Section 3: Agency Relationships, Disclosure, and Duties to the Client in Texas

Additional Agency Disclosure Requirements and Exceptions

-A licensee's name does not need to be on the Information About Brokerage Services form. -While Texas law does not require that the Information About Brokerage Services brochure be signed, your brokerage may require that customers sign the form.

Can't Obey

-A seller asks that the home not be shown to any same-sex couples. -A seller going through a divorce is handling the sale of the former family home and says his soon-to-be ex-partner (whose name is on the title) doesn't need to be involved in the process.

Obey

-A seller client asks to have at least two hours' notice before a showing. -A seller client would like prospective buyers to remove their shoes in the house.

Question

-A seller works from home and would like to remain in the house during showings. -A seller doesn't want a lockbox placed outside the home.

Special Agent

-Acts as an intermediary, but doesn't make decisions or enter into contracts on the client's behalf -Has limited authority to act on a client's behalf -Most real estate transactions involving a buyer and seller deal with this type of agency

Reasonable Skill Truths

-Agents may perform a market analysis to determine a price range for a property. -Agents may search for properties on the MLS. -Agents may market their listings through flyers.

Designated Agent

-Appointed by the broker to assist one party in an in-house transaction -Only the licensee appointed to the client owes fiduciary duties to that client -Also known as an appointed or assigned agent

Universal Agent

-Empowered to do anything the principal could do personally -Has the most authority of any agent -Not a common role for a real estate agent

A real estate licensee is acting as what type of agent when assigned by the broker to represent one party in an in-house transaction?

Designated

Informing parties of material facts related to a transaction describes the duty of ______.

Disclosure

Of the fiduciary duties an agent owes to a client, which one was left out of the following string: loyalty, care, obedience, confidentiality, accounting?

Disclosure

Which fiduciary duty requires agents to reveal all facts that are pertinent to the transaction to their clients?

Disclosure

Which of the following statements about the fiduciary duty of disclosure is true?

It's owed to other parties, not just to the agent's clients.

Why is the licensee required to make the agency disclosure?

It's the law

The Information About Brokerage Services Form

-The role of the intermediary -The role of the sub-agent -The role of the owner's agent -The role of the buyer/tenant's agent -A list of min duties brokers owe to their clients

The Information About Brokerage Services brochure is not a contract.

True

Name That Agent

-Keira's clients are only open to showing their property weekday evenings from 5 to 7 p.m. and weekends from noon to 7 p.m. She advises them that this may limit the number of showings, but they insist. -Keira demonstrates the duty of obedience by complying. One of Keira's buyer clients writes an earnest money check. She follows proper procedures for handling it, demonstrating accounting . -Keira's seller clients would prefer not to mention to any prospects that they sometimes get water in their basement because it only happens when the rain is very heavy for prolonged periods of times. By advising her clients to notify prospective buyers about the water issue, Keira is demonstrating the duty of disclosure .

Not Confidential

-Keira's listing backs up to an open space that will soon be developed into a retail site. -Keira's seller's house was featured in a movie in the early 1980s.

Confidential

-Keira's seller is moving because he doesn't like his neighbors. -Keira's seller is flexible in her price. -Keira's former buyer client was a strong believer in numerology and refused to look at any houses unless the address added up to three.

Which of these duties do agents owe their clients?

-Obedience -Loyalty -Accounting -Disclosure -Confidentiality

General Agent

-Responsible for handling all dealings for a specific piece of client property -Property managers generally serve in this role -Enters into contracts on behalf of the client

Loyal

-The clients are selling their home and moving out of state. Keira gives them the name of an agent she knows in that state and, in return, that agent will give her a referral fee if the clients purchase a new home through him. -A friend of Keira's represents sellers of a two-bedroom bungalow that would be perfect for Keira's buyer client. She shows the buyer the property, but doesn't tell them she knows the seller's agent. -Keira has a buyer looking at condos downtown, but she shows him a condo in the same price range slightly farther away from his desired area so he can see the difference in what his money will buy. -Keira shows her buyer two houses. One has a cooperating agent commission of 2.5% and is priced at the low end of the client's budget. The other is at the higher end of her budget, but pays a 3% commission to cooperating agents. The client loves them both and asks Keira which she should choose. Instead of answering, she tries to help her client come to a decision by comparing qualities of both.

