Texas Law of Agency

950 Pages·2017·8.83 MB·English

by  Course Structure

Texas Law of Agency
Texas Law of Agency

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Texas Law of Agency
Table of Content
Lesson One: Agency Concepts Disclosure of Agency—Relationship between Principle and
Agent ............................................................................................................................................... 6
Introduction ................................................................................................................................. 7
What is Agency ........................................................................................................................... 7
What is Agency? ....................................................................................................................... 17
License Act Statute and Rules................................................................................................... 22
Why Study Agency? ................................................................................................................. 82
Relationship Between the Principal and the License Holder .................................................... 86
Lesson Summary ....................................................................................................................... 87
Lesson Two: Basic Agency Relationships, Disclosures and Duties to the Client ......................... 89
Agency Defined ........................................................................................................................ 94
Authority of Agent in Agency Relationships ............................................................................ 95
Classification of Agency Fiduciary Duties and Responsibilities ............................................ 124
Lesson Summary ..................................................................................................................... 180
Lesson Three: Duties and Disclosures to Third Parties .............................................................. 184
General Duties of Honesty and Fairness ................................................................................. 185
Definition of and Obligations to Non-Principals and Third Parties ....................................... 220
Avoiding Disclosure and Misrepresentation Problems ........................................................... 220
Section 5.008 of the Texas Property Code .............................................................................. 231
Stigmatized Property ............................................................................................................... 242
Lesson Summary ..................................................................................................................... 251
Lesson Four: Seller Agency ........................................................................................................ 253
Introduction ............................................................................................................................. 253
Texas Statue of Frauds ............................................................................................................ 254
Preparing to Take a Listing ..................................................................................................... 256
Listing Agreements ................................................................................................................. 261
Exclusive Seller Agency ......................................................................................................... 327
Benefits of Seller Agency Relationships ................................................................................. 331
Sub-Agency............................................................................................................................. 332
Disclosure Issues ..................................................................................................................... 333
Lesson Summary ..................................................................................................................... 348
Lesson Five: Buyer Agency ........................................................................................................ 351
Introduction ............................................................................................................................. 352
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Texas Law of Agency
Buyer Representation Agreement ........................................................................................... 397
Deciding to Represent the Buyer ............................................................................................ 423
The Creation of Buyer Agency ............................................................................................... 444
Benefits of Buyer Agency Relationships ................................................................................ 445
Written Notification of Compensation to Broker ................................................................... 447
Buyer’s License Holder Disclosures ....................................................................................... 448
Lesson Summary ..................................................................................................................... 452
Lesson Six: Representing More Than One Party in a Transaction Intermediary Brokerage ...... 454
History of Dual Agency and Intermediary .............................................................................. 454
The Path from Dual Agency to Intermediary Brokerage ........................................................ 486
Representing More than One Party in a Transaction .............................................................. 502
Intermediary Brokerage .......................................................................................................... 538
Specialized Intermediary Applications ................................................................................... 547
Intentional vs Unintentional Dual Representation .................................................................. 547
Lesson Summary ..................................................................................................................... 553
Lesson Seven: Creation and Termination of Agency .................................................................. 556
Rules of the Texas Real Estate Commission ........................................................................... 556
How Agency is Terminated ..................................................................................................... 579
Duties of Agency that Survive Termination ............................................................................ 591
Lesson Summary ..................................................................................................................... 596
Lesson Eight: Clarifying Agency Relationships ......................................................................... 599
Agency Relationships ............................................................................................................. 599
Disclosure Policy .................................................................................................................... 609
Understanding the Broker’s Office Policy .............................................................................. 612
Lesson Summary ..................................................................................................................... 616
Lesson Nine: Employment Issues ............................................................................................... 617
Employment Law .................................................................................................................... 617
Employment Relationship Between Brokers and Principals .................................................. 671
Independent Contractor Agreements ....................................................................................... 672
Statement of Understanding .................................................................................................... 683
Employment and Compensation of Personal Assistants ......................................................... 684
Relationships Between Brokers and Agents ........................................................................... 685
Compensation Issues ............................................................................................................... 686
Lesson Summary ..................................................................................................................... 688
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Texas Law of Agency
Lesson Ten: Agency, Ethics and the Law ................................................................................... 691
Distinction between State Law, Professional Ethics, and Personal Morals ............................ 691
Minimum Ethical Standards ................................................................................................... 788
Lesson Summary ..................................................................................................................... 789
Lesson Eleven: Deceptive Trade Practices and Consumer Protection ........................................ 792
Fraud vs Misrepresentation ..................................................................................................... 792
Deceptive Trade Practices and Consumer Protection Act ....................................................... 824
Damages .................................................................................................................................. 840
Defenses .................................................................................................................................. 841
Ethical and Legal Concerns .................................................................................................... 843
Lesson Summary ..................................................................................................................... 866
Lesson Twelve: Implementation and Presentation...................................................................... 869
The Broker Working for/with the Seller ................................................................................. 869
The Broker Working for and with the Buyer .......................................................................... 877
A Practical Guide to Everyday Practice .................................................................................. 883
Other Considerations .............................................................................................................. 885
Risk Management ................................................................................................................... 886
Lesson Summary ..................................................................................................................... 949

