One of my agents wants to sell her home without listing the property with our firm or any other firm. She’s not advertising the property through the MLS, either. What disclosure must she make about her status as a real estate agent?

She should inform any buyer that she is a licensed real estate sales agent acting on her own behalf—either in writing before entering into a sales contract or by disclosing the information in Paragraph 4 of the sales contract. This disclosure is required by TREC rules.

The Code of Ethics outlines similar requirements in Article 4 and Standard of Practice 4-1. In addition, Standard of Practice 12-6 requires REALTORS® to disclose their status as owners or landlords and as REALTORS® or real estate license holders when advertising unlisted real property for sale. Similar rules apply when license holders intend to acquire property on their own behalf.

These disclosure requirements are intended to ensure the public is informed of an agent's license status when buying real estate from the license holder, and to avoid claims that a real estate license holder was using her undisclosed license status and expertise to take advantage of a member of the public.  

An architectural design firm I recommend to clients gave me free box seat tickets to a local sporting event. Does the Code of Ethics say I have to disclose this to my clients?

It depends. Article 6 of the Code of Ethics says REALTORS® must disclose to clients any financial benefit or fees, other than real estate referral fees received from other brokers, the REALTOR® or the REALTOR®’s firm may receive as a direct result of recommending real estate products or services. If you are receiving these tickets as a direct result of your recommendation, then you would have to disclose this to your clients.

Remember to make sure any actions you take related to recommendations or referrals are in compliance the Real Estate Settlement Procedures Act (RESPA).

Can a broker solicit new sales agents by promising to provide them leads in exchange for a required payment?

Yes. However, this activity triggers the Business Opportunity Rule, which is a federal law requiring a brokerage to provide the sales agent with the Federal Trade Commission’s one-page disclosure notice, Disclosure of Important Information About Business Opportunity. A brokerage can offer advertising or training in its solicitation without triggering the Business Opportunity Rule if it does not promote these activities as leading to the sales agents’ success. Instead, the brokerage’s solicitation should focus only on the assistance provided.

Will a buyer be automatically given 10 days to conduct inspections for lead-based paint in all transactions?

The right to conduct inspections for lead-based paint applies to sales of target housing. The 10-day period is negotiable, but if no other time is specified, the buyer will have 10 days to conduct inspections for lead-based paint before becoming obligated under the contract. The 10-day right does not apply to leases of target housing.

Are there instances in which the rules about providing the lead-based paint addendum don't apply?

Yes, exemptions include:

1. housing built after Dec. 31, 1977; 
2. housing for the elderly or disabled (where no child under six resides);
3. dwellings with no bedrooms, meaning the living area is not separated from the sleeping area such as efficiency apartments, dormitory housing, military barracks, and individual rooms;
4. sales of target housing at foreclosure;
5. leases of target housing that are found to be free of lead-based paint by an inspector certified under the federal certification program or under a federally accredited state or tribal certification program;
6. short-term leases of 100 days or fewer where no lease renewal or extension can occur; and
7. renewals of existing leases in target housing in which the lessor has previously disclosed all information and where no new information has come into his possession.

How do brokers in Texas ensure compliance with the rules?

Concerning lease transactions, the association revised its residential lease forms effective May 15, 1996. Included in these revisions is a notice in the lease, paragraph 35, advising the parties of requirements under the act. If the property was built before 1978, the Addendum Regarding Lead-Based Paint (TAR 024H) will probably be attached to the lease. The association also made available copies of the federal lead hazards information pamphlet that tenants will receive prior to executing a lease.

Do these rules apply if I am selling an apartment complex for an owner in a commercial real estate transaction?


What's wrong with lead-based paint?

