What happens if a client sues an agent or broker and wins, but the license holder can’t pay the awarded damages? Clients who find themselves in that situation can apply to the Texas Real Estate Commission, which maintains two “funds of last resort” to cover out-of-pocket damages.

The Real Estate Recovery Trust Account covers damages caused by brokers, sales agents, easement/right-of-way agents, or a license holder’s employees. Payments are capped at $50,000 per transaction with a maximum of $100,000 per license holder for multiple transactions.

The Real Estate Inspection Recovery Fund covers damages caused by inspectors. Payments may not exceed $12,500 per transaction with a maximum of $30,000 per license holder for multiple transactions.

Only certain conduct qualifies for reimbursement:

  • Recovery trust account criteria includes when a license holder engages in misrepresentation, dishonesty, or fraud when selling, buying, trading, or leasing real property in their own name, or for their spouse, parents, siblings, or children. Other criteria include negligence or incompetence, dishonesty or bad faith conduct, and material misrepresentation concerning a significant defect known to the license holder that would be a significant factor to a reasonable and prudent buyer in making a decision to purchase real property.
  • Inspection recovery fund criteria includes negligence and accepting an assignment if the employment or a fee is contingent on reporting a specific, predetermined condition of the improvements to real property or specific findings other than what the inspector knows to be true when the assignment is accepted. Acting in a dishonest or fraudulent manner, or in a dual capacity as inspector and undisclosed principal or broker/sales agent, also qualifies.

Real estate consumers who seek TREC funds must take several legal steps before applying. They must file suit within two years of the events of the claim, receive a final judgment against the license holder for damages, obtain and file an abstract of judgment, and obtain a writ of execution demanding payment. Consumers may only apply if the license holder does not have the funds required to pay the damages.

Learn more at trec.texas.gov/public/real-estate-recovery-funds.