Texas Real Estate Principles - Key Terms
*At time of application, how much does applicant pay into Recovery Trust Fund?
$10
*Per guidelines, any test-taker, Commission-approved education provider, or instructor may NOT do the following:
(1) Attempt to obtain specific exam question or answers (2) Remove or attempt to remove questions or answers from the exam site (3) Provide or attempt to provide exam questions or answers to another person
*What are the Canons of Professional Ethics and Conduct for Real Estate Licensees?
(1) Fidelity - a licensee while an agent as a fiduciary puts the principal's interest above all others, including agents* - all licensees are expected to deal fairly with all parties (2) Integrity - a licensee must be prudent and cautious to avoid all acts of misrepresentation* (3) Competency - a licensee must be knowledgeable, informed, and exercise judgement and skill* - gained through education and experience (4) Consumer Information Form 1-1 - must be posted in a prominent location in each place of business the broker or inspector maintains* (5) Discriminatory Practices - licensees must obey all federal, state, and local fair housing laws and may not discriminate in any instance* -FReSH CoRN: familial status, race, sex, handicap (recovering alcoholic, physical/mental, HIV/AIDS), color, religion, national origin
*A real estate license is required for any person or business entity that for compensation does any of the following:
(1) Lists (2) Leases (3) Buys (4) Exchanges (5) Auctions (6) Negotiates (7) Sells - LLBEANS - acronym to remember when you need a real estate license
*Explain the requirements to obtain a broker's license
(1) Must have a minimum of 4 years of active experience as a Texas licensee (in 5 years preceding application date) (2) Must complete required education of 60 semesters (900 hours) which include: - 18 semesters (270 hours) of core courses including 2 semesters (30 hours) of real estate brokerage - remaining 42 semesters in any other courses accepted by TREC (3) Must pass state broker's license exam
What two types of accounts to brokerages typically have?
(1) Operations - used for running the firm - real estate commissions owed are paid from this account (2) Trust Accounts - used to hold money for the benefit of others - can't contain operating funds - commissions must be removed within 30 days - may contain sufficient brokerage/ broker funds to open and operate the account
*What failures to act in a professional manner can result in suspension, revocation, or denial of a license under TRELA?
(1) being negligent, incompetent, dishonest, or untrustworthy (2) allowing or working with another to break license law (3) allowing an unlicensed employee o act as a licensee (4) failing to advise a buyer to get an abstract or title insurance policy (5) offering property for sale by means of a lottery (6) failing to provide copies of all signs documents to the signing parties (7) breaking fair housing laws
*When handling trust funds, what can result in suspension, revocation, or denial of a license under TRELA?
(1) commingling or converting funds (2) disbursing trust funds prior to closing or termination (3) failing to properly account for all trust funds (4) failing to keep trust funds in a Texas bank or title company
*What misrepresentations can result in suspension, revocation, or denial of a license under TRELA?
(1) failing to disclose a material fact or latent defect* (2) misrepresenting or making false promises (3) using deceptive practices (4) advertising in any form that is misleading - especially failing to identify an advertisement as being from a licensed broker or salesperson, the brokerage, name of the broker of record, or designated broker*
*When listing or attempting to list, what can result in suspension, revocation, or denial of a license under TRELA?
(1) failing to give a definite termination date in a listing contract (with the exception of a property management agreement)* (2) offering to sell or lease without the consent of the owner (includes placing signs or advertising the property) (3) advertising a listing that is not the brokerage firm or brokers (4) offering terms other than those authorized by the owner - includes sharing confidential information (5) attempting to solicit a seller of an active listing to terminate and list with the soliciting broker
*After receiving the broker's license, the licensee is qualified to do what?
(1) hire and supervise other licensees* (2) supervising licensees includes: - making sure all contract obligations are fully met - meeting all compliance and regulatory requirements - establishing office policy and compensation requirements
*Active brokers may choose to act as:
(1) managing/principal broker in charge of a brokerage firm (2) independent broker (3) broker associate under a principal broker (like a salesperson) (4) designated broker overseeing a team in a brokerage firm* (5) delegated licensee who manages one or more licensees for six months or longer
If TREC declines to issue a license, it:
(1) must immediately give written notice (2) allow an appeal by the applicant (3) issue a probationary license - issued when licensee does not meet all the criteria for a full active license
*What are the rules governing a trust account?
