Chapter 4 - Agency Positions and Disclosures

As defined in the Texas Real Estate License Act, what is a subagent?

A license holder who represents a principal through cooperation with the principal's broker. * A license holder who represents both the buyer and the seller in the transaction. A license holder who procures a buyer for a property through a multiple listing service and cooperates with the listing agent. An associated license holder who is appointed by the supervising broker to represent the supervising broker's principal. Answer A subagent is a license holder who represents a principal through cooperation with the principal's broker.

HIV and AIDS Disclosure

A potential buyer may want to be informed about whether the previous or current occupant of a home has AIDS or HIV. This information is private and should not be disclosed. Part of the reason that this topic is not required to tell to a third party is because: It has nothing to do with the property. Disclosing that information could be a violation of Fair Housing Laws and the privacy of the person in question.

Agency Is a Broker-Client Relationship

Agency is always created at the broker level when a sales agent signs an agency agreement on behalf of the broker. Therefore, agency is between the client and the broker, and yet the sales agent is performing the acts necessary in the transaction. It can be said then that the broker represents all of the clients and all of the sales agents represent the broker.

Intermediary Without Appointments

All of that does not mean that the broker cannot stay involved in a transaction that became an intermediary situation. The broker might be the listing agent and one of the sales agents may have created agency with the buyer. The broker can continue working in the transaction but it would be considered intermediary without appointments. In this situation, both the broker and the sales agent would have to be neutral. And since this is the case, it might be better if the broker would appoint someone else in the office to the seller and leave the buyer's agent appointed to the buyer.

Listing Broker Liability

And it's not just brokers who do not want their sponsored agents acting as subagents; many listing brokers do not want to collaborate with subagents as well. Most listing brokers do not want sales agents from other offices showing their listings as a subagent. The problem is that if the other agent is a subagent, the listing company and the seller are also liable for any mistakes that may be made by that subagent. That's a liability that many listing brokers do not want to risk.

Can the sales agent act as an agent without a broker.

Brokers are the only Texas real estate professionals who can officially enter into an agency relationship with a buyer or seller. Any sales agent involved in a transaction then represents the broker - the sales agent cannot act as an agent without a broker.

The Third Party- listing agent & buyer

If a listing agent is dealing with a buyer who wants to purchase one of their listed homes, the buyer would be the third party and only the seller would have representation. A client is never a third party to the company that is representing them. The agent works FOR the principal and works WITH (but not for) the third party. The third party negotiates with the principal through the agent. In these negotiations, the agent is obligated to represent the principal's interests. It is not the agent's task to look out for or act on behalf of the third party. The third party should have an agent of their own, whose job it is to act in the third party's best interest.

What an Intermediary Relationship Isn't

If the buyer is a customer to someone at the listing company, it is not an intermediary relationship. If the buyer is represented by someone at a different office than the listing company, it is not an intermediary relationship. If the agent at another office is working as a subagent with a buyer, it is not an intermediary relationship. The only way an intermediary transaction can take place is if the broker is representing both the seller and the buyer as clients.

Material Fact Example...

If the seller is aware that the fence surrounding their listed property extends beyond the designated property boundaries and that this may lead to problems with the owners of the adjoining property, they need to inform potential buyers of this material fact, as it would probably be difficult for a buyer to discover this on their own. If known, the license holder (both listing agent and buyer's agent) must disclose this information to the prospective buyer. Otherwise, the license holder is intentionally concealing important information that could very likely impact the third party's decision.

In order for a brokerage to be able to represent both the buyer and seller

In order for a brokerage to be able to represent both the buyer and seller in a real estate transaction, the brokerage needs to have the permission of BOTH PARTIES.

The Principal

In real estate, the principal engages the professional advice and other services of their agent to aid in the sale, purchase, exchange, or lease of real property. The principal may be a seller, a prospective buyer, an owner wanting to lease their property to another person, or an individual seeking property to rent.

Intermediary relationships!

Intermediary relationships occur when the same real estate office is representing both the seller and the buyer as clients in the same transaction. The broker appoints associated license holders to work with both parties.

Material Fact in a real estate transaction

Is any fact that is significant or essential to the transaction - that is, any piece of information that could reasonably be expected to influence a prudent individual's decisions regarding the transaction. This duty requires the agent to disclose latent or hidden defects in the property that may not be identified by an ordinary inspection but could alter the customer's decision regarding the property.

Texas Disclosure Guidelines

License holders have the general duty to disclose agency relationships to all parties involved in a transaction. There are actually two requirements to disclosing agency: Tell everyone (agents, customers, and prospects) whom you represent (if any) at first contact. This disclosure is required at open houses. This disclosure can be oral or in writing. Give the written statutory statement (IABS Notice) at the first substantive communication about a specific property.

