Realtor Course Chapter 8
Sec. 1101.652. Grounds for Suspension or Revocation of License (cont.)
(1) engages in misrepresentation, dishonesty, or fraud when selling, buying, trading, or leasing real property in the name of: (A) the license holder; (B) the license holder's spouse; or (C) a person related to the license holder within the first degree by consanguinity; (2) fails or refuses to produce on request, within a reasonable time, for inspection by the commission or a commission representative, a document, book, or record that is in the license holder's possession and relates to a real estate transaction conducted by the license holder; or (3) fails to use a contract form required by the commission under Section 1101.155. (b) The commission may suspend or revoke a license issued under this chapter or take other disciplinary action authorized by this chapter if the license holder, while engaged in real estate brokerage: (1) acts negligently or incompetently; (2) engages in conduct that is dishonest or in bad faith or that demonstrates untrustworthiness; (3) makes a material misrepresentation to a potential buyer concerning a significant defect, including a latent structural defect, known to the license holder that would be a significant factor to a reasonable and prudent buyer in making a decision to purchase real property; (4) fails to disclose to a potential buyer a defect described by Subdivision (3) that is known to the license holder; (5) makes a false promise that is likely to influence a person to enter into an agreement when the license holder is unable or does not intend to keep the promise; (6) pursues a continued and flagrant course of misrepresentation or makes false promises through an agent or sales agent, through advertising, or otherwise; (7) fails to make clear to all parties to a real estate transaction the party for whom the license holder is acting; (8) receives compensation from more than one party to a real estate transaction without the full knowledge and consent of all parties to the transaction; 9) fails within a reasonable time to properly account for or remit money that is received by the license holder and that belongs to another person; (10) commingles money that belongs to another person with the license holder's own money; (11) pays a commission or a fee to or divides a commission or a fee with a person other than a license holder or a real estate broker or sales agent licensed in another state for compensation for services as a real estate agent; (12) fails to specify a definite termination date that is not subject to prior notice in a contract, other than a contract to perform property management services, in which the license holder agrees to perform services for which a license is required under this chapter; 13) accepts, receives, or charges an undisclosed commission, rebate, or direct profit on an expenditure made for a principal; (14) solicits, sells, or offers for sale real property by means of a lottery; (15) solicits, sells, or offers for sale real property by means of a deceptive practice; (16) acts in a dual capacity as broker and undisclosed principal in a real estate transaction; (17) guarantees or authorizes or permits a person to guarantee that future profits will result from a resale of real property; (18) places a sign on real property offering the real property for sale or lease without obtaining the written consent of the owner of the real property or the owner's authorized agent; (19) offers to sell or lease real property without the knowledge and consent of the owner of the real property or the owner's authorized agent; (20) offers to sell or lease real property on terms other than those authorized by the owner of the real property or the owner's authorized agent; (21) induces or attempts to induce a party to a contract of sale or lease to break the contract for the purpose of substituting a new contract; (22) negotiates or attempts to negotiate the sale, exchange, or lease of real property with an owner, landlord, buyer, or tenant with knowledge that that person is a party to an outstanding written contract that grants exclusive agency to another broker in connection with the transaction;
Sec. 1101.557. Acting As Agent; Regulation of Certain Transactions
(a) A broker who represents a party in a real estate transaction or who lists real estate for sale under an exclusive agreement for a party is that party's agent. (b) A broker described by Subsection (a): (1) may not instruct another broker to directly or indirectly violate Section1101.652(b)(22); (2) must inform the party if the broker receives material information related to a transaction to list, buy, sell, or lease the party's real estate, including the receipt of an offer by the broker; and (3) shall, at a minimum, answer the party's questions and present any offer to or from the party. (c) For the purposes of this section: (1) a license holder who has the authority to bind a party to a lease or sale under a power of attorney or a property management agreement is also a party to the lease or sale; (2) an inquiry to a person described by Section 1101.005(6) about contract terms or forms required by the person's employer does not violate Section 1101.652(b)(22) if the person does not have the authority to bind the employer to the contract; and (3) the sole delivery of an offer to a party does not violate Section 1101.652(b)(22) if: (A) the party's broker consents to the delivery; (B) a copy of the offer is sent to the party's broker, unless a governmental agency using a sealed bid process does not allow a copy to be sent; and (C) the person delivering the offer does not engage in another activity that directly or indirectly violates Section 1101.652(b)(22).
Sec. 1101.652. Grounds for Suspension or Revocation of License (cont.)
