LAW OF AGENCY
INSTRUCTOR: SAM YOUNG
Chapter 1 – Agency Concepts

PG 9: Agency Relationship
o An agency relationship exists when one person, the agent, acts for or on behalf of another person, the principal,
who is also known as the client.
o This relationship is a fiduciary relationship, meaning that it is a relationship based on trust. While treating all
others honestly, the agent places the interests of the principal or client first. The agent must always remain loyal
to the principal
o AGENCY IS A RELATIONSHIP WHERE THE AGENT ACTS ON BEHALF OF THE CLIENT A FIDUCIARY RELATIONSHIP

PG 10: What is TRELA
o The Texas Real Estate License Act (TRELA) was passed in 1939. The Texas Real Estate Commission was created
to enforce and administer the act in 1949. The purpose of the act is to protect the public against unscrupulous
brokers and sales agents. Since it went into effect, it has been unlawful for anyone to “act in the capacity of,
engage in the business of, or advertise or hold himself out as engaging in or conducting the business of a real
estate broker or a real estate sales agent within this state without first obtaining a real estate license from the
Texas Real Estate Commission.” It is also unlawful for an individual licensed as a sales agent to engage in the
business unless he or she is associated with a licensed broker.

Broker Relationships
o A broker works for a client.
o A broker works with a customer.

THE INITIAL RELATIONSHIP WE HAVE WITH ALL POTENTIAL BUYERS AND SELLERS IS A CUSTOMER, AND THAT
DETERMINES THE LEVEL OF SERVICE THAT CAN BE PROVIDED TO THEM
EVERYONE IS A CUSTOMER UNTIL THEY ENER INTO AN AGENCY RELATIONSHIP WITH THE BROKER
o SELLER BECOMES A CLIENT WITH A LISTING AGREEMENT
o BUYER BECOMES A CLIENT WITH A BUYER REPRESENTATION AGREEMENT

COOPERATIVE BROKER = A BROKER SELLS THE LISTING OF ANOTHER BROKER.
o THEY ARE ALSO KNOWN AS THE OTHER BROKER IN THE TRANSACTION AND ARE WORKING WITH THE BUYER
CUSTOMER OR A BUYER CLIENT

PG 18: DUTIES OF PRINCIPALS (CLIENT) TO THEIR AGENT:
REMEMBER: CRIP
o COMPENSATION
o REIMBURSEMENT
o INDEMNIFICATION
o PERFORMANCE
REIMBURSEMENT MEANS THE AGENT SHOULD BE REIMBURSED BY THE PRINCIPAL FOR EXPENSES THEY HAVE
INCURRED ON BEHALF OF THE PRINCIPAL. TO BE SURE YOU ARE GOING TO BE REIMBURSED, GET AUTHORIZATION
FROM THE PRINCIPAL TO INCUR THE EXPENSE FOR THEM FIRST BEFORE ACTUALLY DOING SOMETHING. THESE ARE
DUTIES ABOVE AND BEYOND NORMAL MARKETING EXPENSES, ETC., SUCH AS HAVING THE LAWN MOVED OR GETTING
THE HOUSE CLEANED


INDEMNIFICATION STATES THE PRINCIPAL WILL PROTECT THE AGENT FROM DAMAGES OF LOSS DUE TO THE AGENT’S
RELIANCE ON INFORMATION RECEIVED FROM THE PRINCIPAL
STATE EXAM – YOU WILL NEED TO KNOW A LOT OF THE ASPECTS OF THE REAL ESTATE LICENSE ACT, AND TREC’S
AUTHORITY, THAT IS MENTIONED ON PAGES 10 – 15.
STATE EXAM – KNOW THAT A BROKER WORKS FOR AND ON BEHALF OF THE CLIENT, BUT THEY ONLY WORK WITH
CUSTOMERS.
STATE EXAM – KNOW THE DIFFERENCE BETWEEN PUBLIC RESPONSIBILITIES AND FIDUCIARY RESPONSIBILITIES ON PG
18
Chapter 2 – Agency Relationships

AGENCY BY ESTOPPEL
o IS CREATED WHEN THE AGENT IS NOT BEING PROPERLY SUPERVISED BY THE PRINCIPAL AND THE AGENT
TAKES ON POWERS OR AUTHORITY THAT THEY DO NOT HAVE. YOU SHOULD NEVER DO THIS BECAUSE IT
CAN RESULT IN COMPLICATIONS.

A WRITTEN LISTING AGREEMENT OR BUYER REPRESENTATION AGREEMENT IS EVIDENCE THAT THE AGENCY
RELATIONSHIP EXISTS AND PROVIDES THE AGENT WITH EXPRESS AUTHORITY.

PG 26 EXPRESS AUTHORITY
o COMES FROM THE WRITTEN LISTING AGREEMENT AND THE WRITTEN BUYER REPRESENTATION AGREEMENT. IT
IS ACTUAL BECAUSE IT IS STATED IN THE AGREEMENT.

PG 26 IMPLIED AUTHORITY
o COMES FROM WHAT IS TYPICAL OR NORMAL FOR THE MARKET AREA YOU DEAL WITH, SUCH AS WHEN YOU
CAN SCHEDULE APPOINTMENTS, ETC

IN THE RESTATEMENT OF AGENCY
o “FIDUCIARIES ARE HELD TO THE HIGHEST AMOUNT OF GOOD FAITH, REQUIRED TO EXCLUDE ALL SELFISH
INTEREST, CANNOT PUT THEMSELVES IN POSITIONS WHERE REPRESENTATIVE INTEREST AND PERSONAL
INTEREST WILL BE IN CONFLICT, AND MUST DISCLOSE ALL RELEVANT FACTS TO THE PRINCIPAL AND GIVE THEM
THE OPPORTUNITY TO OBTAIN OUTSIDE INDEPENDENT ADVICE”

CLASSIFICATIONS OF AGENCY
o UNIVERSAL AGENCY - IS CREATED WITH A POWER OF ATTORNEY AND GIVES THE AGENT THE BROADEST RANGE
OF AUTHORITY.
o
GENERAL AGENCY GIVES THE AGENT THE AUTHORITY TO REPRESENT THE PRINCIPAL IN A PARTICULAR TYPE OF
TRANSACTION OR BUSINESS. PROPERTY MANAGERS AND AGENTS WORKING FOR THEIR SPONSORING BROKER
WILL BOTH BE GENERAL AGENTS
 A COMMON EXAMPLE OF A GENERAL AGENT IS A PROPERTY MANAGER.
o
SPECIAL AGENCY IS THE MOST LIMITED TYPE OF AGENCY, HAS THE LEAST AMOUNT OF AUTHORITY, AND IS
CREATED WHEN THE CLIENT SIGNS THE LISTING AGREEMENT OR THE BUYER REPRESENTATION AGREEMENT
BETWEEN THE CLIENT AND THE BROKER.

