Texas Real Estate
Commission
Ethics MCE
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Canons of Professional Ethics
 Fidelity
 Integrity

Deftenus V. Dallas Bayue Bend, LTD
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Competence
 Licensee
is knowledgeable and is informed on
market conditions, continues education,
stays informed about national, state and
local issues and developments, and
exercises judgment and skill in
performance of their work
 Questions the Licensee should ask

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CASE STUDY
 Owner entered into property management
agreement.
 Broker advised owner to accept Section 8
voucher for less than rental rate.
 Broker prepared lease showing lower rent
and higher security deposit and also indicated
rents were past due when they were not.
 Owner filed a complaint with TREC.
 TREC reprimanded broker, assessed $500,
and ordered broker take 30 hr. course.
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Canons of Professional Ethics
 Consumer Information Form – Broker or
inspector must display Consumer Information
Form 1-1 in each place of business.
 Discriminatory Practices - No licensee shall
discriminate based on protected classes race, color, religion, sex, national origin,
ancestry, familial status and handicapped
status.
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TREC Complaints
 A person may file a complaint with TREC
against a licensee if person believes licensee
violated TRELA.

If appropriate, TREC will investigate
 Most frequent issues:


Misappropriation, commingling, general
negligence, false promises, broker
supervision, general negligence, false
promises, rebates, improper referrals.
Intermediary/IABS – no written consent.
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Payments made from the Real Estate Recovery
Trust Account were at an all-time high.
 TRELA requires investigating using risk-
based approach
 Refund
 TREC Advisory Letters

Not formal disciplinary action.
 Informal Proceedings
 Temporary Suspension
 Association Complaints
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Citation Program
 TAR has citation policy for faster resolution.

Only certain complaints qualify.

A grievance tribunal determines if
complaint is subject to citation.

If citation is issued, respondent has right to
full hearing rather than pay the fine.

Sanctions include fines and education.
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Chapter 2
Agency Relationships
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Customer or Client?
 Customer


What Broker owes customer
What Broker cannot provide to customer
 Client
 Fiduciary Duties
 Information About Brokerage Services and
Agency Disclosure (IABS)

When IABS is not required
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Intermediary
 Broker could be in position of assisting two
principals involved in same transaction.

If so, must be an intermediary and must obtain
written permission
 Intermediary may appoint different
licensees
 Example 1
 Example 2
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Intermediary
 Example 3


Alternative 1
Alternative 2
 Example 4

Broker is solo practitioner? May broker
act as intermediary?
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Intermediary
 Example 5

When broker owns small firm and actively
sells, may broker appoint himself?
 Example 6

I have a listing, and an unrepresented
buyer wants to make an offer, must I act as
an intermediary?
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Conflicts Arising in Early Termination of Agency
Representation
 Agency relationship is highly personal
requiring continuing consent of parties.
 Early termination might create liability.
 Case Study - Kim v. Ahn
 Early Termination