23) publishes or causes to be published an advertisement that: (A) misleads or is likely to deceive the public; (B) tends to create a misleading impression; (C) implies that a sales agent is responsible for the operation of the broker's real estate brokerage business; or (D) fails to include the name of the broker for whom the license holder acts, which name may be the licensed name, assumed name, or trade name of the broker as authorized by a law of this state and registered with the commission; (24) withholds from or inserts into a statement of account or invoice a statement that the license holder knows makes the statement of account or invoice inaccurate in a material way; (25) publishes or circulates an unjustified or unwarranted threat of a legal proceeding or other action; (26) establishes an association by employment or otherwise with a person other than a license holder if the person is expected or required to act as a license holder; (27) aids, abets, or conspires with another person to circumvent this chapter; (28) fails or refuses to provide, on request, a copy of a document relating to a real estate transaction to a person who signed the document; (29) fails to advise a buyer in writing before the closing of a real estate transaction that the buyer should: (A) have the abstract covering the real estate that is the subject of the contract examined by an attorney chosen by the buyer; or (B) be provided with or obtain a title insurance policy; (30) fails to deposit, within a reasonable time, money the license holder receives as escrow or trust funds in a real estate transaction: (A) in trust with a title company authorized to do business in this state; or (B) in a custodial, trust, or escrow account maintained for that purpose in a banking institution authorized to do business in this state; (31) disburses money deposited in a custodial, trust, or escrow account, as provided in Subdivision (30), before the completion or termination of the real estate transaction; (32) discriminates against an owner, potential buyer, landlord, or potential tenant on the basis of race, color, religion, sex, disability, familial status, national origin, or ancestry, including directing a prospective buyer or tenant interested in equivalent properties to a different area based on the race, color, religion, sex, disability, familial status, national origin, or ancestry of the potential owner or tenant; or (33) disregards or violates this chapter.
A lottery
A scheme or procedure whereby one or more prizes are distributed by chance among persons who have paid or promised consideration for a chance to win anything of value, whether such scheme or procedure is called a pool, lottery, raffle, gift, gift enterprise, sale, policy game, or some other name. You CANNOT solicit, sell, or offer a property for sale by means of a lottery. Win the lottery? More like lose your license.
535.34 Salespersons Employed by an Owner of Land and Structures Erected by the Owner
Additionally, you should note that an employee who works for a home builder, such as a sales agent who sits in a model home (Echo! Echo! Echo!), does not have to have a real estate license. Here is the TREC Rule on that: For the purposes of the Act and this title, "salesperson, employed by an owner" means a person employed and directly compensated by an owner. An independent contractor is not an employee. Withholding income taxes and Federal Insurance Contributions Act (F.I.C.A.) taxes from wages paid to another person is considered evidence of employment.
Coded Language
Advertisements can mislead, as well. For years, real estate professionals have used coded information that may be misleading to the public. An agent should not say something like, "This property is cozy," if what the agent meant was that the property is dinky. Don't say, "This property is a fixer upper," when the property is actually just in pretty bad shape. Being as truthful as possible in ads is the best way to go. Many agents let the pictures sell the property and only give statistical information, like the number of stories, bedrooms, baths, and parking spaces.
A license holder does not have to use a promulgated form if no form exists for what the principals are attempting to do.
Allow me to break it down: there are so many forms available from the Texas Real Estate Commission and the Texas Association of REALTORS®, it would be difficult to find a transaction in which the form needed has not already been created. Some local boards of REALTORS® have some forms of their own that may be used by their members.
Conversion
Along the same lines, if the broker is supposed to return money to someone and does not do so because they have used those funds for something else, trouble will also ensue. The act of a broker or sales agent using a client's or customer's money for their own use is called conversion, as in they are converting the funds for something in which it was not intended. Don't do that, y'all!
Draw Up Your Own Form
An owner or buyer may draw up their own form. The most likely scenario in which this would happen would be if a corporation of some type, such as a home builder, has a form that is preferred. Brokers and agents CANNOT draft their own contracts for the transfer of real property. This is considered unauthorized practice of law. A license holder does not have to use a promulgated form if no form exists for what the principals are attempting to do.
Failure to Disclose When would an agent fail to disclose?
For example, a selling agent who knows that the home is infested with termites (Ack!) and fails to let a potential buyer know, is creating an environment in which their license may be revoked and a possible lawsuit could occur. The selling agent should also make sure that it is the seller who fills out the disclosure form, and that the form is submitted in a timely fashion. A buyer has a right to know that the license holder is representing and looking out for the seller in the transaction. In the same way, the seller should be informed that they are talking to the agent who is attempting to get the best price for the buyer, not the seller.
Commingling
In most cases, brokers send clients' checks to the title company for safekeeping. Procedures like this prevent commingling, or the illegal act of a license holder mixing their own money with a client's or customer's money. Commingling can also take place if a license holder fails to promptly remove earned commissions or fees from the trust account.
Incompetence Incompetence usually occurs when a license holder attempts to facilitate a type of transaction which they have never attempted. For example, a license holder who has spent years in tenant representation — common in office space — trying to represent the buyer of an industrial complex. Article 11 of the NAR Code of Ethics says: REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth.
Incompetence usually occurs when a license holder attempts to facilitate a type of transaction which they have never attempted. For example, a license holder who has spent years in tenant representation — common in office space — trying to represent the buyer of an industrial complex. Article 11 of the NAR Code of Ethics says: REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth.