Although lead poisoning does not often exhibit obvious symptoms, blood levels as low as 10 micrograms per deciliter (mg/dl) have been associated with learning disabilities, growth impairment, permanent hearing and visual impairment, and other damage to the brain and nervous system. Lead exposure can also alter fetal development and cause miscarriages. It is especially damaging to children under six and pregnant women. In 1991, the secretary of Health and Human Services characterized lead poisoning as the number-one environmental threat to the health of children in the United States. A national health survey indicated that over the past 20 years, the average child's blood lead level has decreased from 12.8 mg/dl to 2.8 mg/dl. In 1991, 1.7 million U.S. children under the age of six had blood-lead levels exceeding 10 mg/dl. Efforts to reduce lead exposure from gasoline and food cans have been successful and have contributed to the decline in blood lead levels. However, lead-based paint still poses a threat. About 83% of the privately owned housing units built in the United States before 1980 contain some lead-based paint (approximately 64 million homes). The lead from paint can flake off and dust caused during normal wear can create a hard-to-see film over surfaces. Even regular cleaning and dusting can disperse fine dust particles containing lead into the air. If managed improperly, the exposed lead may be inhaled or ingested.

What does the term target housing mean?

It refers to any housing constructed before 1978. It does not include housing for the elderly or persons with disabilities unless a child less than six years of age resides or is expected to reside in the housing. It does not include dwellings with no bedrooms.

What is meant by lead-based paint and lead-based paint hazard?

"Lead-based paint" refers to paint or other surface coatings that contain lead equal to or in excess of 1 milligram per square centimeter or 0.5% by weight. "Lead-based paint hazard" refers to any condition that causes exposure to lead from lead-contaminated dust, soil or paint that is deteriorated or present in accessible surfaces, friction surfaces or impact surfaces that would result in adverse human health effects.

When did the lead-based paint rules become effective?

For owners of more than four residential dwellings, the rules took effect Sept. 6, 1996. For owners of one to four residential dwellings, they took effect Dec. 6, 1996.

Will a buyer be automatically given 10 days to conduct inspections for lead-based paint in all transactions?

The right to conduct inspections for lead-based paint applies to sales of target housing. The 10-day period is negotiable, but if no other time is specified, the buyer will have 10 days to conduct inspections for lead-based paint before becoming obligated under the contract. The 10-day right does not apply to leases of target housing.

Does it matter which party signs the Addendum for Seller's Disclosure of Information on Lead-Based Paint and Lead-Based Paint Hazards (TAR 1906, TREC OP-L) first?

Yes. The seller must sign first because the seller has the obligation to provide information to the buyer regarding any known lead-based paint and/or lead-based paint hazards, as well as any records and reports pertaining to lead-based paint and/or lead-based paint hazards that the seller may have.

The prospective buyer must have this information when deciding whether to conduct a risk assessment or inspection for the presence of lead-based paint or lead-based paint hazards. Note that this seller’s disclosure must be made before any contract for the purchase of a residential dwelling built before 1978 is executed by the buyer.

What's the difference between the pamphlet Protect Your Family From Lead in Your Home and the lead warning statement required in a contract or lease?

"Protect Your Family From Lead in Your Home" was written by the EPA and is a small booklet containing about 16 pages that generally discusses the sources of lead, where to obtain additional information and what precautions a person should take when buying or leasing a dwelling with lead-based paint. The pamphlet is to be provided to each buyer or tenant as information. The lead warning statement is specific language, prescribed by the rules, that must be contained in the contract to sell or lease. The lead warning statement will be placed in the addendum that will be attached to the lease or contracts. It is a short paragraph about lead-based paint and lead-based paint hazards.

Must relocation companies comply with the rules?

If the relocation company is the seller, yes.

How can brokers and salespersons remember what must be provided?

Provide all prospects the pamphlet "Protect Your Family From Lead in Your Home" as early as possible. If selling or leasing housing built before 1978, use the addenda regarding lead-based paint at the time the buyer or tenant is prepared to make the offer. Because the addenda will contain disclosures by the seller or landlord, use the addenda following the same procedure used when obtaining a seller's disclosure notice. Before preparing an offer, the broker working with the buyer or tenant will need to contact the listing agent for a copy of the addendum completed by the seller or landlord.

If a property was foreclosed upon by a lender and the lender listed the property for sale, must the lender (new owner) comply with the rules?

Yes. The exemption concerning sales at foreclosure is limited to the foreclosure sale itself.

