Legal FAQs for REALTORS®
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My client wants to make an offer on a for-sale-by-owner property. What is the best way to approach the seller with the offer and make sure I receive my fee from the seller? (updated June 16, 2014)

Follow this order of signing documents so you have the seller’s written agreement to pay your fee before the parties sign a contract:

1. It is recommended to have your buyer sign a buyer’s representation agreement. If she signs the Residential Buyer/Tenant Representation Agreement (TAR 1501), you may want to remind her that under Paragraph 11B, she may be obligated to pay you if the seller refuses or fails to pay your fee.

2. Provide the seller with the Information About Brokerage Services form (TAR 2501, TREC OP-K) and discuss the agency relationships involved in this purchase.

3. Complete the Registration Agreement Between Broker and Owner (TAR 2401) and check the box in the broker’s representation section that indicates you are representing the prospect only. Have the seller sign this document.

4. Give the seller the Seller’s Disclosure Notice (TAR 1406) to complete and sign.

5. Present your buyer’s offer for the seller’s consideration and signature.

Remember, even though your client is the buyer, you have an obligation to treat the seller fairly and honestly. Avoid actions that might be construed as pressuring the seller to sell the property to your client.


Must the respective appointed licensees each provide an opinion of value to the respective buyer prospect and seller prospect? (updated Nov. 1, 2003)

At the time a property is listed, the licensee is obligated to advise the owner as to the licensee's opinion of the market value of the property. Once appointments have been made, the appointed associates are permitted, but not required, to provide the party to whom they have been appointed with opinions and advice during negotiations.


When acting as an appointed licensee what "agency" limitations does the licensee have when communicating with a buyer/tenant or seller/landlord that an agent representing one party only doesn’t have? (updated Nov. 1, 2003)

The appointed licensee may not, except as permitted by Section 1101.651(d) of the Real Estate License Act, disclose to either party confidential information received from the other party. A licensee representing one party would not be prohibited from revealing confidential information to the licensee’s principal, and if the information were material to the principal’s decision, would be required to reveal the information to the principal.


Is disclosure of agency required to be in writing? (updated Nov. 7, 2005)

The disclosure may be oral or in writing. Licensees must provide the parties with the written statement titled Information About Brokerage Services at their first substantive meeting. This information simply defines several types of agency relationships. The licensee should clarify which party he represents and make that representation clear to all parties. The Information About Brokerage Services form encourages the consumer to enter into a written agreement with a broker if the consumer wants to be represented.


What are the differences between the duties provided to the seller or landlord by the intermediary broker and the duties provided to the buyer or tenant by the appointed licensee? (updated Nov. 1, 2003)

The intermediary and the appointed licensees do not provide duties; they perform services under certain duties imposed by the law. The intermediary is authorized to negotiate a transaction between the parties, but not to give advice or opinions to them in negotiations. The appointed licensee may provide advice or opinions to the party to which the licensee has been appointed. Both intermediary and appointed licensee are obligated to treat the parties honestly and are prohibited from revealing confidential information or other information addressed in Section 1101.651(d) of TRELA.


Can salespersons act as intermediaries? (updated Nov. 1, 2003)

Only a broker can contract with the parties to act as an intermediary between them. In that sense, only a broker can be an intermediary. If, however, the broker intermediary does not appoint associated licensees to work with the parties in a transaction, any salespersons or broker associates of the intermediary who function in that transaction would be required to act just as the intermediary does, not favoring one party over the other.


If a salesperson or associated broker lists a property and has also been working with a prospective buyer under a representation agreement, how can the salesperson or associated broker sell this listing under the new law? (updated Nov. 1, 2003)

There are three alternatives for the brokerage firm and the parties to consider: 1. The firm, acting through the salesperson or associated broker, could represent one of the parties and work with the other party as a customer rather than as a client (realistically, this probably means working with the buyer as a customer and terminating the buyer representation agreement). 2. If the firm has obtained permission in writing from both parties to be an intermediary and to appoint licensees to work with the parties, the salesperson or associated broker could be appointed by the intermediary to work with one of the parties. Note: Another licensee would have to be appointed to work with the other party under this alternative. The law does not permit an intermediary to appoint the same licensee to work with both parties. 3. If the firm has obtained permission in writing from both parties to be an intermediary, but does not appoint different associates to work with the parties, the salesperson or broker associate could function as a representative of the firm. Since the firm is an intermediary, the salesperson and associated broker also would be subject to the requirement not to act so as to favor one party over the other.


I represented a buyer who had contracted to buy a home from a FSBO seller. The contract did not close because of reasons not related to the property. The buyer decided to continue renting for several years, and we have terminated our broker-client relationship. The owner of the home has now approached me and asked me to list the property. Can I represent the seller under these circumstances? (updated Jan. 27, 2005)

Yes, it is OK for you to represent the seller in this situation. However, you should make it clear to this new client that you cannot reveal to him any confidential information provided to you by your former client unless that client consents to the release of that information to the seller. While there may be little confidential information obtained from the buyer that would be of interest to the seller, it should be noted that information about material defects in the property is not considered confidential information under the Code of Ethics or the Real Estate License Act. Thus, if you had obtained material information about the property while representing your former buyer client, you would be required to disclose that information to the seller and any subsequent buyer of the property during your representation of the seller.