Compensation and Release of Contractual Obligation
Representing a Party Who is Subject to a Prior Agency
Relationship
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Working Both Sides of One
Transaction
 Refer to the chart in the
text book that portrays the
scenario where one broker
is representing both the
buyer and the seller.
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Chapter 3
Contract Issues
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Effective Date
 Effective date is most crucial date in contract.
 Who determines effective date? – May be
seller’s or buyer’s broker
 Four elements must be satisfied.
1. Final contract must be in writing.
2. Both buyer and seller must sign final.
3. Acceptance must be unequivocal.
4. Last party to accept must communicate
acceptance.
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Effective Date
 If the effective date is not filled in, is there
no contract? – No, parties have mutually
instructed broker to fill in final date.
 Is effective date the first day? - No. Buyer
has right to terminate within 5 days of
effective date of 1/1. Buyer may terminate
until 11:59 p.m. on 1/6.
 Is the effective date Saturday or Monday?
Elements of final acceptance can be satisfied
on Saturday.
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Paragraph 11 — Special
Provisions
 Licensee may insert only factual statements
and business details into contracts.
 Inserting a provision that materially affects
legal rights or duties may be unauthorized
practice of law.
 Licensees may use TREC adopted NonRealty Items Addendum. (Voluntary)
 Case Study - Lewis v. Foxworth
 Case Study - Johnson v. Conner
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Paragraph 11 — Special
Provisions
 As-Is Clause
 Brokerage Fees
 Poorly Drafted Clauses
 Factual Statements and Business Details
 Matters that may be appropriate
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Multiple Offers
 In Texas, seller does not have to do anything.
 Licensees might argue but seller has several
choices regardless of which offer was first
 Deal With Multiple Offers Before You
Receive Them
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Chapter 4
Defect Disclosure
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Seller’s Disclosure of Property Condition
 Property Defects- some irregularity that
mars a property’s appearance or causes
some aspect of property to weaken or fail.
 Involves appearance or structure.
 (Coldwell Banker Whiteside v. Ryan
Equity).
 Exceptions to the Seller’s Disclosure Form
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Disclosure
 Seller and broker must disclose any known
defect regardless of whom broker represents.
 Applies to residential and commercial.
 Texas Property Code provides that a seller of
not more than one residential unit is to
complete and deliver a seller’s disclosure
notice.
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Defect Disclosure FAQ
 What if I learn there is a defect, but the
seller does not want it disclosed?
 Why do multiple variations of seller’s
disclosure notice exist?
 Must every seller deliver seller’s
disclosure notice to a prospective buyer?
 Is relocation company required to deliver
notice?
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Defect Disclosure FAQ
 Must a seller disclose previous death at a
property?
 Must a seller disclose prior water
penetration in a property?
 Must seller or broker disclose registered
sex offender resides in neighborhood?
 Is an off-site condition considered a defect
(eg., roadways, landfills, feed lots, etc.)?
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Defect Disclosure FAQ
 Must listing broker or seller provide copy
of a prior inspection report?
 May a listing agent instruct a buyer or
buyer’s agent not to provide a copy of the
inspection report the buyer may obtain?
 Case Study
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Chapter 5
Advertising
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TRELA prohibits licensee from publishing an
advertisement that:
 misleads or is likely to deceive the public
 tends to create a misleading impression
 fails to identify person causing the
advertisement as a licensee
 “Advertisement” updated to encompass
broad variety of electronic communications
 Information on a website and behind a
firewall requiring a password or registration,
is not considered an “advertisement.”
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Including Broker’s Name
 Rule requires licensees to clearly include
broker’s name in all advertising.
 Broker must notify commission within 30 days
of starting or stopping use of assumed name.
 See text for examples of correct and
incorrect advertisements.
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Advertising Issues
 Teams
 Teams & Assumed Names
 Corporations & Trade Names
 Signs
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Chapter 6
Intellectual Property
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Copyright Infringement
 Giving credit to newspaper NOT good
enough for copyrighted material.
 Apply to blogs, websites and social media
postings as well as printed materials.
 Licensee wishing to give opinion about an
article may simply refer to the article and
should NOT cut and paste entire article.
 Copyright FAQs available at
http://www.copyright.gov.
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Other Copyright Issues
 Private Industry Association Forms -
created by associations such as TAR, may be
used only by association members.
 Photographs and Music - frequently
copyright protected so licensee should be
certain to read all the fine print.
 Software - Use licensed software on all
equipment because copyright infringement
lawsuit will eliminate money saved by not
purchasing a license
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Chapter 7
Dispute Resolution
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Mediation
 One of the five recognized types of
Alternative Dispute Resolution (ADR).
 Mediation resolution procedure - a forum
before an impartial person (mediator) to
facilitate communication to promote
reconciliation, settlement or understanding.
 Mediators - no decisions or awards.
 In a successful mediation, parties agree on
a settlement in writing.
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Mediation
 Mediation has been used to settle a high % of
disputes - many Texas judges require
mediation before hearing a case.
 Numerous mediation service providers,
county supported mediation services, private
mediators, university law schools, and
professional and trade associations.
 Mediators should remain neutral, but their
expertise can provide valuable guidelines for
settlement.
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Arbitration
 Arbitration - forum where parties and counsel
present their positions before an impartial
third party who renders a specific award.
 Parties must agree to arbitrate a dispute.
 Arbitration procedure calls for complaint or
petition to be filed describing the dispute.
 Prevailing party may seek to enforce award
and awards may be appealed on procedural
or due process grounds.
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Chapter 8
Unlicensed Assistants
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Assistants
 Determining Brokerage Activity – Is the
activity “real estate brokerage” done “for
another” with intention of collecting something
of value.
 Two categories of activities:
 Direct: - Where person helps buy, sell or
lease property, negotiating, showing.
 Indirect: Licensure required of those who
procure or assist in procuring prospects
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Assistants
 May an unlicensed person host an open
house?
 May assistants set appointments?
 May assistant drive a buyer to a listing
and let the buyer into the home?
 May unlicensed assistant answer phone;
place signs; open a property, accompany
inspectors, or place advertisements as
directed by the broker?
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Assistants
 May assistant answer phone; place signs;
open a property, accompany inspectors,
or place newspaper ads?
 Which functions may an office manager
perform?
 Does a bookkeeper need to be licensed?
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Assistants
 May unlicensed assistants assist in
arranging financing?
 May unlicensed persons serve as property
managers?
 What can a licensee do to avoid criminal
or disciplinary actions?
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Chapter 9
TREC Cases
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TREC Cases
 Misidentifying a Trust Account


Result: Broker entered into agreed order
TREC reprimanded and assessed $1,500
 Not-So-Timely Condo Documents
 Both agents didn’t read or understand contract
terms
 Result: All licensees entered into individual
agreed orders with TREC
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TREC Cases
 False Promises

Result - TREC issued advisory letter that
short sale negotiators not subject to TREC’s
jurisdiction.
 Roof Repairs

Result: Buyer’s broker entered into an order
with TREC and was formally reprimanded and
paid penalty of $1,000.

Also agreed to take 30-hour agency course
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TREC Cases
 Missing Rent Payments

Result: Broker entered into agreed order to a
probated suspension of license for one-year
and agreed to take 30-hour agency law course
and paid an administrative penalty of $5,500
 Ignoring the Client

Result: Broker entered into order admitting he
leased property on terms not authorized and
engaged in dishonest conduct, and agreed to
surrender his license
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