Real Estate Unit 4

In addition to proportionate responsibility for damages under the DTPA, a defendant may be held jointly and separately responsible for all damages recoverable if the defendant's percentage of responsibility is found to be more than what percentage?

The answer is 50. A defendant who is only marginally at fault will be liable to the consumer for that defendant's percentage of responsibility. However, in addition, a defendant may be held jointly and separately responsible for all damages if (a) the defendant's percentage of responsibility is greater than 50% or (b) the defendant, with specific intent to do harm, acted with another person to commit a third-degree-or-higher felony. The actions of persons licensed under a broker are always the responsibility of the broker.

If a broker is forced into an intermediary position because a buyer expresses interest in a company listing, and therefore appoints two other associated license holders to represent seller and buyer, respectively, do the respective appointees need to be of roughly equal skill and experience?

The answer is Texas law is silent on the issue. Brokers should, however, be cautious about who they appoint to represent buyers and sellers. Sales agents have differing strengths and weaknesses, including ability to negotiate, and clients are entitled to benefit from those talents.

An agent's legal requirement to act in the client's best interest and with the utmost good faith is called

The answer is a fiduciary relationship. Agents and subagents have a fiduciary relationship with a principal—one in which a license holder has a legal requirement to act in the client's best interest and with the utmost good faith.

Broker Y is cooperating with a listing broker by showing that broker's listing to a prospective purchaser/customer. She is, therefore, working as

The answer is a subagent. A broker who lists the property for sale or lease represents the owner as a seller's agent. A broker who acts as a subagent represents the owner in cooperation with the listing broker and must place the interests of the owner first. A subagent is not sponsored by or associated with the listing broker's office and works with the buyer as customer rather than as client. A broker who acts as a buyer's agent represents the buyer as client, usually through a written buyer representation agreement.

Are the principals allowed to know how license holders divide the various commissions, splits, and fees between themselves?

The answer is all of these are correct. While there is no legal obligation by the license holders to explain how commissions and fees are divided, if a principal asks and the license holder is inclined to explain compensation, there is no statutory bar to that conversation.

If a homeowner who has NOT hired a broker agrees to accept an offer brought to him by a broker, he may create

The answer is an agency by ratification. The homeowner is ratifying the agency of the broker after the fact and is attempting to benefit from his actions. An agency by ratification is created when the principal agrees to be bound by the actions of a person acting as an agent who actually is not one—such as a for sale by owner accepting a contract and agreeing to pay a commission on a property that has not been listed.

Under the Fraud in Real Estate and Stock Transactions statute,

The answer is any person who stands to gain financially from a transaction is assumed to have knowledge of all aspects of the transaction. The statute provides for actual and punitive damages against not only the person making the misrepresentation or promise but also against any person who benefits from the transaction, has actual knowledge of the falsity, and fails to reveal it. If a broker or a seller is aware of the wrongful acts of another broker or seller, that broker can be liable for those acts if a benefit is received.

Advertising, telephone charges, and other expenses in a broker's office may be paid by which of the following?

The answer is both of these. Some brokers pay for all office expenses and most promotional expenses, while some make licensed associates (sales agents) pay for advertising and other promotional expenses of listed properties.

Are violations of antitrust laws considered civil violations or criminal violations?

The answer is both. Antitrust violations not only can result in $1 million in civil fines against an individual but also up to 10 years in prison on the criminal side. Corporations that engage in antitrust actions can be fined up to $100 million.

Brokers will often provide time for license holders to work "desk duty," a period in which the desk person fields incoming calls to the brokerage and may work with callers who are not otherwise affiliated with other sales agents. May brokers assign (order) sales agents to work specific hours of desk duty?

The answer is brokers may assign desk duty to employees, but may negotiate contracts with independent contractors that include desk duty expectations. If brokers expect independent contractors to work desk duty, that expectation should be included in the contract and open to discussion.

The four statutory positions a broker might take when doing business include the intermediary position, seller representation, subagency, and

The answer is buyer representation. A broker who acts as a buyer's agent represents the buyer, usually through a written buyer representation agreement.

