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Texas Pre-License - Law of Agency

Level 1 Summary

Agency Concepts

STUDY GUIDES

Level Summary

Congrats on (almost) completing Level 1! In this summary chapter, we’ll review the most important concepts you just learned.

Pro tip: After this chapter, there will be a short assessment on these concepts!

_Agency _

#What is Agency? An agency relationship is "a fiduciary relationship created when one party (client) authorizes another party (agent) to represent their best interests and the agent accepts that responsibility."

Texas buyers, sellers, landlords, and tenants seek the professional services of Texas license holders to represent their interests in real estate transactions — and Texas license holders owe their clients fiduciary responsibilities.

TREC and TRELA

The Texas Legislature established the Texas Real Estate Commission (TREC) in 1949 to safeguard consumers in matters of real property transactions and valuation services.

TREC's purpose is to regulate educational and licensing programs that maintain standards AND interpret legislation that affects the real estate profession — primarily the Texas Real Estate License Act (TRELA).

Agency Roles

#Professionals in the Real Estate Industry Here's a little refresher on the distinctions between some pretty important real estate titles.

Broker: An individual licensed by TREC to perform brokerage duties; sponsors sales agents to represent clients on their behalf

Sales agent: An individual holding a sales agent license from TREC who is sponsored by a broker

License holder: A broker or a sales agent licensed by TREC

REALTOR®: A licensed sales agent who is a member of the National Association of REALTORS®.

Brokers

#Brokers: Licensed to Perform Brokerage Acts A broker is an individual licensed by the

1 of 3 (TX.RE-PL-LAV.L1.C7 - Level 1 Summary)

Texas Real Estate Commission (TREC) to perform brokerage acts. Brokers are responsible for fulfilling fiduciary duties to their clients.

Brokers may also sponsor and supervise sales agents, and are liable for all sponsored actions committed by their sales agents.

Four Different Types of Agents

Listing Agent: A broker representing a seller in a real estate transaction, a.k.a. seller's agent, seller's broker, or listing broker

Buyer's Agent: A broker representing a buyer in a real estate transaction, a.k.a. selling agent, buyer's broker, or selling broker

Tenant's Agent: A broker representing a tenant in a real estate transaction

Landlord's Agent: A broker representing a landlord in a real estate transaction

Roles of the General Public

Here are the four roles that the general public plays in a real estate transaction.

Principal: The major parties of the transaction (the buyer and seller or landlord and tenant) or a party who has authorized an agent to represent themClient: Anyone who has an agency relationship with you or your broker is your clientCustomer: A party to the transaction who has an agency relationship with another license holderThird Party: All non-client parties to a transaction, including real estate professionals

Agency Relationships

#Agency Relationships: Mutual Agreement Required It takes two to form an agency relationship, Agent. Agency relationships require the consent of both parties (client and agent), which can be demonstrated by one of three methods:

Written agreement '�þ�Oral agreement Ø=ÝãAction Ø=ÜƒØ<ßý

Note: To prevent miscommunication and other problems (and to protect their commissions!), license holders should always form their agency relationships in writing.

Let's Get Quizzical!

Congrats on finishing the level!


Now you’ll need to complete a short assessment, where you’ll need to earn a 100% to move onto the next level. You got this, Agent.



Level 2 Summary

Basic Agency Relationships

STUDY GUIDES

Level Summary


Pro Tip: After this chapter, there will be a short assessment on these concepts!

Agency

Agency refers to agency relationships where agents advocate on behalf of their clients.

Real estate brokerage is a type of agency, referring to how the real estate broker is their client's agent and advocate on behalf of their clients.

An agent is any individual acting as a representative for another individual in dealings with a third party. The agent is authorized by the person they represent to act on that person’s behalf.

Types of Authority

#Express Authority Express authority is when a client has given an agent explicit permission for an action. Express authority can be given both verbally or through a written agreement.

Other Ways to Create Agency

Agency by ratification is when a license holder acts without authorization on behalf of a principal and the principal accepts those actions after the fact, thus affirming the actions taken and creating retroactive agency.

Ostensible agency occurs when a principal allows a license holder to act in such a way as to cause a third party to believe that the license holder is the principal’s agent.

Agency by estoppel is agency imposed by law when it is determined that ostensible agency existed. It is used to create legal accountability for the agent or the principal on whose behalf the agent acted. Agency by estoppel occurs in an environment of ostensible agency.

Special Agency

#Three Agency Types: Special, General, and Universal There are three different types of agency relationships:

Special Agency (broker-client)General Agency (sales agent-broker)


Universal Agency (child-parent as executor of will)

General Agency

#General Agency: Broker and Sales Agent General agency is the most common type of agency between brokers and their sales agent. And their general agency relationships can be a little confusing.

Principal: The broker is the principal of the agent.Agent: The sales agent is the agent of the broker.

Role Explanation: The sales agent represents the broker in their relationships with clients. Sales agents help the broker fulfill their fiduciary duties to their clients, and in this way, the sales agents are general agents of the broker.

Universal Agency

#Universal Agency: The Most Broad Type of Agency Universal agency is the most broad type of agency. Universal agency gives agents a very general scope of power to act on behalf of their principal and make decisions on behalf of the principal. It describes any form of total legal stewardship over someone else.

Under universal agency, an agent is given the general power of attorney — this means the agent has the actual power to sign legal documents on behalf of their principal. Examples include a legal guardian who is able to enter into contracts on behalf of a minor or the executor of a will.

Agency Relationships = Fiduciary Relationship

Ultimately, an agency relationship is a fiduciary relationship between one individual (the principal) and another individual (the agent). In this relationship, the agent acts on behalf of the principal to negotiate with another individual (a third party), subject to the principal’s control and consent.

Fiduciary Duties

#Fiduciary Duty: Obedience It's important for license holders to understand that they must obey their client's decisions, as clients are the final decision makers in a real estate transaction — not the agents.

Who decides the sales price of a transaction? The buyer and seller.Who decides the amount of earnest money in the sale of a residential home? The buyer and the seller.

Agents advise their clients, but they ultimately obey their clients — with one exception:


the duty of obedience does not apply if the principal’s instructions are illegal or unethical in any way.

Honesty and Fair Dealing: Owed to All

While an agent does not owe fiduciary duties to all parties involved in a transaction, they do owe some things. All parties in a transaction are owed honesty and fair dealing. An agent needs to disclose two things:

1. Disclosure of representation: An agent must disclose to all parties their agency relationship

2. Disclosure of property condition: An agent must disclose all facts regarding property condition

Remember: the client (principal), on the other hand, receives all the fiduciary duties of their agent.