DUTIES OF AGENT TO PRINCIPAL (OLDCAR):
o OBEDIENCE
 MEANS THE AGENT IS OBLIGATED TO FOLLOW ALL LAWFUL INSTRUCTIONS OF THE CLIENT, BUT YOU
WOULD NEVER FOLLOW ANY INSTRUCTION THAT WOULD VIOLATE THE LAWS OF DISCLOSURE OR FAIR
HOUSING, ETC. IF THEY INSTRUCTED YOU TO DISCRIMINATE, YOU MUST TERMINATE THE RELATIONSHIP
WITH THEM
o LOYALTY
o DISCLOSURE (FULL)
o CONFIDENTIALITY (FOREVER)
o ACCOUNTING
 MEANS YOU WILL HANDLE THE CLIENT’S MONEY WITH CARE AND MAKE SURE YOU DO NOT COMMINGLE
THE CLIENT’S MONEY WITH YOUR MONEY OR WITH THE COMPANY’S MONEY.
 YOU WOULD ALSO NEVER CONVERT, OR SPEND, A CLIENT’S MONEY TO PAY FOR YOUR OWN EXPENSE.
CONVERSION OCCURS WHEN A BROKER SPENDS HIS OR HER CLIENT’S FUNDS WITHOUT AUTHORIZATION.
 BROKERS SHOULD HAVE A SEPARATE TRUST ACCOUNT TO DEPOSIT MONEY BELONGING TO OTHERS INTO
VS. DEPOSITING IT INTO THE COMPANY’S ACCOUNT
o REASONABLE CARE

INFORMATION ABOUT BROKERAGE SERVICES (IABS)
o WHEN AN AGENT AND POTENTIAL PARTY ENTER INTO A SUBSTANTIVE DISCUSSION OF A REAL ESTATE
TRANSACTION, THE PARTY MUST BE PROVIDED WITH THE PRESCRIBED (IABS) FORM
o EXCEPTIONS TO THE IABS: OPEN HOUSE, MEETING WITH A PARTY THAT IS ALREADY REPRESENTED BY ANOTHER
AGENT OR IF THE PROPOSED TRANSACTION IS FOR A LEASE OF ONE YEAR OR LESS.

PG 36: THE GOAL OF PROSPECTING FOR BUYERS IS TO SECURE THE BUYERS AS CLIENTS

PG 36: IF THE PROSPECT IS A SELLER, YOUR GOAL IS TO GET THEM TO AGREE TO BE A CLIENT AND HAVE THEM SIGN
THE LISTING AGREEMENT SO YOUR COMPANY CAN REPRESENT THEM AS A CLIENT

PG 36: IF YOUR PROSPECT IS A BUYER, YOUR GOAL IS TO GET THEM TO AGREE TO BE A CLIENT AND GET THEM TO
SIGN THE BUYER REPRESENTATION AGREEMENT SO YOUR COMPANY CAN REPRESENT THEM AS A CLIENT
Chapter 3 – Creation & Termination of Agency

FOUR STATUTORY AGENCY RELATIONSHIPS ALLOWED IN TEXAS
o SELLER AGENCY
o BUYER AGENCY
o INTERMEDIARY
o SUBAGENCY

BEST WAY TO CREATE AN AGENCY IS TO DO SO IN WRITING.

ORAL AGREEMENTS ARE ENFORCEABLE AGAINST THE AGENT, BUT THEY ARE NOT ENFORCEABLE AGAINST THE CLIENT

PROSPECTS ARE CUSTOMERS UNTIL AN AGENCY RELATIONSHIP HAS OFFICIALLY BEEN CREATED; IN OTHER WORDS,
BOTH THE PRINCIPAL AND THE AGENT HAVE AGREED TO ESTABLISH THE AGENCY RELATIONSHIP

ANATOMY OF A TRANSACTION
o EVERY TRANSACTION HAS 2 SIDES:
 THE LISTING SIDE, WHERE THE SELLER RETAINS THE SERVICES OF A BROKER TO HELP THEM MARKET THEIR
PROPERTY
 AND THE SELLING SIDE, WHERE THE BUYER RETAINS THE SERVICES OF A BROKER TO ASSIST THEM
o WHEN A BROKERAGE SELLS A PROPERTY – TWO POSSIBILITIES EXIST
 A COOPERATIVE SALE INVOLVING TWO DIFFERENT COMPANIES
 OR IT’S AN IN-HOUSE SALE WHERE ONE COMPANY IS REPRESENTING OR SERVING BOTH SIDES AT THE SAME
TIME

PG 45: SOMETIMES, IN A COOPERATIVE SALE, THE BUYER IS ONLY A CUSTOMER AND IS NOT REPRESENTED BY THE
OTHER BROKER. IN THOSE SITUATIONS, THE SELLING BROKER BECOMES THE SUBAGENT OF THE LISTING BROKER AND
MUST ALSO REPRESENT THE SELLER. NO ONE IS REPRESENTING THE BUYER IS THAT TRANSACTION
o
THERE WERE TIMES IN THE PAST WHEN THE BUYER WAS NEVER REPRESENTED BY THE AGENT AND EVERY AGENT
WAS A SUBAGENT WHENEVER THEY HAD THE BUYER AS A CUSTOMER. IN TEXAS WE DID NOT GET PERMISSION
TO REPRESENT BUYERS UNTIL ABOUT 1988

AGENCY MAY TERMINATE BY (YOU NEED TO KNOW ALL OF THE WAYS THAT AN AGENCY RELATIONSHIP CAN BE TERMINATED)
o WHEN THE PURPOSE OF THE AGENCY IS COMPLETE (PROPERTY SOLD)
o EXPIRATION OF CONTRACT PERIOD IN THE LISTING CONTRACT
o MUTUAL AGREEMENT – PARTIES FREELY AGREE TO TERMINATE
o DEATH OR INCAPACITY OF EITHER PARTY
 IF THE BROKER OR CLIENT DIES OR IS DETERMINED TO BE INSANE, THE AGENCY AGREEMENT IS
TERMINATED
 THE DEATH OR INCAPACITY OF A SPONSORED LICENSED HOLDER HAS NO LEGAL EFFECT ON THE
AGREEMENT BECAUSE THE CLIENT BELONGS TO BROKERAGE
o CONDEMNATION OR DESTRUCTION OF PROPERTY
o BANKRUPTCY
o OPERATION OF LAW
o REVOCATION OF THE BROKERS LICENSE
o ABANDONMENT BY AGENT
o REVOCATION OF THE AGREEMENT AT ANY TIME BY PRINCIPAL
o TERMINATION FO THE AGREEMENT AT ANYTIME BY THE BROKER

PG 49: IF THE CLIENT GIVES NOTICE OF TERMINATION, THE BROKER MUST: CEASE ALL MARKETING, REMOVE SIGNS
AND LOCKBOXES, REMOVE THE LISTING FROM ALL WEBSITES AND TERMINATE THE LISTING IN THE MLS SYSTEM.