The initial buyer's inspector contacted the seller and stated that neither the seller nor the seller's broker can provide a copy of the inspection report to a buyer who has not paid for the report. Is the seller or the seller's broker ever prohibited from providing a copy of an inspection report to a subsequent purchaser?

A seller or seller's broker is only prohibited from sharing a copy of an inspection report with a subsequent buyer if the seller or the seller's broker is the client of the inspector (i.e., the seller or the seller's broker ordered the inspection) and the seller or seller's broker signed an agreement prohibiting the seller or broker from sharing the report. While an inspector is obliged to answer only to the inspector's client and is under no obligation to speak with any other person about the content of the inspector's report, the inspector's report should stand on its own. The inspector's opinion as to the condition of the property as of the date specified in a report does not change based upon who reads the report. Most inspectors know that a client will use the inspection report to negotiate repairs in a transaction and that the client may need to provide a copy of the report to the other party. This is the nature of the industry that gives rise to the demand for the inspector's business. Most inspectors do not require that their clients sign confidentiality agreements prohibiting the client from sharing the report with others. Even if an inspector has a client sign a confidentiality agreement that limits the client's right to copy and distribute the report, that agreement is binding only upon the client and not upon any other person who may receive a copy of the report.

Let's say the buyer in the above scenario chose to terminate the contract. What obligations does the seller have to subsequent buyers to disclose information in the prior inspection report the seller disagrees with?

A broker or seller who receives an inspection report is charged with knowledge of the information in the report. This is true even if the broker or seller does not open the report or disagrees with the information contained in the report. If an inspection report reveals material defects, the seller and the broker are obliged to disclose those defects to subsequent potential buyers. The seller and broker may choose to disclose the defects orally, but that may be imprudent since no record of the disclosure would exist; summarize the defects in some written communication to the subsequent purchaser, but that may create a risk that some important information may be edited out. The seller and broker should provide a copy of the report to the subsequent potential purchaser along with the seller's disclosure notice, thereby providing all of the information the seller and broker have with regard to any know defects. If the seller strongly believes the information in the inspection report is incorrect, the seller could have another inspection performed. If this is done, the seller should provide both reports to subsequent buyers. The TAR Seller's Disclosure Notice (TAR 1406) asks the seller to identify and attach copies of previous inspection reports. TAR's notice cautions the buyer against relying on previous reports as a reflection of the current condition of property and suggests that the buyer employ an inspector of the buyer's choice to inspect the property.

My seller client disagrees with the buyer’s inspector’s finding that an item needs to be repaired. Does a seller have to make the repairs requested by a buyer?

No. There is no requirement for a seller to make any repairs. However, a seller who rejects any repair amendment or refuses to negotiate any repairs risks the buyer terminating the contract if the buyer has an unrestricted right to terminate the contract and is within the termination-option period.

To avoid this situation, a seller who disagrees with an inspection report provided by a buyer could consider hiring another inspector to inspect the property or the items in dispute in an effort to continue negotiating with that buyer.

On behalf of my buyer, I attached the inspection report the buyer paid for to an amendment for repairs and submitted that to the seller's agent. The seller and the seller's agent refused to open the report or negotiate for any repairs. What can the buyer do in this situation?

A broker or seller who receives an inspection report is charged with knowledge of the information in the report even if the broker or seller does not open the report. While sellers and listing agents should review inspection reports they receive on the property, a buyer and/or buyer's representative can't force them to do that. Additionally, there is no requirement that sellers agree to or even consider amendments requiring the seller to perform repairs to the property. Buyers should have inspections performed and negotiate any repairs during the buyer's option period. If the buyer is not satisfied with the information in the inspection report or cannot get the seller to agree to requested repairs, the buyer can exercise his right to terminate the contract.

My seller client knows that his next-door neighbor has applied with the city to change his property’s zoning. Is the seller required to disclose this information to potential buyers?

The seller and the seller’s agent are required to disclose known material facts about the property. Because the zoning change could be something a buyer would want to know before deciding to purchase the property, it’s a good idea for the seller to disclose what he knows about the potential zoning change.

