Chapter 18
Commingling and conversion
Commingling is the mixing of personal money with the money of others (trust money). Conversion is changing the intended use of the money. The broker must not commingle trust money with the broker's personal money deposit trust money in any kind of brokerage business account The following are examples of commingling and converting trust money: placing trust money in a broker's personal or operating account (commingling) paying operating expenses or making withdrawals from a trust account for any purpose other than proper disbursement of trust money (conversion)
Referrals
If an advertisement offers the use of services of a real estate service provider other than the license holder and the license holder expects to receive compensation if a party uses those services, the advertisement must contain a disclosure that the license holder may receive compensation from the service provider. A license holder may not advertise regarding service providers in a way that ranks the providers unless the ranking is based on disclosed objective criteria.
Which of the following constitutes the unauthorized practice of law?
Adding a late-rent clause to a lease agreement
Trust funds and accounts
"Trust money" refers to client's money, earnest money, rent, unearned fees, security deposits, or any money held on behalf of another person. It can also include anything else of value, such as a valuable painting stored for a client during a move. Brokers need to be aware of what their sponsored license holders are keeping for their clients, because there may be something that could be considered a thing of "trust" to which all the rules and regulations would apply. A trust account is an account managed by one party for the benefit of another in a banking institution authorized to do business in Texas. Real estate brokers are not required to have a trust fund account unless they are holding trust money. Most real estate brokers who concentrate on real estate sales will not need a trust account. If the brokerage engages in property management, it is almost mandatory for the broker to maintain a trust account.
One of the following is a license law violation, and three are not. Which one is a violation?
A broker does not provide information requested by the Commission
Disbursing trust money
A broker may only disburse money from the broker's trust account in accordance with the agreement under which the money was received. If any or all of the parties to a real estate transaction make a written demand for payment of trust money, the broker must pay the trust money to the party or parties entitled to the money within a reasonable time, which the Commission has determined to be not later than the 30th day after the date the demand is made. If, by a subsequent written agreement, all parties to a real estate transaction authorize the broker to disburse the trust money in a manner not in accordance with the original agreement, the broker must pay the trust money to the party or parties entitled to the money under the subsequent written agreement within a reasonable time, which the Commission has determined to be not later than the 30th day after the date the broker receives the subsequent written agreement. If the broker cannot reasonably determine to which party or parties the trust money should be paid, the broker may pay the trust money into the registry of a court and interplead the parties. The broker must immediately notify all parties in writing of any disbursement of trust money.
Records retention
A broker must maintain all documentation regarding a trust account for four years from the date the documentation was received or created by the broker.
Course offerings
A license holder may not advertise that the license holder offers Commission-approved courses in conjunction with an approved school or other approved organization unless the license holder is approved by the Commission to offer the courses.
Illegal compensation
A licensed broker may not compensate anyone for real estate services except the broker's own sponsored license holders or another licensed real estate broker. Texas attorneys, though exempt from the Act, must show the listing broker a real estate broker's license to claim part of a commission. Attorneys without a real estate broker's license can be paid directly by their own clients, not by a real estate broker. A license holder may accept compensation only from the license holder's designated broker. The license holder cannot pay anyone either. All payment of fees must go through the designated broker.
Which of the following is the best example of trust funds?
A pet deposit charged by an apartment complex.
Integrity
A real estate license holder has a special obligation to exercise integrity in the discharge of all responsibilities. Integrity is the quality of a person who demonstrates sound moral and ethical principles in life. People who demonstrate integrity draw others to them because they are trustworthy and dependable. They can be counted on to behave in respectable ways even when no one is monitoring them.
Electronic media
A real estate license holder placing an advertisement on the Internet, electronic bulletin board, or the like, must include the name of the broker on each page on which the license holder's advertisement appears. A real estate license holder placing an advertisement by using an electronic communication, including but not limited to email and email discussion groups, text messages, and social networking websites, must include the name of the broker in the communication which is an advertisement. In addition, the advertisement content must not be deceptive.