(1) must use a high level of accuracy and care* (2) are personally responsibly for the funds in the trust account (3) must have a record keeping system and retain all account records for 4 years*
*Explain the requirements for a salesperson license in Texas?
(1) no experience required (2) must be 18 years old - US citizen or legal alien - legal resident of Texas at time of filing - working under the supervision of a principal or sponsoring broker (3) Complete required salesperson education of 12 semester or 180 hours, which include:* - 4 semesters or 60 hours of principles of real estate - 2 semesters of 30 hours each of agency, contracts, contract forms and addenda, and real estate finance (4) Submit a written application and required fee to TREC - Salesperson Sponsorship Form - can be submitted before or after passing the exam, but an active license cannot be issued without a sponsoring broker* - Certifications showing completion of the required education - Fast Fingerprint Pass with fingerprinting (5) Receive TREC letter of eligibility to take the license exam - schedule to take the exam with the test provider - exam must be passed within one year of the date of filing the TREC application* (6) satisfy TREC as to the honest, trustworthiness, integrity, and competency of the applicant (information on the application, submitting fingerprints, an passing the licensing exam are considered proof)
Notice of the foreclosure sale must include:
(1) posting at the door of the courthouse in the county where the property is located and the sale is to be conducted (2) filing it at the office of the county clerk (3) sending it by certified mail to each debtor obligated to pay the debt
*In regards to advertising, what can cause disciplinary action to be taken against a licensee?
(1) publishes any advertisement that misleads or is likely to decide the public, tend to create a misleading impression, or failed to identify the advertising is from a licensed broker or salesperson*
*When pertaining to commissions, what can result in suspension, revocation, or denial of a license under TRELA?
(1) receiving compensation (commission or rebates) from a party to a transaction without consent of the other parties* (2) paying commission to unlicensed persons
*What failures to properly disclose can result in suspension, revocation, or denial of a license under TRELA?
(1) the brokerage relationship and whom the broker or salesperson represents* (2) acting as an undisclosed principal in the sale or purchase of real estate*
*What are the recovery maximums under the Recovery Trust Fund?
- $50,000 per transaction, regardless of number of claimants* - $100,000 total per licensee, regardless of number of claimants*
*Personal property may also be protected under homestead laws for a maximum of:
- $60,000 for family - $30,000 for a single person
*What is the homestead acreage limitation for urban primary residence?
- 10 acres of continuous tract of land for a family or single person
*What is the homestead acreage limitation for rural primary residence?
- 200 acres for a family - 100 acres for a single person
*If a loan is not redeemed, written notice of the sale must be given to the borrower at least how many days before the foreclosure sale date?
- 21 days
*What is the timeline for notifying a tenant before selling or disposing of the tenant's personal property?
- 30 days for personal - 60 days for commercial
*What is the composition of the Texas Real Estate Commission?
- 9 members: 6 brokers & 3 general public members - all are appointed by the governor, with the advice and consent of the state senate - staggered 6 year term - one broker member is designated by the governor as chairperson
*In Texas, a person who acts as a real estate licensee without an active real estate license is guilty of? - how can they be punished (two ways)?
- Class A misdemeanor - $4,000 fine and/or up to one year in jail* - court can charge a penalty of 1 to 3 times the total money received
*Are licensees with an inactive or expired license allowed to practice real estate?
- No - they are prohibited
*Can an unlicensed person received referral fees from a broker? What can the receive?
- No - merchandise gifts as long as it does not exceed $50 - can't give cash - does not include giving money to the principals to the transaction, even if they are unlicensed (typically seen as a negotiation or renegotiation of the broker's fees)
*Define TRELA and TREC and what is their purpose?
- Texas Real Estate License Act - law that governs all real estate licensees and sets the powers for Texas Real Estate Commission - purpose is to protect the public of the State of Texas*
If there are insufficient funds after a foreclosure sale, what could result?
- a deficiency judgement which must be filed by the lender within 2 years
*If after investigation, the Commission determines it is appropriate to deny, suspend, or revoke a person's license or certification, what is the licensee entitle to? and the details about it?