Test Question-Brokerage A charges clients a 6% commission, while Brokerage B charges only 5%. Is this legal? Why or why not?

No, 6% is standard across the industry. Undercharging clients creates illegal competition. No, commissions for each county are set by TREC and cannot be negotiated or changed. Yes, brokerages can charge whatever commission they choose. Commissions are negotiable. * Yes, but only if the supervising brokers at the two agencies discussed it beforehand and agreed that it was appropriate. Answer- Commissions vary! There is no set percentage a residential agent "should" earn. This is why it is important to clarify commission ahead of time so all parties are on the same page.

Substantive Communication

Once substantive communication occurs between an agent and a potential client or a third party, the agent must give the person a written statement that outlines Texas agency law (IABS Notice). TRELA indicates that a substantive communication is communication that involves a substantive discussion relating to specific real property.

IABS Exceptions

So, other than the open house scenario we covered a few screens back, §1101.558(c) provides two other exceptions to the statutory obligation to provide written notice (IABS): The proposed transaction is for a residential lease for not more than one year and a sale is not being considered The license holder meets with a party whom the license holder knows is represented by another license holder

On a listing sheet, what would a field stating "BC: 3" mean?

That the brokerage representing the buyer and the brokerage representing the seller will split 3% commission that any subagent to the seller's broker will receive 3% commission that the brokerage representing the buyer will receive 3% of the commission * that the brokerage representing the seller will receive 3% of the commission Answer- On a listing sheet, a field stating "BC: 3" means the buyer's broker will get 3% commission once the sale closes.

Subagency

The Idea: Listing brokerages would share their inventory with each other. If a buyer was interested in another listing brokerage's property, the listing broker could then show the property on behalf of the other listing broker and their seller...as a "subagent."

Intermediary Relationship in Texas

The Texas Real Estate Commission rules state that the broker can never be appointed to anyone and must always be neutral in an intermediary relationship.

May a broker who works by themself and has no agents practice an intermediary relationship?

The answer is yes, but only as an intermediary without appointments. If that broker has one sales agent, intermediary with appointments cannot take place because the company must have at least two agents for appointments, but the transaction could still be done without appointments. In addition, appointments must also be made before any advice or opinions are given to either party by anyone at the representing brokerage.

The principal is...

The individual who authorizes another person to act on their behalf. The principal may also be referred to as the client. The transfer of this authority is what allows the license holder to take on the role of agent.

Buyer's Agency on the Listing Sheet

The other field will say "BC" (short for "buyer representative commission") followed by a number. The number that goes in that field is a percentage of the sales price that the buyer's broker will receive. For example, if the field said "BC: 4," when this transaction closes, the company that brought the buyer-client to the table would receive 4% of the sales price as their commission. That 4% would then be split between the broker and buyer's agent at whatever breakdown the broker and agent have agreed to.

The Third Party

The third party is the final variable to consider when an agency relationship is formed. The third party is the individual with whom the agent and principal enter into real estate negotiations. The third party is also sometimes referred to as the customer. This individual may be a prospective seller, buyer, landlord, or tenant - anyone who expresses real interest in completing a contract toward the sale, purchase, or rental of real property and is both ready and able to do so. In short, the third party is the person the agent is not representing.

Subagency on the Listing Sheet

The way that a sales agent knows whether or not the other office (listing broker) is accepting subagents is indicated on the multiple listing sheet. The software you use may differ, but typically, it will have fields that require information to be entered by the listing agent. Search for a field that indicates the subagent commission to find out the brokerage's stance on subagency. For example, if the MLS information sheet says "SC: 0" (Subagent Commission: 0), the brokerage is indicating that they will not share a commission with a subagent.

Test Question-Jamie is an agent representing a seller. She holds an open house to find a buyer for the home. What is she legally required to do?

Verify that none of the buyer agents share a brokerage with her prominently post the asking price of the house disclose that she represents the homeowner * collect the names of the potential buyers and their agents Answer A license holder must disclose orally or in writing to others of their representation of a party to a real estate transaction at the first contact, including at an open house.

Floor Duty

What's "floor duty"? It's a system by which each sales agent volunteers to be given a period of time in the office where they are the first person to answer the phone or grab the first person who walks in the door in an attempt to turn that person into a client. It's the perfect task for eager beavers just starting out in the industry! Some offices give it a much fancier name, like "Opportunity Time." While floor duty could bring plenty of clients to a brokerage, it is important for license holders to actively find clients in other ways, too.

What do you call a person who is representing someone else in a transaction?

buyer client subagent agent * Agents in real estate aren't quite as cool as the secret agents in spy movies, but they do have the power to represent other people who may be involved in a sale.