Broker X represents a prospective buyer. When he calls to schedule an appointment to show a property listed by another broker, X must

The answer is disclose that representation at the time he schedules the appointment to show the property. The Real Estate License Act requires a license holder who has an established agency relationship with one party in a proposed transaction to disclose that representation either orally or in writing at the time of the license holder's first contact with (1) another party to the transaction—the seller in this case—or (2) another license holder who represents another party to the transaction—the listing broker in this case.

Which duty requires the broker to keep the principal fully informed at all times of all information the broker obtains that could affect the principal's decisions?

The answer is disclosure. The broker may be held liable for damages resulting from failure to disclose such information.

To protect themselves from financial loss due to liability for mistakes and negligence, many brokers and agents purchase which kind of insurance?

The answer is errors and omissions. The broker or agent pays an annual fee (or a per-transaction fee) to an insurance company, which defends him and pays legal costs and judgments. The insurance will not cover intentional acts of deception, misrepresentation, or negligence.

A seller has accepted an offer from a ready, willing, and able buyer, and the real estate agent is anticipating the closing of the transaction and receiving a commission. However, if the transaction does not close, the broker still would receive a commission under which circumstances?

The answer is failure of the owner's spouse to sign the deed. Generally, a broker has earned a commission when the broker performs under the terms of a listing contract or buyer representation agreement—when a completed sales contract has been signed by a ready, willing, and able buyer. There are a few exceptions, however, including (1) failure of the agent to give the required title notice to the buyer, (2) failure to have a written listing agreement signed by the seller(s), (3) failure to be licensed, (4) failure to state an amount of percentage rate of commission in a listing contract because commissions are negotiable in every case, and (5) failure (without fault) on the part of the seller to deliver an abstract or title insurance policy to the buyer. The refusal of the owner's spouse to sign the deed or the owner changing his mind and refusing to sell are among the circumstances under which a broker usually would still be entitled to a commission if the transaction does not close.

A broker who represents a seller knows that the house has structural defects that will need expensive repairs but does NOT tell prospective buyers. This is an example of

The answer is fraud. The broker has intentionally concealed an important fact. If the broker were unaware of the structural defects and said the structure was sound, the statement would be a misrepresentation.

An unlicensed assistant may

The answer is handle correspondence for a licensed agent. Unlicensed assistants, working under the direction and control of a real estate agent, may perform myriad tasks, among them: answering phone calls, maintaining records, handling correspondence, scheduling appointments, and serving as hosts or hostesses at open houses. They may not, however, engage in any activity for which a license is required (such as interviewing prospects, showing property, soliciting prospects or listings); and they may not at any time respond to inquiries about a property when the response requires communication of information that has not been advertised.

The broker must NOT act in self-interest because of the duty of

The answer is loyalty. Acting in self-interest would be putting loyalty to self ahead of loyalty to the principal. For example, brokers may not take advantage of confidential information to the principal's disadvantage, buy property they have listed without the principal's knowledge and consent, or profit from the agency beyond the agreed commission.

The Deceptive Trade Practices Act (DTPA) does NOT apply to the actions of real estate agents when an agent

The answer is makes an exaggerated or unsubstantiated statement of value given as advice, judgment, or opinion when selling real estate. The DTPA applies to real estate agents when the misrepresentation or action cannot be characterized as advice, judgment, or opinion. The practice of making exaggerated or unsubstantiated statements of value is called puffing. Although permissible under agency law and the DTPA, statements of opinion and puffing still should be avoided to steer clear of claims under the DTPA that the statements misled the consumer.

An agency can be terminated by which without liability for breach of contract?

The answer is mutual agreement. Discharge or resignation may leave one of the parties liable for breach of contract.

Inside a brokerage office, if all the independent contractor sales agents are on the same commission split, is that price-fixing?

The answer is no, each real estate brokerage has its own policies regarding sales agent compensation and has the right to fix those amounts. Price-fixing issues typically involve illegal agreements among brokerages in a community to fix commission levels and splits between nonaffiliated offices.

If an independent contractor announces her "farm" will henceforth be the country club crowd, can the sponsoring broker redirect her if someone else in the office already is working the country club scene?

