Chapter 6

Broker Pappas of Pappas Realty enters into a written agreement to represent seller Kelly and buyer Jenny that also authorizes Pappas to act as an intermediary. Pappas elects not to make appointments when Jenny begins negotiations for the purchase of Kelly's property. Under this scenario, which statement by the sales associate working with Jenny would NOT be authorized?

The answer is "in our market, buyers typically ask sellers to pay buyer closing costs."

How did TRELA treat dual agency before statutory dual agency was enacted?

The answer is TRELA was silent on the subject of dual agency. Until 1993, when statutory dual agency was enacted, TRELA was silent on the subject of dual agency. Before 1993, Texas had always recognized the concept of common law dual agency.

What does a real estate license holder serving as a representative in an intermediary transaction offer to a client that was NOT offered under dual brokerage?

The answer is advice and opinions.

What is undisclosed dual agency?

The answer is when a nonrepresented buyer believes that a license holder is acting for her, and the license holder fails to make it clear that he represents the seller either as an agent or as a subagent.

TAR 1409, Intermediary Relationship Notice, is used to indicate that an intermediary transaction is occurring and

The answer is whether appointments are to be made.

Why do in-house sales provide the opportunity for unintended dual agency?

The answer is without an intermediary agreement, the firm cannot represent both parties.

A prospective buyer has telephoned a license holder to inquire about a property listed by the license holder's associated broker. Which of the following statements from the license holder might cause unintended dual agency?

The answer is "I can make sure you get the best price possible on that house." Implied agency relationships with buyers can be created if buyers are given the impression that the license holder is working for them.

Which of the following statements is TRUE?

The answer is a broker may act as an intermediary between parties in a real estate transaction with the written consent of each party.

A broker acts as an intermediary between a buyer and a seller. Once appointments are made, the broker must

The answer is remain neutral.

Broker Fitzroy of Dunoon Realty is the listing broker for seller Roni's property. One of Fitzroy's sales associates is providing customer-level service to buyer Barnie. Which comment(s) by the sales associate to Barnie might place Fitzroy in violation of TRELA?

The answer is all of these are violations of TRELA. Customers are not entitled to advice and opinion that would give them a negotiating advantage over the broker's client. It not only is a violation of the fiduciary duty to the client but also could lead the buyer in this case to presume he was also represented (i.e., implied agency). A broker may be an intermediary for the parties only with expressed written consent of both clients. [§ 1101.559(a)] In this scenario, Fitzroy only has one client.

What are some of the consequences of undisclosed dual agency?

The answer is all of these. All three of the listed consequences could result from undisclosed dual agency. License holders should be very careful to make it clear to unrepresented parties just whom they represent to avoid the consequences of undisclosed dual agency.

Broker Katy has employment contracts with seller Sue and buyer Betty permitting Katy to act as an intermediary and make appointments. Brenda, an associate for Katy, has been working with both Sue and Betty. Betty decides to make an offer to Sue. Which option(s) is(are) available to Katy?

The answer is all of these. As long as Katy has two associates and Betty agrees, Betty may be assigned a different associate. TRELA states the broker "may" make appointments but is not required to do so, even if she has two or more associates. If both clients agree, the negotiation may also proceed with no appointments; Brenda, however, would of necessity have to remain fair and impartial and be careful not to provide preferential advice and opinion to either client. If Betty desires continued full representation, however, Katy would be prudent to consider releasing Betty from the agency contract and allowing her to seek full representation through another brokerage office. Although not the ideal solution for Katy, considering she would then have to share the commission with a cooperating broker, Katy must always put her client's interests above her own personal interests. [TREC Rule 531.1(3)]

How does a license holder create implied agency by accident?

The answer is all of these. The classic example of implied dual agency is the situation in which a nonrepresented buyer believes that a license holder is acting as an agent for her, and the license holder fails to make it clear that he represents the seller either as an agent or subagent. When this occurs, a form of dual representation arises, known as undisclosed or nonconsensual dual agency.

A license holder wishes to purchase a listing he came across in the MLS. The law requires that the broker do which of the following?

The answer is all of these. While a license holder is not precluded from purchasing a listing that he discovered while acting as an agent, the law requires that the license holder not use his expertise to the disadvantage of seller. In addition, the license holder must disclose his license status in writing and must provide a comparative market analysis or broker price opinion about the property to the seller.

