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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: Misappropria tion, 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 Non-
Realty 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 - 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
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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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TREC Cases
Chapter 9
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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