PG 49: IF THE BROKER WANTS TO TERMINATE THE LISTING, THEY MAY DO SO BY GIVING NOTICE TO THE CLIENT.
TREC FEELS THE BROKER SHOULD ONLY DO THIS IF THE PRINCIPAL IS NOT COOPERATING WITH THEIR EFFORTS TO
GET THE PROPERTY SOLD

CONFIDENTIALITY = ONE FIDUCIARY DUTY THAT CONTINUES FOREVER
Chapter 4 – Duties & Disclosures To Third Parties

PG 53: AN AGENT WORKS FOR A CLIENT AND WITH A CUSTOMER (ALSO KNOWN AS 3RD PARTY)

PG 53: GENERAL DUTIES OF HONESTY AND FAIRNESS
o AGENTS HAVE A DUTY OF HONESTY WHENEVER THEY ARE BUYING OR SELLING PROPERTY IN THEIR OWN NAME
o OR IN THE NAME OF THEIR SPOUSE, CHILD OR PARENTS OR BUSINESSES IN WHICH THEY HAVE MORE THAN A 10%
OWNERSHIP INTEREST. THIS IS CALLED AGENCY COUPLED WITH AN INTEREST AND COULD CAUSE REVOCATION
OR SUSPENSION OF YOUR LICENSE IF IT IS NOT DISCLOSURE

PG 59: TREC ADVERTISING RULES
o KNOW THE ADVERTISING RULES
 AN ADVERTISEMENT MUST CONTAIN THE LICENSE HOLDER’S OR TEAMS NAME AND THE BROKER’S NAME IN
AT LEAST ½ THE SIZE OF THE LARGEST CONTACT INFORMATION.
o KNOW THE DIFFERENCE AMONG ALTERNATE NAMES, ASSOCIATED BROKER, ASSUMED BUSINESS NAME OR DBA,
AND TEAM NAMES
 TEAMS MAY NOT USE THE WORDS COMPANY, BROKERAGE, OR ASSOCIATES IN THEIR TEAM NAMES. THESE
ARE CONSIDERED MISLEADING FOR A TEAM TO USE.
o CHART AT THE TOP OF PAGE 59
 GIVES YOU ALL THE DETAILS YOU NEED TO KNOW ABOUT USING A NAME

TREC REQUIRES THAT THE SPONSORING BROKER’S NAME BE AT LEAST HALF THE SIZE OF THE LARGEST FONT OF
INFORMATION.

ADVERTISING AND SOCIAL MEDIA
o USING JUST THE LOGO OF THE COMPANY IS NOT THE SAME AS USING THE BROKER’S NAME, UNLESS THE LOGO
ALSO CONTAINS THE NAME OF THE BROKERAGE COMPANY
o ADVERTISING ON SOCIAL MEDIA SITES SHOULD FOLLOW THE SAME ADVERTISING RULES AS OTHER TYPES OF
ADVERTISING.
 THE ONE EXCEPTION IS THAT ON SOCIAL MEDIA, YOU CAN EITHER HAVE THE BROKER’S NAME, THE COMPANY
NAME OR A DIRECT LINK THAT LEADS TO THE BROKER’S NAME OR THE COMPANY NAME. THE RULE IS ONE
CLICK TO LINK TO THE BROKER’S INFORMATION

SELLERS DISCLOSURE NOTICE
o SELLERS FILL OUT THE DISCLOSURE AND THE SELLER IS RESPONSIBLE FOR THE ACCURACY OF THE SELLER’S
DISCLOSURE NOTICE
o WHILE A BROKER HAS SOME RESPONSIBILITY TO DISCOVER AND DISCLOSE PROPERTY ISSUES, THAT
RESPONSIBILITY IS LIMITED TO AREAS ACCESSIBLE FOR VISUAL INSPECTION
o AS THE LISTING AGENT, YOU SHOULD GIVE THE SELLER A BLANK SELLER’S DISCLOSURE FORM AND ENCOURAGE
THEM TO BE THOROUGH AND HONEST IN FILLING IT OUT. THERE IS A TREC FORM THAT IS THE MINIMUM
DISCLOSURE UNDER THE LAW, AND THERE IS A TEXAS REALTORS VERSION. MOST BROKERS PREFER THAT THEIR
AGENTS USE THE ONE FROM TEXAS REALTORS BECAUSE IT IS A MORE COMPREHENSIVE DISCLOSURE. THE TREC
ONE IS THE MINIMUM DISCLOSURE THAT MOST SELLERS HAVE TO MAKE UNDER THE TX PROPERTY CODE

PG 72 A STIGMATIZED PROPERTY
o IS ONE THAT HAD SOME ADVERSE EVENT OCCUR ON-SITE OR SOME PEOPLE BELIEVE THAT A PAST EVENT OR
CONDITION IS AFFECTING IT.
o SOME BUYERS MAY PASS ON THE OPPORTUNITY TO BUY THE PROPERTY REGARDLESS OF THE TYPE STIGMA IT HAS
o A PROPERTY CAN BE STIGMATIZED PSYCHOLOGICALLY OR PHYSICALLY
 PHYSICAL STIGMA OCCURS AS A RESULT OF SOME ENVIRONMENTAL OR NATURAL CONDITIONS
o WHAT CAN STIGMATIZE A PROPERTY: MURDER ON THE PROPERTY, SUICIDE, PARANORMAL ACTIVITY

o
PARANORMAL ACTIVITY IS AVOIDED BY MOST POTENTIAL BUYERS AND SHOULD BE DISCLOSED IF THE AGENT
OR SELLER HAS HEARD ABOUT IT
NOT REQUIRED TO DISCLOSE: DEATH BY NATURAL CAUSES, SUICIDE, ACCIDENT UNRELATED TO THE CONDITION
OF THE PROPERTY OR A PREVIOUS OCCUPANT WHO HAD HIV / AIDS
 THESE OTHER DEATHS MAY BE DISCLOSED, HOWEVER, AT THE DISCRETION OF THE SELLER OR THE BUYER’S
AGENT. LISTING AGENTS CANNOT DISCLOSE THE OTHER TYPES OF DEATHS WITHOUT THE SELLER’S
PERMISSION
 WE ARE NEVER ALLOWED TO ASK ABOUT OR DISCLOSE INFORMATION ABOUT ANYONE WHO HAS HAD AIDS,
HIV OR ANY RELATED ILLNESS. THEY ARE PROTECTED AS A HANDICAPPED PERSON UNDER THE CENTER FOR
DISEASE CONTROL
STATE EXAM – YOU MIGHT HAVE A QUESTION ABOUT WHAT TO DO ABOUT PROXIMITY TO A REGISTERED SEX OFFENDER. YOU
ALWAYS REFER THEM TO THE DATABASE WHICH IN TEXAS IS LOCATED ON THE TDPS WEBSITE. SEX OFFENDERS THEMSELVES
HAVE TO LET LOCAL AUTHORITIES THEIR ADDRESS ANY TIME THEY RELOCATE. SEX OFFENDERS ARE NOT A PROTECTED CLASS
UNDER FEDERAL OR STATE FAIR HOUSING LAWS.
STATE EXAM – YOU MAY HAVE QUESTIONS ABOUT OTHER DISCLOSURE ISSUES AND HAZARDOUS CONDITIONS SUCH AS LOCATED
IN AN HOA, FLOODPLAIN, ZONING, TAX DISTRICTS, MOLD, RADON, ASBESTOS, UFFI, LEAD LANDFILLS, UNDERGROUND STORAGE
TANKS, FARMING HERBICIDES/PESTICIDES AND INFORMATION ABOUT EMFS
Chapter 5 – Seller Agency

