Texas Law Agency Review

Every real estate agent should be warned about what is known as the

"15 Minute Rule." What this means is that 15 minutes after the moving van leaves, a neighbor will be disclosing what the real estate agent should have disclosed.Every real estate agent should be warned about what is known as the "15 Minute Rule." What this means is that 15 minutes after the moving van leaves, a neighbor will be disclosing what the real estate agent should have disclosed.

Client

A person being represented in a real estate transaction, also called the principal.

The duties that the agent owes their principal are

Care - reasonable care Obedience Accountability Loyalty Disclosure or Notice These are often referred to by the acronym COALD or COALN.

Remember that there are two kinds of customers

Customers that you are working with directly when showing them properties. A client that another agent is representing, is a customer to you. Both parties to a transaction - the seller and the buyer - may have agents representing them, but one agent's client is a customer to the other agent

Here are the considerations the seller and licsencee should discuss when attempting to secure a listing

Does the listing broker intend to share fees with subagents or with buyer's agents? Who will have access to listing information? Will the property be listed in the MLS? Will other licensees be authorized to cooperate in the search for buyers? Will other licensees be subagents?

here are three ways to create agency with the seller. The best way to do it is to fill out a form that creates

Exclusive Right to Sell Agency. The Texas Real Estate Commission does not have listing agreement forms. The broker must establish some listing agreements through the help of an attorney or obtain listing agreements from the Texas Association of REALTORS®. Exclusive Right to Sell is the most desirable type of listing to have. It does not matter who sells the property. As long as the property sells during the time that the broker had the listing, the seller owes the broker a commission

real estate agent commits fraud or misrepresentation

If a real estate agent commits fraud or misrepresentation while representing the seller, the seller is liable for that action IF the seller knew of his agent's misrepresentation. To avoid misrepresentation, it is important for a real estate licensee to only share facts that they know for certain when dealing with others. The agent should also share their sources for whatever pertinent facts they offer.

The customer does receive facts, and of course honesty and fairness.

If the customer wants a higher level of service then they must request agency or respond to agency when it's offered. The customer will be told the known facts about the property. This includes any defects with the improvements, such as a roof that leaks or a foundation problem.

Texas law requires that a licensee provide a customer with the

Information About Brokerage Services form at the time of their first substantive dialogue. The form explains in general terms the positions of seller representation, subagency, buyer representation, and the intermediary position.

Texas' disclosure statement is the

Sellers Disclosure Notice

Over time, buyers became dissatisfied with the lack of representation and litigation mounted

Simple broker disclosure requirements were initiated, but this measure was not a solution to the buyer's lack of representation.

Another way that agency can end is the death of the broker.

Since all clients belong to the broker, all relationships end upon the broker's death. The salespeople need to stay with the office long enough to see if another broker is going to take over the business. If not, then they will find a new broker to sponsor them, since the deceased broker's listings are now terminated. When a broker dies, TREC requires that a broker be assigned to the office to complete transactions that are in trust.

If the licensee changes brokers, the licensee is working for the new broker once the sponsorship change is completed on the

TREC website through the Relationship Management Tool. The agent does not have to wait until the license arrives at the new broker's office.

Buyer agreements are generally forms approved by the

Texas Real Estate Commission.

A seller is required to complete a

Texas Seller's Disclosure of Property Condition form.

The seller's acceptance of the offer is effective only if all four of the following required terms are met, the last being communication. Note that the buyer can revoke the offer at any time before the seller's acceptance.

The final contract must be in writing. This is typically satisfied when negotiations are made using promulgated forms. The buyer and seller must sign the final contract. This includes initialing any handwritten changes to the initially drafted offer, if applicable. Acceptance must be unequivocal. The last party to accept must communicate acceptance back to the other party or the other party's agent, if applicable.

All agency relationships have two important factors

The principal believes the agent is an expert that they can go to for professional advice and counsel. The relationship involves money or property, and the agent must always work in the principal's best financial interests. In other words, the agent has a fiduciary responsibility to the principal. Often the agent is called a fiduciary

When the buyer's representation agreement is filled out, the licensee should explain to the buyer that the commission can be received in three different ways.

The seller could pay the commission. The buyer could pay the commission. The seller and the buyer could both pay the commission

In a firm, intermediary agency can occur in two ways:

The supervising broker or a single licensee represents both parties. One of the principal broker's agents represents a seller and another of their agents represents a buyer. In the second case, the supervising broker is technically representing both sides as an agent. That's because the licensees are associates of the supervising broker.

Debt Stigma

This occurs when debt collectors are not aware that a debtor has moved out of a particular residence and continue to harass the new owners.

Public Stigma

This stigma is known to a wide selection of the population and any reasonable person should be expected to know about it.

Agency can be classified into three categories:

Universal General Special

A company's best defense to prevent problems in the area of agency is

a well-defined, written policy regarding agency relationships that is approved and practiced by the brokerage.

General agency is the most common type of

agency between brokers and their affiliated licensees. It is created using the independent contractor agreement.