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Texas Law of Agency
Lesson One: Agency Concepts Disclosure of
Agency—Relationship between Principle and Agent

Lesson Topics
This lesson focuses on the following topics:
 Introduction
 What is Agency?
 License Act Statute and Rules
 Roles People Play in Agency Relationships – Client or Customer
 Why Study Agency?
 Relationship Between the Principal and the Agent

Lesson Learning Objectives
At the conclusions of this lesson you will be able to:
 Explain applicable agency terminology
 Explain how an agency relationship is formed.
 Identify the different types of agency
 Explain how common agency practiced in real estate
 Describe your role in agency
 Understand how to determine type of agency to practice
 Recognize how historical aspects have influenced the current agency practice
 Describe agency in every day real estate practice.
 Identify who the principals and license holders are in an agency relationship.
 Explain what role your broker plays in agency
 Describe what role your client plays in agency
 Describe what your role is in agency
 List the types of agency license holders practice

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Texas Law of Agency
Introduction
Agency relationships make up the foundation of the real estate industry. It was one of the
reasons the National Association of REALTORS® (NAR) and the Texas Real Estate
Commission was formed. To enhance the professionalism of license holders by
recognizing an agency relationship between the broker and his or her client and to
educate all parties about the duties imposed in the relationship.

Given the current evolution of differing agency practices, there is a crucial need for
clarification of agency concepts and assumptions for all parties, the license holder, seller,
buyer, tenant and landlord.

A license holder who is confused about her role, or loyalty, or understanding of their
duties, inevitably sends signals about that confusion to the consumer. Such confusion
breeds mistrust and frustration among the public and results in increased litigation, liability
and regulation for the license holder.

The license holder needs to be educated in various types of agency relationships today
and the duties involved in each type of relationship. All brokers in Texas do not practice
the same type of agency.

What is Agency
An agency relationship is the fiduciary relationship resulting when one person, called the agent,
represents the interests of another person, called the principal, in dealings with others.

What does this mean?
One person—broker or sales agent
Another person—broker, seller, buyer, tenant or landlord
Dealings with others—customer, other broker or sales agent

In a real estate transaction, an agency relationship is formed by mutual consent, between the
broker, all sponsored sales agents, and with the client in writing.

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Texas Law of Agency
How Are Agency Relationships Created?
An agency relationship is created by mutual consent by the client and license holder delegating
authority to the broker to consent to act on his or her behalf. Both parties must consent for the
agency relationship to be legal. A good business practice is to get the consent in writing. An
agency relationship does not need to be a contract with the elements of offer, acceptance, and
consideration.