When serving as an agent, you must disclose any adverse material fact relating to the transaction. Determine whether these items need to be disclosed when the seller is your client.

-The property has lead paint -The roof leaks -The buyer is the seller's agent's brother

Express Agreement

-While at lunch, you start talking with a young man at the next table. It seems he is new in town and is looking for someone who can help him find an apartment in his price range. You mention that you're a real estate agent and would be happy to assist him. He agrees to stop by the office and sign a buyer representation agreement so that the two of you can get started. -You have an appointment to meet with the Arnolds, an older couple who are interested in selling their house and moving to a patio home. After listening to their options for agency representation, they agree to sign a listing agreement with you.

In Texas, what two forms can the agency disclosure take?

-Written -Oral

Implied Agreement

-Your next door neighbor is looking for a new place to live and asks you if you know of any good buys in the area. In your free time, you do a little research and provide your neighbor with a list of homes. Your neighbor asks if you could get him in to see a few of the houses, and you agree to do so. -You've met with a potential client a few times now and have shown her a few different homes, at her request. She finds one she likes and asks you to help her prepare an offer to present to the seller.

A _____ is "a person who is put in a position of loyalty and trust..

A fiduciary

Newt's buyer client isn't happy with him. The buyer has accused Newt of breaching his duty of ______ by mishandling the earnest money.

Accounting

In Texas, when is the licensee required to make the agency disclosure?

At first contact with another party to the transaction or another licensee (who represents another party to the transaction)

Rhonda Becomes an Agent

At the start of the meeting, Rhonda welcomes the Kleins as customers, and explains to them the types of agency representation available to them. Rhonda also explains that only after they agree to enter into an agency relationship by signing an agency agreement with her broker will Rhonda be able to act on their behalf as their agent. Once in a position of trust and loyalty, Rhonda will assume the role of fiduciary to her new clients. Once they have a sales contract, the Kleins will be the principals to the transaction and Rhonda, as their agent, will represent them.

In Texas, when is a licensee required to provide an agency disclosure?

At the time that the licensee is having the first substantive dialogue about a specific property with the party whom they are not representing in the transaction

Phil is a property manager, which means he serves as a ______ agent to his landlord/client.

General

Jessie, the buyer's agent, decides to informally inspect the property while she waits for the professional inspection. She notices a small puddle of water in the basement behind a stack of boxes. Later, Jessie calls the seller's agent and tells him what she found. The agent tells her not to worry; the seller is aware of the leak and plans to have it fixed within the week. Which one of these statements about this situation is true?

Jessie should disclose this to her buyer.

Layla, a licensee, has had a few casual meetings with a potential client, Marcus. Marcus has told Layla the type of home and locations he's interested in. Layla has mentioned a few homes that she thinks Marcus might be interested in. Although Layla hasn't said that she will continue to look for homes for Marcus, Marcus believes she'll do just that. Which of these statements about this situation is correct?

Layla's actions may have created an implied agency agreement with Marcus.

When agents put their clients' interests ahead of their own, this describes the duty of ______.

Loyalty

Which fiduciary duty requires agents to put their client's interests ahead of all others?

Loyalty

While hosting an open house, Liza speaks with prospective buyers. They're interested in the house, but think the listing price is a little high. They ask her what other incentives they could include in their offer to get the seller to come down on their price. If Liza helps them, what duty may she be breaching?

Loyalty

Micah's client often tells him to do things that Micah doesn't necessarily agree with and that create a lot more work for him. Micah has multiple clients and can't spend all of his time doing the bidding of just one demanding woman. Micah decides to pick and choose which of his client's instructions he is going to follow. What might be the consequence if Micah doesn't fulfill his duty of obedience to his client?