Which of the following would NOT be considered advertising?
A text message to a current client.
Advertising defined
An "advertisement" is a written or oral communication by a license holder which attempts to induce a member of the public to use the services of the license holder. The term "advertisement" includes, but is not limited to, all publications; radio and television broadcasts; all electronic media including email, text messages, social networking websites, and the Internet; business stationery, business cards, signs and billboards. The rules apply to all advertisements by a license holder. The following information is not considered an advertisement or advertising: a communication from a license holder to a client, provided the first communication from the license holder contained the required information, as set forth below real estate information, including listings, available to the public on a license holder's website, extranet or similar site that is behind a firewall or similar filtering software which requires registration to access that information.
Rebate offers
An advertisement containing an offer to rebate a portion of a license holder's commission must disclose that payment of the rebate is subject to the consent of the party the license holder represents in the transaction. If payment of the rebate is contingent upon a party's use of a selected service provider, the advertisement also must contain a disclosure that payment of the rebate is subject to restrictions.
Names
An advertisement must clearly and conspicuously contain the name of the broker, either a business entity or an individual. A license holder may use the broker's assumed name instead of the name in which the broker is licensed, if the assumed name is registered with the Commission. If the broker's name or assumed name includes a salesperson's name, an advertisement must include another assumed name of the broker that does not include the salesperson's name. A broker of a business entity must notify the Commission in writing not later than the 30th day after the date the broker starts or stops using an assumed name in business other than the name in which the person is licensed. A business entity licensed as a real estate broker may do business in the name in which it was chartered or registered by the Office of the Secretary of State. A license holder may not use a copyrighted trade name unless the license holder has legal authority to use the name.
Signs
An advertisement placed where it is likely to attract the attention of passing motorists or pedestrians must contain language that clearly and conspicuously identifies the person publishing the advertisement as a real estate broker or agent. This does not apply to signs placed on or providing directions to real property listed for sale, rental or lease, with the broker who has placed the sign, provided the signs otherwise comply with the Act.
Reasonable care and due diligence
An agent must exercise reasonable care and due diligence to promote and protect a client's best interest. An agent must protect a client from any foreseeable risks or harm. Also, an agent must refrain from advising or assisting a client when the client's needs fall outside the agent's area of expertise. The agent must then recommend that the client obtain expert assistance in these matters. An agent must use all his or her skill and expertise to take care of a client, always making sure to maintain skill and expertise through pursuing educational courses and seminars. For an agent representing a seller, exercising care and skill includes helping the seller set a realistic asking price discovering and disclosing facts that affect the seller presenting contracts properly marketing the property effectively keeping the property secure helping the seller evaluate purchase offers assisting in working with the title company through closing responding to inquiries by the seller keeping the seller from legal harm following up after closing For an agent representing a buyer, exercising care and skill includes helping the buyer locate appropriate housing evaluating property values and property conditions determining financing alternatives presenting offers and counteroffers with the buyer's interests in mind assisting in working with the lender through closing responding to inquiries by the buyer keeping the buyer from legal harm following up after closing If an agent fails to exert reasonable efforts to represent his client's interest, the agent might be found guilty of negligence in court. An agent is liable to the principal for any loss that results from carelessness or negligence. The duty of reasonable care and due diligence encompasses the agent's responsibility in every area of service throughout the transaction, beginning with the initial consultation, advancing through the stages of negotiation and contract execution, all the way through to closing. Inherent in this duty is the responsibility of responsiveness to the client's needs. Consider the concept of imputed, or assumed, notice, which holds that informing an agent is the same as informing the agent's client. When information is provided to an agent, it is assumed to be communicated to the agent's client and therefore becomes binding on the client, even if the agent fails to convey the information to the client. The duty also encompasses the knowledge and expertise that agents bring to the work they will do on behalf of their principals. Since the principal employs the agent to represent the principal's interests, it follows that the principal should trust that the agent has the knowledge and expertise to represent the principal well and that the agent's advice will be sound and offered in the principal's best interest. A broker must present all offers to his or her principal before closing unless expressly instructed otherwise in writing. When confidential information seems to conflict with disclosure, a broker should openly discuss this with the client unless disclosure is required by law. A real estate broker is usually an independent contractor. Under the law of agency, the listing broker is a special agent who deals in the name of the principal to negotiate the sale of property. The broker does not have control over the property itself. He or she acts within the course of a special agency, and only has the right to represent that principal.