The Need to Disclose

"What must license holders disclose?"

In order to ensure that all parties understand whose interests are being represented in a transaction, license holders (brokers and agents) must disclose to all parties who they are representing. License holders who fail to do this are in violation of TRELA and could face the loss or suspension of their real estate license and/or a fine!

Example: Hi, Shane! My name is Josh and I'm the listing agent for 7565 Krollton Drive. I'd be happy to show you the property.

Information About Brokerage Services (IABS)

Texas law requires all brokers and sales agents to provide written notice regarding information about brokerage services at the first substantive communication with prospective buyers, tenants, sellers, and landlords concerning specific real property. The Information About Brokerage Services (IABS) Notice is the required method to provide that information to those parties.

The IABS Notice serves to establish broker minimum duties and to disclose the types of representation available to the parties right up front.



Now you’ll need to complete a short assessment, where you’ll need to earn a 100% to


move onto the next level. You got this, Agent.



Level 3 Summary

Scenario-Based Learning Exercise: Document! Document! Document!

STUDY GUIDES

Scenario-Based Learning Exercises

#Scenario Based Learning Exercises This is your first Scenario Based Learning Exercise in the Law of Agency course. You will watch a video that details a real-life situation and then take a four-question quiz about it. You'll need to score 75% or better on the quiz in order to move on.

Ready? Let's do it.

Up Next: The Duty-Bound License Holder

#The Duty-Bound License Holder In Level 2, we talked about the fiduciary duties (OLD CAR) that license holders owe their clients, along with what agents need to do with respect to proper IABS disclosure. The video you're about to watch touches on those topics.

Enjoy...

One Life to List: Document! Document! Document!

Hopefully these documents are resistant to fire because things are starting to heat up on One Life to List.

The Discussion

#The Reviews Are In Wow! That document drama took a real turn at the end. I need to cool down a little bit. Let's talk about what we just witnessed.

Information About Brokerage Services

One thing the agent did do correctly was to give his client the Information About Brokerage Service (IABS) form at the very beginning. Unfortunately, his explanation of it was little more than "the real estate commission requires you to sign it."

This is a problem on a couple of fronts.

The Listing Agreement

As with the IABS, the agent's explanation of the Listing Agreement was woefully incomplete.

That's a shame, because when properly filled out and explained, a Listing Agreement, in conjunction with the IABS, can set the foundation for a successful agency relationship between licensed real estate professionals and their clients.


Let's Get Quizzical

#The Forgotten Restriction: The Discussion (cont.) What should have Ash and Sam done?

All license holders who sell condominiums need to be educated and knowledgeable on all documents in a homeowner’s association. Those documents include: CC&R’s (Covenants, Conditions, & Restrictions) Financials, Resale Certificates, dues, assessments, bylaws, articles of incorporation, and any additional disclosures. A license holder should know what these documents are, and what their purpose is for the specific property and HOA.



Level 4 Summary

Duties and Disclosures to Third Parties

STUDY GUIDES

Level Summary

Pro Tip: After this summary, there will be a short assessment on these concepts... soooo I recommend paying attention.

TRELA on Honesty and Fairness

Recall that license holders must:

Be honest and fair with all parties, including customers who are not their clientsAlways disclose who they are representingEnsure that the Seller's Disclosure Notice (SDN) reveals all material factsAdvise buyers to have the abstract examined by an attorney and to obtain a title insurance policyGive copies to all parties who sign a document and request a copyDisclose who they are representing in a transaction

Customers: On the Other Side

Before I describe the duties that license holders owe customers, let's review who the customers are in a real estate transaction.

Client: A person who has signed an agency agreement with you as their agent, a.k.a your principal.Client Example: A seller who has signed a listing agreement with a license holder is the client of that license holder.

Customer: A person on the other side of the transaction with whom the license holder does not have an agency relationship.Customer Example: A listing agent negotiating with a buyer on the purchase of their seller's home would consider the buyer their customer.

An agent works for the client and with the customer.

The Duties of Honesty and Fairness

License holders owe all parties (customers and clients) at least the following two duties:

Duty of Honesty: License holders are expected to never mislead parties to a transaction. This includes not giving false promises and always disclosing any material fact to a transaction.

Duty of Fairness: License holders are expected to act in a manner that is fair to all parties. This includes always disclosing their agency relationships so that it is clear who


they are representing.

Third Party Examples

Any individual in a real estate transaction who is not your client is a third party.

Third Party Examples:

home inspectorloan officerappraiserinsurance agentreal estate attorneyescrow officertitle agentbuyer represented by another license holderseller represented by another seller

All customers are third parties. But not all third parties are customers. Remember that!

What Is a Material Fact?

Remember learning about material facts in this level? I sure do! Prospective buyers need to be informed of all material facts about the property.

Material Fact: A fact that could possibly persuade a buyer or seller to change their decision if they knew about it as opposed to a trivial fact.

Example: If you were showing a buyer a house and you failed to mention that the house's foundation was 12 inches off from center, the buyer could hold you accountable for never mentioning this fact as they would probably make a different decision if they had known this material fact.

Disclosure and Misrepresentation Problems

TREC Rules require that the license holder disclose all known information that may affect the buyer's decision to accept or reject offers and keep the buyer informed of all significant information.

License holders must disclose all known information as well as not misrepresent any information that may affect a buyer.

Defects and Malfunctions

Defects and malfunctions are two types of disclosures required by the Seller's Disclosure


Notice.

A defect is an item that was installed or is attached to the home and has an imperfection.

A malfunction is when something is designed or built to perform a certain function and no longer does so.

So a defective plumbing system might be one that was manufactured with a poorly soldered seam and leaks, but a malfunctioning plumbing system might have been great until the tree roots readjusted their alignment and now the water does not flow properly.

Permitted Disclosures

Permitted disclosures are those disclosures that are not required, but also not forbidden. For example, the law specifically says that death on a property does NOT have to be disclosed if it was from natural causes, an accident unrelated to the property, or suicide. The seller is permitted to give the agent instructions to disclose it if the seller decides to do so.

The law also specifically says that the seller does NOT have to disclose registered sex offenders. But the seller is permitted to give their agent instructions to disclose it if they so choose.

Permitted means exactly that — you are permitted to disclose the information (in that it is not illegal), but are not required to disclose.

Unlawful Disclosures

Lastly, there are unlawful disclosures, which are disclosures that you are legally forbidden from making.