LISTING AGREEMENT is an employment contract used by sellers to employ a real estate broker or brokerage firm, to
find a buyer for their property

PG 81: ELEMENTS OF A VALID LISTING AGREEMENT INCLUDE:
o THE SIGNATURES OF ALL THE OWNERS OF THE PROPERTY
o A LEGAL DESCRIPTION OF THE PROPERTY (including street address)
o THE LIST PRICE OF THE PROPERTY
o A DEFINITE CONTRACT STARTING AND ENDING DATE
o THE AGREEMENT TO PAY A STATED COMMISSION

PG 82-83: TYPES OF LISTING AGREEMENTS
o OPEN LISTING = NOT FAVORABLE
 GIVES THE SELLER THE RIGHT TO LIST THE PROPERTY WITH MULTIPLE COMPETING BROKERS AND TO SELL THE
PROPERTY PERSONALLY WITHOUT LIABILITY FOR PAYMENT OF COMMISSION
o
EXCLUSIVE AGENCY
 SELLER AGREES TO LIST THE PROPERTY WITH ONLY ONE BROKER WITH THE PROVISION THAT THE SELLER CAN
SELL THE PROPERTY THEMSELVES WITHOUT PAYING YOU.
o
EXCLUSIVE RIGHT TO SELL = RECOMMENDED BY MOST REALTORS
 A COMMISSION IS PAID ON EVERY PROPERTY SOLD EVEN IF BY THE OWNER
o
NET LISTING = POTENTIAL FOR ABUSE
 SELLER ESTABLISHES A MINIMUM NET AMOUNT THEY WANT IN PROCEEDS AT CLOSING
 COMMISSION IS THE DIFFERENCE BETWEEN THE MINIMUM NET AND THE ACTUAL SELLERS PRICE.
 EX: SELLER SAYS I WANT 300,000 @ CLOSING / HOUSE SELLS FOR 400,000 / REALTOR COMMISSION $100,000

PG 83: COMPARATIVE MARKET ANALYSIS
o THE MULTIPLE LISTING SERVICE (MLS) IS WHERE MEMBERS SHARE THEIR LISTINGS WITH OTHER MEMBERS AND
IT IS WHAT WE USE TO PREPARE A COMPARATIVE MARKET ANALYSIS (CMA) FOR EITHER OUR SELLER OR BUYER
CLIENT.
o DATA SHOULD BE PROPERTIES THAT HAVE SOLD IN THE LAST 6 MONTHS AND INCLUDES ACTIVE & EXPIRED
LISTINGS.

PG 83 – 84: THE BENEFITS OF SELLER AGENCY INCLUDE:
o MARKETING
o NEGOTIATIONS
o ATTENTION TO LEGAL & FINANCIAL DETAILS
o USING TIME EFFECTIVELY
o SAFETY

PG 84: SUBAGENCY
o INVOLVES TWO DIFFERENT BROKERS, WHEREIN THE BUYER IS ONLY A CUSTOMER AND IS NOT BEING
REPRESENTED BY EITHER BROKER, SO BOTH BROKERS ARE REPRESENTING THE SELLER.
o OCCURS MORE FREQUENTLY IN RURAL COMMUNITIES, BUT SELDOM IN METROPOLITAN MARKETS.



PG 87 ALL LISTING AGREEMENTS MUST HAVE A DEFINITE TERMINATION DATE.
(JUST FYI) PG 96: Is the Addendum To Listing = means addition
(JUST FYI) PG 97: Is the Amendment To Listing = means change to contract
Chapter 6 – Buyer Agency


THE FIDUCIARY DUTIES REPRESENTED BY THE ACRONYM “O-L-D-C-A-R” APPLY IN ALL STATES.
o UNDERSTANDING THESE DUTIES ON THE HIGHEST LEVEL ESTABLISHES AN AGENT’S CREDIBILITY IN THE
MARKETPLACE
PG 105: Buyer Representation Agreement = agency agreement that has the duties & responsibilities of both the
buyer and broker

BENEFITS OF BUYER AGENCY:
o ACCESS TO MARKET DATA
o INVESTMENT ANALYSIS
o ASSISTANCE IN CULLING OUT UNSUITABLE PROPERTIES
o NEGOTIATIONS
o PREPARING OFFERS AND NEGOTIATING STRATEGIES
o ASSISTANCE WITH SURVEYS, INSPECTIONS, REPAIRS, ETC…

PG 106: WRITTEN NOTIFICATION OF COMPENSATION TO BROKER
o IN TEXAS, RESIDENTIAL COMMISSIONS ARE COMMONLY PAID BY SELLERS TO THE LISTING BROKER AND THEN THE
LISTING BROKER SHARES PART OF THAT COMMISSION WITH THE CO-OP BROKER WHO FINDS THE BUYER.
o FEE SPLITTING ARRANGEMENTS ARE ADVERTISED ON THE MLS SYSTEM WHEN THE LISTING BROKER POSTS THE
LISTING INFORMATION THERE

PG 107: BUYER’S BROKER DISCLOSURES
o REGARDLESS OF REPRESENTATION, ALL BUYERS SHOULD BE PROVIDED WITH AN ORAL OR WRITTEN DISCLOSURE
AT THEIR FIRST CONTACT WITH THE BUYER.
o THE AGENT HAS TO MAKE IT CLEAR WHENEVER THEY ALREADY REPRESENT THE SELLER.

PG 107: BROKER EMPLOYMENT
o THE LISTING AGREEMENT AND THE BUYER REPRESENTATION AGREEMENT ARE CONSIDERED EMPLOYMENT
AGREEMENTS. BROKERS MUST PROVE THEY WERE EMPLOYED TO SELL THE PROPERTY IN ORDER TO COLLECT A
COMMISSION

PG 108 LICENSE HOLDERS MUST DISCLOSE ALL MATERIAL FACTS THAT HE OR SHE KNOWS OR SHOULD BE
REASONABLY EXPECTED TO KNOW ABOUT A PROPERTY.
o ANY ATTEMPT BY A GROUP OF BROKERS TO SET THE COMMISSION RATES IN THEIR AREA IS CALLED PRICE FIXING,
WHICH IS ILLEGAL.