How can the intermediary broker advise the seller or the buyer on things such as the value of the property, the amount of any escrow deposits, or interest rates? (updated Nov. 28, 2007)

When the listing contract or buyer representation agreement has come into existence but no intermediary status yet exists, the broker (or salesperson) may advise the parties generally on these matters. Once the intermediary status has been created, the intermediary broker may not express opinions or give advice during negotiations. Information about matters which do not constitute an opinion or advice may be supplied in response to a question from the client. For example, the intermediary could tell the buyer what the prevailing interest rate is without expressing an opinion or giving advice. The seller's question about the amount of earnest money could be answered with a factual statement that, in the broker's experience, the amount of earnest money that is usually seen in transactions depends upon the amount of the sales price and could give examples of those figures. If the buyer asks what amount should be in the offer, the intermediary could respond with another factual statement that, in the broker's experience, those offers closest to the listing price tend to get accepted by the seller. These same rules would apply to a salesperson acting as an intermediary without appointments made by the intermediary broker. If appointments have been made following the procedures in the license act, then the appointed salesperson may provide opinions and advice during negotiations to the party to whom the salesperson is appointed.


Our company policy requires all buyers and sellers to agree to the intermediary practice before commencing to work with them. Does the law permit a broker employment agreement to specify this practice only? (updated Nov. 1, 2003)

If by "broker employment agreement" you mean a listing contract or buyer representation agreement, yes.


Can a broker who is a solo practitioner act as an intermediary? (updated Aug. 5, 2009)

Yes. The solo practitioner may act as an intermediary, but he cannot make appointments of associated licensees to each of the parties (as may be done when the broker has two or more other licensees working for the broker's firm). Section 1101.559(a) of the Texas Real Estate License Act provides that a broker may act as an intermediary between parties to a real estate transaction as long as the broker has the written consent from each of the parties and that written consent states who will pay the broker. Any broker acting as an intermediary must treat each party fairly, honestly, and impartially and otherwise comply with the requirements of the act. Additionally: 1. The broker may not disclose any confidential information obtained from one party without the written instructions of that party unless disclosure is required by the act or a court order, or unless the information materially relates to the condition of the property. 2. The broker may not disclose without written authorization that the seller will accept less than the asking price or that the buyer will pay more than the price submitted in a written offer. It should be noted that nothing in the Texas Real Estate License Act prevents a broker from handling a real estate transaction when one party is a client and the other party is a customer. In that case, the broker would not be acting as an intermediary. The requirements of the act regarding intermediaries applies to all brokerage activity including landlord/tenant and commercial transactions.


What is the advantage for the broker in acting as an intermediary? (updated Nov. 1, 2003)

If the broker and associates are going to continue to work with parties they have been representing under listing contracts or buyer representation agreements, the intermediary role is the only statutorily addressed vehicle for handling "in-house" transactions, providing both parties the same level of service.


A prospective buyer emailed me to view a property I listed after seeing my listing on my website. Is there a form I should give him to disclose that I represent the seller? (updated June 16, 2014)

No, there isn’t a form available for this purpose. Past agency disclosure forms led to misuse and misunderstandings about the nature of those forms and their intended purpose. Don’t confuse this representation disclosure with the written notice about brokerage services.

Verbal or written disclosure of representation is acceptable, but it should be done upon first contact with another party to the transaction or with another licensee representing a party to the transaction. In this scenario, your call or email response will be the first contact with this prospective buyer.

If a contract is subsequently executed by your seller client and this prospective buyer, a written notation of who you represent will be provided in the Broker Information section of the TREC contracts.


I understand that it's important to have a written representation agreement when representing a buyer and that it's required that a broker have a written agreement signed by the person agreeing to pay a commission to enforce this right against a client. But why should I be concerned about this fee issue, since in my market the seller's agent almost always pays the cooperating broker's fee under the MLS residential listings? (updated Jan. 25, 2006)

The TAR Buyer/Tenant Representation Agreement does contain language that states that the broker will seek to obtain payment of the broker's fees from the seller, landlord, or their agents, but provides that if the buyer agent does not receive all or any of the specified commission from those sources, then the buyer/tenant is obligated to pay that commission (or the difference in the amount specified in the agreement and the amount paid by the seller, landlord, or their agent). This provision can also establish a legal claim to a fee from a buyer who has purchased a home during the term of the agreement using some other agent to complete the purchase contrary to the buyer's agreement to use the broker named in the buyer representation agreement. Brokers should clearly explain the buyer's potential fee obligations under this paragraph of the agreement when they first present the representation agreement to the buyer for signing. Clarity of the parties' rights and obligations in the broker/client relationship is one of the main reasons for having a written brokerage agreement.


Does the law require a broker to have a written representation agreement to act as someone’s agent? (updated June 17, 2014)

No. A relationship between a broker and a client can legally exist without a written document. However, there are four good reasons why a broker-client relationship should be in writing, whether it’s with a buyer, seller, landlord, or tenant:

1. A broker cannot sue for a commission unless there is a written agreement signed by the party agreeing to pay that commission.

