolution. An ombudsman can answer questions and research complaints dealing with real estate transactions and issues surrounding ethical practices and the Code of Ethics. Mediation is a voluntary process and one which must be available to all REALTORS®.
What are the two forms of informal dispute resolution?
The licensee doesn't have the personality for pursuing and persuading clients to buy or list property. The licensee may lack confidence when starting out and prefer working as an assistant to gain experience. Financial situations might persuade an agent to seek steady income as an assistant instead of relying solely on commission.
What are three reasons why a licensed agent might want to become a real estate assistant?
Cleaning the carpets and decluttering the closets are two good tips for the seller prior to showings. See the full list in the chapter.
What are two good tips for the seller prior to showings?
If you believe that the offer you are presenting is a reasonable and fair offer, your goal should be to seek the sellers' acceptance rather than a counteroffer. Once the seller rejects an offer, it is "dead in the water."
What are two important recommendations when presenting an offer to a seller?
The preamble contains thoughts about how licensees should conduct themselves.
What does the Preamble contain?
The seller is not going to pay for or make any improvements.
What does the seller mean when listing a property "as is"?
Ethics are rules of conduct or accepted behavior based on moral principles.
What does the term "ethics" mean?
Always alert the members of your MLS of the price change through an email rather than hoping they will notice it on the MLS site.
What is a recommended way to communicate price changes of an MLS listing?
A "tie-down" is a statement that elicits a positive response.
What is a tie-down statement?
An advisory letter is a non-formal disciplinary action.
What is an advisory letter?
You can minimize confusion by giving out of town buyers fliers with photos of each property you show. That way, when they get back home, they can use those documents as reference.
What is an important technique when working with out of town buyers?
Equitable title is a buyer's right to have property transferred once all conditions of the contract are met.
What is equitable title?
Unlicensed assistants can perform a variety of activities to assist real estate licensees in transactions. However, they may not perform any activity which requires a real estate license. Therefore, hiring a licensed assistant might be a good idea.
What is important to know about unlicensed real estate assistants?
Placing trust funds in a licensee's operating or personal account.
What is meant by commingling?
Representation is not determined by who pays the commission.
What is not determined by who pays the commission?
HUD sends out testers to evaluate a real estate office to determine if the office is practicing discriminatory methods.
What is one method used by HUD to determine if a real estate office is practicing discriminatory methods?
Choosing a broker is the most important decision a salesperson makes.
What is one of the most important decisions a salesperson makes?
The judge will use what is called reasonable person theory. This means that the judge will look at the evidence and if they believe a reasonable person could have known about the problem, the real estate agent should have known about the problem.
What is the Reasonable Person Theory and how is it applied?
The Trust Account money is used to pay final judgments against persons who were licensed by TREC as a real estate salesperson, broker, or easement and right of way agent at the time the real estate transaction occurred.
What is the Trust Account money used for?
The maximum payment is $50,000 for a single transaction and $100,000 for all claims against a single license holder.
What is the fine payout structure for the TREC's Real Estate Recovery Trust Account?
The main difference between the two is an issue of control, as established by income tax laws.
What is the main difference between an employee and an independent contractor?
The most common objection buyers have is that the listing price is too high.
What is the most common objection buyers have?
The most critical component in managing risk is the capacity to evaluate a claim at the earliest possible time.
What is the most critical component in managing risk?
Failure to disclose material facts is the most frequent basis for complaints against real estate licensees.
What is the most frequent basis for complaints against real estate licensees?
The most important tool a broker can use in establishing a daily routine for their licensees is a comprehensive policy and procedures guide.
What is the most important tool a broker can use in establishing a daily routine for their licensees?
Unless there is an independent contractor agreement in place, agents are required to withhold taxes and social security from their assistants pay or they are in violation of federal and state tax laws. If the government discovers the violation, the assistant, the salesperson, and even the broker could get into trouble.
Why is it necessary for agents to withhold taxes and social security from their part-time or full-time assistants?
The agreement needs to be provided to the TREC board when the licensee applies. The information also includes the licensee's social security numbers, so it should be in a safe place. It is especially important for the licensee to have easy access to the agreement if any conflict occurs between the licensee and broker. The agreement contents should clear up most issues.
Why is keeping easy to find records of the agreement a good idea for both the broker and licensee?
Because it is regularly revised as necessary.
Why is the Code of Ethics called a living document?