SUIT FOR COMMISSION
o UNDER A SUIT FOR COMMISSION, THE BROKER IS THE ONLY ONE WHO CAN EARN THE COMMISSION AND THEY
ARE THE ONLY ONE WHO CAN SUE TO COLLECT THE COMMISSION
o TO ENFORCE PAYMENT OF THE COMMISSION THE BROKER MUST:
 HAVE A SIGNED EMPLOYMENT AGREEMENT
 BE LICENSED
 BE THE PROCURING CAUSE OF THE SALE
 MUST PRODUCE A READY WILLING AND ABLE BUYER TO BUY ON TERMS THE SELLER STATED THEY WOULD
ACCEPT
 INFORMED THE BUYER IN WRITING TO GET AN ABSTRACT OF TITLE OR A POLICY OF TITLE INSURANCE

Procuring Cause of Sale = is the individual who, through a series of uninterrupted activities or actions brought about
the completion of the contract

AGENT’S DUTIES TO CUSTOMER
o HONEST DEALING
o REASONABLE CARE & SKILL
o DISCLOSURE OF MATERIAL FACTS THAT HE OR SHE KNOWS, OR WOULD BE EXPECTED TO KNOW, THAT
MATERIALLY AFFECT THE VALUE OF OR DESIRABILITY OF THE PROPERTY

COMMISSION RATES
o ARE ALWAYS NEGOTIABLE BETWEEN THE PARTIES AND ANY ATTEMPT TO SET A COMMISSION RATE FOR
DIFFERENT COMPANIES TO ALL CHARGE IS PRICE-FIXING. THE SHERMAN ANTITRUST ACT AND THE CLAYTON
ANTITRUST ACT PROHIBIT PRICE-FIXING. BOYCOTTING IS ALSO A VIOLATION OF THESE FEDERAL LAW

PG 110: BUYER REPRESENTATION AGREEMENT – PARAGRAPH 4
o JUST LIKE IN THE LISTING AGREEMENT BETWEEN THE BROKER AND THE SELLER, THE BUYER REPRESENTATION
AGREEMENT ALSO NEEDS TO HAVE A DEFINITE TERMINATION DATE.
o THE TERM ON THE BUYER REP AGREEMENT MIGHT BE VERY SHORT, SUCH AS ONE DAY, OR TO ONLY LOOK AT 23 PROPERTIES.

BUYER REPRESENTATION AGREEMENT – PARAGRAPH 8.A
o THE SELLER CONSENTS TO INTERMEDIARY IN THE LISTING AGREEMENT, AND THE BUYER GIVES WRITTEN
CONSENT FOR INTERMEDIARY IN THE BUYER REP AGREEMENT
Chapter 7 – Intermediary Brokerage

PG 122 SENATE BILL NO. 489
o In 1995, the Texas Legislature passed several amendments to the Texas Real Estate License Act in Senate Bill
No. 489.
o Senate Bill 489 is the legislation that gave the industry the Intermediary process, along with some new
requirements for disclosure. Both buyers and sellers face some decisions that must be made when buying
or selling property. In addition to bringing us Intermediary, Senate Bill 489 includes a representation
disclosure requirement.

In Texas, we must use Intermediary instead of Dual Agency.

PG 124: IN HOUSE SALE
o FYI – ON THE STATE EXAM – YOU NEED TO KNOW THAT WHENEVER A BROKER, OR ONE OF THEIR AGENTS,
SELLS ANY OF THE COMPANY’S LISTINGS IT IS CALLED AN IN-HOUSE SALE
o SINCE THERE IS NO COMMISSION SPLIT WITH ANOTHER BROKER ON AN IN-HOUSE SALE, THE LISTING BROKER
KEEPS THE ENTIRE GROSS COMMISSION. THE AGENTS INVOLVED IN AN IN-HOUSE SALE ARE PAID ACCORDING
TO THEIR AGREEMENT WITH THEIR BROKER, AND A BROKER CAN HAVE DIFFERENT SPLITS FOR DIFFERENT
AGENTS

PG 125: INTERMEDIARY RELATIONSHIPS
o IN TEXAS, INTERMEDIARY IS STATUTORY LAW NOW AND BROKERS CANNOT BE DUAL AGENTS.
o Intermediary is a process that makes it possible to bring client buyers and sellers together while at the same time
representing their best interests. When this type of transaction occurs, the broker becomes the Intermediary.
Since the broker has a personal duty to represent both sides, it is only appropriate that the broker remain neutral
and avoid negotiating for either party.
o A broker may act as an intermediary between parties to a real estate transaction if:
 The broker obtains written consent from each party for the broker to act as an intermediary in the
transaction; and
 The written consent of the parties states the source of any expected compensation to the broker.

THERE ARE TWO FORMS OF INTERMEDIARY - WITH APPOINTMENTS AND WITHOUT APPOINTMENTS.
o IF THE BROKER ALREADY HAS TWO DIFFERENT AGENTS WORKING THE TRANSACTION, HE/SHE WILL MOST
LIKELY MAKE THE APPOINTMENTS.
o IF YOU ARE ONE OF THE APPOINTED AGENTS, YOU CAN GIVE ADVICE AND OFFER OPINION DURING
NEGOTIATIONS, BUT ONLY TO THE PARTY YOU WERE APPOINTED TO SERVE.

INTERMEDIARY WITH APPOINTMENTS
o
o
Notice that our in-house sale involves two agents of Broker Bob - Sue with the
seller and Bill with the buyer. In this situation, Broker Bob will most likely appoint
Sue to represent the seller, and Bill to represent the buyer.
The appointed associates will give advice and opinions (which means negotiate)
to their respective parties. The broker must make the appointments, most likely
by using the Intermediary Relationship Notice. Sue and Bill do not become
appointed associates until the appointments are made.

INTERMEDIARY WITHOUT APPOINTMENTS
o
Definition: When an agent has the opportunity to sell his or her own listing.
o
Under Intermediary rules, Agent Sue can go ahead and complete the transaction,
but cannot give advice and opinions to either party. This process is called
intermediary without appointments.
Much like the broker, Sue cannot negotiate for one client to the detriment of the
other client. When the Intermediary process begins, the Intermediary
Relationship Notice (TXR-1409) must be filled out by members of the NAR. In this
case, there will be no appointments because there is only one agent in the
transaction.
o

INTERMEDIARY WITHOUT APPOINTMENTS – LIABILITY ISSUES
o TO APPOINT OR NOT IS AT THE DISCRETION OF THE BROKER
STATE EXAM – YOU NEED TO KNOW THAT WHENEVER A BROKER, OR ONE OF THEIR AGENTS, SELLS ANY OF THE COMPANY’S
LISTINGS IT IS CALLED AN IN-HOUSE SALE
STATE EXAM – KNOW THAT VERY SMALL COMPANIES HAVING ONLY A BROKER OR A BROKER AND ONE OTHER AGENT, IT WILL
ALWAYS BE INTERMEDIARY WITHOUT APPOINTMENTS AND THAT MEANS NEITHER CLIENT WILL GET ADVICE OR BE GIVEN
OPINION
STATE EXAM – STUDY THE FAQS ABOUT INTERMEDIARY ON PAGES 129-135. A LOT OF THOSE SAME QUESTIONS WILL BE ON THE
STATE PORTION OF YOUR STATE EXAM
Chapter 8 – Clarifying Agency Relationships

DISCLOSURE OF REPRESENTATION = IS REQUIRED AT FIRST CONTACT WITH ANOTHER PARTY TO THE TRANSACTION
OR ANOTHER LICENSE HOLDER WHO REPRESENTS ANOTHER PARTY TO THE TRANSACTION.