In order to comply with federal and state fair housing laws, neither the seller nor the license holder may ever disclose any information in regard to the Fair Housing protected classes, including race, color, religion, sex, familial status, disability (including HIV/AIDS status), or national origin.

Stigmatized Properties 101

Buyers might not buy a property due to its condition. They may also not buy a property because of something that happened there — we call this a stigmatized property.

Some of the things that may stigmatize a property are:

MurderCrime


Death in a propertyGhosts*

Many times the property sells, but at a lower than market value price. These issues bring up many questions for real estate license holders.

*Yes. Ghosts.

Let's Get Quizzical


Now you'll need to complete a short assessment, where you'll need to earn a 100% to move onto the next level. You got this, Agent!



Level 5 Summary

Seller Agency

STUDY GUIDES

Level Summary

Congrats on (almost) completing this level! In this summary chapter, we’ll review the most important concepts you just learned.


Listing Agreements

As I'm sure you know, the safest way to enter into an agency relationship is through a written agreement. In the real estate profession, most license holders use written listing and buyer representation agreements rather than relying on oral agreements.

This helps ensure that everyone is treated fairly in a transaction, as well as ensures the broker gets their commission. Ø=ÜM

Seller Agency

Perhaps the most familiar agency relationship in the real estate industry is seller agency. Seller agency is the relationship between a real estate agent and the seller in the brokerage of homes.

Generally, this agency relationship is demonstrated and established in a listing agreement, which creates an agency relationship between a seller and a broker. The most common is an exclusive right-to-sell listing.

Four Types of Listing Agreements

There are four types of listing agreements.

Open Listing: Seller will pay any broker who brings a buyer who purchases the property.Net Listing: Seller establishes a minimum acceptable net price and will pay the broker the difference between the minimum price and the final sales price.Exclusive Agency Listing: Seller has an exclusive relationship with an agent but has the right to sell the property to named prospects for a lesser (or none) commission to the listing broker.Exclusive Right-to-Sell Listing: The most common type of listing. The seller guarantees the named broker receives a commission if the property is sold even if the seller brings the buyer themselves.

Exclusive Right-to-Sell Listing

The exclusive right-to-sell listing is a win-win for both the seller and the broker. This type of listing gives both the seller and the broker benefits and responsibilities, and it


gives them both the goal of getting the property sold for the greatest value.

Exclusive Agency Reminder

An exclusive agency listing agreement is one where the seller agrees to only use one listing agent.

If, however, the seller sells the home to a named prospect (say a neighbor or cousin), the seller owes the listing agent a smaller (or zero) commission — depending on what the two parties agree to in a written agreement.

Open Listing

With an open listing, the seller has the right to list the property with multiple competing brokers. They can also choose to sell the property personally so that they don't have to pay commission to a broker. Some sellers think that an open listing is in their best interest, but many brokers advise against open listings because it may put the owner at risk of having commission claims by more than one broker since they may be listing their property with multiple brokers.

It's not always easy to tell which broker was the procuring cause (the interaction between a seller and a broker that results in the purchase or sale of a property) of the sale, and that could lead to expensive procuring cause lawsuits, each broker claiming they are the one who deserves the commission.

Net Listing

The last type of listing agreement we'll go over is a net listing. With a net listing, the seller establishes a minimum acceptable net price. In these cases, the broker's commission comes from the difference between the seller's established minimum price and the price that the buyer is willing to pay.

As you can imagine, the potential for legal issues here is great. This is why net listings are not legal in a lot of states. They may be legal in Texas, but TREC has passed two specific rules in order to minimize the potential for abuse in net listing situations.

Subagency

#What Is a Subagent? In Section 1101.002 of the Texas license law, a subagent is defined as a license holder who:

represents a principal through cooperation with and the consent of a broker representing the principalis not sponsored by or associated with the principal's broker


Earned Commission

There are several ways in which you earn your commission without the home selling and that’s when the list price becomes very important.

When an agent produces a ready, willing, and able buyer and the seller accepts the offer, that agent's commission has been earned.

If for any reason, the seller breaches the listing agreement, the commission is also considered earned.

Duty to Disclose Material Facts

The agent must inform the third party of any material facts that they know about the property. A material fact in a real estate transaction is any fact that is significant or essential to the transaction – that is, any piece of information that could reasonably be expected to influence a prudent individual’s decisions regarding the transaction.

This duty requires the agent to disclose latent or hidden defects in the property that may not be identified by an ordinary inspection but could alter the customer’s decision regarding the property.

Careful When Talking About Terms

While a seller's agent must always inform prospective buyers of material facts, they need to be careful when talking to prospective buyers about price and terms.

According to the law of agency, a seller's agent can only state terms that are included in the listing agreement.

Essentially, don't put words into your client's mouth. Suggesting additional terms or a price change without the client's approval can get an agent into hot water.

Listing Agreement Terms

#Listing Agreements - Section 4: Term The "term" is the span of time for which this contract will be enforced.

Do Not: Write the starting date as the day that you plan to put the listing on the MLS.

Do: Write the starting date as the day the sellers sign the listing agreement. (This keeps you and your broker fully covered.)

This paragraph gives your seller the ability to make your listing null and void if they make an arrangement with someone to sell the listing before your listing agreement "


term" starts.

Texas Disclosure Guidelines

License holders have the general duty to disclose agency relationships to all parties involved in a transaction. There are actually two requirements to disclosing agency:

1. Tell everyone (agents, customers, and prospects) whom you represent (if any) at first contact. This disclosure is required at open houses. This disclosure can be oral or in writing.

2. Give the written statutory statement (IABS Notice) at the first substantive discussion about a specific property.

Written Agreements

#In Plain English, Please TRELA code says:

An oral agreement to represent the seller is not illegal. However, without a signed, written agreement, if the seller refuses to pay a commission based solely upon an oral agreement, the broker could not pursue court action against the seller to collect the commission.

The safest way to establish an agency relationship with a seller is to do so in writing.

Before You Sign

Before they sign a listing agreement, sellers should be advised about a few things, like:

The license holder's opinion of the property's market value (like we just discussed)Pricing trends that may affect the final sales price of the propertyThe Information About Brokerage Services Notice

Let's Get Quizzical





Level 6 Summary

Buyer Agency

STUDY GUIDES

Level Summary



Buyer Agency

#The Buyer’s Agent The license holder becomes the buyer’s agent (also known as the buyer’s representative) by entering into an agreement to represent the buyer, usually through a written buyer representation agreement.

A buyer’s agent can assist the owner but does not represent the owner and must place the interests of the buyer first. All fiduciary duties are owed to the buyer.