2. If office policy permits a broker to act as an intermediary (the broker has a broker-client relationship with both the seller and the buyer in the same transaction), then the broker must obtain the written consent of each party and it must state who will pay the broker. The Texas Association of REALTORS® buyer's representation agreements and listing agreements include the necessary written consents and other statutory requirements for a broker to act as an intermediary.

3. Written agreements between a broker and his client help ensure that all parties have mutually agreed on the terms of representation.

4. Article 9 of the Code of Ethics requires that REALTORS®, for the protection of all parties, assure whenever possible that all agreements related to real estate transactions are in writing.


Does a listing broker have to act as an intermediary if a buyer interested in the listed property is not represented?

No. The broker may represent the seller only as the seller’s agent. There is no law requiring that a buyer be represented in a transaction. When a broker represents the seller only, the seller is the broker’s client while the buyer is a customer. In those instances, the broker would be obligated to act in the seller’s best interests. An intermediary, on the other hand, would be prohibited from favoring one party over the other.


Must the intermediary broker furnish written notice to each party to a transaction when the broker designates the appointed licensees? (updated Nov. 1, 2003)

Yes.


In the absence of the appointed licensees, can the intermediary broker actually negotiate a purchase offer between the parties? (updated Nov. 1, 2003)

Yes. See the answer to the question relating to the duties of an intermediary.


How is a typical intermediary relationship created, and how does it operate? (updated Nov. 1, 2003)

At the time of the first substantive dialogue with a seller or a prospective buyer, the salespersons or brokers associated with a firm would provide the parties with a copy of the statutory information about agency required by The Real Estate License Act (TRELA). The statutory information includes an explanation of the intermediary relationship. The brokerage firm would negotiate a written listing contract with a seller and a written buyer representation agreement with a buyer. In those documents, the respective parties would authorize the broker to act as an intermediary and to appoint associated licensees to work with the parties in the event that the buyer wishes to purchase a property listed with the firm. At this point, the broker and associated licensees would be functioning still as exclusive agents of the individual parties. The listing contract and buyer representation agreement would contain in conspicuous bold or underlined print the broker’s obligations set forth in Section 1101.651(d) of TRELA. When it becomes evident that the buyer represented by the firm wishes to purchase property listed with the firm, the intermediary status would come into play, and the intermediary may appoint different associates to work with the parties. The intermediary would notify both parties in writing of the appointments of licensees to work with the parties. The associates would provide advice and opinions to their respective parties during negotiations, and the intermediary broker would be careful not to favor one party over the other in any action taken by the intermediary.


I'm changing brokers and I have several buyer clients who've signed buyer-representation agreements. Can I take these buyers with me to my new broker? (updated Oct. 14, 2010)

No. A buyer-representation agreement is a contract between a buyer and a broker, not a salesperson. As such, your buyers would still be represented by your previous broker. However, your buyers can ask to be released from the buyer-representation agreements with your previous broker.


I was the listing agent for a property that didn't sell but was listed by another broker after the expiration of my agreement. I now have a buyer client who wants to see that same property. Must the new broker, or my broker, designate me as an appointed licensee, or how may I otherwise act? (updated Nov. 1, 2003)

Assuming an agreement with the listing broker as regards cooperation and compensation, you may represent the buyer as an exclusive agent. You cannot be appointed by the intermediary because you are not an associate of the listing broker, and from the facts as you describe them, no intermediary status is going to arise. Confidential information obtained from the seller when you were acting as the seller's agent, of course, could not be disclosed to your new client, the buyer.


Must each party’s identity be revealed to the other party before an intermediary transaction can occur? (updated Nov. 1, 2003)

Yes. If associates are going to be appointed by the intermediary, the law provides that the appointments are made by giving written notice to both parties. To give notice, the intermediary must identify the party and the associate(s) appointed to that party. The law does not require notice if no appointments are going to be made. The law provides that the listing contract and buyer representation agreement are sufficient to establish the written consent of the party if the obligations of the broker under Section 1101.651(d) are set forth in conspicuous bolt or underlined print.


What is the difference between an appointed licensee working with a party and a licensee associated with the intermediary who has not been appointed to work with one party? (updated Nov. 1, 2003)

During negotiations the appointed licensee may advise the person to whom the licensee has been appointed. An associated licensee who has not been appointed must act in the same manner as the intermediary, that is, not giving opinions and advice and not favoring one party over the other.


May the same salesperson be appointed by the intermediary to work with both parties in the same transaction? (updated Nov. 1, 2003)

No. The law requires the intermediary to appoint different associated licensees to work with each party.


As the broker for my firm, can I appoint myself to represent one of the parties in an intermediary situation? (Updated June 18, 2014)

No. Appointing yourself, the firm's broker, to represent one party and appointing a sponsored licensee to represent the other party in an intermediary situation may not be considered fair and impartial, which is required by the Real Estate License Act.

Remember that intermediary isn’t mandatory. The Texas Association of REALTORS® listing agreements and buyer representation agreements allow brokers to address whether they will allow an intermediary in a transaction, but a firm may also adopt a no-intermediary policy.