INFORMATION ABOUT BROKERAGE SERVICES (IABS)
o LICENSE HOLDERS MUST PROVIDE A LINK TO THE IABS FORM IN A READILY NOTICEABLE PLACE ON THE
HOMEPAGE OF THEIR BUSINESS WEBSITE IN AT LEAST 10-POINT FONT.

SUBSTANTIVE DIALOG
o TRELA DEFINES AS A MEETING OR WRITTEN COMMUNICATION THAT INVOLVES A SUBSTANTIVE DISCUSSION THAT
RELATES TO A SPECIFIC PROPERTY

AGENTS NEED TO KNOW THEIR BROKER’S POLICY ON INTERMEDIARY. POSSIBLE POLICIES INCLUDE:
o NO INTERMEDIARY
o INTERMEDIARY WITH APPOINTMENTS ONLY
 UNDER INTERMEDIARY WITH APPOINTMENTS ONLY, IF A SINGLE AGENT IN THE FIRM IS WORKING WITH
BOTH THE BUYER AND THE SELLER, THE POLICY REQUIRES ANOTHER AGENT IN THE FIRM TO BE BROUGHT
IN SO APPOINTMENTS CAN BE MADE.
o INTERMEDIARY WITH OR WITHOUT APPOINTMENTS.

THE INFORMATION ABOUT BROKERAGE SERVICES SAMPLE FORM
o ON THE IABS FORM, IT TELLS CONSUMERS HOW AGENTS CAN BE REPRESENTING CONSUMERS IN A
TRANSACTION. THEY COULD BE REPRESENTING THE SELLER ONLY, THE BUYER ONLY, BE AN AGENT FOR BOTH AS
THE INTERMEDIARY OR BE A SUBAGENT

A BROKERAGE FIRM THAT HAS A BUYER AGENCY ONLY OR SELLER AGENCY ONLY HAS THE ADVANTAGE OF:
o IT WOULD NEVER BE AN INTERMEDIARY & THE FIRM DOES NOT HAVE TO WORRY ABOUT UNINTENTIONAL DUAL
REPRESENTATION
o BROKERS DO NOT HAVE TO ACT AS INTERMEDIARY OR MAKE APPOINTMENTS
o AGENTS ARE ONLY RESPONSIBLE FOR GIVING ADVICE & OPINION TO ONE PARTY IN THE TRANSACTION, AVOIDING
CONFLICTS OF INTEREST THAT MAY OCCUR WHEN REPRESENTING BOTH SIDES
STATE EXAM – YOU NEED TO KNOW THE MAIN DISADVANTAGE OF BUYER ONLY OR SELLER ONLY IS THAT THE BROKER WOULD
NOT BE ON BOTH SIDES OF THE TRANSACTION AND THEREFORE ONLY GET ONE SIDE OF THE COMMISSION

COMMON PROBLEMS THAT THE BROKER SHOULD ADDRESS IN THEIR AGENCY POLICY
o IS HAVING THE BUYER SIGN THE IABS WHEN THE BUYER IS READY TO WRITE AN OFFER ON A PROPERTY WHICH IS
TO LATE
o THE INFORMATION ABOUT BROKERAGE SERVICES (IABS) NEEDS TO BE PROVIDES TO PROSPECTIVE BUYERS,
SELLERS, LANDLORDS AND TENANTS AT THE AGENT’S FIRST SUBSTANTIVE DISCUSSION OF A REAL ESTATE
TRANSACTION. LICENSE HOLDERS MUST ALAO PROVIDE A LINK TO THE IABS FORM IN A READILY NOTICEABLE
PLACE ON THE HOMEPAGE OF THEIR BUSINESS WEBSITE
Chapter 9 – Employment Issues

EMPLOYMENT RELATIONSHIPS
o MOST LICENSE HOLDER ARE NOT EMPLOYEES OF THE BROKER.
o THEY ARE INDEPENDENT CONTRACTORS ENGAGED IN A PRINCIPAL-AGENT RELATIONSHIP, WHICH IS THE
GENERAL AGENCY RELATIONSHIP THAT EXISTS BETWEEN BROKER AND SPONSORED LICENSE HOLDER
o SALES AGENTS GENERALLY GET PAID ON COMMISSION (1099-MISC) RATHER THAN A SALARY OR WAGE.

PG 153 -154: GUIDELINES THE IRS USES TO DETERMINE WHETHER A SALES AGENT IS CLASSIFIED AS AN
INDEPENDENT CONTRACTOR INCLUDE
o COMMISSION MUST COMPENSATE THE SALES AGENT / NO ADVANCES
o FOLLOWING A POLICIES AND PROCEDURES MANUAL MAY NOT BE MANDATORY
o THE SALES AGENTS SHALL PAY THEIR OWN BUSINESS EXPENSES
o CANNOT BE MADE TO ATTEND MANDATORY MEETINGS LIKE SALES MEETINGS
o CANNOT BE MADE TO ATTEND MANDATORY TRAINING SEMINARS
o NO SET HOURS
o NO PARTICIPATION IN THE BROKER’S INSURANCE OR RETIREMENT PROGRAM
STATE EXAM – KNOW THAT IF THE BROKER GUARANTEED A MONTHLY INCOME, PAID AN AGENT’S LICENSE FEE, CONTROLLED AN
AGENT’S DAY-TO-DAY OPERATION THROUGH THEIR POLICY MANUAL, OR DIVIDED COMMISSION BASED ON TIME SPENT IN THE
OFFICE, THE BROKER IS TREATING THEM AS AN EMPLOYEE AND THEY ARE IN VIOLATION OF THE INDEPENDENT CONTRACTOR
STATUS.

TAX EQUITY AND FISCAL RESPONSIBILITY ACT HAS A THREE-PART TEST SPECIFYING THAT A SALES AGENT IS AN
INDEPENDENT CONTRACTOR:
o MUST HOLD A REAL ESTATE LICENSE
o MUST BE PAID ON COMMISSION
o MUST HAVE A WRITTEN CONTRACT WITH THE BROKER SPECIFYING THAT THE SALES AGENT IS NOT AN EMPLOYEE.
STATE EXAM – YOU WILL NEED TO KNOW THAT THERE ARE EMPLOYMENT LAWS THAT EXIST ON THE STATE AND THE NATIONAL
LEVEL SUCH AS EQUAL EMPLOYMENT OPPORTUNITY, WORKER’S COMPENSATION LAWS AND OTHERS. SINCE MOST AGENTS ARE
NOT EMPLOYEES, THESE LAWS DO NOT APPLY TO REAL ESTATE BROKERAGE COMPANIES

