1. PRESENTED
BY
Peggy
Santmyer

3. The purpose of the course is to address
the regulatory aspects of the
Management
Operation
Supervision
of a real estate brokerage business in
Texas

4. A working knowledge of
 The Law of Agency
 Planning and organization of business
entities
 Requirements for written policies &
procedures
 Records retention and control
 Advertising rules and
 The anatomy of a complaint filed with the
Texas Real Estate Commission

5.  The Texas Real Estate License Act is Chapter
1101 of the Texas Occupations Code
 The Texas legislature has empowered the
Real Estate Commission to enact Rules of the
Commission which describe how they intend
to enforce the license act.
 A violation of the Rules is subject to the same
sanctions as a violation of the license act.

6. Section 535.2 of the TREC Rules require the
following to take the 6 hour course as a part
of their 15 hour MCE
 A broker that sponsors salespersons
 A designated broker of a business entity
 A licensee that is the delegated supervisor of
one or more licensees for 6 months of more
during the current license term
 Licensees and employees required by the
sponsoring broker to take the course

7.  Buying, Selling or Leasing Real Estate for
another with the expectation of receiving
something of value constitutes the practice of
brokerage under the Texas Occupations Code
1101.652(a).
 Acting for the licensees own account does
not fall under the definition of brokerage.

8.  Individual
 Partnership
 Corporation
 LLC
 Any other legal entity

9.  Sells, exchanges, leases, purchases real
estate for another
 Offers or negotiates any of the above
 Deals in options on real estate
 Aids, offers or attempts to locate properties
or purchasers for any of the above
 Controls the deposit of rent on a single family
residential unit
 Provides opinions of value in the ordinary
course of business

10.  An individual with an active Texas
Broker’s License designated by a
business entity (licensed by TREC) to act
on the entities behalf.
 Must be an officer of a
corporation, manager of an LLC or
general partner of a partnership
 NOTE: If the DO does not own at least
10% of the entity, the entity will be
required to have E&O insurance.

11.  A person who is associated with a
licensed broker for the purpose of
performing real estate brokerage

13.  Residential or Commercial Sales
 Residential or Commercial Leasing and
Property Management, International Selling
 Sale or rental or coastal area property
 Sale or rental of farm and ranch property
 Sale or rental of condos and townhouses
 Sale of vacant land, Short Sales, Foreclosures
 …. Just to name a few

14.  Can any salesperson be
knowledgeable enough to work in all
of those various fields??
 Can any sponsoring broker be
knowledgeable enough to train and
monitor agents in all of those fields??

15. Does Broker liability increase when
their sponsored licensees attempt
to work in areas of the real estate
business that they are not trained
or experienced in???

16. How many real estate specialties
can the average broker have the
knowledge & experience to train
and monitor agents??
Is it risky for a broker to authorize
their agents to do things the
broker has no knowledge about?

17.  A broker is required to advise a sponsored
sales person on the scope of their authorized
activities. Trec Rules 535.2a
 The broker is responsible for the authorized
activities of their agents
 If the broker permits the salesperson to
conduct activities beyond the authorized
scope the broker is responsible to those
activities too.

18.  A sponsoring broker should create
competency standards required before a
supervised licensee can enter into specific
real estate specialties.
 The standards can be in the office
manual, the independent contractor
agreement, etc
 The standards might include education or
experience in the various specialties.

19.  Is a new licensee capable of selling a
downtown high rise office building?
 Do new licensees need assistance with
completing contract forms?
 Does a licensee need to know about the
Landlord/Tenant laws before offering
property management?
 Should licensees selling Farm and Ranch
property be aware of mineral rights and cash
crops?

20. A broker :
 must have written policies to ensure
the competency of their salespeople
within the scope of their practice.
 must ascertain that the licensees are
receiving the necessary education to
perform the duties of their authorized
activities.

21.  Sponsoring Brokers may find it
prudent to require a background
check of all employees of the broker
and all employees of the licensees that
have access to the office and the files.
 A broker may want to consult with an
attorney regarding the
implementation of such a policy.

22.  Thereare no regulations
regarding recruiting licensees
from other sponsoring brokers.

23.  A salesperson represented a buyer in the
purchase of a condominium. The buyer told
the salesperson they could not afford more
that $200 a month for association fees.
 Condo documents were delivered late and
showed fees of $323 a month and no one
noticed
 Salesman did not review the HUD and still no
one noticed the $323 monthly fees.
 Continued….