- a hearing conducted by the State Office of Administrative Hearings* - TREC has the power to subpoena witnesses and documents for the hearing and may file suit through the attorney general - failure to obey a court order may be punished by the court as contempt - appeals of the TREC decision may be made to a district court*
Explain a certificate of registration
- a person who receives compensation for selling, buying, transferring, or leasing rights-of-way in connection with telecommunication, utility, railroad, or pipeline companies can have a certification of registration from TREC instead of the active salesperson license - good for 2 years - no education or exam is required - can be revoked if any rules are broken
Where is earnest money typically deposited? Where can it be deposited? When must it be deposited?*
- a title company escrow account - may be in an identifiable trust/escrow account - no later than the end of the second business day after the effective date of the the contract (excludes holidays and weekends)
Explain what the Recovery Trust Account is
- account maintained by TREC with a million dollar minimum - purpose is to reimburse consumers who suffer damages caused by real estate licensees, certificate holders, or their employees - brokerage firms must display the Consumer Information Form 1-1 to inform public of the fund - account is funded by license fees
Who must a principal broker whose license is suspended notify? What if it is a salesperson whose license is suspended?
- all the firm's salespersons and parties to existing contracts - remit the escrow or trust money (if held by the broker) in accordance with instructions of the contract principals - they must notify the principal broker
If the contract specifies "as is", what is the licensee responsible for?
- an accurate description and disclosure of all material facts - as is only means that the seller will not fix anything before selling
In order waiver to be affective under DTPA, what must it have?
- be conspicuous, in boldface, and at least 10-point type in size - be identified by the heading Waiver of Consumer Rights - use the language prescribed by law
*Why are waivers not typically used in real estate practices?
- because real estate professionals are obligated to advise all consumers to seek legal counsel
*When is a foreclosure sale held in Texas? by who?
- between 10 am - 4pm on the first Tuesday of the month at the county courthouse - by the trustee
*Statutory Redemption period
- comes after the foreclosure sale - borrower must pay off the full principal plus all interest and fees to retain the title - Texas has no statutory redemption for deed of trust or mortgage foreclosures
*What happens to a licensee if payment is made from the Real Estate Recovery Trust Fund?
- commission may revoke a license or issue a probationary license* - renewal of a license or certificate will be held until repayment of the full amount plus interest is paid
*To renew a license after first 2 years, what must all licensees do?
- continuing education - salesperson's apprentice education (SAE) requirement for first renewal of two years after receiving the initial license* - a salesperson must provide TREC with evidence of completion of an additional 6 semesters or 90 hours of a cumulative total 18 semester or 270 hours pre and post license
Real estate brokers and salespeople cannot offer legal advice or advising which includes?
- how to take title to real property - validity of any documents, including contracts and deeds - marketability of title to real property
Deceptive or misleading advertising includes but is not limited to:
- inaccurate advertising or a material fact - misrepresenting any property, terms, values, services, or policies - failing to remove an advertisement about a listed property within a reasonable time after closing - failing to clearly disclose the permitted uses of the property
What are the duties and powers of TREC?
- make and enforce license rules and regulations - establish standards of conduct and ethics for licensees - administer and enforce the license law and levy civil fines - select commission administrator and employees - issue active an probationary licenses and collect money for licenses and renewals - conduct investigations (with 4 years of incident), hold hearings, issue injunctions - suspend or revoke a license, place on probation, or reprimand - order a licensee to pay a refund to a consumer - initiate a cease and desist action - inspect and accredit real estate educational programs - promulgate real estate contracts and addenda - enforce the Texas time-share act
*Explain what puffing is and the possible risks of doing it?
- making a statement anyone should understand as an exaggeration - typically not considered a violation or misrepresentation in other states - will not be allowed as a defense under the law - an unthinking consumer could take a statement as fact given that a licensee is a "professional with more knowledge"
*What is TREC not allowed to do?
- mediate or settle commission or other disputes between licensees or brokerage firms* - recommend individual licensees to the public* - send licensees to jail*
*Professional inspector
- most experienced home inspector and requires the most education - must pass a state license exam - may hire and supervise real estate or apprentice inspectors
*What is the timeline on a security deposit?
- must be returned or accounted for on or before the 30th day after the tenant surrenders the residential premises (60 days)
If a brokerage firm operates under an assumed name, what are the requirements?
- must file a certificate of assumed name with the county clerk in each county in which they conduct real estate
*Real Estate Inspector
- must have a combination of experience and education or meet all additional education requirements - must pass a state license exam - must be under indirect supervision of a professional inspector (doesn't physically have to be present)
How is the exam different for a broker?