An agency relationship can be established by words, deeds, or acts of either party. Commissions
agreements paid by one party to another does not necessarily create or confirm an agency
agreement.

Agency—A relationship created when one person, the principal, delegates to another, the agent,
the right to act on his or her behalf in business transactions and to exercise some degree of
discretion while so acting. An agency gives rise to a fiduciary or statutory relationship and imposes
on the agent, as the representative of the principal, certain duties, obligations and high standards
of good faith and loyalty. (The Language of Real Estate, sixth edition)

Agency Terminology
The first hurdle to understanding agency relationships is the vocabulary used when discussing
these relationships.
 Broker
 Sales Agent
 Sub-Agent
 Customer
 Other Broker
 Seller Representation
 Seller
 Client
 Buyer Representation
 Buyer
 Principal
 Fiduciary
 Third Party
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Texas Law of Agency
 Tenant Representation
 Landlord Representation

Broker—An individual licensed by the Texas Real Estate Commission to act independently in
running a real estate brokerage business. A broker can also sponsor sales agents who have met
the educational requirements by the Texas Real Estate Commission. A broker is licensed to sell,
buy, lease or exchange real property for others and to charge a fee for services rendered. A
broker is a special agent for clients and has a general agency with his or her sponsored sales
agents.

Sales Agent—Is licensed by the Texas Real Estate Commission and has met their educational
requirements to become licensed. They have a general agency relationship with their sponsoring
broker. A sales agent works on behalf of the sponsoring broker by taking listings, buyer
agreements, leases and property managements in the name of the sponsoring broker.

Sub-agent—A licensee sponsored by another broker who represents the listing broker and the
listing broker’s client with specific common law duties. This takes place when the sub-agent does
not represent the customer (buyer) when selling the listing broker’s listing. Buyer needs to be fully
informed and agree they do not want representation by the sub-agent in writing.

Customer—A consumer who has not signed any representation agreement with any licensee in
Texas. They want to buy, sell, rent or manage a rental without a license holder representing them.
There are still duties that must take place when working with them by both license holders:
Honesty, Fairness, Disclosure, Good Faith and Competency.

Other Broker (also known as the cooperating broker)—A licensed holder who wants to sell
your listing.

Seller Representative—License holder who has a written agreement signed by both parties to
represent a property owner in the marketing and sale of their property. Fiduciary duties take place
and you have a special agency relationship with them.
Seller—a consumer who owns real estate by title.

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Texas Law of Agency
Client—Known as the principal, seller, buyer, tenant or landlord. The person who hires a broker
to represent them in a transaction.

Buyer Broker—A broker who represents the buyer in a fiduciary capacity to purchase a property.

Buyer—A consumer who wants to buy real estate.

Principal—One of the main parties to a transaction. They are in a fiduciary relationship, the
person who hires a real estate license holder to represent him or her in a specific transaction.

Fiduciary—A relationship that implies a position of trust and confidence wherein one person is
usually entrusted to sell, lease or manage for another. The fiduciary describes the faithful
relationship owed by the license holder with the duties of Obedience, Loyalty, Disclosure,
Confidentiality, Accountability and Reasonable Care.

Third Party—A person who is not party to a contract but who may be affected by the contract.
One who is not a principal to the transaction.

Tenant Representation—A license holder who represents a consumer in leasing property of any
type.

Landlord Representation—A broker who represents an owner of rental property. Fiduciary
duties apply with many specific authorities of what the license holder can and cannot do with the
monies of the broker, repairs, zoning requirements and much more.
The landlord retains a reversionary interest in the property so that when the lease ends the
property will revert to the landlord.

For each transaction, you should be able to determine who is who. So if a broker takes a listing
agreement from a consumer, you should know:
 Who are the parties engaged in the relationship and
 How are they referred to?
o In conversations
o Presenting the information on brokerage services
o Listing agreements
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