Does the law require a broker to have a written representation agreement to act as someone’s agent? (updated June 17, 2014)

No. A relationship between a broker and a client can legally exist without a written document. However, there are four good reasons why a broker-client relationship should be in writing, whether it’s with a buyer, seller, landlord, or tenant:

1. A broker cannot sue for a commission unless there is a written agreement signed by the party agreeing to pay that commission.

2. If office policy permits a broker to act as an intermediary (the broker has a broker-client relationship with both the seller and the buyer in the same transaction), then the broker must obtain the written consent of each party and it must state who will pay the broker. The Texas Association of REALTORS® buyer's representation agreements and listing agreements include the necessary written consents and other statutory requirements for a broker to act as an intermediary.

3. Written agreements between a broker and his client help ensure that all parties have mutually agreed on the terms of representation.

4. Article 9 of the Code of Ethics requires that REALTORS®, for the protection of all parties, assure whenever possible that all agreements related to real estate transactions are in writing.


I'm changing brokers and I have several buyer clients who've signed buyer-representation agreements. Can I take these buyers with me to my new broker? (updated Oct. 14, 2010)

No. A buyer-representation agreement is a contract between a buyer and a broker, not a salesperson. As such, your buyers would still be represented by your previous broker. However, your buyers can ask to be released from the buyer-representation agreements with your previous broker.


Must the respective appointed licensees each provide an opinion of value to the respective buyer prospect and seller prospect? (updated Nov. 1, 2003)

At the time a property is listed, the licensee is obligated to advise the owner as to the licensee's opinion of the market value of the property. Once appointments have been made, the appointed associates are permitted, but not required, to provide the party to whom they have been appointed with opinions and advice during negotiations.


Can the intermediary delegate to another person the authority to appoint licensees associated with the intermediary? (updated Nov. 1, 2003)

The intermediary may delegate to another licensee the authority to appoint associated licensees. If the intermediary authorizes another licensee to appoint associated licensees to work with the parties, however, that person must not appoint himself or herself as one of the associated licensees, as this would be an improper combination of the different functions of intermediary and associated licensee. It is also important to remember that there will be a single intermediary even if another licensee has been authorized to make appointments.


Who decides whether a broker will act as an intermediary, the broker or the parties? (updated Nov. 1, 2003)

Initially, the broker, in determining the policy of the firm. If the broker does not wish to act as an intermediary, nothing requires the broker to do so. If the broker’s policy is to offer services as an intermediary, both parties must authorize the broker in writing before the broker may act as an intermediary or appoint licensees to work with each of the parties.


Can there be two intermediaries in the same transaction? (updated Nov. 1, 2003)

No.


Our firm's Web site contains the Information About Brokerage Services form (TAR 2501), which can be read and downloaded by anyone visiting the site. If we meet with a prospective buyer at one of our listed homes, and the buyer says that he found the home on our Web site and read the form while on the site, are we still required to give him a copy of the form when we meet him for the first time at the listed home? (updated Nov. 1, 2003)

While it is proactive for you to provide the form on your Web site, Section 1101.558(c) of the Real Estate License Act requires that a licensee furnish the written statement contained in the form to a party to a real estate transaction at the time of the first substantive dialogue with the party. The Real Estate License Act defines "substantive dialogue" to mean a meeting or written communication that involves a substantive discussion relating to specific real property. The term does not include a meeting at an open house or a meeting or written communication that occurs after the parties to a transaction have signed a contract or lease. In the situation you describe, the Real Estate License Act would require you to provide the form to the prospective buyer when you first meet him at the listed home. Note: A licensee is not required to provide the written statement (the form) if the proposed transaction is for a residential lease for not more than one year and no sale is being considered, or the licensee meets a party who is represented by another licensee.


I represent a buyer who is interested in several properties and wants me to find out what the owners paid to purchase these properties. I represented one of the owners when he bought his property, but the sales-price information is in the MLS. Can I tell my new client the price that my former client paid for the property? (updated Nov. 1, 2003)

Standard of Practice 1-9 requires that REALTORS® preserve confidential information provided by clients in the course of the agency relationship after the termination of the relationship. But it seems clear that sales data provided to the MLS upon the sale of the property would not be considered confidential information protected under this obligation. Publication of the sold data in the MLS would remove any possible confidentiality protection that might be given to that information under agency law. A more difficult issue might be presented if the former sale was conducted outside of an MLS and no sales data was made available to parties outside the transaction. Under those circumstances, an argument could be made that the sales price might be entitled to confidentiality treatment by the buyer's agent, and he should obtain the consent of the former client to release that information to the potential buyer. Absent some confidentiality agreement between the buyer and seller and their agents in the former transaction, the sales data probably would not be considered to be protected confidential information since it was known to the seller and his agent. Furthermore, Section 1101.804 of the Real Estate License Act specifically provides that a licensee shall not be liable to any other person for providing sales prices or terms of sale information for the purpose of facilitating the sale of real property unless the disclosure of that information is otherwise specifically prohibited by statute.