You may want to inform the seller that, as the seller’s agent, you are also required to disclose known material facts about the property.

What must a seller disclose regarding fire detection and safety equipment?

Under the new law passed in the 80th Texas Legislature, a seller of a single-family residence will now be required to disclose information regarding the presence of fire-detection and safety devices in the residence. The items that must be disclosed include smoke detectors, hearing-impaired smoke detectors, carbon monoxide detectors, and emergency escape ladders. These changes have already been made to the Texas REALTORS® Seller's Disclosure Notice (TAR 1406).

I took a listing that is going to be a short sale and will require the lender's approval. The seller insists that since the lender is a necessary party to any sale that the seller is not obligated to provide a disclosure notice. Is that true?

No. Section 5.008 of the Property Code does not grant a seller an exemption to the requirement to provide the seller's disclosure notice because any sale of the property requires approval by the lender. While the lender's approval may be necessary for the transaction to be successful, the lender is not a party to the contract. Only the seller is selling the property. Remember that the seller's disclosure notice is a risk-reduction tool for the benefit of the seller. The seller does not need to add to his financial problems by risking a DTPA suit for nondisclosure of items that could have been provided to a buyer by the careful preparation of the seller's disclosure notice.

Both TAR and TREC have a seller’s disclosure notice. Can my seller use either form and still be in compliance with the law?

Yes, both forms comply with Texas statutory requirements related to disclosure.

The TREC form is essentially a copy of the statutory minimum information required in Section 5.008 of the Texas Property Code. TAR recommends that Texas REALTORS® use the TAR Seller's Disclosure Notice (TAR 1406), which has added provisions that provide more information for buyers and is designed to serve as a risk-reduction tool for sellers.

Remember, the Seller's Disclosure Notice is not a contract. The notice should not be part of the contract of the parties and should not be listed as an addendum to the contract.

I occasionally buy older homes that need a lot of work, remodel the homes, and sell them for a profit. I heard that the Legislature made some changes that place the responsibility of complying with the statutory warranties concerning new homes on me.

People who buy homes and remodel them by making a material improvement to the home and who do not live in the home for at least one year following the completion of the remodeling are responsible for the statutory warranties for the remodeling work in the same way a builder or remodeler is responsible for the warranties. This is true even though the owner is not required to register as a builder. The key issue here is whether the person buying the home makes a "material improvement" to the home. A material improvement is a modification to the home that increases or decreases the square footage of the living area and also modifies the home's foundation, perimeter walls, or roof. A material improvement does not include modifications that are designed primarily to repair or replace the home's component parts. So, if you occasionally buy a distressed home and remodel the home by making a material improvement, you would be responsible for the statutory warranties for the remodeling work in the same way that the remodeler or builder is responsible even though the you are not required to register as a builder. Note that the contractors that you may use to remodel the home will provide at least the statutory warranties to you in the contracts that you use to engage the contractors. You could have the warranties transferred to the buyer, but you would still be responsible for the statutory warranties to the buyer in the event the transferred warranties were not honored. Additionally, there are third-party warranty companies with whom you can contract to provide and administer warranties to a buyer that covers the statutory warranties of the remodel. For more information, concerning the statutory warranties, visit the Texas Residential Construction Commission's Web site.

Is the owner of a duplex required to provide a seller's disclosure notice when listing his property?

No. The seller's disclosure-notice requirements in the Texas Property Code only apply to sellers of residential property comprising "not more than one dwelling unit;" however, a seller must still disclose known material defects concerning the property. Therefore, it's a good idea for the owner of a duplex to provide the notice for each side of the duplex. 

Any seller should review the seller's disclosure notice and consider the advantages of disclosing information about the property's condition before an offer is made. The notice can be a significant risk-reduction tool. 

When must sellers begin giving this additional notice?

The fire safety information is required to be given beginning Sept. 1, 2007. Any seller who enters into a sales contract on or after that date should give the potential buyer the updated notice. It is also recommended sellers begin using the new notice form immediately to avoid having to update the notice if the listing does not go under contract before September 1.