Sec. 1101.558. Representation Disclosure
It indicates that a license holder representing a party in a proposed real estate transaction must provide either oral or written disclosure of that representation upon first contact with a party to the transaction or to another license holder representing another party to the transaction. It identifies the content and format of the written communication required when a substantive dialogue relating to a proposed transaction regarding a real property occurs with a party. (The commission provides the guidelines for the text, format, and manner of presentation of that written notice.) It lists the few exceptions to the written notice requirement. Many license holders find that providing a party with the Information About Broker Services (IABS) Notice* to be the most convenient way to fulfill their obligation with respect to the written statement requirement. *We'll give you a peek at the IABS Notice a little later in the course!
In commercial transactions-forms
It is likely that one of the parties to the contract will hire an attorney to draw up the contract due to the fact that TREC and TAR do not promulgate or provide forms for commercial transactions. No agent should insist on using the forms they are used to if an attorney is available and needed for the transaction to close.
Misrepresentation of Material Facts Misrepresentation of material facts can happen in so many ways. Too many ways!
Most of those ways occur during situations where the condition of the home is being described. The agent may state that the roof is "new" when it was really installed two years ago. Hmm. Or they may say that the property is not in the flood zone when, in fact, a portion of the backyard is. Double hmmm. (Hmm, hmm.) There are so many different ways to get into difficult situations and trouble in this area.
TREC Forms
One acceptable alternative to using TREC promulgated forms is using TAR forms. These contracts are created by the Texas Association of REALTORS® and are available only for use by REALTOR® members. The TAR versions of TREC forms serve the same purpose and are often very similar. Your broker may want you to use TAR forms because of personal preference, uniformity, or compatibility with your online document signing system.
Difference between the two types, check the top of the form
Promulgated by the Texas Real Estate Commission (TREC) or Approved by the Texas Real Estate Commission (TREC).
Puffing
Some license holders use certain phrases like, "This house is perfect!" or "This condo is in great shape." This is known as puffing. ☁️ An exaggeration to accomplish a goal, such as a sale. Puffing is not punishable under the Deceptive Trade Practices Act because it takes the form of general adjectives and opinions, not actual misrepresentation of facts. Still, puffing should not be used to entice a person into a transaction. Let facts be your selling points. There's a fine line between puffing and misleading statements that could put your license at risk.
earnest money
The law allows the broker to hold the earnest money in an account, as long as none of the broker's money is in that same account.
Sec. 1101.652. Grounds for Suspension or Revocation of License
There are not many license holders that commit fraud, because fraud is a deception that is performed intentionally. Most agents would never do such a thing. (And if they did, they would not last long in the business.) It is more likely that a license holder, especially a new one, would commit misrepresentation. One easy way to do that is by plain lack of knowledge.
Outside Fees and Commission
There may be a time when a license holder is offered a fee or commission from someone other than a client. This could happen when a service person, such as a remodeler, wants to give a finder's fee to an agent. (This can legally take place but hardly ever does.) When it does, though, the license holder must disclose the fee to their client and permission must be received to obtain the fee.
Alternative Forms
When the agent is buying or selling their own property. They can use any forms they want. My advice is to stick to what you're used to whenever you can. Another exception to the promulgated-only rule is when a government agency requires a contract form that is not promulgated by the Texas Real Estate Commission. If there is no promulgated form for the situation, then a promulgated form can't be used! One way that this could happen is if the agent is assisting a buyer in purchasing land from the federal government.
Negligence
a potential problem when practicing real estate. Negligent is to be careless in the work that needs to be accomplished. For example, if a sales agent has a property under contract but fails to take the earnest money and contract to the title company to be processed for the closing, that agent would be considered to be negligent.
Sec. 1101.652. Grounds for Suspension or Revocation of License
enters a plea of guilty or nolo contendere to or is convicted of a felony or a criminal offense involving fraud, and the time for appeal has elapsed or the judgment or conviction has been affirmed on appeal, without regard to an order granting community supervision that suspends the imposition of the sentence; 2) procures or attempts to procure a license under this chapter or Chapter 1102 for the license holder by fraud, misrepresentation, or deceit or by making a material misstatement of fact in an application for a license; (3) fails to honor, within a reasonable time, a check issued to the commission after the commission has sent by certified mail a request for payment to the license holder's last known business address according to commission records; (4) fails to provide, within a reasonable time, information requested by the commission that relates to a formal or informal complaint to the commission that would indicate a violation of this chapter or Chapter 1102; (5) fails to surrender to the owner, without just cause, a document or instrument that is requested by the owner and that is in the license holder's possession; (6) fails to notify the commission, not later than the 30th day after the date of a final conviction or the entry of a plea of guilty or nolo contendere, that the person has been convicted of or entered a plea of guilty or nolo contendere to a felony or a criminal offense involving fraud; or (7) disregards or violates this chapter or Chapter 1102.
Commission from Both Sides
the license holder may receive a commission from both sides of a transaction. The portion of the License Act we just covered almost makes it sound as though it is illegal to do so, but in fact, it is okay for an agent to receive a commission from both the buyer and the seller, with the proper disclosures to each party. if the buyer and the seller both want to pay the commission, it is fine as long as both parties know it is happening and they authorize it.