How Agency is Created

Buyer agency can be created in three possible ways:

1. Actual agency - Refers to actions an agent has been authorized (orally or in writing) to complete on behalf of a principal.

2. Apparent or ostensible agency – When a principal allows a license holder to act in such a way as to cause a third party to believe that license holder is the principal’s agent.

3. Agency by Ratification - When the principal accepts an agent's actions after the fact, thus affirming the actions taken and creating retroactive agency.

Refresher: What is Disclosure?

A real estate disclosure essentially is comprised of statements of facts associated with real estate transactions that by law must be disclosed. Real estate disclosures are governed by state and federal law. These laws determine and specify which information real estate agents and brokers are required to disclose to both buyers and sellers, as well as the information that sellers must disclose to real estate brokers and buyers.

Let's Get Quizzical




Level 7 Summary

Representing More Than One Party in a Transaction: Intermediary Brokerage

STUDY GUIDES

Level Summary



The Intermediary Role

#Intermediary Brokerage Intermediary brokerage is formed when a single transaction is negotiated within one brokerage and during which proper representation for both the seller and the buyer takes place in accordance with Section §1101.559 of the Texas Real Estate License Act. Intermediaries (brokers) must:

First receive written consent from both parties — this is usually done through either a listing agreement or a buyer representation agreementTreat both parties fairly and honestlyNot disclose confidential information

Dual Agency: Not Legal in Texas

Dual agency occurs when a broker represents both a seller and a buyer in a single real estate transaction according to common law precedent. The laws regarding the legality and application of dual agency vary by state.

Dual agency is not legal in Texas ; it has been replaced with intermediary brokerage.

In dual agency, neither the seller nor buyer receives advice or opinions as opposed to intermediary-with-appointments where fiduciary representation is given to both parties, including giving advice or opinions. Because dual agency does not oblige the agent to perform full fiduciary duties, this form of representation is known as a limited dual representation.

Let's Get Quizzical




Level 8 Summary

Creation & Termination of Agency

STUDY GUIDES

Level Summary

Congratulations: You’re just about done with Level 8! Before heading over to Level 9, let’s do a quick review of the major concepts of this level. A little repetition never hurt anyone...unless you accidentally hit your thumb with a hammer. You wouldn’t want to repeat that.

Note: After this chapter, there will be a short assessment on these concepts!

Agency Creation

Agency can be described in terms of...

The manner in which it is createdThe degree of authority and liability it bringsThe form that it takes.

Types of Agency

#Express Agency Express agency is created when the principal explicitly instructs the broker/agent to act on their behalf. The best forms express agency can take are the listing agreement and the buyer/tenant representation agreement.

Termination of Agency

#The Best Way to Terminate Agency Agency can be terminated in a number of ways, but the most desirable way to terminate agency is when the purpose for that agency has been fulfilled. Both parties, client and agent, go their separate ways with happy memories of the agency relationship.

Duties that Survive Termination

A fiduciary duty that never terminates is the duty of confidentiality. Any confidential information that an agent learns of during an agency relationship with a principal must remain confidential forever — regardless of whether the termination was amicable.

Along with the duty of confidentiality, the duty of accounting is another duty that license holders have that survives agency termination. License holders are required to account for all funds and/or property that clients have entrusted to them during their agency relationship. And, once these items have been handed over, the license holders are then expected to forever maintain confidentiality regarding the financial affairs of the client.



Congratulations on finishing the level!

Now you'll need to complete a short assessment, where you'll need to earn 100% to move on to the next level. You got this, Agent.



Level 9 Summary

Clarifying Agency Relationships

STUDY GUIDES

Level Summary

Congrats on (almost) completing Level 9! In this summary chapter, we’ll review some of the most important concepts you learned in the level.

TREC

The Texas legislature established the Texas Real Estate Commission (TREC) in 1949 to safeguard consumers in matters of real property transactions and valuation services. The agency provides licensing, education, and complaint investigation services, as well as regulation and enforcement of applicable state and federal laws and requirements.

They are the body that oversees and enforces the statutes and rules that dictate industry disclosure policy and the mandate for brokers to have written company policies for their brokerages.

Disclosure Policy

When we talk about disclosure policy, we’re simply referring to the obligations of disclosure that a broker or agent has to customers, clients, and third parties to a real estate transaction. Statutory requirements can differ, depending on...

With whom the license holder is interactingWhere the interaction took placeWhat was being discussed

Three Exceptions

#Three Execeptions Three exceptions to the written notice requirement include:

1. If the transaction is for a lease less than a year with no plan for sale2. If the party is already known to the license holder to be represented by another

license holder3. The interaction occurs at an open house and the communication concerns that

property

Current Status: In a Relationship

If a license holder is already in an agency relationship, they have an obligation to immediately disclose that relationship to another party to the transaction or another license holder who represents another party to the transaction.

This disclosure can be given orally or in writing.

Substantive Dialogue


Substantive dialogue or "substantive communication” refers to interaction a license holder has with a customer that is significant because it relates to specific real property.

It triggers the need for a written notice (usually an IABS Notice) about the roles that a license holder might play in a transaction. General observations or statements about real estate or the local market usually won’t rise to the level that conversations about a specific property will.

IABS

The Information About Brokerage Services (IABS) Notice is a TREC form that contains the text required for the written notice a license holder will give to a customer after having entered into a substantive dialogue about real property. Brokers are not required to use TREC’s IABS Notice, but they usually do because the formatting rules of the written notice mimic that of the IABS Notice anyway.

Pro Tip: The IABS Notice must be filled out by the broker prior to handing it out.

Agency & Disclosure

In a real estate context, agency is a consensual relationship between a broker and a client. Once established, an agency relationship imposes a fiduciary responsibility upon the broker (or the sponsored agent) to act in the best interests of the client. This is why agency — or the lack thereof — must be disclosed as early as possible.

All parties in a transaction deserve to know who is represented by whom.

Implied Agency & Disclosure

Implied agency arises when a party assumes an agency relationship based upon inferences formed from another party’s actions, conduct or words. Implied agency is not typically a desirable thing. It’s usually the result of misunderstanding and lack of proper and timely disclosure on the part of the license holder.

Where there is ambiguity, the courts rule in favor of the consumer, not the license holder. Early disclosure of agency will help prevent the problems implied agency brings.

Brokerage Policy Manual Requirements

The Real Estate License Act (TRELA) requires brokers to establish policies and procedures for their brokerages.

TREC Rule §535.2(i) reinforces that requirement by mandating that brokers put those company policies and procedures in writing — which take the form of the brokerage company policy manuals you see today.