I understand that it's important to have a written representation agreement when representing a buyer and that it's required that a broker have a written agreement signed by the person agreeing to pay a commission to enforce this right against a client. But why should I be concerned about this fee issue, since in my market the seller's agent almost always pays the cooperating broker's fee under the MLS residential listings? (updated Jan. 25, 2006) o

The TAR Buyer/Tenant Representation Agreement does contain language that states that the broker will seek to obtain payment of the broker's fees from the seller, landlord, or their agents, but provides that if the buyer agent does not receive all or any of the specified commission from those sources, then the buyer/tenant is obligated to pay that commission (or the difference in the amount specified in the agreement and the amount paid by the seller, landlord, or their agent). This provision can also establish a legal claim to a fee from a buyer who has purchased a home during the term of the agreement using some other agent to complete the purchase contrary to the buyer's agreement to use the broker named in the buyer representation agreement. Brokers should clearly explain the buyer's potential fee obligations under this paragraph of the agreement when they first present the representation agreement to the buyer for signing. Clarity of the parties' rights and obligations in the broker/client relationship is one of the main reasons for having a written brokerage agreement.


Although both the buyer and the seller initially consented to the intermediary broker practice at the time each signed a broker employment agreement, must each party consent again to a specific transaction to ensure there are not potential conflicts? (updated Nov. 1, 2003)

TRELA does not require a second written consent. TRELA does require written notice of any appointments, and the written notice would probably cause any objection to be resolved at that point. A broker would not be prohibited from obtaining a second consent as a business practice, so that potential conflicts are identified and resolved. The earnest money contract, of course, would typically show the intermediary relationship in the Broker Information and Ratification of Fee section of the contract.


May more than one associated licensee be appointed by the intermediary to work with the same party? (updated Nov. 1, 2003)

Yes.


What are the duties and obligations of an intermediary? (updated Nov. 1, 2003)

Section 1101.559(a) requires the intermediary to obtain written consent from both parties to act as an intermediary. A written listing agreement to represent a seller/landlord or a written buyer/tenant representation agreement which contains authorization for the broker to act as an intermediary between the parties is sufficient for the purposes of Section 1101.559(b) if the agreement sets forth, in conspicuous bold or underlined print, the conduct that is prohibited under Section 1101.651(d) and the agreement states who will pay the broker. If the intermediary is to appoint associated licensees to work with the parties, the intermediary must obtain written permission from both parties and give written notice of the appointments to each party. The intermediary is also required to treat the parties fairly and honestly and to comply with TRELA. The intermediary is prohibited from acting so as to favor one party over the other, and may not reveal confidential information obtained from one party without the written instructions of that party, unless disclosure of that information is required by TRELA, court order, or the information materially relates to the condition of the property. The intermediary and any associated licensees appointed by the intermediary are prohibited from disclosing without written authorization that the seller will accept a price less than the asking price or that the buyer will pay a price greater than the price submitted in a written offer.


What is the Intermediary Relationship Notice used for? (June 9, 2010)

The Intermediary Relationship Notice (TAR 1409) is essentially a due diligence form. It's used for two purposes. It serves as a reaffirmation by the seller and the buyer of the prior consent they both gave in writing to the broker to act as an intermediary in the transaction. It is also used by the broker to satisfy the license act requirement to give written notice to all parties of the appointment of associates to each side of the transaction, if such appointments are to be made. This form is not a substitute for the initial written consent that both parties gave when they each signed brokerage agreements with the broker. The Intermediary Relationship Notice should only be used if the seller and the buyer have given their written consents to the broker to act as an intermediary in the listing and buyer/tenant representation agreements. This form may also be used when the broker is acting as an intermediary in a landlord-tenant situation.


I represent a buyer who is interested in several properties and wants me to find out what the owners paid to purchase these properties. I represented one of the owners when he bought his property, but the sales-price information is in the MLS. Can I tell my new client the price that my former client paid for the property? (updated Nov. 1, 2003)

Standard of Practice 1-9 requires that REALTORS® preserve confidential information provided by clients in the course of the agency relationship after the termination of the relationship. But it seems clear that sales data provided to the MLS upon the sale of the property would not be considered confidential information protected under this obligation. Publication of the sold data in the MLS would remove any possible confidentiality protection that might be given to that information under agency law. A more difficult issue might be presented if the former sale was conducted outside of an MLS and no sales data was made available to parties outside the transaction. Under those circumstances, an argument could be made that the sales price might be entitled to confidentiality treatment by the buyer's agent, and he should obtain the consent of the former client to release that information to the potential buyer. Absent some confidentiality agreement between the buyer and seller and their agents in the former transaction, the sales data probably would not be considered to be protected confidential information since it was known to the seller and his agent. Furthermore, Section 1101.804 of the Real Estate License Act specifically provides that a licensee shall not be liable to any other person for providing sales prices or terms of sale information for the purpose of facilitating the sale of real property unless the disclosure of that information is otherwise specifically prohibited by statute.


As a listing agent, I hold open houses. If a prospective buyer at an open house wants to purchase the property I listed, can I represent that buyer? (Updated Sept. 18, 2015)

Yes, your broker—or you acting on your broker’s behalf—may represent the buyer if your broker has chosen to offer intermediary services. But you and your broker must take a few steps to ensure all parties understand the situation. 

You must provide the buyer with the Information About Brokerage Services (TREC OP-K, TAR 2501) form upon first substantive dialogue and disclose—orally or in writing—that the broker is representing the seller. 