PG 157 UNLICENSED ASSISTANTS’ MAY:
o ANSWER PHONE CALLS, TYPE CORRESPONDENCE & MANAGE OFFICE
o REGISTER PROSPECTS & GREET PROSPECTS AND GIVE GENERAL INFORMATION
o SCHEDULE APPOINTMENTS FOR A LICENSE HOLDER TO SHOW PROPERTY
o TELE MARKET IF NOT SOLICITING FOR LISTINGS OR BUYERS
o ACCOMPANY A LICENSE HOLDER ON SHOWINGS TO OPEN HOUSE
o TRAIN AND MOTIVATE LICENSE HOLDERS
o ACT AS AN ONSITE APARTMENT MANAGER
o PUT SALE SIGNS ON PROPERTIES, ACCOMPANY INSPECTORS

PG 157: UNLICENSED ASSISTANTS’ MAY NOT
o SHOW PROPERTIES & ANSWER REAL ESTATE RELATED QUESTIONS
o NEGOTIATE CONTRACTS
o HOST OPEN HOUSES & TELE MARKET FOR LISTINGS OR SALES
o UNLOCK A DOOR TO A PROPERTY FOR A PROSPECT BECAUSE JUST UNLOCKING THE DOOR IS CONSIDERED
SHOWING THE PROPERTY
STATE EXAM – YOU SHOULD KNOW THAT THE WAY AN UNLICENSED ASSISTANT IS PAID BY THEIR AGENT. COULD BE HOURLY, PER
PROJECT, A SET SALARY, ETC. YOU SHOULD NOT PAY AN UNLICENSED ASSISTANT ANY PORTION OF THE COMMISSION ON A
PARTICULAR TRANSACTION. INCENTIVE BONUSES, HOWEVER, CAN BE PAID BASED ON OVERALL PRODUCTION PER MONTH OR PER
QUARTER.
CHAPTER 10 – Agency, Ethics, and The Law


ETHICS IS USUALLY CONCERNED WITH RIGHT VS WRONG, GOOD VS BAD, FAIR VS UNFAIR, RESPONSIBLE VS
IRRESPONSIBLE
MORALS ARE BASED ON AN INDIVIDUAL’S DEEPLY PERSONAL VALUES AND BELIEFS TAKEN BEYOND WHAT SOCIETY
DEEMS TO BE AN ESTABLISHED NORM
STATE EXAM - AN INDIVIDUAL'S PERCEPTION OF RIGHT AND WRONG IS ESTABLISHED BEFORE THE AGE OF 10 AND ARE
BASED ON INFLUENCES FROM THEIR IMMEDIATE FAMILY, RELIGIOUS TRAINING AND SCHOOL EXPERIENCE

PG 179 FIVE SOURCES OF ETHICAL STANDARDS:
o THE UTILITARIAN APPROACH
o THE RIGHTS APPROACH
o THE FAIRNESS OR JUSTICE APPROACH
o THE COMMON GOOD APPROACH
o THE VIRTUE APPROACH
 SAYS THAT ETHICS ARE HABITS THAT ENABLE US TO ACT ACCORDINGLY AS PERSONS WHO ARE TRUTHFUL,
HONEST, COURAGEOUS, COMPASSIONATE, GENEROUS, TOLERANT, AND POSSESS INTEGRITY, FAIRNESS, SELFCONTROL AND PRUDENCE.

ETHICAL DILEMMAS OCCUR WHEN WE:
o DO NOT KNOW THE RIGHT COURSE OF ACTION IN A CERTAIN SITUATION
o HAVE DIFFICULTY DOING WHAT WE CONSIDER TO BE RIGHT
o FIND THE WRONG CHOICE VERY TEMPTING

PG 181 THE SHERMAN ANTI-TRUST ACT = COMMISSIONS ARE NEGOTIABLE ALWAYS
o PREVENTS ANY RESTRAINT OF TRADE AND THAT IS WHY COMMISSION RATES MUST ALWAYS BE A MATTER OF
NEGOTIATIONS BETWEEN THE BROKER AND THE CLIENTS. ANY ATTEMPT BY A GROUP OF BROKERS TO ESTABLISH
A SET RATE FOR ALL COMPANIES WOULD BE PRICE FIXING AND WOULD VIOLATE ANTI-TRUST LAWS
o ANY ATTEMPT TO BOYCOTT DISCOUNT BROKERS IS ALSO A VIOLATION

PG 182 THE CANONS OF PROFESSIONAL ETHICS AND CONDUCT FOR REAL ESTATE LICENSE HOLDERS ARE:
o FIDELITY
 SCRUPULOUS = DO THE RIGHT THING
 METICULOUS = BE CAREFUL
o INTEGRITY
o COMPETENCY
o CONSUMER INFORMATION
o DISCRIMINATORY PRACTICES
STATE EXAM – YOU NEED TO KNOW ABOUT THE COMPLAINT PROCEDURES FOR TREC AND THE PENALTIES TREC CAN ISSUE TO AN
AGENT

PROFESSIONAL CODE OF ETHICS
o
o
THE TERM REALTOR IS A REGISTERED COLLECTIVE MEMBERSHIP MARK. IT MAY ONLY BE USED BY MEMBERS OF
THE NATIONAL ASSOCIATION OF REALTORS (NAR).
UNDER THE CODE OF ETHICS FOR THE NATIONAL ASSOCIATION OF REALTORS, DISCIPLINARY ACTION FOR
VIOLATIONS OF THE CODE OF ETHICS COULD INCLUDE:
 A REPRIMAND
 A FINE
 PROBATION
 SUSPENSION OR REVOCATION OF MEMBERSHIP
 OR ANY COMBINATION OF THE ABOVE
STATE EXAM – YOU WILL NEED TO KNOW PARTICULARS OF MOST OF THE FEDERAL LAWS ON PAGE 181: FAIR HOUSING, ADA,
TRUTH IN LENDING, RESPA, SHERMAN ANTI-TRUST ACT AND OTHERS.
Chapter 11 – Deceptive Trade Practices & Consumer Protection Act

DEFINITIONS UNDER THE DTPA (DECEPTIVE TRADE PRACTICE ACT)
o GOODS = REAL PROPERTY
o SERVICES = BROKERAGE IS A SERVICE
o CONSUMERS = WHO WE DEAL WITH
THEREFORE, WE CAN BE SUED UNDER DTPA
STATE EXAM – YOU NEED TO KNOW THAT THE DECEPTIVE TRADE PRACTICES ACT IS PART OF THE TEXAS BUSINESS AND
COMMERCE CODE

STATUTORY DEFENSES UNDER THE DTPA ARE THOSE DEFENSES THAT ARISE OUT OF LAW. EXAMPLES ARE:
o WRITTEN INFORMATION FROM GOVERNMENTAL RECORDS
 EX APPRAISALS DISTRICT RECORDS WHICH WE USE TO QUOTE SQUARE FOOTAGE OF A PROPERTY
o WRITTEN INFORMATION FROM ANOTHER SOURCE
o WRITTEN INFORMATION CONCERNING A TEST REQUIRED OR PRESCRIBED BY A GOVERNMENT AGENCY