This is where license holders can find the disclosure and agency policies they are authorized to operate under by their broker and guidelines regarding adherence to state and federal laws, TRELA, and TREC rules. Brokers rightly view their brokerage company policy manuals as a risk management tool.

TREC Rule 535.2(i): Agent Guidelines

TREC Rule §535.2(i) specifies that a broker's policy manual address the following for sponsored agents:

They are advised of the scope of their authorized activities and are competent in those activitiesThey maintain their license in active statusTheir compensation is paid by, through, or with the written consent of the brokerThey are notified, before the effective date of the change, of any change to the Act, Rules, or Commission promulgated contract formsThey complete minimum continuing education requirements and any additional education necessary to maintain competencyThey comply with the Commission's advertising rules

Agency Relationship Strategy

Before writing policies regarding how agency relationships will be handled, the broker will need to determine if the brokerage will specialize and/or limit license holder activity to specific types of agency relationships.

Will the brokerage be a seller agency only? A buyer agency only? Or will the brokerage allow intermediary transactions? If so, will they be with or without appointments?

Documentation of Disclosure

A license holder can mitigate future problems if they document when disclosure of agency relationships take place. Documentation is a vital component of risk management.

Get it in writing, Agent!

Subagent

When a subagent works with a buyer, the buyer is their customer, NOT their client. Therefore, the subagent represents the seller through cooperation with the seller’s listing broker. The subagent is NOT sponsored by the listing broker but may be paid a commission, depending on whether that is provided for in the listing agreement.

The subagent must take care to disclose to the buyer that there is no agency


agreement between them...that the subagent is working in the best interests of the seller. While subagency is legal, in reality it is not all that common of a practice.



Now you'll need to complete a short assessment, where you'll need to earn 100% to move on to the next level. You can do it, Agent.



Level 10 Summary

Employment Issues

STUDY GUIDES

Level Summary



Independent Contractor Status

The vast majority of real estate sales agents operate as independent contractors. Right now it's the industry standard and is supported by IRS code, Section 3508(b).

IRS guidelines determine if a person is an employee or an independent contractor.

Safe Harbor & TEFRA

Section 530 of the Revenue Act of 1978 is known as the Safe Harbor — a place of refuge for those industries Congress felt were victims of an overly aggressive IRS practice of attempting to reclassify independent contractors as employees. It specifically addresses the independent contractor status of real estate agents.

Safe Harbor was initially viewed as a temporary truce between employers and the IRS but was extended several times before being made permanent as part of the Tax Equity and Fiscal Responsibility Act (TEFRA) in 1982.

Three Buckets of Control

The IRS determines whether or not a worker should be considered an employee in part by focusing on degrees of control and independence. These are the three control categories (or "buckets"):

1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does their job?

2. Financial: Are the business aspects of the worker’s job controlled by the payer? (These include things like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)

3. Type of Relationship: Are there written contracts or employee-type benefits (i.e., pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

If the answer to these questions is 'yes,' the worker is most likely an employee.

Getting the Big Picture of Control


First, the IRS employee vs. independent contractor classification is evaluated on the basis of control. The distinction is based on the level of employer control as a whole rather than the presence or absence of a certain, single condition.Second, the Safe Harbor/TEFRA provides a "control allowance" for the broker/sponsored agent relationship because state regulations require a degree of broker control and oversight that would normally indicate employee status.Third, the Independent Contractor Agreement and Statement of Understanding are used to ensure the broker and agent are in agreement with the independent contractor status for the agent.

These three components combine to explain why and how the broker and sponsored agent relationship works.

The Employee Agent

It's not common, but some brokers hire their sales agents as employees. In this case, all of the control factors typical of an employer-employee relationship will likely be present. The broker may control these aspects of the job:

Work scheduleMeeting and training attendanceProduction quotasDress code policyReporting requirementsCompany supplied tools of the trade (office access, computer, forms, and supplies)Administrative supportCompany benefits (health insurance, vacation/sick time, profit-sharing)

Income and Taxes

Employees and independent contractors are generally treated differently when it comes to income and taxes.

Employees:

Paid a salaryIncome taxes and social security are withheld from their salaries

Independent contractors:

Paid via commissionIncome taxes and social security are NOT withheld and must be paid by the independent contractor

The Principal is the Real Boss


Sometimes we focus so much on the unique relationship between the agent and the broker that we forget who the real boss is: the principal.

After all, it's the principal that hires the broker (and, by extension, the sponsored agent) and is responsible for the fees earned. Like so many things in life, if you follow the money, you'll find out where the power and authority reside. But if you take a close look at how the relationships work, you'll see that the brokers in these "employment contracts" operate more like independent contractors than employees.

Special Agency

One reason brokers don't look at that themselves as employees of the principal is that the agreements entered into and the ensuing relationships that arise from that are generally short-term and limited to one activity or purpose:

Sell a propertyBuy a propertyLease/rent a property

In these short-term instances, the broker is operating under what is known as special agency.

Two Principal-Broker Employment Contracts

There are two primary "employment contracts" principals will use to "hire" a broker (or their sponsored agent). The principal will use one of these:

1. The listing agreement (between a broker and a seller)2. The buyer/tenant representation agreement (between a broker and a buyer or tenant)

These are both short-term, special agency agreements that are comprised of many tasks and responsibilities.

Duties of a Principal to a Broker

The duties a principal owes a broker in an employment agreement are these:

CompensationAvailabilityPerformanceReimbursementIndemnification

Broker Compensation


Regardless the type of employment agreement — listing, buyer/tenant representation, or property management — the principal and the broker need to make sure the terms and compensation (whatever form they take) are clearly spelled out in writing. Why?

While verbal agreements are legal in Texas, a broker will find it difficult, if not impossible, to legally compel a principal to pay a disputed compensation if the agreement is not in writing.

Personal Assistants

Before a broker or an agent hires a personal assistant, they need to determine what type of support they are looking for. If it involves real estate brokerage activities, the personal assistant must have their own active real estate license.

A licensed personal assistant can do anything a license holder sponsored by the same broker can do.

Representing the Broker

Whether you are operating as an employee or an independent contractor, you are representing your sponsoring broker in all your business activities. This authority comes to you via the general agency inherent with your employment agreement.

That general agency allows you to do two things:

1. Act on the broker's behalf for multiple transactions2. Bind the broker to a transaction

Compensation Rules & Regulations

The Texas Occupations Code §1101.651 and TREC Rules §535.3 and §535.131 lay out how compensation and commissions are to be paid and handled:

1. A license holder has no authority to accept or receive compensation except through their broker (TREC rules allowing the broker to make an exception by written consent).