Superior Realty is a licensed brokerage firm that engages in intermediary agency. The firm has three brokers (including the designated broker for the firm) and five sales associates. Allison has engaged Superior to list her 16-unit apartment complex for sale. Dustin is a Superior client interested in purchasing the property. Both parties have consented to intermediary representation. Who may serve as an appointed license holder to represent the parties in the transaction?

The answer is any of the license holders except for the designated broker may be appointed to represent the parties. Brokers cannot appoint themselves to a buyer or a seller.

Why was dual agency made illegal in a real estate transaction?

The answer is because there is an inherent conflict of interest when an agent represents the buyer and the seller. Texas courts frowned on dual agency applications in real-life situations because of the near impossibility of accomplishing a successful dual agency legally without betraying the interests of one party or the other.

If the broker or a sales agent sponsored by the broker wants to purchase an in-house listing, how can the broker ensure that undisclosed dual representation does not occur?

The answer is by having a policy that the owner/agent must use another sales agent in the firm to purchase the property.

How can a license holder avoid creating an unintended dual agency when helping a buyer locate an appropriate home through a MLS service?

The answer is create an expressed buyer agency agreement with the buyer.

Which of the following forms of agency representation is not authorized in Texas?

The answer is dual agency.

Which of the following is a TRUE statement regarding intermediary representation?

The answer is intermediary laws and rules apply to broker representation in 1031 Tax Deferred Exchanges.

What was the law in Texas before intermediary agency was introduced?

The answer is license holders were required to practice statutory dual agency.

Broker Maggie Mae is representing her parents in the purchase of their new home. Maggie Mae will have no financial interest in her parents' new home. In regards to her relationship with the buyers, Maggie Mae

The answer is must inform the sellers in writing of her relationship regardless of any planned financial interest in the property.

Broker Sue enters into a written agreement to represent seller James and buyer Mary that authorizes Sue to act as an intermediary and make appointments. What must Sue now do before any of her associates may show James's property to Mary?

The answer is nothing. The buyer representation agreement with Mary and the listing agreement with James were sufficient to establish written consent for Sue to act as an intermediary.

Broker Blake enters into a written agreement to represent seller Kelly and buyer Jenny that also authorizes Blake to act as an intermediary. The written agreement does not specifically address authority for making appointments. If Jenny now wishes to enter into negotiations for the purchase of Kelly's property, what must Blake do before making appointments for his two clients?

The answer is obtain written consent from Kelly and Jenny to make appointments.

Which of the following statements is TRUE?

The answer is only REALTOR® members may use the Intermediary Relationship Notice form created by the Texas Association of REALTORS®.

Best Realty is a licensed brokerage firm that engages in intermediary agency. The firm has three brokers (including the designated broker for the firm) and two sales associates. Allison has engaged Best to list her 16-unit apartment complex for sale. Jones Investments LLC is a Best client interested in purchasing the property. Both parties have agreed to intermediary representation. What kind of service can the appointed license holders provide to the parties if appointments are made?

The answer is the appointees may give advice and opinions to each party.

A broker does not have the buyer sign a written buyer/tenant agreement, but expressly agrees to act as the buyer's agent. The buyer is interested in an FSBO and the seller authorized intermediary in a registration agreement. Realizing that she does not have written consent from the buyer to act as an intermediary, what can the broker do to stay in compliance with the law?

The answer is the broker can still get the buyer to sign written consent for the broker to act as an intermediary.

A brokerage firm represents both the buyer and the seller in a real estate transaction, and both have authorized that the broker act as an intermediary. The firm has one broker and three sales associates. What role does the broker play in the transaction?

The answer is the broker is the intermediary and must remain neutral.

A broker owns a firm with one other sales agent. Which of the following statements is TRUE with respect to the broker's ability to engage as an intermediary between a seller and a buyer?

The answer is the broker may act as an intermediary between a buyer and the seller but cannot make appointments.

Jones Realty is a licensed brokerage firm that engages in intermediary agency. The firm has three brokers (including the designated broker for the firm) and five sales associates. Allison has engaged Jones to list her 16-unit apartment complex for sale. Dustin is a Jones client interested in purchasing the property. The firm has appointed James to work with Allison and Gloria to work with Dustin. Both parties have agreed to intermediary representation. What disclosures must the broker provide before James and Gloria start negotiating on behalf of the parties?

The answer is the broker must provide written notice of the appointments to the parties.

In a real estate transaction where the broker is an intermediary between a buyer and a seller and no appointments have been made, which of the following statements BEST describes the broker's role in the transaction?