To authorize the possibility of an intermediary relationship in a listing agreement or buyer representation agreement, the statute requires that the

agreement be in writing.

The general agency relationship between a broker and a salesperson is created with

an independent contractor agreement.

Officially, Megan's Law is known as the Sexual Offender (Jacob Wetterling) Act of 1994

and requires persons convicted of sex crimes against children to notify local law enforcement of any change of address or employment after release from custody.

If a client files a complaint with the real estate commission

both the licensee and the broker will have their licenses in danger if they're found guilty of the activity for which they are accused.

The buyer's representation agreement used in Texas is an exclusive contract with the

broker. This means the buyer may not enter into another contract with another broker to purchase a home.

The intermediary relationship has affected

brokers more than it has anyone else with a real estate license. This is especially true of brokers who have small offices.

One of the joys of real estate is working with real estate investors. These people tend to

buy and sell a lot of real estate. They also prefer to have some freedom. Investors are not as likely to want buyer agency because they do not want a long-term commitment with only one agent.

Real estate licensees must discuss all proposed agency relationships with

buyers and sellers - both landlords and tenants - so they can make informed decisions. Agency is a consensual relationship that requires a delegation of authority by the principal and consent by the agent, in this case a broker or licensee.

If a licensee has listings

buyers will come

The law expects an agent to do their job with a reasonable degree of

care, skill, and diligence.

The general law of the sale of property is

caveat emptor, meaning "let the buyer beware."

Beginning in September of 2005, TRELA no longer permitted brokers to act as

common law dual agents. Brokers are now required to act as intermediaries when representing more than one party.

The broker must, however, continue to keep confidential information

confidential forever. That duty is eternal.

The one fiduciary duty that continues beyond the agency relationship is

confidentiality. The information that the licensee learned while representing the client must stay in confidence. The only exception to this is if the client gives the salesperson permission to share that information with others.

A licensee can impart factual knowledge to a

customer, but the licensee does not provide advice and counsel to the customer.

Disclosure of agency relationships and who the licensee currently represents in the transaction must take place

early in the first substantive meeting about real property.

The broker of record for the office is responsible for

everything that is done by the broker and their salespeople.

It is important for the licensee to follow this rule because the commission may suspend or revoke a license issued, or take other authorized disciplinary action. This may happen if the license holder, while acting as a broker or salesperson

fails to make clear to all parties to a real estate transaction the party for whom the license holder is acting, and/or receives compensation from more than one party to a real estate transaction without the full knowledge and consent of all parties to the transaction.

The broker can cancel the agency agreement, but they must have

good cause to do so. Good cause might be when a client is not negotiating in good faith, or when a client tells the licensee to violate Fair Housing laws.

It may seem simple, but most potential problems can be avoided with

good communication. Asking questions is the best way to decide who represents whom in a transaction.

Licensees who practice real estate in Texas

have strong responsibilities to the people they represent.

If negotiations break down and an agreement cannot be reached

he buyer's agent will continue to locate more properties for the buyer and the process begins again.

The seller is not allowed to counter offer all bids because

if all buyers accept, the property will have been sold more than once.

primary reason that understanding agency is important is the

increased interest in litigation.

The broker will also file away all

information concerning the transaction in a safe manner so that the file will not be used by someone else for unauthorized purposes.

However, the same salesperson can continue to work with both the buyer and seller in a situation called

intermediary without appointments. In this case, the salesperson doing the work must give no advice or opinions to either party.

A real estate syndicate

is a financial services group formed temporarily for the purpose of handling a large transaction that would be difficult or impossible for an individual entity to handle.

A retainer fee

is an advanced payment for services.

Undisclosed dual agency

is illegal in all states and is an overt action taken by an unprofessional agent in order to take advantage of uninformed buyers and sellers. In this situation, the agent is treating both sides as clients, but without proper notice. Accidental dual agency is also illegal, but the agent is not purposely trying to deceive anyone. Like any other agency, it may occur unintentionally or inadvertently. Sometimes the cause is carelessness, and other times an agent doesn't fully understand their fiduciary responsibilities.

Rescission

is when both the client and the broker agree to end the relationship that they are in.

With the number of agency relationships available, it is very important that every brokerage firm develop

its own policies. The most effective way to establish a company policy on agency relationships is to follow an organized approach.

An agent should never

make up the answers to these questions to appear skilled or knowable.

The broker will give the buyer-client a

market analysis on other homes that have sold which are similar to the property that the client has selected.

the seller's agent must disclose

material facts about the property.

The broker must stay

neutral. They cannot give advice or opinions to either party but may help the salespeople in an administrative way.

buyer calls or walks into the office and asks about a listing placed with the broker

no matter which licensee the buyer is talking to - it is the salesperson's job to represent the seller in obtaining for them the highest possible sale price for that property.

Undisclosed intermediary agency is

not legal in Texas or in any state

Implied agency

occurs with the seller when the licensee does not write an agreement.

The duty of loyalty requires the agent to

place the client's interests above those of all others, including their own. You must negotiate agreements without considering the amount of compensation you will receive. In addition, you are required to disclose any personal interest you have in a property. Confidentiality about the principal's affairs is an important aspect of loyalty.