24.  The sponsoring broker was the respondent in
a TREC complaint
 The broker was found guilty of having failed
to monitor and supervise the sales agent
 The broker was not aware that the
transaction involved a condominium or that
the salesperson was inexperienced in
handling condominium transactions
 The broker agreed to a reprimand and paid
an administrative fee of $1,000.00.

26.  The Law of Agency and the Texas Real
Estate License Act govern the relationships
between clients and brokers.
 Agency relationships can be created in
various ways by written or verbal authority.
 Broker compensation can come from the
brokers principal, the other principal in the
transaction or the other principals broker as
long as all parties are aware and agree.

27.  The relationship requires the consent
of both parties to establish.
 The consent can happen in writing or
orally or by action of the parties.
 Confidential information
obtained, even in pursuit of an agency
relationship, may obligate the broker
to keep confidential information
confidential forever

28.  Agency by Actual Authority
 Agency by Ostensible
Authority
 Agency by Ratification

29.  Created by an express written or oral
contract between the parties.
 The contract can obtain some express
authority plus it includes some implied
authority
 Implied authority is the right to perform
certain acts on behalf of the principal even
though the acts have not been specified in
the contract. ie:
marketing, advertising, placing signs, etc.

30.  Agency by Ostensible Authority is
formed when the principal causes
a third party to believe someone
is their agent even though a
contract does not exist

31.  Agency by Ratification is also
known as Agency After the Fact.
It happens when the principal
allows the agent to act, even
though the agent is not
authorized, and the principal
benefits from the agents actions.

32.  Real estate licensees are sometimes sued by
parties in a transaction for the following
alleged liability for:
 Misrepresentation
 Breach of contract
 Negligence
 Slandering title
 Fraud
 Expression of an opinion

33. General Agency
 An ongoing relationship
 Many transactions
 Broker to Agents
 Property Managers
Special Agency
A one time transaction
 Broker to Sales Clients

34.  The relationship between a broker and their
sales-agents is general agency. It is on going.
 The principal (Broker) is always responsible for
the acts of the agent that is working within the
scope of their authorized duties.
 General agency comes with a wide range of
authority. For example an agent can sign a
Listing Agreement and bind the broker.
 If the agent makes a misrepresentation the
broker is liable.
 Note: Property Management Transactions are
usually general agency. Broker can bind
principal.

35.  The relationship between the broker and the
sales client is usually special agency. It is for
one transaction.
 The agent does not have the authority to bind
the client under special agency or to sign
anything for the client.
 In special agency the principal/client has very
little control over the agent. Therefore any
misrepresentation or other wrongful acts by
the broker (or their agents) will result in the
broker being liable rather than the client.

36. Special Agency General Agency
Broker Can Not Bind Client Sales-Agent Can Bind
One Time Transaction Broker
Property Manager
Broker can Bind Owner
On Going Transactions

37. The agent (broker) acts as a fiduciary
for the client. The agent owes the
client:
 Trust
 Honesty business dealings
 Confidentiality
The agent must not do anything that is
not in the clients best interest.

38.  The license act gives any licensee or not for
profit real estate board the right to use
information regarding sales prices or terms
for the purpose of
facilitating, selling, leasing, financing or
appraising real property.
 This right exist even if there is a
confidentiality clause in the contract, unless
the disclosure is specifically prohibited by
statute. Tx Occ Code 1101.804

39. A person with Aids or HIV illness
is handicapped according to the
Fair Housing Laws.
 Section 1101.556 of the License
Act provides that real estate
licensees have no duty to inquire
or disclose anything regarding
Aids or HIV illness.

40.  Under the license act a licensee does
not have to disclose death in a
property because of natural
causes, suicide or accident unrelated
to the property.
 Nothing in the law address disclosure
in the event of murder, accident
related to the property or unnatural
causes.

41.  Section 62.056(e) of the Code
of Criminal Procedure says
that the licensee has no duty
to disclose registered sex
offenders.
 Parties can research on the
data base.

42.  Performance
 Loyalty
 Reasonable Care
 Accounting for All Monies

43.  The Broker, as the agent, will use their
best efforts and diligence to market
the property according to the
principals instructions.
 Obtain the best price available for the
principal.
 Corresponding duties apply to buyers
agents, tenant representatives or
landlords’ agents.