Accepting trust funds
Any trust money accepted by a broker is held in a fiduciary capacity and must be maintained in a designated trust account maintained by the broker or delivered to a Texas Title Company that was agreed upon by the principals of the transaction. A sales agent may not maintain a trust account. A sales agent in receipt of trust money must immediately deliver it to the sales agent's sponsoring broker. Brokers are ultimately responsible for any trust fund account held by their brokerage.
Breach of confidentiality
Confidential information is defined by TREC as information that applies to the parties of a transaction, not to the property. A broker who acts as an intermediary may not disclose that the seller will accept a lower price that the buyer will pay a higher price Any information a party specifically instructs the broker or salesperson in writing not to disclose is confidential, unless the broker is otherwise instructed in a separate writing by the respective party the broker is required by law to disclose the information the information materially relates to the condition of the property Dishonest dealing. A licensee many not treat any party to a transaction dishonestly.
Which of the following statements would subject a license holder to license suspension or revocation?
Confiding to a buyer that his client-seller will take a 93% offer
Deceptive advertising
Deceptive or misleading advertising, which is prohibited, includes, but is not limited to advertising that is inaccurate in any material fact or in any way misrepresents any property, terms, values, services, or policies advertising a property that is subject to an exclusive listing agreement without the permission of the listing broker and without disclosing the name of the listing broker unless the listing broker has expressly agreed to waive disclosure failing to remove an advertisement about a listed property within 10 days after closing or termination of a listing agreement, unless the status is included in the advertisement an advertisement by a salesperson which identifies the salesperson as a broker advertising a property in a manner that creates a reasonable likelihood of confusion regarding the permitted use of the property An advertisement placed by a license holder must include a designation such as "agent," "broker" or a trade association name that serves clearly to identify the advertiser as a real estate agent. A broker or salesperson may not place an advertisement that in any way implies that a salesperson is the person responsible for the operation of a real estate brokerage business causes a member of the public to believe that a person not authorized to conduct real estate brokerage is personally engaged in real estate brokerage
A sales agent receives a security deposit check on a lease. What is this sales agent's proper course of action?
Deliver the funds to the sponsoring broker for depositing.
Which of the following is a license law violation?
Failing to provide a customer with copies of the transaction documents
Trust fund documentation must be maintained by the broker for what period of time?
Four years
To comply with website advertising rules, brokers must
Identify themselves on each page of the HTML document.