PG 207: BEST PRACTICES
o LICENSE HOLDER SHOULD ALWAYS DISCLOSE ANY DEFECTS OR INFO ABOUT THE PROPERTY
o USE SELLERS DISCLOSURE NOTICE FORM
o GIVE AT LIST OF AT LEAST 3 INSPECTORS (LET BUYER CHOOSE)
o HAVE PROPERTY REINSPECTED SHORTLY BEFORE CLOSING
o HAVE THE BUYER PROVIDE IN WRITING IF THEY WANT TO WAIVE AN INSPECTION
o DO NOT GIVE OPINION OF PROPERTY CONDITION
o KEEP COPIOUS NOTES ON ALL ASPECTS OF TRANSACTION
STATE EXAM – KNOW THAT THE CONSUMER HAS TO PROVE THAT YOUR ACT OR OMISSION WAS A SIGNIFICANT FACTOR IN
BRINGING ABOUT INJURY TO THEM. THIS IS CALLED PRODUCING CAUSE.
STATE EXAM – YOU NEED TO KNOW THAT THERE CAN BE TREBLE DAMAGES ASSESSED UNDER THE DTPA FOR KNOWINGLY OR
INTENTIONALLY DECEIVING A CONSUMER
STATE EXAM - KNOW THAT BEST PRACTICES FOR AN AGENT: PG 207

PUFFING (PUFFERY) = IS NOT MISREPRESENTATION. IT IS MARKETING IN WHICH AN AGENT USES ADJECTIVES AND OPINIONS
RATHER THAN DETAILS OR FACTS
o EX: BEAUTIFUL VIEW, BEAUTIFUL LANDSCAPING
o EXAGGERATED PUFFING CAN LEAD TO MISREPRESENTING, SUCH AS SAYING THE BEST WATER IN THE WORLD.
Chapter 12 – Implementation & Presentation

STATE EXAM – KNOW THE 3 WAYS SALES AGENTS ADD VALUE TO THE BUYING PROCESS FOR BUYERS:
o PROVIDE COUNSELING
o HELP WITH NEGOTIATIONS
o MANAGE THE TRANSACTION ONCE THE BUYER HAS SIGNED A CONTRACT WITH THE SELLER

STATE EXAM – KNOW THAT AN ERRORS AND OMISSIONS INSURANCE POLICY IS A CONTRACT BETWEEN THE
INSURANCE COMPANY AND THE BROKER/LICENSE HOLDER.
o IT PROTECTS US FROM LIABILITY FOR PROFESSIONAL MISTAKE WE MAKE IN DOING OUR JOB.

STATE EXAM – YOU NEED TO KNOW THE 8 REQUIRED POLICIES THAT A BROKER MUST HAVE IN THE POLICIES AND
PROCEDURES MANUAL. THEY ARE MENTIONED ON PAGE 224 IN THE BOXED INFO UNDER 535.2 BROKER
RESPONSIBILITY

PG 226 DEFAMATION IS: THE DELIBERATE ACT OF HARMING THE REPUTATION OF ANOTHER PERSON BY MAKING
FALSE STATEMENTS TO A 3RD PERSON
o SLANDER WHICH IS SPOKEN WORDS
o LIBEL WHICH IS WRITTEN OR PRINTED WORDS

DEFAMATION REQUIRES EVIDENCE OF: (STATE EXAM)
o A FALSE STATEMENT
o A STATEMENT MADE TO SOMEONE OTHER THAN THE PERSON WHO IS ALLEGEDLY DEFAMED
o THE DAMAGE TO THE PERSON ALLEGEDLY DEFAMED

PG 227 WHEN THE DESIGNATED BROKER OF A BUSINESS ENTITY DIES, THE LICENSES OF AGENTS SPONSORED BY THE
BUSINESS ENTITY ARE PLACED ON INACTIVE STATUS UNTIL THE COMPANY LETS TREC KNOW WHO THE NEW
DESIGNATED BROKER IS GOING TO BE

PG 227 VIOLATIONS UNDER THE TREC LICENSE ACT 1101.652(B) INCLUDE:
o PUBLISHING AN ADVERTISEMENT THAT MISLEADS OR IS LIKELY TO MISLEAD
o OFFERING TO SELL OR LEASE A PROPERTY WITHOUT THE KNOWLEDGE AND CONSENT OF THE OWNER
o OFFERING A PROPERTY ON TERMS OTHER THAN THOSE TERMS AUTHORIZED BY THE OWNER OR THE OWNER’S
AGENT
o MAKING MISREPRESENTATIONS OR FALSE PROMISES
o PLACING A SIGN ON A PROPERTY FOR SALE OR LEASE WITHOUT THE WRITTEN CONSENT OF THE OWNER OR
THE OWNER’S AGENT.

PG 228 – 229 TREC ADVERTISING RULES: DECEPTIVE ADVERTISING INCLUDES ADVERTISEMENT THAT:
o IMPLIES A SALES AGENT IS RESPONSIBLE FOR THE BROKERAGE BUSINESS CAUSES SOMEONE TO BELIEVE A PERSON
NOT AUTHORIZED TO CONDUCT BROKERAGE IS ENGAGED IN BROKERAGE
o IS INACCURATE IN ANY MATERIAL WAY OR MISREPRESENTS THE PROPERTY, TERMS, VALUES, SERVICES, OR
POLICIES
o ADVERTISES ANOTHER BROKER’S LISTING WITHOUT PERMISSION AND WITHOUT DISCLOSING THE NAME OF THE
LISTING BROKER
o FAILS TO REMOVE AN ADVERTISEMENT ABOUT A LISTING WITHIN A REASONABLE TIME AFTER IT ENDS IS
CONSIDERED MISLEADING OR DECEPTIVE
o IDENTIFIES A SALES AGENT AS A BROKER
o CREATES CONFUSION ABOUT THE PERMITTED USE OF A PROPERTY
o PG 229 THE NAME OF THE BROKER MUST APPEAR IN ALL FORMS OF ADVERTISING
o PG 229 BROKERS ARE REQUIRED TO REGISTER AN ASSUMED NAME WITH TREC EVEN IF IT IS A TEAM NAME OR
A SALES AGENT’S NAME

PG 230 -231 FYI – ON THE STATE EXAM – KNOW THERE ARE SEVERAL FEDERAL LAWS DEALING WITH SOLICITATION
OF BUSINESS SUCH AS DO-NOT-CALL RULES, CAN SPAM LAWS, FAX SOLICITATION LAWS

THE DO-NOT-CALL REGISTRY SHOULD BE CONSULTED BEFORE MAKING “COLD CALLS” TO MAKE SURE NONE OF THE
CONSUMERS YOU ARE TRYING TO CALL HAVE PUT THEIR NAME ON THE NATIONAL DO-NOT-CALL REGISTRY. YOU
SHOULD CHECK YOUR CALL LIST AGAINST THE REGISTRY EVERY 31 DAYS

MARKETING GUIDELINES
o CONSISTENCY MEANS FOR AT LEAST 6 MONTHS