If the buyer chooses to have your broker represent him or her, the buyer can enter into a representation agreement with the broker. Written consent, which states the source of compensation and broker’s obligations as intermediary under the Texas Real Estate License Act, is required from all parties before a broker can serve as an intermediary. The Residential Real Estate Listing Agreement, Exclusive Right to Sell (TAR 1101) and the Residential Buyer/Tenant Representation Agreement (TAR 1501) satisfy these requirements. 

Next, the broker should notify the buyer and seller of whether the broker will appoint licensed associates to provide advice and opinion to each of the parties during negotiations by providing the Intermediary Relationship Notice (TAR 1409) and having the buyer and seller sign it. The broker would then appoint a sponsored license holder to the buyer and a different sponsored licensed holder to the seller. You, as a sponsored license holder of the broker, could be one of the agents appointed. If the broker is not going to make appointments, you, as a sponsored license holder of the broker, could act on behalf of the broker as intermediary, but you would not be permitted to provide advice or opinion to either of the parties. 


My client wants to make an offer on a for-sale-by-owner property. What is the best way to approach the seller with the offer and make sure I receive my fee from the seller? (updated June 16, 2014)

Follow this order of signing documents so you have the seller’s written agreement to pay your fee before the parties sign a contract:

1. It is recommended to have your buyer sign a buyer’s representation agreement. If she signs the Residential Buyer/Tenant Representation Agreement (TAR 1501), you may want to remind her that under Paragraph 11B, she may be obligated to pay you if the seller refuses or fails to pay your fee.

2. Provide the seller with the Information About Brokerage Services form (TAR 2501, TREC OP-K) and discuss the agency relationships involved in this purchase.

3. Complete the Registration Agreement Between Broker and Owner (TAR 2401) and check the box in the broker’s representation section that indicates you are representing the prospect only. Have the seller sign this document.

4. Give the seller the Seller’s Disclosure Notice (TAR 1406) to complete and sign.

5. Present your buyer’s offer for the seller’s consideration and signature.

Remember, even though your client is the buyer, you have an obligation to treat the seller fairly and honestly. Avoid actions that might be construed as pressuring the seller to sell the property to your client.


What are the agency disclosure requirements for real estate licensees? (updated Nov. 1, 2003)

To disclose their representation of a party upon the first contact with a party or a licensee representing another party.


How is the intermediary broker responsible for the actions of appointed licensees when a difference of opinion of property value estimates is provided? (updated Nov. 1, 2003)

Brokers are responsible for the actions of their salesmen under TRELA. Opinions of property values may be different and yet not indicative of error or mistake by the salesmen. If a salesman makes an error or mistake, the sponsoring broker is responsible to the public and to TREC under Section 1101.803 of TRELA.


May an intermediary appoint a subagent in another firm to work with one of the parties? (updated Nov. 1, 2003)

Subagency is still permitted under the law, but a subagent in another firm cannot be appointed as one of the intermediary’s associated licensees under the provisions of Section 1101.560.


Is an intermediary an agent? (updated Nov. 1, 2003)

Yes, but the duties and obligations of an intermediary are different than for exclusive, or single, agents.


When must the intermediary appoint the licensees associated with the intermediary to work with the parties? (updated Nov. 1, 2003)

This is a judgment call for the intermediary. If appointments are going to be made, they should be made before the buyer begins to receive advice and opinions from an associated licensee in connection with the property listed with the broker. If the broker appoints the associates at the time the listing contract and buyer representation agreements are signed, it should be clear that the appointments are effective only when the intermediary relationship arises. The intermediary relationship does not exist until the parties who have authorized it are beginning to deal with each other in a proposed real estate transaction; for example the buyer begins to negotiate to purchase the seller’s property. Prior to the creation of the intermediary relationship, the broker will typically be acting as an exclusive agent of each party. It is important to remember that both parties must be notified in writing of both appointments. If, for example, the listing agent is "appointed" at the time the listing is taken, care must be taken to ensure that the buyer is ultimately also given written notice of the appointment. When a buyer client begins to show interest in a property listed with the firm and both parties have authorized the intermediary relationship, the seller must be notified in writing as to which associate has been appointed to work with the buyer.


I was the listing agent for a property that didn't sell but was listed by another broker after the expiration of my agreement. I now have a buyer client who wants to see that same property. Must the new broker, or my broker, designate me as an appointed licensee, or how may I otherwise act? (updated Nov. 1, 2003)

Assuming an agreement with the listing broker as regards cooperation and compensation, you may represent the buyer as an exclusive agent. You cannot be appointed by the intermediary because you are not an associate of the listing broker, and from the facts as you describe them, no intermediary status is going to arise. Confidential information obtained from the seller when you were acting as the seller's agent, of course, could not be disclosed to your new client, the buyer.


How is a property "showing" different from a proposed transaction? (updated Nov. 1, 2003)

The question appears to be, "May an associate show property listed with the associate’s broker while representing the buyer without first being appointed by the intermediary, and if so, why?" Yes. Only showing property does not require the associate to be appointed, because it does not require the licensee to give advice or opinions (only an appointed associate may offer opinions or advice to a party). If no appointments will be made, of course, the associate will be working with the party and will not be authorized to provide opinions or advice.


