Advertising rules you need to know

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Texas REALTOR®, August 2012

Advertising can attract attention and clients, but if you're not careful, it can also bring you something you don't desire: trouble.

by Kinski Moss

Are license numbers required in advertisements?

No. When the new TREC Rule 535.154 was proposed, it required that licensees include their license number in all advertising. However, when the rule was adopted and became effective March 9, 2011, the license- number requirement was removed.

Article 12 of the Code of Ethics—the one dealing with advertising rules—is violated more than any other article in the Code. Violations of advertising rules also are among the most frequent complaints the Texas Real Estate Commission receives.

In addition to complying with the Real Estate License Act (RELA), Texas Real Estate Commission rules, and NAR's Code of Ethics, you must also follow applicable federal laws and regulations. With so many rules to keep up with, here are some tactics to help you stay out of trouble.

Stay away from deceptive or misleading advertising

RELA prohibits a licensee from publishing an advertisement that misleads (or is likely to deceive the public) or fails to identify the person responsible for the advertisement as a licensed broker or agent.

What is an advertisement?

The scope of the definition may surprise you
TREC rules define an advertisement as a written or oral statement or communication that induces or attempts to induce a member of the public to use the services of the licensee or service provider. The definition of an advertisement includes the following:

  • Publications
  • Radio or television broadcasts
  • All electronic media including email, text messages, social-networking websites, and the Internet
  • Business stationery or business cards
  • Signs and Billboards

What is not considered an advertisement?
TREC Rule 535.154(b) provides that the following are not considered advertisements:

  • A communication from the licensee to a member of the public after the member of the public has agreed for the licensee to provide services
  • Real estate information available to the public on a licensee's website, extranet or similar site that is behind a firewall or similar filtering software which requires a password or registration to access that information.

What is considered deceptive or misleading?

Just knowing that misleading advertising violates RELA may not be enough guidance. Thankfully, TREC rules clarify the types of advertisements considered deceptive or misleading:

  • An advertisement that is inaccurate in any material fact or in any way misrepresents any property, terms, values, services, or policies
  • Advertising a property that is subject to an exclusive listing agreement without the permission of the listing broker and without disclosing the name of the listing broker unless the listing broker has expressly agreed to waive disclosure
  • Failing to remove an advertisement about a listed property within a reasonable time after closing or termination of a listing agreement, unless the status is included in the advertisement
  • An advertisement by a salesperson that identifies the salesperson as the broker
  • Advertising a property in a manner that creates a reasonable likelihood of confusion regarding the permitted use of the property.

The next time you are thinking of advertising another listing broker's property, think again. This marketing strategy can lead to disciplinary action if you fail to obtain permission and fail to disclose the name of the listing broker. TREC may suspend or revoke your license or take other disciplinary action if you are found to have engaged in deceptive or misleading advertising.

Identify yourself

As stated above, RELA prohibits ads that identify the salesperson as the broker. TREC rules also require a licensee to include a designation such as agent, broker, or a trade association name that serves to clearly identify the advertiser as a real estate licensee. A licensee using a trade name must have legal authority to do so. Only members of the REALTOR® association are authorized to use the term REALTOR®. Therefore, authorized use of the term REALTOR® is sufficient to satisfy the TREC rule of identifying the advertiser as a real estate broker or agent.

Note that terms such as real estate, properties, and management do not satisfy the requirement to identify the firm as a real estate brokerage firm.

In no way should you imply that you're a broker if you're not. Again, this action would constitute deceptive or misleading advertising. A broker or salesperson is prohibited from placing an advertisement that in any way implies that a salesperson is the person responsible for the operation of a real estate brokerage business.

Costly mistakes

Not complying with advertising rules can set you back a considerable amount. A recent violation reported in the TREC Advisor led to a $4,800 penalty for a licensee whose Craigslist post advertised real estate information that was no longer valid. The licensee also failed to identify himself as an agent in the ad.

Include the name of the broker in all advertising

Under TREC Rule 535.154(c), an advertisement must clearly and conspicuously contain the name of the broker: either a business entity or an individual. If you've identified yourself as an agent—or if you are an agent and you identified yourself as a REALTOR®—you still need to provide the name of your broker.

Can you include the broker's "doing business as" name instead?
Yes. The broker's DBA, or assumed, name may be used as long as it is registered with TREC. A broker must notify TREC in writing within 30 days after the broker starts (or ceases) to use the assumed name. If the broker's assumed name includes a salesperson's name, the advertisement must include another assumed name of the broker that does not include a salesperson's name. Hence, make sure that the salesperson's name is not the only name that appears in the advertisement. Doing so would imply that the salesperson is responsible for the operation of the brokerage.

TREC has created a safe harbor for ensuring the broker's name to be clear and conspicuous if it is no less than half the font size of the largest telephone number or other contact information in the advertisement.

