© 2014 OnCourse Learning Texas Real Estate Commission Ethics MCE

© 2014 OnCourse Learning

Texas Real Estate Commission

Ethics MCE


Canons of Professional Ethics

Fidelity Integrity

Deftenus V. Dallas Bayue Bend, LTD


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


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.


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.


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: Misappropria tion, commingling, general

negligence, false promises, broker supervision, general negligence, false promises, rebates, improper referrals.

Intermediary/IABS – no written consent.


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


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.


Chapter 2

Agency Relationships


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


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


Intermediary

Example 3 Alternative 1 Alternative 2

Example 4 Broker is solo practitioner? May broker

act as intermediary?


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?


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


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.


Chapter 3

Contract Issues


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.


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.


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 Non-

Realty Items Addendum. (Voluntary) Case Study - Lewis v. Foxworth Case Study - Johnson v. Conner


Paragraph 11 — Special Provisions

As-Is Clause Brokerage Fees Poorly Drafted Clauses Factual Statements and Business Details Matters that may be appropriate


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


Chapter 4

Defect Disclosure


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


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.


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?



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.)?



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


Chapter 5

Advertising


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.”


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.


Advertising Issues

Teams Teams & Assumed Names Corporations & Trade Names Signs


Chapter 6

Intellectual Property


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.


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


Chapter 7

Dispute Resolution


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.


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.


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.

Arbitration


Chapter 8

Unlicensed Assistants


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


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?


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?


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?


TREC Cases

Chapter 9


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


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


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