Further grounds for suspension & revocation
In addition to punishing the foregoing prohibited acts, the Texas Real Estate Commission may take disciplinary action for any violation of the Texas Real Estate License Act, including conviction for a felony or fraud Fraud is against the public good and therefore against the primary objective of TREC, which is to protect the public from real estate license holders. failure to provide information requested by the Commission TREC expects each and every license holder to obey the Commission's directives. If TREC requests information and the license holder does not provide the information, TREC can only believe the license holder is trying to hide something. failure to surrender to the owner a document that is requested by the owner or TREC TREC requires that signatories receive a copy of whatever they sign. It further requires license holders to produce a document if there is a request for it. failure to use a contract form required by the Commission TREC promulgates contracts for mandatory use by license holders, and the license holders must use only those forms (with a few exceptions). negligence or incompetence TREC expects each license holder to act correctly and competently. Failure to do so would be against the public good. TREC further requires continuing education for all license holders to maintain their competence. dishonest conduct Dishonesty harms the public as well as the reputation of all license holders. failure to disclose who the license holder is acting for to all parties Non-disclosure of agency is considered dishonest and deceptive behavior. compensation from more than one party without the full knowledge and consent of all parties It is actually not a violation to receive money from both the buyer and seller in a single transaction, but all parties need to know about it and agree to it. Disclosure is typically the best policy for all license holders. failure to properly account for money that belongs to another Commingling is the mixing of others' funds with your own. Conversion is using those funds for a wrongful purpose. Both of these constitute mishandling of money that belongs to another. failure to specify a definite termination date in a representation agreement TREC cannot promulgate an employment agreement (listing agreement or buyer's representation agreement) because those agreements are made between the broker and the client. However, to protect the public, TREC mandates that an employment agreement have a definite termination date and that the termination date must not automatically renew the termination date must not be for an unreasonable length of time offering real property for sale by means of a lottery All lotteries in the state of Texas, including one that would offer real property as a prize, must go through the Lottery Commission. For a license holder to conduct a lottery would not in the best interest of a consumer. guaranteeing future profits Nothing in the future is guaranteed. For a real estate license holder to guarantee that a property will gain in value would be deceptive and against the good of the public. placing a sign on a property without the written consent of the owner This may sound like a great way to get business, but it is a TREC violation. It would be deceptive to put a sign on a property without the owner's permission. It is easier to understand how this could become an issue if the house was actually vacant. For a listed property, the TAR Listing Agreement has a clause that gives permission to place a sign. offering to sell or lease a property without the consent of the owner This is clearly deceptive. CASE IN POINT - A license holder once needed another house to complete an advertisement, so he included his brother's house for sale without the knowledge or consent of his brother. On any calls, the license holder would say the house was now off the market. Clearly deceptive. inducing a contracted party to break the contract for the purpose of substituting a new contract This is also a violation of law (tortuous interference), third party interference into another's contract. For example, one real estate license holder calls the seller on a listed property and tells the seller, "Your listing agent is bad and you should ask for an unconditional release and list with me." The license holder that made such a call is interfering in the listing agreement (contract) of another broker. negotiating a sale with of a party who has an exclusive agency agreement with another broker This is interference in the agency relationship of another. Suppose one license holder had a buyer who was submitting a low offer to an owner of a listed property. Instead of taking the offer to the listing broker (proper procedure), the buyer's license holder took the offer directly to the owner so that he could induce the owner to accept the offer without the advice of his/her own broker (violation). publishing an advertisement that deceives the public or fails to identify the person placing the advertisement as a license holder This would be deceptive because the general public would think the property is being offered by the owner and by not a professional real estate license holder. circulating an unjustified threat of a legal proceeding A real estate license holder should never threaten a lawsuit. First of all, only a broker can bring a lawsuit, and, secondly, a threat is an attempt to manipulate a situation and may be judged an act of misrepresentation. License holders should never threaten that their client will sue. failure to advise a buyer in writing before closing that a buyer should have the abstract examined by an attorney or be provided with a title insurance policy This is a requirement by TREC to protect the public. The general public does not necessarily understand the need for a title insurance policy, and because of that, TREC requires disclosure by the license holder. failure to deposit money the license holder receives as trust funds Trust money is any money held for others. If the license holder fails to deposit that money, it could put that money in jeopardy, against the public good. discrimination Discrimination is a direct violation of the Texas Real Estate License Act, a direct violation of the national Fair Housing Act, and just plain wrong. A professional license holder should never even consider discriminating against anyone. drafting an instrument that transfers an interest in real property or advises on the validity of a legal document Lawyers are the only professionals who can legally draft a contract for use by others in the state of Texas. For a license holder to draft a contract is a violation of TRELA and a violation of law.