The answer is the broker must remain impartial and not give preferential treatment to the buyer or the seller.

Ace Realty is a licensed brokerage firm that engages in intermediary agency. The firm has three brokers (including the designated broker for the firm) and five sales associates. Allison has engaged Ace to list her farm for sale. Dustin, an Ace client, is interested in buying the farm. Both parties have agreed to intermediary representation. What kind of service can the intermediary provide to the parties if no appointments are made?

The answer is the broker must treat both parties honestly and fairly.

If a broker wants to purchase an FSBO, how can the broker ensure that undisclosed dual representation does not occur?

The answer is the broker should disclaim any agency relationship with the FSBO.

How can a broker purchasing property for her own account that is listed in the MLS lessen the potential for undisclosed dual agency?

The answer is the broker should expressly disclaim subagency to the seller.

Dual agency arrangements are NOT favored by brokers because

The answer is the brokerage is exposed to a much greater degree of liability as it tries to balance the interests of the buyer-client and the seller-client.

Jones Realty is a licensed brokerage firm that engages in intermediary agency. The firm has two brokers: the designated broker for the firm and a broker associate. There are three sales associates. Allison has engaged Jones to list her 16-unit apartment complex for sale. Dustin is a Jones client interested in purchasing the property. Both parties have consented to intermediary representation. Who may serve as an appointed license holder to represent a party in the transaction?

The answer is the designated broker is the only license holder that may not be appointed to represent the parties.

What is a license holder required to provide to a seller when the license holder buys property for her own account that she learned about when showing the property to a potential buyer?

The answer is the license holder is required to provide a comparative market analysis.

Which of the following statements describes undisclosed dual representation in other kinds of real estate transactions?

The answer is the representation of more than one party is not confined to residential transactions.

What are the intermediary rules for commercial real estate transactions?

The answer is the same intermediary rules and laws apply to commercial transactions and residential transactions.

ABC Brokerage is careful to include all the proper language to permit intermediary relationships in their buyer-representation and listing contracts. They have trained their sales agents to carefully explain how this can happen in an in-house transaction. Under these circumstances, why might it be important to provide a "second consent" form when a represented buyer becomes interested in one of the brokerage's listings?

The answer is the second form helps to remind the buyer and the seller about intermediary brokerage and provides a way to meet the statutory requirement to identify the appointed license holders by name to all parties.

Broker Bob wants to purchase a home that appears in the MLS that was listed by another broker. Bob has never met the broker or the owner. Why is it necessary for Bob to disclaim any subagency when purchasing this property?

The answer is the seller may claim that Bob owed fiduciary duties to the seller under any MLS offer of subagency.

Jones Realty is a licensed brokerage firm that engages in commercial real estate leasing with intermediary agency. The firm has two brokers: the designated broker for the firm and an associated broker. There are two sales associates. Ace, LLC has engaged Jones to find commercial tenants for an office building. Smyth, LLP is a Jones client interested in leasing space for a law firm. Although both parties have legal counsel, they have consented to intermediary representation. If license holders are appointed to each of the parties, what can be expected of the license holders?

The answer is they must be available to provide advice and opinion to their designated principal.

Roni, who has just received her broker's license, immediately opens her own brokerage office, Whiska's Realty. Numerous license holders with whom she has worked in the past approach her for sponsorship. Although Roni is anxious to get started, she has no time to set up a training program. In the past, she focused on property management rather than residential sales and feels insecure in her understanding of intermediary relationships that frequently arise in residential sales. In regard to intermediary services, Roni

The answer is would be best advised to deny intermediary services to clients until she had time to formally establish a clear office policy for her new license holders.

To be able to appoint license holders to the buyer and the seller, the broker must have which of the following?

The answer is written consent to act as an intermediary and written consent to make appointments.

Carson is a broker who works with four license holders. Business is good, and only two license holders are available for Carson to appoint as intermediaries in a transaction. One of these license holders has many years of experience with similar transactions. The other license holder has very little real estate experience but has an MBA. Can Carson appoint the experienced license holder for one party and the inexperienced license holder to the other?

The answer is yes, but one party may later claim that the less-experienced appointee created a disadvantaged position.

Can a farm and ranch broker engage in intermediary agency?

The answer is yes, she would be subject to the same rules and laws as in a residential setting.

Which of the following entities made dual agency illegal in Texas?

The answer the Texas Legislature.