44.  The Broker (and all of the brokers sales
agents) owe the principal 100% loyalty.
 When one Broker represents both the Buyer
and the Seller in one transaction, the conflict
is resolved by the intermediary relationship
as defined by the act. It is important to
follow the procedures defined in the act.
 Loyalty also means the agent will not advance
the agents’ interest to the detriment of the
principal. This is the essence of the fiduciary
responsibility of the agent.

45.  The duty of loyalty includes the agents full
disclosure to the principal.
 TREC Rules require that the licensee
disclose all known information that may
affect the principals decision to accept or
reject offers and keep the principal
informed of all significant information.
 A broker that puts their own interest above
that of the client may face breach of
fiduciary duties allegations.

46.  A broker must ascertain a seller knows
about any appreciation in value before
agreeing to sell the property.
 If a broker has more than a 10% interest in
the entity purchasing the property it must
be disclosed to the seller
 A broker working on behalf of his
spouse, parent or child must be disclosed.
TREC Rules 535.144 (b)

47.  Protecting the principal from harm requires
the brokers’ competence and expertise.
 The broker must avoid any fraud or
misrepresentation that would prevent the
principal from making sound decisions
 Standards of conduct concerning
reasonable care can be found in the act, in
the TREC Rules and in customary practice
within the industry.

48.  Any money collected for a principal must be
promptly remitted or delivered into an escrow
account.
 Money belonging to principals my never be
commingled with the brokers’ funds. Tx. Occ.
Code 1101.652 (b) (10) and (11)
 A broker or salesperson may never accept an
undisclosed rebate, commission or profit on
expenditures. Tx. Occ. Code 1101.652 (b)
(13)

49.  Performance
 Compensation
 Reimbursement
 Indemnification

50. The principal is expected to
do what ever is necessary to
accomplish the purpose of
the agency.

51.  Normally compensation is agreed to in
the Listing Agreement, Buyers’
Representation Agreement, etc.
 Compensation is earned when the
agent produces a ready, willing and
able buyer.
 Compensation is usually payable when
the transaction closes.

52.  The principal owes the agent
reimbursement for expenses made on
behalf of the principal.
 Would include minor repairs made to
protect the property for an absentee
owner
 Does not include cost of doing
business such as
marketing, advertising, etc.

53.  The duty arises when the agent, due
to no fault of their own, suffers a loss
while performing duties on behalf of a
principal
 For example if the owner
misrepresents the condition of the
property to the agent causing the
agent to make a misrepresentation to
a third party, the agent may be
entitled to reimbursement for losses.

54.  The duty of fidelity is owed to the
principal, however a duty of fairness and
honestly is owed to third parties in the
transaction.
 All parties are entitled to complete
disclosure regarding the property. Tx. Occ.
Code 1101.652 (b) (3) and (4)
 All parties are entitled to know who the
broker is representing. Tx. Occ. Code
1101.652 (b) (7)
 Continued….

55. A broker that represents a buyer may do so
under a written or oral agreement.
Note: Intermediary transactions require written
permission from both parties
A broker can represent a buyer and be paid
by the seller or the seller’s agent, paid by
the buyer or paid by both.
 All commission must be disclosed to the
principal.

56.  A broker is obligated to advise all parties to
have the abstract examined Tx. Occ. Code
1101.652 (b) (29)
 If a broker or agent receives a request for a
copy of a document by a person that signed
the document, the licensee is obligated to
return the document. Tx. Occ. Code
1101.652 (b) (28)
 All licensees when engaging in real estate
on their own behalf are obligated to inform
anyone in the transaction they are licensed
and shall not use their expertise to the
disadvantage of any party. TREC Rules
535.144.

57.  Fees for services provided
 Works well for buyers and sellers that
want to do part of the research, etc
 Rebates to buyers do not violate the
act

58. A broker who represents a party
must:
Inform their client of material
information including offers on
the property
Present offers to the client
Help the client negotiate the offer

59.  The law states that a broker that represents
both the buyer or tenant and the owner or
landlord in a transaction must act as an
intermediary under the rules in the license
act
 No dual agency in Texas
 Both parties must agree to allow the broker
to be an intermediary. The listing
agreement and the Buyer/ Tenant
representation agreement are the usual way
permission is given.