2. A broker can only share or pay commissions to a license holder (in the state of Texas) or to a licensed foreign broker (as long as the foreign broker did not practice in this state).

If an agent receives money from someone other than their broker, the agent should bring the payment to their broker for handling.

Forms of Compensation


The independent contractor agent will most likely be compensated by their sponsoring broker via a commission. The variable here will be how the commission is paid. Common commission-based approaches to agent compensation include:

100% commission real estate officeRent-a-broker real estate officeCommission splits



The next thing you'll need to do is complete a three to nine question quiz, where you'll need to earn 100% to move on to the next level. You got this, Agent!



Level 11 Summary

Agency, Ethics, and the Law

STUDY GUIDES

Level Summary



Laws, Laws, Laws

Laws are rules that are enforced by government authority (whether local, state, or federal). They are official and require mandatory compliance. Laws create order in society by establishing a “social contract” between citizens and the government.

Ethics and Morals

Ethics are standards of conduct agreed upon and recognized by a particular group or culture. For example, there are business ethics that pertain to the corporate world. Doctors have a standard of ethics that shape their behavior as doctors.

Morals are the personal values derived from a system of beliefs. Most of us were raised to believe that certain things are right and certain things are wrong. These principles are usually based on religion and philosophy. While morals are generally instilled in us at an early age, our experiences throughout our lives shape and evolve our morals — sometimes a little bit, sometimes a lot, and sometimes not at all.

The main differentiating factor here is that ethics are determined by an external group and are standardized, while morals are held internally and vary by the individual.

Ethics for Real Estate Agents and Brokers

As a real estate agent, you’ll need to not only follow the laws, but you’ll also need to adhere to the codes of ethics agreed upon by your industry. And much like the law, there are consequences for failing to adhere to the National Association of REALTORS® Code of Ethics, and the TREC Canons of Professional Ethics and Conduct.

Consequences for violating these published codes of ethics can include disciplinary action, loss of membership, suspension or loss of real estate license, as well as potential litigation. You can find the specific causes for disciplinary action in Section 1101.652 of TRELA, Grounds for Suspension or Revocation of License.

Federal and State Laws

Federal Laws are created by the federal government (including supreme court rulings, legislative action, and executive orders handed down by the president) and apply to all


50 states.

State Laws are created by each state individually and are applicable only to that state.

Important Acts

#Some Important Acts Federal Fair Housing Act (or FFHA):

Protects from discrimination when renting, buying, or securing financing for any housing. The prohibitions specifically cover discrimination because of race, color, national origin, religion, sex, disability, and familial status.

Americans with Disabilities Act in 1990:

Identified and defined the protected disabilities.

Codified that any buildings built after March 13, 1991 with public access or employees, must have features that provide reasonable access for people with protected disabilities.

Canon of Professional Ethics

The Canon of Professional Ethics is made up of six individual rules that are written and enforced by TREC. While we will not dive into them now as thoroughly as we do in our Principals 1 course (you are taking that course with us, too, aren't you, Agent?), I do want to quickly list them for easy reference for you here:

1. §531.1 Fidelity2. §531.2 Integrity3. §531.3 Competency4. §531.18 Consumer Information5. §531.19 Discriminatory Practices6. §531.20 Information About Brokerage Services

NAR Code of Ethics

The Code of Ethics and Standards of Practice of the National Association of REALTORS® was adopted in 1913 to establish a widely-held code for conducting business in a proper fashion. The NAR Code of Ethics consists of a Preamble and 17 Articles:

The first 9 Articles are Duties to Clients and CustomersArticles 10 through 14 are Duties to the PublicArticles 15, 16, 17 are Duties to REALTORS®


Kickbacks

A kickback, as the government sees it, is considered to be any money, fees, commission, credit, gift, gratuity, thing of value, or compensation of any kind for improperly obtaining or rewarding favorable treatment.

The SEC

The mission of the United States Securities and Exchange Commission (or SEC) is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

Antitrust

The Sherman Antitrust Act is a landmark law that was passed in 1890 (so, a million years ago) that prohibits the formation of trusts, or monopolies, in the marketplace. Specifically, it prohibits:

Price fixingCollusionAssignment of market areas between brokeragesGroup boycotts

TREC

#2-4-6-8! Who Does TREC Regulate? TREC oversees educational and licensing programs to maintain standards of the real estate profession AND interprets legislation that affects the real estate profession.

TREC regulates the activities of:

Real estate brokers and sales agentsInspectorsEducation providers who offer real estate and inspection coursesResidential service companiesTimeshare developersEasement or right-of-way developers

(Those who deal strictly in easements or rights-of-way are not issued a license but a certificate of registration.)

Grounds for Suspension or Revocation of License

A partial selection of Section 1101.652 of TRELA provides a list of Grounds for Suspension or Revocation of License. Condensed explanations of those grounds


follow on the next several screens:

Procurement of a license by fraud, misrepresentation, or deceitFailure to surrender to an owner, without just cause, a document or instrument that is requested by the ownerEngaging in misrepresentation, dishonesty, or fraud when selling, buying, trading, or leasing real property in the name of: (A) the license holder; (B) the license holder's spouse; or (C) a person related to the license holder within the first degree by consanguinity

Protected Classes

Texas even includes one protected class more than the seven included in the Federal Fair Housing Act (hint: it’s ancestry). Everything’s bigger in Texas — even our fair housing laws, which you can read more about in TREC's Canons of Professional Ethics and Conduct, found in Chapter 531 of the Texas Administrative Code (TAC).

RaceColorReligionSex/genderNational originAncestryFamilial statusDisability

Commission Consequences

The Commission could suspend or revoke a license or take other disciplinary action if a license holder engages in misrepresentation, dishonesty, or fraud when selling, buying, trading, or leasing real property in the name of:

The license holder's spouse, orA person related to the license holder within the first degree by blood

Unauthorized Practice of Law

#Reminder: You're Not A Lawyer The commission may suspend or revoke the real estate license of someone who is not a licensed attorney in this state and who, for money or some other reward (present or anticipated, direct or indirect, or in connection with the person's employment, agency, or fiduciary relationship as a license or certificate holder), does the following:

Drafts an instrument other than a form prepared by the Texas Real Estate Broker-Lawyer Committee and adopted by the Commission that transfers or otherwise


https://texreg.sos.state.tx.us/public/readtac$ext.ViewTAC?tac_view=4&ti=22&pt=23&ch=531&rl=Y

affects an interest in real property, orAdvises a person regarding the validity or legal sufficiency of an instrument or the validity of title to real property.