All of these fiduciary duties are designed to

place the client's needs above the desires of the brokers and salespeople.

In residential sales, the traditional commission sharing agreement between a listing broker and the other broker to the transaction is the

primary accepted method of compensating the buyer's broker.

Often the owner cannot or does not want to conduct some activities related to the

property, so the owner hires a manager and authorizes them to carry out these tasks.

Texas law requires that seller agents provide a party to a

real estate transaction - at the time of the first substantive dialogue - with a "written statement" that explains in general terms the positions of seller representation, subagency, buyer representation, and the intermediary position.

Under Section 1031 of the United States Internal Revenue Code (26 U.S.C. § 1031), the exchange of certain types of property may defer the

recognition of capital gains or losses upon sale and hence defer any capital gains taxes otherwise due. Section 1031 exchanges occur frequently in rental property sales.

Obedience

requires that the agent act in good faith and obey the principal's directions as outlined in the contract - as long as they are legal.

he commissions on a commercial lease are much larger than a

residential lease. In addition, the client usually renews that lease numerous times, meaning the commissions are a recurring revenue.

The licensee should never fill out any information on this form on behalf of the

seller. The seller may ask the salesperson to do so because of physical impairment, but the agent should explain that filling out the form is against company policy.

The document itself was created by the broker-lawyer committee, an Advisory Body to TREC. The committee is comprised of:

six attorneys who are appointed by the State Bar of Texas. six real estate brokers who are appointed by TREC. a member of the public who is appointed by the Governor.

The agency relationship between the broker and clients is called

special agency

In a commercial transaction, the tenant tells the agent what they need in terms of

square footage, parking, visibility, accessibility, storage, and possibly even loading docks. The agent locates an appropriate property and negotiates for it on behalf of the client.

The most important reason that the buyer should want to be a client is that they are in the

strongest negotiating position possible.

When one broker is representing the seller and the other broker is representing the buyer, this is not

subagency. The buyer has to be a customer to create subagency.

The broker is considered to do only one task for each client

such as finding a ready, willing, and able buyer for the seller, and finding the appropriate property for the buyer.

All real estate activities must be performed under the

supervision of a broker. It is illegal for a licensee to perform real estate functions without a sponsoring broker.

The broker is legally the

the agent of the client.

If the retainer fee from the buyer is retained by the broker and the transaction closes with the buyer's broker being paid by the seller

the broker would receive compensation from both parties.

Subagency exists when

the buyer is a customer and there are two brokers involved.

The decision to be a subagent depends on whether the licensee thinks

the buyer is actually going to buy, whether the buyer has the funds to buy, and whether the buyer will continue to work with the salesperson.

Any time there is an agency relationship

the client - along with the broker and the licensee - is liable for any wrongdoing that the agent does.

A buyer's agent is permitted to hide

the identity of the buyer from the seller.

When the buyer decides that they want to make an offer on a property listed with the same company that the buyer's agent works for

the intermediary relationship is beginning.

When showing another company's listing

the licensee is a subagent or a buyer's agent.

When an offer comes in

the licensee presents the offer to the client and helps the seller make a decision on what to do about the offer.

When more than one offer comes in on the same listing

the listing agent must inform all buyers about the existence of the other offer or offers, but not reveal their content.

Licensees selling their own property must disclose

their license status

When a licensee arrives at a home for a listing appointment, the most important thing to do is to convince the owners that

they are the right agent for them. The way that is done is through a listing presentation.

Some buyers seek out stigmatized properties because

they know they can buy at a deep discount. These buyers believe they can ride out the stigma and make a great profit.

Notably, when a salesperson requests that their license be returned to TREC

this should be done immediately. The same rule applies when a broker ends the independent contractor agreement. The license should be returned to TREC immediately.

A specialized real estate transaction usually involves

three or more parties and a number of party representatives. In a commercial lease transaction, for instance, there is the landlord, the property manager, the lessee, the brokers, attorneys, and others. Often a person involved in a transaction incorrectly assumes that everyone in the transaction knows the role of everyone else.

The best way to end agency is to

to close the deal

The broker must obtain the written consent of each party

to the transaction to act as an intermediary.

All the salesperson has to do to end subagency is

to turn the buyer into a client.

On the other hand, in residential tenant representation, it's difficult to

turn a profit. For this reason, it does not happen very often in residential real estate. Most agents choose to work with tenants only in a commercial capacity, if at all.

Another way to create agency with sellers and buyers is to have a

verbal agreement. This is problematic because the spoken word is not as easily understood as the written word.

The best way to create agency is through a

written agreement. This is a situation in which both parties know what they are supposed to do and what they can expect from the other. This type of agency is called express agency. Written agreements and oral agreements can be express agency as long as the relationship is clear, concise, and understandable.

The existing agency disclosure is completely separate from the

written information statement. While agency disclosure can be oral or written, most brokers require the licensees in their company to always provide agency disclosure in writing.