60.  If the Listing Agreement and
Buyer/Tenant Agreement give the
Broker the right to appoint two
different agents to assist the two
different parties the Broker may do so.
 The parties must accept the
appointments in writing. TAR Notice
of Intermediary works well.

61. Much more complicated transactions
than a sales transaction.
Brokers contract with vendors for
service to maintain or repair the
properties. Vendors expect to be paid
If the agent works within the scope of
their authority and the vendor knows
who the owner is, the agent is
normally not liable for the debt.
Continued…………

62.  If a vendor relied on the fact he believed the
agent was acting under authority from the
principal/owner the principal may still be
liable to the vendor under apparent
representation however
 If the agent was acting outside their scope
of authority the owner may have a cause of
action against the agent
 If the vendor never knows the identity of
the owner, the agent will probably be liable
to the vendor for payment.
continued…..

63.  Can be by an agreement of the parties
 Can be by one party if it is for just cause
Either party may be exposed to legal
liability if they default under the contract
 Can be an operation of law
◦ Death or insanity of the principal or the
agent
◦ A change in the law making the
transaction illegal
◦ Expiration of the agreement

64.  Improper creation of agency was a part of
several TREC hearings last year.
 Buyer ask agent to prepare an offer on an in
house listing. Buyer had not signed a Buyers
Rep.
 Agent had buyer sign IABS and TAR Notice of
Intermediary but no Buyers Rep.
 There was an amendment to the contract
later with an additional $12,000 earnest
money and some ambiguous language.
 Continued…..

65. The salesperson was found guilty of
failing to establish a proper
intermediary relationship and failing
to instruct purchaser they should seek
legal advise before signing the
amendment.
Agent agreed to:
 $2500 administrative penalty
 Reprimand

67.  Many Licensees like to work under
legal entities for liability
protection and for tax purposes.
 The choice should be made only
after consultation with both legal
and tax consultants.

68.  If an entity is to receive real estate
commissions the entity must be licensed by
TREC.
 The entity must designate an individual
broker to be responsible for the actions of
the entity as a licensee.
 The designated broker must be
An officer of the corporation
A manager of the limited liability company or
A general partner of the partnership

69.  If the designated officer owns less
than 10% of the entity the entity
must obtain and maintain errors and
omissions insurance in the amount
of $1million.
 Legal entities(including individuals)
can do business under an Assumed
Name. Must file the assumed name
with TREC. Can use the TREC dba
form.

70.  Corporations
 Partnerships
General Partnership
Limited Partnership
 Limited Liability Companies

71.  Chartered by the State of Texas
 Owned by shareholders
 Operated by officers
 Structured by bylaws
 S Corp pays no tax at the Corporate
Level
 C Corp pays tax at both the
Corporate and individual level

72. General partnership
 All partners have liability for the debts of the
partnership
 A written agreement is recommended but not
required.
Limited partnership
 Filed with the Secretary of State
 LP or LLP after it’s name
 The partners have a Partnership Agreement
 Must have a General Partner that accepts liability

73.  Articles of incorporation are filed with
the Secretary of State
 Limited liability for the members
 Taxes passed through to the members
 No requirement for a general partner
 An individual broker who is a manager
is needed for the LLC to get a real
estate license

75.  Section 532.2 of the TREC Rules require
brokers to maintain written policies and
procedures addressing:
 The relationship between the broker and the
agents
 Competency of agents
 Compensation issues
 Maintenance of trust accounts and business
records

76.  A contract between the broker and the
insurance company
 Policies need to be scrutinized to
determine exclusions and other
coverage issues
 Most E&O policies require timely and
complete disclosure of any potential
claim

77.  Brokers need to address:
 Broker/agent safety
 Client safety
 Cell phone use
 Computer use
 Checklist for office personnel
 Listing and contract files
 Copyright and license obligations
 Other risk management issues broker thinks
is needed

78.  It is a crime for an unlicensed person to
engage in any activity that requires a real
estate license.
 The licensee that employs the unlicensed
person can be charged with a crime and
penalized by TREC
 Real estate brokerage activities must be for
another person or entity and done with the
expectation of receiving something of value