Micah may lose the client's business.

Select the situation that correctly represents a true conflict of fiduciary duties.

Nikki's seller client has instructed her not to present offers that are less than the listing price. This is a conflict of Nikki's duty of disclosure, which requires her to present all offers, and her duty of obedience.

When working an open house for one of her listings, Keira meets a young couple. They're not looking to purchase anything right now, but are trying to get a sense for how much house their money will buy in different areas of town. Keira tells them about a few listings she knows about and the listing prices compared to house size and amenities. They also ask about financing a new home and what's the best way to save money for a down payment when they have other debt and how much they should save. She tells them they should have about 20% of the sale price saved for a down payment and that other debt will factor into the ability to obtain financing, so they should pay off anything they can. She also tells them that fixed rate mortgages are better than adjustable rate mortgages. Was Keira's discussion with the couple within the scope of her expertise?

No. She should not have given the couple advice related to specific mortgage types.

What acronym can licensees use to recall the fiduciary duties an agent owes to a client?

OLD CAR

Shari's clients want her to post that there are "no showings on weekends" on the MLS. Shari knows that will significantly cut down on their market exposure. Her duty of reasonable skill and care is in conflict with her duty of ______.

Obedience

Henry is Monica's listing agent. As Monica's agent, Henry has a duty to account for and properly handle her funds and ______.

Paperwork

Which of these tasks that Jenna performs does NOT represent the fiduciary duty of accounting?

She discloses the terms of the listing agent's compensation to her client.

Which one of the following statements about the Texas Information About Brokerage Services brochure is true?

The Information About Brokerage Services brochure is not a contract.

You are the Texas agent for the buyers, the Jansens. The Yothers are the sellers, and their mortgage holder is Richard Steele. To which of these parties must you disclose your agency status?

The Yothers only

A seller tells his agent that he has to sell his house quickly because of a divorce proceeding and that he's willing to accept less than his list price. His agent tells a buyer that the seller will accept as much as $10,000 less than the list price. Which of these is true?

The agent has breached his duty of confidentiality to his client.

If an agent fails to perform the duty of obedience, what might the legal consequence be?

The agent may be charged with misrepresentation.

Which fiduciary duty requires agents to handle their clients' funds and paperwork properly?

The duty of accounting

Gary's new seller client is concerned about privacy and doesn't want her listing posted on the MLS. Gary explains to her the potential impact this will have on marketing her property, but the client remains adamant. Gary doesn't list the property on the MLS. What fiduciary duty is at play?

The duty of obedience

Simone can't believe that her client won't let her put a lockbox on the property. How does he expect other agents to be able to show the home? Oh well, it's not as if he's asking her to do something illegal. The client's wish is her command. What fiduciary duty is this an example of?

The duty of obedience

In Texas, who is required to disclose the agency relationship, and who receives the disclosure?

The licensee must disclose the agency relationship to any party to the proposed transaction that the licensee does not represent.

Monica meets a colleague from another firm, Kate, for lunch, and discovers that a former seller client, Reuben, is now Kate's buyer customer. Monica tells Kate, "You know Reuben inherited a bunch of money right before he sold his house, right?" Which of these statements is true?

This is a breach of confidentiality because confidentiality survives forever.

Through which of these actions is implied agency created?

Through the actions of the parties

Keira's sellers have decided to list their home at $300,000. They say they don't have much wiggle room on the price and ask to not even be bothered with an offer less than $290,000. After a few weeks on the market, an offer comes in at $280,000. Keira thinks for a minute about what to do, then calls the buyer's agent back to tell him that his clients need to bring the offer up; the listing price is $300,000. Did Keira break any fiduciary duties?

Yes. She must present every offer to the client, regardless of their instructions, and she did not.

What happens when your client asks you to do something that's against the law?

You must break your duty of obedience.