Legal FAQs for REALTORS®
Limitations on Communications
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 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.
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.
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.
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.
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.
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.
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.