Competence
It is the obligation of a real estate license holder to be knowledgeable about real estate brokerage practices. The license holder should be informed on market conditions affecting the real estate business be informed on national, state and local issues and developments in the real estate industry exercise judgment and skill in the performance of the work Competence is the ability to practice real estate successfully and efficiently. It is the capability to perform and accomplish the client's goal. The license holder must be an expert and demonstrate skill and mastery of the profession. A commitment to continuing education is a large part of maintaining competence.
Misrepresentation
Misrepresentation is the making of false statements. This can occur by way of commission - saying something—or omission - neglecting to say something. Generally, Errors and Omissions insurance helps protect practitioners against liability from these types of mistakes. Misrepresentation can also involve fraud. Fraud is the intentional misleading of a person, and no insurance will cover fraud. Certain factors must be in place for fraud to be adjudged. These factors, include reliance on the information - the consumer must have relied on the information to make an important decision intent to commit fraud - the person making the misrepresentation must have known it was incorrect and continued anyway for his/her own gain damage to the individual - the individual must have incurred some type of damage from the misrepresentation
A broker changes his registered assumed name. What must he do to comply with TRELA?
Notify the commission within 30 days.
Prudence and caution
Prudence and caution help avoid danger and mistakes. Both require judgement, wisdom and common sense. Part of a license holder's mission is to protect clients against risky situations.
Unauthorized practice of law
Real estate license holders frequently use real estate contracts in the course of business. However, in this state they cannot draw up contracts. The Texas Real Estate Commission will suspend or revoke the license of a license holder who is not a licensed attorney in this state and who, for consideration drafts an instrument that transfers or affects an interest in real property, or advises a person regarding the validity or legal sufficiency of title to real property A license holder who completes a contract form for the sale or lease of an interest in real property is not engaged in the unauthorized practice of law in this state if the form was adopted by the Commission for the type of transaction for which the form is used prepared by a Texas attorney for the type of transaction for which the form is used prepared by the property owner or by an attorney and required by the property owner
Limits on Commission rules
The Commission may not adopt a rule restricting advertising by a person regulated by the Commission except to prohibit a false, misleading, or deceptive practice by the person. The Commission may not include in rules to prohibit false, misleading, or deceptive practices by a person regulated by the commission a rule that restricts the use of any advertising medium restricts the person's personal appearance or use of the person's voice in an advertisement relates to the size or duration of an advertisement used by the person restricts the person's advertisement under an assumed or trade name that is authorized by a law of this state and registered with the Commission requires the term "broker," "agent," or a similar designation or term, a reference to the Commission, or the person's license number to be included in the person's advertisement
Consumer Protection Notice
The Commission requires the Consumer Protection Notice to be displayed in a brokerage office. This document is available from the Texas Real Estate Commission. Each active real estate broker must also provide the notice by placing a link to it labeled "Texas Real Estate Commission Consumer Protection Notice" in at least a 10 point font in a readily noticeable place on the homepage of the business website of the broker and sponsored license holders. Essentially, the Consumer Protection Notice discloses that TREC regulates brokers, inspectors, warranty providers, etc. how to file a complaint existence of recovery fund how to contact TREC
Recovery fund payments
The Commission will revoke a license if the Commission makes a payment from the Real Estate Recovery Trust Account on behalf of a license holder and the license holder does not repay the trust account the full amount of the payment before the 31st day after the date the commission provides notice to the license holder. A license holder's repayment of all amounts owed to the trust account does not affect any disciplinary proceeding. A person is not eligible for a license until the person has repaid in full the amount paid from the account for the person, plus interest at the legal rate. If payment is made from the Real Estate Recovery Trust Account on behalf of a business entity license holder or a designated broker of a business entity license holder, the commission will proceed against both the business entity and designated broker.