My client's home has been on the market for several months. Several buyers have made offers, but none have been acceptable to the seller. We now have a buyer who is interested in buying the property but refuses to sign the seller disclosure notice until the seller updates the notice that was prepared and signed at the beginning of my listing period. Must the seller update the notice, and can the buyer refuse to sign the notice until the seller does?

Section 5.008 of the Property Code requires that the notice shall be completed to the best of the seller's belief and knowledge as of the date the notice signed by the seller. While the statute does not require the seller to update the notice, a seller who has acquired material information about the property's condition since filling out the original notice should consider updating the notice or in some other manner providing that information to prospective buyers. The disclosure of such information can greatly reduce the seller's risk of a later claim of or suit for nondisclosure of material problems with the property. The signature of a buyer on any seller's disclosure notice only acknowledges receipt by the buyer of that notice. While there is no statutory mandate that buyers must sign the notice, buyers should cooperate by signing the receipt portion of the notice when they receive the notice. Such a signature could also be helpful should a question later arise concerning whether the buyer received this notice or maybe another seller's disclosure notice provided by a seller containing different information. In any event, if a buyer refuses to sign the receipt for the notice, the broker could note on a copy of the notice the date that the notice was provided to the buyer and that the buyer would not sign the receipt. That noted copy could be retained in the broker's file as evidence of compliance by the broker in furnishing a copy of the notice to the buyer.

Do the seller's disclosure-notice requirements apply to a relocation company?

A relocation company that has title to the property is not exempt from the notice requirements. Listing agents should suggest that the relocation company fill out the notice and attach the notice that they received from their employee along with any inspection reports that they have concerning the property.

Two of my listings involve homes that may have a registered sex offender living nearby. There is a sex-offender sign in the yard of a property about two blocks from one of these listings. A neighbor of the owner of the other home sent us a flier describing the sex offender and where he lived. What disclosures are we or our clients required to make about this information?

Article 62.056(e) of the Texas Code of Criminal Procedures provides that an owner of residential real property or any broker or salesperson in a residential real estate transaction shall have no duty to make a disclosure to a prospective buyer or tenant about a registered sex offender. Under this provision of the law, neither you nor the owners of the properties would have a duty to disclose any information that you know about registered sex offenders. However, since it is quite likely that prospective buyers will find out about this information from neighbors or other sources, the listing agent may consider some innocuous method of getting this information to agents for prospective buyers. There are some buyers who might be very disturbed about this information and not want to purchase the property. Some may even breach an existing contract by refusing to close. The seller is better off not being involved at all with this type of buyer. Other buyers might consider this as only one small consideration in their evaluation of the home for possible purchase.

Does a landlord have to provide a Seller’s Disclosure Notice to a tenant entering into a lease?

No. The section of the Texas Property Code which requires the notice does not apply to any lease transaction. 

What must a seller disclose specifically regarding smoke alarms?

Sellers must disclose whether or not their property has working smoke detectors installed in accordance with the smoke detector requirements of Chapter 766 of the Health and Safety Code (as added by House Bill 2118 in the 2007 legislative session). This change has already been made to the Texas REALTORS® Seller's Disclosure Notice (TAR 1406). Chapter 766 requires one- or two-family dwellings to have working smoke detectors installed in accordance with the requirements of the building code in effect in the area in which the dwelling is located, including performance, location, and power source requirements. If a seller does not know the local building code requirements, the seller should check unknown or contact his local building official for more information.

My buyer wants to purchase a residential property owned by an investor who hasn’t seen the property in years. The owner refuses to fill out a seller’s disclosure notice, except to note he has no knowledge of the property’s condition. Is this sufficient disclosure?

The Texas Property Code requires a seller of residential real property comprising not more than one dwelling unit to provide a seller’s disclosure notice to the buyer. The Property Code doesn’t offer an exception to the requirement because a seller hasn’t seen or lived in the property. After all, knowledge of the property can come from sources other than a visual examination, such as complaints from tenants or reports from property managers.

Failing to provide a completed seller’s disclosure notice to the buyer may entitle the buyer to certain remedies, like terminating the contract.