- must pass with a 75% score - 10 additional state-specific questions
*Salesperson Sponsorship Form
- needed to have an active license - must be sponsored by a broker - can be submitted before or after passing the exam
*Apprentice Inspector
- no education or exam required - must work under direct supervision of a sponsoring professional inspector* - upon renewal of the license, will have to meet required experience an education requirements
Can a tenant assign or sublease without the landlord knowing?
- not unless it is stated in the lease
Short Sales
- occurs when a borrower is in default and instead of foreclosing, the lender allows the sale of the property - occurs when market value is less than the loan amount but lender realizes cost savings by not foreclosing TREC-promulgated Short Sale Addendum must be attached to the sale contract in Texas
*Who can salespeople receive compensation from?
- only the principal broker who sponsored them* - never from another broker or brokerage*
*Who is allowed to complete a real estate transaction or certain real estate activities without a license?
- person hired as a host or hostess at an open house - licensed auctioneer auctioning real estate - attorney licensed in Texas, with no requirement to be licensed to act as a broker - attorney-in-fact under power of attorney - person under a court order, will, or trust (e.g. trustees, executors, or administrators) - public officials while engaged in official duties - trustees selling foreclosed properties at auction - onsite managers of an apartment complex - transactions involving only mineral or mining interests - a new home sales employee selling for a new homebuilder
*What are the requirements for a brokerage firm?
- principal brokers must have a fixed office and obtain a branch office license for each additional brokerage office they maintain* - if change of address occurs then the principal broker must apply to TREC for anew license within 10 days*
*Community Property
- property acquired by either spouse during marriage that is not separate property - income from separate property is considered community property unless there is a signed agreement between the spouses - can only be conveyed or mortgaged with signed consent of both spouses (one to buy two to sell)
*What are the requirements to claim a homestead?
- property must be owned and occupied as the primary residence by the head of a family or single person* - no filing is required - to receive a homestead tax exemption to reduce property taxes, the owner must apply for the exemption with the county where the property is located*
*To file a court action to collect unpaid fees, brokers or salespeople must:
- prove they were licensed at the time the fees were due - have a written and signed listing or other agreement showing how the fees were to be paid and hen they would be owed
*Separate property
- real property acquired before marriage or* - property acquired during marriage by gift, devise, descent, personal injury lawsuit, or by written contract with the spouse* - can be mortgaged or conveyed by the owning spouse without the consent of the other
*Under DTPA, what claims/ damages can be rewarded?
- recover may include economic damages and an amount not to exceed treble (3 times) damages* - damages for mental anguish may be included if the conduct of the defendant was committed knowingly or with intention
What must corporations and other business entities (like limited partnership or llc) do?
- register with TREC and identify the name of the designated broker - file a certificate of assumed name with the secretary of state - file in the office of the county clerk of the county in which the registered office is located
*When a residential property has a new tenant, what must the landlord do? timeline?
- rekey locks at each tenant turnover* - time the old tenant moves out but no later than seven days after the new tenant moves in*
*After a hearing, what can the commissioners do?
- revoke, cancel, or suspend a license
*After the first renewal, what continuing education requirements apply?
- salespersons and brokers must complete a total of 15 hours in every two-year license renewal period* - 6 classroom hours of TREC-created courses which include 3 hours of legal update and 3 hours of ethics update* - 9 remaining hours may be completed in any TREC approved elective courses*
*Homestead - definition and properties
- statutory life estate that is owned and occupied as the primary residence - applies to single and married homeowners - protected from the forced sale of their residence by unpaid general creditors - both spouses must sign on conveyances and mortgages - terminated only through death, alienation, or abandonment - no limits on value - don't protect the owner from all creditors
*If a salespersons/ broker guarantees or promises future profit from resale of real estate, what can happen?
- suspension, revocation, or denial of a license under TRELA because it is a felony/ misdemeanor
When can a security deposit be retained?
- tenant leans no forwarding address - money is owed and not disputed by the tenant
*What initiates an investigation? *How are they prioritized?
- the Commission may initiate it on its own or in response to a signed written document - uses a risk-based approach to assign priorities - highest impact to the public first*
*Who do proceeds in excess of the mortgage indebtedness belong to?
- the defaulting borrower (this doesn't happen very often)
*Commingling
- the improper mixing of operating account funds with trust account funds
*If a salesperson leaves a brokerage firm or is terminated, what must occur?