79.  Part of the license act says that assisting to
find buyers, sellers or properties requires a
license. No telemarketing
 Can sit on an open house as host/hostess but
must take care not to “show the property”
 Can set up appointments for the licensee
 Can open the property (not show the
property), put up signs, write ads,etc
 Must identify themselves as “unlicensed”
continued……

80.  Unlicensed assistants must refer all
questions about the property to the
licensee
 Unlicensed persons can train, motivate
licensees but can not assist with any
real estate activity to buy, sell or lease
property.
 Cannot review contracts
 May not direct or supervise agents
 A person who controls the collection of
rent on a single family residence must
have a real estate license

81.  Single family residence is a single family
home, condo, townhouse.
 Does not include a duplex, triplex, 4 plex
unless a single unit is what is owned
 One who controls rent is someone that
a. Has the authority to use the rent
money for management of the property
b. Has the right to deposit the rent
checks or withdraw money from that
account

82.  Make sure all licensees keep their license
active.
 Determine the extent to which unlicensed
assistants are being ask to do activities that
may require a real estate license according
to TREC Rules
 Establish written rules describing for agents
and unlicensed assistants what the
unlicensed person can and cannot do.

83.  TREC Rules say that the broker or
salesperson may not place an ad that
in any way indicates someone other
than the broker is responsible for
operation of the brokerage.
All advertising must contain the name
of the broker (may be an individual
name, entity name or assumed name
registered with TREC)
` continued…..

84.  Ifthe assumed name or the corporate name
of the Broker contains the name of a
salesperson, the ad must also contain either
(a) The individual name of the designated
officer or
(b) Another assumed name of the broker
 Groups and Teams that contain the name of
a salesperson must also advertise including
the name of the broker
 If a corporate name includes the name of a
salesperson the D.O. name must also be
included in any advertising

85.  If a Broker Associate sponsors sales
agents, does the company E&O cover them?
 How will the Team or Group be
compensated?
 Are all the assumed names registered with
TREC?
 Is the brokerage name included in all
advertising?

86.  Good marketing opportunities but include
risk such as defamation or copyright
infringement
 If broker is unsure of a statement he/she can
list it as an opinion. Once on the web it is
there forever.
 If others comment on a brokers blog or
website the broker should make a disclaimer
that some of the comments are from others
and give contact information to have
comments removed.

87.  A false statement made to others either in
writing (libel) or spoken (slander) that harms
another’s reputation.
 If a licensee is a victim of defamation he/she
should ask the publisher to remove the
statement or ask for a retraction.
 If a licensee is harmed and has evidence of
the defamation they may have the right to
sue for damages
 Licensees must be cautious about making
false statements about others.

88.  When a broker becomes incapacitated by
illness or dies suddenly the entire company is
put on inactive status until they are able to
locate a new broker.
 If the sponsoring broker is a legal entity the
entity must find a new D.O. to continue
operations.
 If the sponsoring broker is an individual the
agents each must find to new broker to
continue their business. Continued…..

89.  A written policy addressing what
happens in emergency situations may
help alleviate client concerns and help
the firm meet regulatory requirements
and continue operations.

90.  Property management issues were the
origination of many TREC complaints in
2011.
 Many of the complaints included:
*Inadequate supervision by the
broker.
*Lack of knowledge the agent was
doing property management.
*Improper record keeping.
continued…..

91.  Salesperson entered into a property
management agreement with an owner
 Tenant sent rent to salespersons home and she
deposited into her checking account and did
not send the owner what was due
 Owner contacted broker and broker
immediately paid the owner the amount due.
 The broker had a written policy forbidding
agents from doing property management.
Broker had no knowledge of the property
management agreement.
Continued….

92.  Salesperson claimed her former broker
allowed her to manage properties
unsupervised and that she did not know it
was not acceptable.
 She paid the owner all funds due and
ceased all property management activity
 She agreed to a one year suspension of her
license probated for one year, additional
education and a $2400 administrative fee.

94.  Brokers must retain “executed” copies
of all transaction files (closed or
terminated) for at least 4 years.
 Files can be kept electronically but
broker must be able to reproduce
and/or transmit as requested.

95.  A broker is required to advise a salesperson
of the scope of the salespersons authorized
activities under the Act.
 A broker is responsible for the authorized
acts of their sponsored sales agents.
 If the broker allows the sales agent to do
things outside of the authorized activity, the
broker is also responsible for those acts
 Authorized acts can be included in the
independent contractor agreement and
reviewed periodically.