For example, Bill Brown is a broker. He sponsors a salesperson named Sue Smith. Bill Brown's assumed name as registered with TREC is Sue Smith Properties. Since his assumed name contains the name of a salesperson, he cannot solely include his assumed name in the advertisement. This would imply that the salesperson is responsible for the operation of the brokerage. To comply with this rule, Bill Brown would need to include another assumed name that does not include Sue Smith's name.

Does each page of my website have to comply with the advertising rules?

Yes. If you place an advertisement on the Internet, each page that contains your advertisement must comply with these rules. Your website itself is considered an advertisement.

What about a team name?
Similarly, for a team name to be used, the broker needs to register it with TREC. If the team name does not include the name of a salesperson, an advertisement can include the team name without including the broker's name because the advertisement does not imply that a salesperson is responsible for the operation of the real estate brokerage. On the other hand, if the team name does include the name of a salesperson, the salesperson cannot imply that she is responsible for the operation of the real estate brokerage.

So, how do you advertise using a team name that includes the name of a salesperson?

TREC has provided clarification on what is permissible. An advertisement containing a team name that includes the salesperson's name with the word group or team is permissible as long as the advertisement also includes the name of the broker or another assumed name of the broker. Using the team name with the words group or team does not imply that the salesperson is responsible for the operation of the brokerage.

For example (using the same facts as above), Sue Smith Group or Sue Smith Team is permissible as long the advertisement also includes the name of the broker, Bill Brown. However, Sue Smith and Associates or Sue Smith and Company would be impermissible since this would imply that Sue Smith is responsible regardless of whether the advertisement includes the name of the broker.

What if disclosing the name of the REALTOR®'s firm is not practical with social media?
Standard of Practice 12-5 states that, "where disclosing the name of the firm may not be practical in electronic displays of limited information (e.g., thumbnails, text messages, tweets, etc.), such displays are exempt, but only when linked to a display that includes all required disclosures."

How do you comply with the advertising rules when using social media?

A real estate licensee using social media must still comply with the advertising rules. If the social-networking website limits the number of characters in a communication and the required information would consume more than 10% of the available character limit, a licensee may include a direct hyperlink containing the words "TREC DISCLOSURE" that links to the required information.

Satisfy the "true picture" test of the Code of Ethics

In addition to RELA and TREC rules, you have to be cognizant of the standards set forth in the Code of Ethics. Article 12 provides that, "REALTORS® shall be honest and truthful in their real estate communications and shall present a true picture in their advertising. REALTORS® shall ensure that their status as real estate professionals is readily apparent in their advertising, marketing, and other representations, and that recipients of all real estate communications are, or have been, notified that those communications are from a real estate professional."

Standard of Practice 12-5 goes a step further than TREC rules and RELA by requiring REALTORS® to disclose the name of the firm in a "reasonable and readily apparent manner" when advertising real estate services or listed property in any medium. Although TREC rule 535.154(c) permits you to select between the business entity and the individual when disclosing the name of the broker in an advertisement, under the Code of Ethics, REALTORS® are still required to disclose the name of the firm regardless of whether the individual broker's name is disclosed.

Note, too, that the "true picture" test extends to a REALTOR®'s URL and domain name.

Kinski Moss is senior associate counsel for the Texas Association of REALTORS®.

Sidebar: Advertised loan info?

The Truth in Lending Act (TILA) is a federal consumer-protection law that requires certain disclosures when advertising the availability of credit. The regulations implementing TILA are known as Regulation Z.

Who needs to provide these disclosures?
Anyone who advertises the availability of consumer credit must comply with these disclosure requirements whether or not the person advertising is actually the one providing the credit. Therefore, real estate professionals are subject to these requirements when advertising financing information.

What needs to be disclosed?

If an advertisement states a rate-of-finance charge, it must state the rate as an annual percentage rate (APR), specifically using that term. If the APR may be increased over the term of the loan, that fact must also be stated in the advertisement.

Need more info?

To review the advertising rules in more detail, refer to Section 1101.652(b)(23) of the Real Estate License Act, TREC Rule 535.154, and Article 12 of the Code of Ethics. You can also contact the Texas Association of REALTORS® Legal Hotline at 800-873-9155.

Additional disclosures may be required if certain "triggering terms" are used. The triggering terms include any of the following:

  • The amount or percentage of any downpayment
  • The number of payments or period of repayment
  • The amount of any payment
  • The amount of any finance charge.

If any of the above triggering terms are used, all of the following additional disclosures are required:

  • The amount or percentage of the downpayment
  • The terms of repayment, which reflect the repayment obligations over the full term of the loan, including any balloon payment
  • The APR and whether the APR may be increased over the term of the loan.

In addition to Regulation Z, the Mortgage Acts and Practices Rule (MAP Rule) will apply to real estate professionals who provide information about a specific mortgage-credit product to a consumer. The MAP Rule prohibits deceptive advertising of mortgage products and imposes a two-year record-keeping requirement.

[This article was originally titled, "But wait, there's more!" in the print edition of Texas REALTOR®.]

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The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

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