The answer is no, the broker may discuss the difficulties of breaking into the other agent's farm but could not otherwise order the agent to work elsewhere. The broker may suggest, or even urge, the intruding agent to go elsewhere but could not enforce that desire.

When a seller, on the advice of the listing agent, reduces the price of the home, are potential buyers entitled to know why?

The answer is no, the listing agent is not obligated to volunteer why there has been a price reduction. The listing may, however, ask the seller if the reason can be made known. The listing agent cannot lie.

An attorney who is NOT licensed by the Texas Real Estate Commission (TREC) but performs brokerage services in a transaction may

The answer is not receive part of a broker's commission on the sale of a property. A real estate license holder may not pay a commission, fee, or other valuable consideration to a person who is not licensed by TREC. This includes a prohibition against sharing a sales commission with an attorney or giving other valuable consideration (cash, gifts over $50, vacations, bonuses, etc.) to an attorney.

If a Deceptive Trade Practices Act (DTPA) lawsuit is filed against a real estate agent, broker defenses do NOT include

The answer is notice to the consumer before consummation of the sale that the broker is relying on verbal representations given by the seller, the appraisal district, or other providers of information. To avoid a finding of guilt in a DTPA lawsuit, a broker should put in writing all information requested by and/or presented to the agent's principal on behalf of the seller, the appraisal district, the mortgage lender, or other providers.

May sales agents who work for competing companies, but in the same tier of property values, share information with each other about properties that are either new on the market or about to be brought to market?

The answer is sales agents may form loose networks with each other as long as price-fixing does not take place, fair housing laws are not violated, and sales agents from outside the confederation also are allowed to present buyers. Such informal networks often exist because associates see each other while marketing homes in the same price range. There is no state law against private sales between agents in a network, although trade associations may consider it a rules violation.

In order to earn a commission under the terms of the License Act, a licensed broker must meet several stipulations and advise the buyer to obtain what type of insurance?

The answer is title. According to common law, to be entitled to a commission, brokers must first be able to show that they were the procuring cause of the sale (that they did something to cause the sale to be completed). Then the License Act requires that brokers (1) be licensed, (2) have a written memorandum for a commission, and (3) advise the buyer to obtain title insurance or have an abstract examined by an attorney of the buyer's choice.

The purpose of antitrust laws is

The answer is to prevent a company or companies from joining together block competitors from entering the market while simultaneously agreeing how much to charge consumers. Antitrust laws do not exist to make small companies successful, but only to allow them to bring their theories of business and pricing to the market so that consumers can fairly evaluate them.

If a sales agent is working with sellers and makes a mistake in a transaction, in theory the party responsible for the mistake is

The answer is usually the sales agent's sponsoring broker. The sales agent works with sellers on behalf of the broker (who is employed by the sellers), but that does not mean that sales agent will always escape responsibility for their actions.

Clients who have signed listing agreements may "fire" their broker. Is a broker permitted to fire a client?

The answer is yes, a broker may fire a client. If a client is proving too demanding or too difficult to work with or refuses to comply with such requests as keeping the property in a showable condition, the agreement can be terminated.

Are real estate fees and commissions negotiable?

The answer is yes, and no. It is true that commission rates and fees are not set by any institution and therefore consumers are free to negotiate. However, commissions and fees are set by the real estate company based on its cost of doing business plus profit, and individual brokers have no obligation to negotiate those numbers.

Can a buyer broker accept both a portion of a commission split from the listing broker and a fee from the buyer client?

The answer is yes, if the buyer agent agreement calls for a fee to be paid, and the listing agreement also calls for a commission split, the buyer broker may collect from both sides of the transaction. However, it would not be unusual for a lender to reject the high cost of the deal, and there likely would be a stipulation in both the listing agreement and the buyer broker agent that would cap the fees.

May sales agents working as independent contractors play golf every day and report to the office only periodically?

The answer is yes, independent contractors set their own hours. If the country club is the sales agent's "farm" and transactions occur because of networking, and all legal compliance rules are met, the independent contractor would be free to play golf every day.