96.  Supervision of sponsored agents is a
broker responsibility.
 Broker may delegate, in writing, other
licensees to assist in administering
compliance with the Act and the Rules.

97.  Brokers must maintain all of the above
records in addition to the following for at
least four years from the closing or
termination of the contract:
 Disclosures
 Commission Agreements
 Work Files
 Contracts and Related Addenda
 Receipts and Disbursements Related to the
File continued…..

98.  Property Management Contracts
 USPAP documents for appraisals
 Sponsorship Agreements with the Sales Agent
 Brokers Must Also Maintain Written
Policies and Procedures to Ensure That:
 Sales agents maintain current licenses
 Sales agents receive all money for services
subject to the Act through or with the written
consent of the sponsoring broker.
 Sales Agents receive notice in advance of any
changes in the Act, Rules, Contracts continued..

99.  That in addition to required MCE
classes each sales agent receives
additional training to remain
competent in their authorized
activities.
 Sales agents advertising complies
with TREC Rules
 All trust accounts and any consumer
money is handled with appropriate
controls by the broker.

100.  Secure executed copies of all documents in
a transaction
 Devise a filing system making files easy to
find
 Keep duplicate disk if hard copies are
shredded
 Be able to convert and/or transmit to TREC
if requested
 Be able to separate transaction files from
other files at the end of four years
Continued….

101.  Have a written policy regarding having
protected access to files, both in office
and out of office.
 IRS records must be maintained for 7
years.
 Independent Contractor Agreements
must be maintained between the sales
agents and the broker.
 Confidentiality of personal information
does not have an expiration date.

103. Brokers must assure that sponsored agents
comply with TREC Rules regarding
advertising. Brokers need a policy to
demonstrate compliance. Policies might
include:
 How and by whom sales peoples advertising
is reviewed
 How sales people are educated regarding
advertising rules
 How corrections to advertising are
documented

104.  Section 1101.652b provide that a
licensee may not:
 Publish an advertisement that
misleads the public
 Publish an ad that does not identify
themselves as a broker or agent
 Offer to sell or lease without the
knowledge and consent of the owner
or the owner’s agent
Continued….

105.  Offer property on terms other that
those authorized by the owner or the
owner’s agent
 Make misrepresentations or false
promises
 Place a sign on a property without
permission of the owner or the
owner’s agent

106.  If an advertisement promotes a service
provider and the licensee expects
compensation, a disclosure that the
licensee may receive compensation is
required.
 Advertisers may not rank service
providers unless the ranking is based
on disclosed objective criteria.

107. Alicensee may not
advertise they provide TREC
approved classes unless
approved to offer such
courses.

108. TREC Rules 535.154 provides the following
information:
 Definitions of advertisements:
◦ Publications, stationery, business cards
◦ Signs and billboards
◦ Radio, television and electronic media
◦ Internet, e-mail, social media, networking
websites
Does not include:
Correspondence from licensee to client
Information in a virtual office

109.  Each page of a website is an
advertisement and must include the
required disclosure.
 Advertisements by e-mail, discussion
groups, text messages and social
networking must include the
disclosures.
 If space is limited the ad can contain a
link to “TREC Disclosures”

110. A licensee may not place advertising that:
 Implies the salesperson is responsible
for the brokerage business
 Causes someone to think someone not
licensed is engaged in brokerage.
 Is inaccurate in a material way
 Advertising another broker’s listing
without permission. Not including the
listing broker’s name in the ad
Continued…..

111.  Place an ad that indentifies a
salesperson as a broker
 Fail to remove advertising when
property is no longer available
 Place an ad the create confusion about
the use of the property
 Use a copywrited trade name without
authority to do so.

112.  All advertising must clearly and
conspicuously contain the broker’s name
(entity name or individual name)
 An assumed name , registered with TREC, is
the broker’s name and can be use in
advertising.
 All assumed names used in advertising must
be registered with TREC
 If the assumed name contains the name of a
salesman, the ad must include another
assumed name of the broker or the broker’s
actual name.

113.  TREC must be notified within 30 days
of a broker starting or stopping the
use of an assumed name
 Road signs must identify the
advertiser as a broker or agent
 If the broker’s name in the ad is at
least 50% as large as the largest other
contact information in the ad, it will
be considered a safe harbor.