National Association of Realtors® Code of Ethics
The National Association of Realtors® (NAR) has a professional ethics code that its members must adhere to. The penalty is not loss of license, since the NAR is not a licensing agency, but loss of the privilege of being a REALTOR®. The Code represents the standard of conduct for all Realtors and is designed to have a consistency of performance among all Realtors. The Preamble is summarized as follows Realtors understand the power of land and how foundational it is, will be and always has been. Realtors must protect personal property rights. Realtors must act on behalf of the public and perform in an ethical manner. Realtors must cooperate with other Realtors. Realtors must act honestly, fairly and with competence. Realtors must continue to educate themselves. The Code is based upon "The Golden Rule which is to do unto others as you would want them to do to you."
The sellers and buyers in a transaction have directed the broker in writing to cancel the sales agreement and return the earnest money deposit. The broker refuses, stating the sales contract cannot be changed without a buyer penalty. Which of the following is correct?
The broker has violated TRELA by not following proper instructions.
A sum of money held by a broker in a trust fund becomes payable to the broker as commission. What must the broker do to avoid commingling?
The broker must remove the money from the trust fund within thirty days.
Canons of Professional Ethics and Conduct
The code of ethics established by the Texas Real Estate Commission for its licensees is called the "Canons of Professional Ethics and Conduct." The "canons" are: fidelity - represent interests of the client and treat all others honestly integrity - perform with prudence and caution competency - stay informed, continue education, perform ably consumer information - be open, deal with complaints, protect confidentiality non-discrimination - do not use race, color, religion, national origin, sex, ancestry, handicap or familial status to deny service Violation of the Canons can lead to loss of license, since it is TREC that issues the licenses.
Common law duties to a customer
The duties a license holder owes to a customer (someone the license holder does not represent) are more limited than those due a client. Since these duties do not appear in any formal statute but have been imposed by the courts through rulings, they are referred to as common law duties: honesty - the license holder must be honest at all times with all parties fairness - the license holder must be fair to all disclosure - the license holder must disclose material defects and other issues required by law
Loyalty
The license holder must act in the client's interest even if it would jeopardize a commission. If an agent insists a seller accept a risky offer in order to get a commission, this is a violation. The license holder must put the client's interest first. Undivided loyalty means complete faithfulness to one and only one. Therefore, licensees cannot do or say anything to help another person, if by doing so they will harm the client they represent. This is why license holders represent only one party in a transaction. The agent owes complete allegiance to the principal. The agent must never make a profit from the relationship that is not disclosed to the principal. An agent must negotiate agreements without considering the amount of compensation to be earned. In addition, licensees are required to disclose any personal interest they have in a property.
Disclosure
The license holder must disclose material facts that affect the client. This exceeds the agent's duty to make agency disclosure and to disclose known material facts. The agent has a duty to disclose to the principal all facts that are known, or that should be known, that could affect the transaction. This would include all material facts and any other facts (such as the buyer's qualifications to complete the sale) that become known to the agent. Obviously, the facts to be disclosed would be different based on whether the agent is representing the seller or the buyer. In all respects, however, the agent has the duty to disclose all facts known to him. The duty of competence requires the broker to be informed about the real estate industry and communicate related information to the client. The duty of disclosure requires the broker to tell the client anything that a reasonable person would find of interest. This includes any negotiating position, environmental concerns, or market analysis.
Obedience
The license holder must obey all lawful and ethical instructions of the client on matters that fall within the authority of the real estate services performed on behalf of the principal. The principal/client is the employer and the broker and/or broker's sponsored license holder is the employee. The principal/client is the boss and the broker/license holder acts according to the instructions given by the principal. This does not obligate the agent in matters that would constitute breaking the law or violating the Code of Ethics. Obedience requires that the agent act in good faith. For example, an agent may follow the principal's instructions stating that the home may not be shown on Sundays. However, an agent may not follow any directives that violate Fair Housing laws or that instruct the agent to conceal a defect in the property. If a directive is illegal and the agent cannot get the client to remove it from the contract, the agent should withdraw from the relationship.
