Legal FAQs for REALTORS®
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.
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)
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.
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.
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)
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)
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.
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.
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.
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.
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.
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