If a buyer’s agent is required to disclose that licensee’s agency status to a listing broker when setting up a showing appointment, must the listing broker also disclose to the buyer’s agent that the listing broker represents the seller? (updated Nov. 1, 2003)

Yes, on the first contact with the licensee representing the buyer.


May a broker act as a dual agent? (updated Nov. 7, 2005)

Section 1101.561 of the Real Estate License Act provides that if the broker will represent both the buyer and the seller in the transaction, the broker must act as an intermediary. One may not agree to act as a dual agent and comply with the Real Estate License Act.


How can the intermediary broker advise the seller or buyer on value, escrow deposit amount, repair expenses, or interest rates? (updated Nov. 1, 2003)

When the listing contract or buyer representation agreement has come into existence, and no intermediary status yet exists, the broker may advise the parties generally on such matters. Offers from or to parties not represented by the intermediary’s firm may have made the parties knowledgeable on these matters. Once the intermediary status has been created, however, the intermediary broker may not express opinions or give advice during negotiations. Information about such matters which does not constitute an opinion or advice may be supplied in response to question. For example, the intermediary could tell the buyer what the prevailing interest rate is without expressing an opinion or giving advice. The seller’s question about the amount of earnest money could be answered with the factual answer that in the broker’s experience, the amount of the earnest money is usually $1,500 to $2,000, depending on the amount of the sales price. If the buyer asks what amount of money should be in the offer, the intermediary could respond with the factual statement that in the intermediary’s experience, those offers closest to the listing price tend to be accepted by the seller. The intermediary also could refer the party to an attorney, accountant, loan officer or other professional for advice.


Can a broker representing only the buyer be an intermediary? (updated Nov. 1, 2003)

Ordinarily, no. In the case of a FSBO or other seller who is not already represented by a broker, the broker representing the buyer could secure the consent of both parties to act as an intermediary.


If a salesperson may provide services to a party under the new law without being appointed, why would a broker want to appoint a salesperson to work with a party? (updated Nov. 1, 2003)

Appointment following the procedures set out in the new law would permit the salesperson to provide a higher level of service. The appointed salesperson may provide advice and opinions to the party to whom the salesperson is assigned and is not subject to the intermediary’s statutory duty of not acting so as to favor one party over the other.


What is the difference between a dual agent and an intermediary? (updated Nov. 1, 2003)

A dual agent is a broker who represents two parties at the same time in accordance with common law obligations and duties. An intermediary is a broker who negotiates the transaction between the parties subject to the provisions of Section 1101.559 of The Real Estate License Act. The intermediary may, with the written consent of the parties, appoint licensees associated with the intermediary to work with and advise the party to whom they have been appointed. In a dual agency situation in which two salesmen are sponsored by the same broker but are working with different parties, the broker and the salesmen are considered to be agents of both parties, unable to act contrary to the interests of either party.


When representing a client in a real estate transaction, what are the minimum services that I must provide as a real estate license holder (Updated August 26, 2016)

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

1. inform his client if he receives material information related to the transaction, including the receipt of an offer
2. answer his client’s questions and present any offers to or from his client.

These duties exist regardless of the agreed-upon compensation payable to the broker. A broker cannot avoid these requirements by removing himself from negotiations. The minimum-services provisions also prohibit a broker from negotiating or attempting to negotiate directly with the represented party.

There are certain circumstances in which a broker may deliver an offer to a represented party without violating the Real Estate License Act, but the broker must have the other broker’s consent to the delivery and send him a copy of the offer. At no time may the broker cross the boundary into negotiations with the represented party.


A buyer asked me to show him a property that’s listed for sale in the MLS, but we didn’t sign a representation agreement. If I show him the property without a signed representation agreement, would I be considered a subagent of the seller? (Updated March 27, 2015)

It depends. If you have created an agency relationship in which you’re representing the buyer—even if you haven’t signed a representation agreement—then you have a fiduciary duty to the buyer and you are not a subagent of the seller. 

A subagency relationship is not as common as it used to be, but it usually arises when a buyer who is not represented uses the services of a broker to view a property. That broker then owes a fiduciary duty to the listing broker and the seller—not the buyer—and the buyer is treated as customer of the broker. It is important that a broker in this situation obtain permission from the listing broker, and explain his or her role to the buyer to avoid any confusion.    


What information related to agency are license holders required to provide under The Real Estate License Act? (updated September 7, 2016)

License holders have two requirements under Section 1101.558, Representation Disclosure, of The Real Estate License Act:

• To disclose which party they represent to other parties or license holders who represent another party in a proposed real estate transaction

• To provide information about brokerage services to prospective buyers, sellers, tenants, and landlords.

The first requirement is a disclosure, which can be provided orally or in writing. The second requirement is a written notice, which must be provided to prospective parties to a proposed transaction for a property through the Information About Brokerage Services form promulgated by the Texas Real Estate Commission.


Does Section 1101.558 of The Real Estate License Act apply only to residential real estate sales transactions? (updated September 7, 2016)

No. The Real Estate License Act requirements apply to other types of real estate transactions, including leasing, commercial, new home, and farm and ranch sales.