Accounting
The license holder must properly account for money and property entrusted to his or her possession. This duty governs how the agent takes care of the funds that have been given to the agent by another. Funds that the agent holds on behalf of a principal in a real estate transaction must be held in a trust account. Furthermore, they must be deposited to this account by the second business day after the funds have been placed in the agent's possession. The agent must keep a record of all funds received and report the disposition of these funds to the principal whenever requested. The agent must place these funds with a third party who does not represent the agent or either of the principals in the transaction. In Texas, earnest money is most commonly handled by the escrow agent, or title company, in sales transactions. Funds that the agent holds in trust must never be commingled with funds from an agent's business or personal accounts, even if the agent only intends to leave the funds there for a short time. Accounting can go beyond earnest money funds. Perhaps the principal gives the agent something in the house that would run the chance of being stolen during the showing of the house (i.e., a valuable painting, a gun collection, valuable rugs, etc.). Most designated brokers will not allow their sponsored license holders to retain anything of value for their clients. It is not real estate- related and just causes risk. The duty of accounting also requires the agent to provide copies of all signed paperwork. Brokers must give copies of documents to everyone who is affected by them and retain these documents for at least four years.
Trust accounting requirements
The trust account must be clearly identified as a trust account. The broker is not required to maintain separate trust accounts for each client or type of trust money maintained by the broker, such as earnest money deposits or security deposits received for the management of rental property. If trust money held by a broker is deposited in an interest-bearing account the money must be available for disbursal at the appropriate time unless otherwise agreed to in writing, any interest earned on the money must be given to the owners of the money A broker may deposit and maintain a reasonable amount of money in the trust account to cover bank service fees, including fees charged for insufficient funds. Detailed records must be kept for any funds deposited under this exception. If a broker acquires ownership of trust money held in a trust account, including entitlement to compensation, such money must be removed from the trust account not later the 30th day after the date the broker acquires ownership of the money. The broker must retain a documentary record of each deposit or withdrawal from the trust account and provide an accounting to each beneficiary of trust money at least monthly if there has been any activity in the account. A broker may authorize only another license holder to withdraw or transfer money from a trust account, but the broker remains responsible and accountable for all trust money received by that broker and all deposits to or disbursements from the trust account. If a broker deposits trust money in the form of a check in a trust account and the check is dishonored by the financial institution on which it was drawn, the broker must immediately notify all parties to the transaction in writing.
Codes of ethics
Three kinds of standards define the behavior of the professional real estate licensee: legal - everyone must obey the law professional - "Codes of Ethics" define standards of professional and business conduct personal - individual ethics determine what a person will and will not do, no matter what the law or business code prescribes The real estate licensing law establishes lawful behavior. The licensing process evaluates the character of applicants for personal ethics. The Texas Real Estate Commission and professional associations protect the public from unscrupulous and unprofessional acts of real estate license holders by specifying standards of conduct.
A buyer and seller have a serious disagreement regarding a defect in the swimming pool. The buyer gives up and demands the deposit back. The seller disagrees and demands the earnest money as liquidated damages. What should the broker do?
Transfer the trust money into the registry of a court.
Deposits
Trust money received by the broker must be deposited in a trust account within a "reasonable time" unless the principals have agreed otherwise in writing. The Commission has determined a reasonable time to be no later than the close of business of the second working day after the date on which the broker received the money (called the 3 day rule).
Fiduciary duties
When a license holder accepts the delegation of authority from a principal, the license holder becomes a fiduciary. "Fiduciary" loosely translates as "putting the clients' wishes above your own." The fiduciary relationship is a formal one that entails trust, confidence, and fidelity. As a fiduciary, the agent may not personally profit from the agency relationship except through the agreed-upon commission. Six basic fiduciary duties are owed to a client.
In advertising listed property, it is necessary to
identify the name of the broker.
One of the central messages of Form 1-1, Consumer Protection Notice is
there is a procedure for consumers to file a complaint.