Remember, a buyer should never rely upon the information provided by a seller concerning the condition of the property, even in a situation in which a completed seller's disclosure notice has been provided. A buyer should always have his own inspection done to satisfy his concerns about the condition of the property.

My seller told me that a murder occurred at her property before she owned it. Does she have to disclose this information to buyers?

Yes, she should disclose this to buyers. According to the Texas Property Code, sellers aren’t required to disclose deaths on the property that resulted from natural causes, suicide, or an accident unrelated to the property’s condition. However, murder does not fall into these categories.

Your seller can use the TAR Seller’s Disclosure Notice, which includes a question about deaths other than those caused by natural causes, suicide, or an accident unrelated to the property’s condition. The notice also provides space for the seller to explain her answer, but she isn’t required to. She might want to indicate that more information is available upon request.

A seller may want to disclose information about any deaths on the property for a few reasons. A murder occurring on the property might be considered a material fact concerning the property that a buyer would want to know when deciding whether to purchase the property. Also, disclosure by the seller could prevent a scenario where buyers learn about a death on the property from another source and then seek to terminate the contract or seek damages from the seller after the transaction has closed.

My client was named the executor of his mother’s estate after she passed away, and now he’s planning to sell the house she owned. He hasn’t lived in the property, so he has no idea if there are any existing issues. Is he still required to furnish a Seller’s Disclosure Notice to potential buyers?

No. Certain types of sellers, like an administrator or executor of an estate, are not required to provide a seller’s disclosure notice to prospective buyers. The seller should check the box in Paragraph 7B(3) to show that the Seller’s Disclosure Notice is not required. This situation is one of the 11 exemptions found in the Texas Property Code statute regulating seller’s disclosure notices. Click here to see the code, and scroll down to Section 5.008(e), which lists the exemptions.  Remember that even though this type of seller is not required to provide a disclosure notice, he must still disclose any known material defects.

My buyer is purchasing his first home. His option period has ended, and it’s eight days from closing. My client still hasn’t received the seller’s disclosure notice, and asked me if he can terminate the contract. Can he?

Yes. The One to Four Family Residential Contract (Resale) provides that if the notice is not received, the buyer can terminate at any time prior to closing and the earnest money will be refunded.

If the sellers learn of new information about their property after providing the seller’s disclosure notice, do the sellers have a duty to provide the new information to the buyers under the current contract?

Yes, sellers are required by law to disclose any known material information about the property’s condition—even if those conditions are revealed after the completion of the seller’s disclosure notice. This was underscored in a lawsuit in which the court found that “new information must be disclosed when that new information makes the earlier representation misleading or untrue.” Although the Property Code Section 5.008 does not require the sellers to update a previously completed seller’s disclosure notice, the members-only Update to Seller’s Disclosure Notice (TAR 1418) form can be used to provide the newly discovered property information to prospective buyers.

Does a link to the Information About Brokerage Services form in my email signature meet the Real Estate Licensing Act's requirements to provide the information in the form to consumers?

No. Linking to the Information About Brokerage Services form in a footnote or signature block in an email does not satisfy the requirements outlined in the Real Estate Licensing Act.

According to TREC rule 531.20, which is effective February 1, 2016, you can personally deliver the Information About Brokerage Services form, or send it via first class mail or overnight delivery. Or, you could put the form within the body of an email. License holders can reproduce TREC’s Information About Brokerage Services form with the broker contact information section prefilled if the form text is copied verbatim and the spacing, borders, and placement of the text appear identical to the published version of the form.

In addition, you can attach the form to an email, or you can link to the form within the body of an email, but both require that you specifically make reference to the linked or attached form in the body of the email.

My buyer just had an inspection done on a property. The listing agent of the property told me neither he nor the seller wants to receive a copy of the inspection report. Do I or the buyer have to comply with this request?

No. Despite the request, it is up to your buyer whether he or she would like to send a copy of the inspection report to the listing agent or seller. A listing agent or seller who receives an inspection report is charged with knowledge of the information in the report, even if he or she doesn't open it. If the report reveals material defects, the seller and the listing agent are obligated to disclose those defects to subsequent potential buyers.