Does providing the Information About Brokerage Services form meet The Real Estate License Act’s requirements to disclose agency? (updated September 7, 2016)

No. These are two separate requirements. The IABS form is does not meet the law’s requirement to disclose representation of a party.


When and how should license holders disclose who they represent under The Real Estate License Act’s requirements to disclose agency? (updated September 7, 2016)

A license holder must disclose which party she represents at the first contact with another party or another license holder representing a party in a proposed transaction. For example, disclosure must be provided when a seller’s agent meets the buyer (who is unrepresented or working with an agent), or when a buyer’s agent meets the seller’s agent. In either scenario, the disclosure can be oral or in writing, but it’s easier to prove you’ve made the disclosure if it’s in writing. There is no required language for this disclosure.


What should I do if I’m representing a seller and an unrepresented buyer who does not want to be represented approaches me about the property? (updated September 7, 2016)

To meet the requirements of Section 1101.558 of The Real Estate License Act, you will need to disclose either orally or in writing who you represent at first contact with the buyer. Of course, it will be easier to prove you’ve provided this disclosure if it’s in writing. You’ll also need to provide the buyer with the Information About Brokerage Services form upon first substantive communication regarding a property.


When and how should license holders provide the Information About Brokerage Services form? (updated September 7, 2016)

At the first substantive communication with a party about a property, a license holder must provide the Information About Brokerage Services form (TAR 2501, TREC IABS 1-0). The IABS form is promulgated by TREC to satisfy The Real Estate License Act’s requirement that a license holder provide written notice in at least 10-point font that:

• Describes the ways a broker can represent a party to a real estate transaction, including as an intermediary

• Outlines the basic duties and obligations a broker has to a party the broker represents

• Provides the name, license number, and contact information for the license holder and the license holder’s supervisor and broker, if applicable.


Are there any exceptions for providing the Information About Brokerage Services form? (updated September 7, 2016)

Yes. A license holder is not required to provide the notice if any of these situations applies:

• The proposed transaction is for a residential lease of less than one year and a sale is not being considered

• The license holder meets with a party who the license holder knows is represented by another license holder

• The communication occurs during an open house for any prospective buyer or tenant and the communication concerns that specific property.


Does the Texas Real Estate Commission have rules about how to deliver the Information About Brokerage Services form? (updated September 7, 2016)

Yes. The IABS form can be delivered in the following ways:

• Personally delivered by a broker or sales agent

• Through first-class mail or overnight common carrier delivery service

• In the body of an email

• As an attachment to an email, or a link within the body of an email, with a specific reference to the form in the body of the email, which is the part above your name and contact information in your signature block.


Can I provide the Information About Brokerage Services form only electronically? (updated September 7, 2016)

Yes. You may do so in the body of an email. You can also add it as an attachment to an email or a link within the body of an email, as long as there is a specific reference to the form in the body of the email above your name and contact information. License holders can reproduce the IABS form provided that the text is copied verbatim and the spacing, borders, and placement of the text appears identical to that of the published IABS form, except you should complete the Broker Contact Information section.

Here’s an example of an appropriate way to link to the IABS form in an email:

Hi John,

I’m thrilled Sally referred you to me and I’d love to help sell your home. I always give a listing presentation to prospective clients. Do you have time to meet on Saturday so I can explain what my services entail?

By the way, Texas law requires all license holders to provide the Information About Brokerage Services form to prospective clients. Please review the linked document before we meet.

Thanks,
Jane Doe, REALTOR®
1234 Main St.
800-555-1213

 

Note that the hyperlink above goes to a blank IABS form. You must link to an IABS form that has your information in the Broker Contact Information section to comply with the law. Find information on how to link to your completed form in the May 2016 issue of Texas REALTOR® magazine.


Does a link to the Information About Brokerage Services form in my email signature block count as electronic delivery? (updated September 7, 2016)

No. A link to the IABS form in a footnote or email signature block does not meet The Real Estate Licensing Act’s requirements.


Do I have to put a link to the Information About Brokerage Services form on my website? (updated September 7, 2016)

Yes. TREC rules require all active real estate brokers and sales agents to provide a link to the IABS form in a readily noticeable place on the homepage of their business website. The link must say “Texas Real Estate Commission Information About Brokerage Services” and must be in at least 10-point font. This requirement is in addition to the delivery requirements.


Do I have to provide a link to the Information About Brokerage Services form on my business’s social media channels? (updated September 7, 2016)

It depends. Brokers and agents must provide a link to the IABS form on their business website. According to the Texas Real Estate Commission, a business website means a website used to attract or conduct real estate brokerage activity. This may include a business Facebook page or other social media channels you use for business.


If I have links to the Information About Brokerage Services form on my website and provided it via email in compliance with the Texas Real Estate Commission rule, do I still need to deliver the form in person? (updated September 7, 2016)

No. If you’ve provided a link on your business website and delivered the form electronically according to the requirements (see TREC rule 531.20), you do not have to provide it again in person.


Legal Disclaimer: 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.

While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on TexasRealEstate.com. Any legal or other information found here, on TexasRealEstate.com, or at other sites to which we link, should be verified before it is relied upon.

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