Mediation

Since 1987, mediation has been one of the statutorily recognized types of Alternative Dispute Resolution (ADR).

Texas statutes define a mediation resolution procedure as a forum before an impartial person (the mediator) used to facilitate communication between parties and to promote reconciliation, settlement or understanding. Mediators do not make decisions or give awards.

Arbitration

Texas statutes define arbitration as a forum where parties and counsel present their positions before an impartial third party who renders a specific award. The parties must agree in writing to arbitrate a dispute. There are numerous arbitration providers, such as the American Arbitration Association, private attorneys, private arbitrators, and professional and trade associations. Typically, the arbitration procedure calls for a complaint or petition to be filed describing the dispute. The respondent will be given the opportunity to respond.

Minimum Services

The Real Estate License Act contains provisions that impose requirements on all brokers representing a party regarding client communications and negotiations. At a minimum, a broker must...

Inform his client if he receives material information related to the transaction, including the receipt of an offerAnswer client’s questions and present any offers to or from the client

Present All Offers

#Offers You Can't Refuse (to Present) The Real Estate License Act contains provisions that impose requirements on all brokers representing a party regarding client communications and negotiations. One of those is that all offers must be presented to or from a client.

The ONLY exception to this rule would be if the client explicitly instructs you not to present any offers below a certain amount.

Who Owes Whom


#Who Owes Who A quick summary of the duties owed betweent the major players in a real estate transaction:

Buyer’s Agent — owes fiduciary duties to the BuyerSeller’s Agent — owes fiduciary duties to the SellerMortgage Broker — usually owes NO fiduciary duties to anyoneMortgage Banker — owes fiduciary duties to their investorsUnderwriter — only duty is to protect the lender and the investorsTitle Companies — NO fiduciary duties (their duty is to be neutral)Appraiser — duties are to the lender

Additionally, Residential Service Policy salespeople, repair persons, and insurance sales people all work for and represent their respective companies.

Let's Get Quizzical


The next thing you'll need to do is complete a three-to-nine-question quiz, where you'll need to earn 100% to move on to the next level. I believe in you, Agent.



Level 12 Summary

Scenario-Based Learning Exercise: Just Between You and Me

STUDY GUIDES


#Scenario Based Learning Exercises This is your second Scenario Based Learning Exercise in the Law of Agency course. You will watch a video that details a real-life situation and then take a four-question quiz about it. You'll need to score 75% or better on the quiz in order to move on.

Ready? Let's do it.

Up Next: A Matter of Antitrust

#A Matter of Antitrust In Chapter 2 of the previous level, we discussed the concept of antitrust as it relates to real estate license holders. This video revisits that topic.

Enjoy...

One Life to List: Just Between You and Me

Let's take a look at an antitrust violation in another episode of the classic soap opera, One Life to List.

Just Between You and Me: Discussion

1. Does the fact that the Facebook group is open to anyone protect the agents from antitrust violations?

Not if they take other steps to exclude others.

Let's Get Quizzical





Level 13 Summary

Deceptive Trade Practices and Consumer Protection Act

STUDY GUIDES

Level Summary



What Is Fraud?

Fraud is deception deliberately done with the intention of gaining something of value or causing damage to another person. In real estate, this can occur when an agent purposely and deliberately hides a property flaw or feature to make the sale.

Fraud is intentional and has more severe legal penalties than misrepresentation.

What Is Misrepresentation?

Misrepresentation results from statements that are inaccurate, misleading, or an incomplete account of the facts. For example, if an agent fails to tell the buyer that he is aware the creek behind this property overflows and the house has flooded twice in the past two years, the agent is guilty of misrepresentation.

If a broker commits an act of misrepresentation without the seller's knowledge, the seller would not be held responsible. Likewise, if a seller made a misrepresentation to their agent/broker, the agent/broker would probably not be liable for unknowingly passing along that bad information.

Fraud vs. Misrepresentation

A key component in any fraud lawsuit is the ability of the plaintiff to prove intent. The party accusing an agent of fraud would need to prove that the agent intended to deceive in order to receive personal gain while harming that party.

But because intent is so difficult to prove, it can be hard for the principal in a transaction to win a fraud lawsuit against an agent. As a result, the majority of lawsuits filed against agents stem from allegations of misrepresentation because the burden of proof is much lower and does NOT require that the plaintiff prove intent on the part of the agent or broker.

Three Types of Misrepresentation

Misrepresentation can take three basic forms. In increasing order of severity, they are as follows:

1. Innocent: Occurs when an agent communicates false information that the agent is


not aware is false2. Negligent: Occurs when an agent fails to disclose significant property flaws out of

ignorance3. Fraudulent: Occurs when an agent purposely and deliberately hides a property flaw

or feature to make the sale

Increased Litigation

When real estate professionals are sued in the state of Texas, it is usually as a result of violations of the Texas Deceptive Trade Practices Act.

In recent years, the industry has seen an increase in litigation due to a number of reasons including:

Better access to information for consumersIncreased attorney advertisementsConsumer financial stressChanges in real estate marketLack of tort reform

What Is the DTPA?

The Texas Deceptive Trade Practices Act (DTPA) is the primary consumer protection law in Texas. While the law has changed from its original version in 1973, it continues to provide protection to consumers against:

False and misleading statements or deceptive practicesUnconscionable actions, which are acts or practices which, to a consumer's detriment, take advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degreeBreaches of warranty

The DTPA gives consumers the right to sue for damages. However, only TREC can suspend or revoke someone's real estate license.

Statute of Limitations

The statute of limitations for a claim under the DTPA is two years from the date that the violation occurred or two years from the date the plaintiff discovered or should have discovered the violation.

Avoid DTPA Violations

Let's recap how license holders can avoid DTPA violations:


Ensure anything you publish is accurate.Leave comments about the property condition to the seller.Refer your clients to professionals if they have specific questions and concerns.Do your research about the property and surrounding areas, and cite your sources when you share that info.Don't make up answers! Instead of guessing, say you'll find the answer and get back to your client ASAP.Document disclosures in writing.

Types of Defenses

There are a few methods by which real estate agents can defend themselves against DTPA lawsuits. Of course, while each case is different, the most common defenses fall under the umbrella of written disclosure and statutory defense.

The first line of defense is disclosure of defects in forms such as the Seller's Disclosure Notice. The broker’s duty to disclose known defects is the same regardless of who the broker represents. Always get it in writing, Agent!