- the principal broker must return the salesperson's license to TREC immediately* - salesperson must immediately notify the principal broker of intent to leave the firm - when a salesperson's license is returned, it becomes inactive but may be reactivated upon submitting a new principal broker sponsorship application and the required fee - the salesperson's license will become active under the new principal broker from the date the not was mailed or delivered to TREC
*Conversion
- the use of one party's funds for the benefit of another party - trust account may have a zero balance, but negative balance is conversion
*How are salespersons tracked?
- through their principal broker - broker is required to keep the commission informed of any changes of address
*Equitable Redemption period
- time before the sale when a borrower may stop the foreclosure by paying all back payments and fees - debtor must have 20 days before the foreclosure sale date is set
*What is the purpose of the Deceptive Trade Practices Act?
- to protect consumers from false, misleading, and deceptive business practices* - to provide procedures for compensation if the consumers can prove they were a victim (applies to any business even those outside of Texas)
*When a commission is received for a closing, who are fees paid to? then what happens?
- to the brokerage firm which then splits the fees with all employed brokers and salespersons
Why must a report be done by an appraiser?
- to value or appraise property for a federally related loan
Explain how the exam is set up for a salesperson:
- two portions: national (80 questions which you must get 56 correct) and state (30 questions which you must get 21 correct) - 150 minutes to pass national portion - 90 minutes to pass state-specific portion - salespersons must pass with 70% score - if you fail one portion of the exam, you only need to retake the failed portion - test-takers must have two forms of identification that match the TREC eligibility letter - one must have picture and be government issued*
How long until a real estate licenses expires?
- two years - expire on the date shown on the face of the license certificate (set from date license is issued)
*What is the statutory redemption period of property tax liens?
- two years for homestead - 6 months for non homestead properties
*What administrative penalties can TREC issue?
- up to $5,000 per day for each violation* - each day a violation continues, it may be considered a separate violation for purposes of imposing a penalty
*When do mechanic's and materialman's liens rights attach? What makes this valid?
- when the first labor and/or material is furnished - a contract with the owner
*What is the required education for a salesperson?
12 semesters of 180 hours of: - 4 semesters (60 hours) - principles of real estate - 2 semesters (30 hours) each of - agency, contracts, contract forms and addenda, and real estate finance
What is the statutory redemption period for HOA liens?
180 days
If a licensed broker is also the broker of record (principal broker), designated broker, or a broker or salesperson acting as a delegated licensee, then what is required?
6-hour Broker Responsibility Course, but any licensee is allowed to take the course
*Can a salesperson have a trust account?
No
*Can a security deposit be used to pay for the last month's rent?
No - must be applied to actual damages done by the tenant
*Can a Texas broker pay referral fees to a nonresident broker?
Yes; as long as the nonresident broker does not conduct any negotiations in Texas
*Can a nonresident broker receive a Texas license?
Yes; if the reside in a city contiguous to Texas - they must be careful to deposit trust funds and earnest money in a Texas bank though
*If the Recovery Trust Fund falls beneath 1 million dollars, what happens?
each licensee is assessed $10 or a pro rata share at the time of renewal to bring the trust account back up to $1.7 million
*What is the function, member make-up, term of the Broker-Lawyer Committee?
function: - draft and revise contract forms intended for use by licensees* - does not publish, promulgate, or approve, the forms; only TREC may promulgate real estate contract forms *member make-up: - 13 members - 6 brokers appointed by the Commission (expire every 2 years) - 6 lawyers appointed by the president of the State Bar of Texas (expire every 2 years) - 1 public member appointed by the governor (term expires every 6 years) -members serve staggered six-year terms
*What is the function, member make-up, term of the Education Standards Advisory Committee?
function: - reviews and revises education curriculum standards, course content requirements, and instructor certification requirements for all Texas real estate core and MCE courses *member make-up: - 12 members - 7 active licensees (salespeople or brokers with at least 5 years active real estate experience) - 4 education members who are TREC-approved real estate instructors or owners of approved real estate schools - 1 public member - no set terms
When can a licensee complete a contract form?
if it was: - promulgated by TREC - prepared by an attorney licensed in Texas - prepared by the property owner
*When must the license exam be passed in relation to the TREC application
one year
*What must a comparative market analysis include?
the statement: "this is a broker price option or comparative market analysis and should not be considered an appraisal" - or something along those lines