114.  Any ad offering rebates must
disclose the terms of the rebate.

115.  TREC Complaint against a salesperson who
advertised on Craig’s List with 24 ads.
 Failed to identify the broker.
 Offered properties no longer available
 Failed to identify the respondent as an agent.
 Offered unauthorized rebates
 Ads contained conflicting information
 Result = $4800 administrative penalty

117.  Was created to provide financial stability to
the United States by improving transparency
and accountability.
 It targets financial reform and ultimately has
an affect on real estate.

118.  Created in 1974 to help consumers shop for
settlement services and eliminate kick backs.
 Section 8 of RESPA prohibits service providers
from paying or giving anything of value for
referrals of business.
 Service providers may pay brokers for actual
services rendered.
 Service providers must be cautious of paying
for anything for real estate agents. They can
purchase advertising from agents at open
houses, in news letters,etc.

119.  Requires the lender to furnish the buyer
with a Good Faith Estimate of Closing Cost
within 3 days of application and a booklet
explaining their cost.
 The buyer has the right to examine the HUD
closing statement one day prior to closing
and the HUD statement compares the Good
Faith Estimate with the actual closing cost .

120. Disclosure is required when a settlement service
provider refers the consumer to a provider with
whom the referring party has an ownership or
other beneficial interest.
The referring party must give the disclosure at or
prior to the time of referral. The disclosure must
describe the business arrangement that exists
between the 2 providers and give the borrower an
estimate of the second provider’s charges.
The referring party may not require the consumer to
use the affiliated provider (some exceptions)

121.  Section 9 of RESPA prohibits sellers from
making the buyer purchase the Title
Insurance from a particular title company as a
condition of the sale.
 The TREC Legal Update says that the decision
of which title company to use must be left to
a decision of the parties.

122.  Under TREC Rules §535.148 a licensee may
not receive compensation from someone
other than the person whom the client
represents unless the licensee discloses to
the client that the licensee will receive the
compensation and obtains the client’s
consent.
 This does not apply to referral fees between
licensees.

123.  A licensee may not enter into a
contract with a service provider to
provide services on behalf of the
service provider in a transaction if the
contract is exclusive (prohibits the
licensee from offering similar services
on behalf of other service providers).

124.  A licensee may not accept compensation from
a service provider ifthe compensation is
contingent on a party in the transaction
purchasing a contract or service from the
service provider.
 A licensee must use Form RSC-1, Disclosure of
Relationship with Residential Service
Company, if the licensee (or the brokerage
firm) will receive compensation from the
residential service company.
 The compensation to the broker or salesperson
may be in any form, whether a one-time
payment or a periodic payment under a
contract between the broker and the residential
service company.

125.  A broker should maintain a policy related to
transactions in which a licensee is involved in
buying or selling his or her own property.
Items to consider:
 E&O coverage on such transactions
 How such property is advertised,
 Disclosure of the license status in or
contemporaneous with the contract,
 Whether the licensee must be represented by
another licensee in the firm when listing
property owned by the licensee.

126. Licensees Buying or Selling Their
Own Property, TX. Occ. Code
1101.652(a)(3) & TREC Rules
§535.144
A broker should maintain a policy
related to transactions in which a
licensee is involved in buying or
selling his or her own property.
continued

127. The policy should consider:
 Does the Brokers’ E& O Policy cover
the transaction?
 how such property is advertised,
 disclosure of the license status in or
 contemporaneous with the contract,
 whether the licensee must be
represented by another licensee in the
firm

128.  All monies held by a broker must be in a
trust account of the broker.
 Trust Accounts must be in the name of
the broker and identified as a trust
account.
 Trust Accounts may be interest bearing
and broker may retain the interest with
clients permission.
continued

129.  Property managers must have at least
one trust account
 The broker must be able to give an
accounting of any money held in
escrow
 Keep all records up to date.

130.  Supervising Licensees have an obligation to
be available to the sponsored
agents, client, customers during normal
business hours.
 Licensees need to be reminded of the duty to
be fair to all parties in a transaction.
 Licensees must keep clients informed of any
significant information that would alter the
desire to buy, sell or lease property.

131.  Covered by several state and federal laws if
they contain solicitation or advertisements.
 If a broker is using this type of marketing
need to be aware of and educated about the
statutes.