The Seller’s Disclosure Notice contains 11 narrow statutory exemptions such as the new home exemption or builder exemption. The requirement to provide disclosure does not apply those cases.

Puffing

Puffing or puffery is the use of exaggeration in advertising. You'll notice puffing in advertisements that use adjectives to describe the high quality of something as a way of generating buyer interest. Some examples:

"The backyard offers an absolutely breathtaking view."The swimming pool has the most beautiful stonework."This is one of the finest homes in the area."

Puffing is not actually considered misrepresentation. It's simply marketing. It presents opinions rather than facts and is usually not considered a legally binding promise.

Let's Get Quizzical


The next thing you'll need to do is complete a level assessment, where you'll need to earn 100% to move on to the next level. I believe in you, Agent.



Level 14 Summary

Scenario-Based Learning Exercise: Letter of Intent

STUDY GUIDES


#Scenario Based Learning Exercises This is your third Scenario Based Learning Exercise in the Law of Agency course. You will watch a video that details a real-life situation and then take a four-question quiz about it. You'll need to score 75% or better on the quiz in order to move on.

Ready? Let's do it.

Up Next: The Letter of Intent

#The Letter of Intent In this Scenario Based Learning Exercise, you're going to be studying a case focusing on the Letter of Intent. A Letter of Intent is mostly used in commercial transactions. The Letter of Intent is kind of a like a pre-contract. It's a summary of the proposed transaction terms that will appear in the contract, and there is some back and forth between the buyer and seller on all the details. Before the proposed contract is executed, there will be additional rounds of negotiations.

Ace Study: Letter of Intent

It's time for an Ace Study! (And a happy dance.) This one is called Letter of Intent.

Letter of Intent: Discussion

#Letter of Intent: The Discussion The story doesn't end there. The appellate court defined fraudulent inducement as “a species of fraud that arises only in the context of a contract and requires existence of a contract as part of its proof.” A contract is subject to avoidance on the ground that it was induced by fraud (citing Italian Cowboy Partners, Ltd. vs. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011). In this circumstance, failure to disclose information does not constitute fraud unless there is a duty to disclose the information.

Let's Get Quizzical





Level 15 Summary

Implementation and Presentation

STUDY GUIDES

Level Summary

Congrats on (almost) completing Level 15 (and the course!). In this summary chapter, we’ll review the most important concepts you just learned.


The Five Selling Stages

On the upcoming screens, I'll break down each step of the selling process that I've organized into five stages.

Stage 1 – Getting the Listing. In this stage, it's important to be prepared. Always have available copies of the IABS Notice, your agency's disclosure form, the Seller's Disclosure Notice, and your listing agreement.

Here, you'll also be educating the seller on the selling process. This includes you both agreeing on the commission rate and marketing strategy, getting permission to list on the MLS, and getting the seller to sign the listing agreement so they become your client.

The seller will want to know at what price to list the house. For this, you'll need to create a Broker Price Opinion (BPO) or a Comparative Market Analysis (CMA).

The Five Buying Stages

Working with a buyer to find their dream home isn't all a dream. There are specific rules and processes involved to make sure everyone involved in the transaction is aware of and meeting their obligations. These rules and processes can be summed up by five stages of buying.

Stage 1 - Buyer Becoming Client: To ensure that the broker/agent and buyer are all protected legally and the best services are provided, there are some things you need to do before starting the process of working with a buyer. To make the customer a client, have the them sign a buyer's representation agreement. Next you'll need to build a Buyer Profile.

Stage 2 — The Search For Property: You need to make sure you're using the Buyer Profile to find properties that match the buyer's wants and needs and prepare the buyer for viewings.

Some Good Habits

When it comes to chatting with potential clients and spreading the word about what you do, the more practice you get, the better off you’ll be. To do this, you’ll need to form good habits. Here are Ace’s tips on the subject:


If you’re on your brokerage’s phone duty, tell every buyer that calls about a specific listed property, one which your company represents the seller. Then ask how you can help them.When you begin communication with an unrepresented buyer or seller, present the Information About Brokerage Services notice and tell them how your company works.

Specializations

Real estate professionals have the opportunity and choice to specialize in a wide array of niches or interests — all of which come with different challenges, educational requirements, and skill sets.

It's counter-intuitive to think so, but we can expand our opportunities by narrowing our focus — especially in the real estate industry. In the very act of declaring your focus or specialization, you gain stature as an expert. And whether you specialize geographically or by demographic, you need to do your homework so that you will be the expert your marketing positions you as.

A Taxing Situation

If you sign an employment agreement with your sponsoring broker that designates you as an independent contractor for tax purposes, realize that the burden of reporting and paying your taxes will fall squarely on your shoulders.

Become educated on the number of tax deductions available to you. Expenses like vehicles, marketing, home office, education, membership fees, and more can be deducted from from taxable income. And if you have any doubts about what you can deduct, confer with your accountant or a tax specialist.

Risk Management

As an agent, you're gonna have a lot of liability. And because of vicarious liability, your broker could also be responsible for your actions. Liability is probably the biggest thing you have to worry about. However, there are some risk management tools and practices that you can do to minimize your liability:

Make sure your company has an errors and omissions insurance policy, which can keep agents and brokers safe from accidental legal violationsAlways get a written seller’s disclosureStay familiar with laws such as the Fair Housing Act, TRELA, and Texas Property CodeMaintain good record keeping practices (remember, TREC rules require that critical records be kept for a minimum of four years)Recommend inspections and warranties to clients


Advertising Rule Changes

New advertising rules went into effect on May 15, 2018 regarding advertising for brokers and sales agents. The change eliminated an old law that required the advertiser to be identified as a broker or agent in all advertising.

However, an advertisement is still considered misleading if it fails to include the name of the broker or implies that a sales agent is responsible for the operation of a brokerage.

The bill restricts any rule from requiring the use of the term broker or agent, a reference to the Texas Real Estate Commission, or a license number in advertisements. And yet license holders can still choose to use those terms in advertising if they want.

The End (Is Near)

With that refresher of Level 15 vocabulary and key concepts, you have come to the end of the level and the course, Agent. I would cry right about now if I weren’t so worried about corrosion and short-circuiting of electrical components...and if I had tear ducts.

All you need to do to pass this course and get your Law of Agency certificate is to ace the Level 15 quiz (by getting a 100% — but don't worry, there aren't many questions) and then get a 70% on the final course exam.

At the end of the quiz, you'll immediately begin the course final exam, so this is the last time I'll see you. You've been an amazing student, and I hope to see you again soon!

Preparing for Proctoring

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