Chapter 2

Question 1

PERSONS/ACTIVITIES REQUIRING A LICENSE

Answer 1

1. Attorneys must have a real estate license to participate in a commission split.
2. Auctioneers involved in any part of a real estate transaction.
3. Apartment locators.
4. Real Estate sales agents.
5. Business entities that receive compensation on behalf of a license holder (example: a sales
   agent who incorporates and wants commissions paid to his/her corporation) must be
   licensed as a broker.
6. The designated officer of a licensed real estate corporation, or the designated manager of a
   licensed Real Estate Limited Liability Company. The designated one is a broker. If a designated
   agent has a less than 10% interest in a real estate business entity, he must provide
   proof that the entity has E&O insurance with a minimum annual limit of $1 million per
   occurrence. If the designated agent owns 10% or more of the business, then the required
   amount of E&O insurance is $0.
7. A third party (person or entity) who controls the acceptance or collection of rent from a
   single family residence (like a property manager).
8. Any business entity that engages in real estate brokerage and is required to be registered to
   do business in Texas with the Secretary of State must be licensed as a broker

Question 2

All sales license holders must be sponsored by

Answer 2

broker and receive commissions only from that
broker. Designated officers and managers must be brokers. All real estate entities must have a
broker.

Question 3

PERSONS/ACTIVITIES EXEMPT FROM LICENSING

Answer 3

1. Texas licensed attorneys can handle a real estate transaction for a client for a fee as long
   as they do not participate in broker to broker commission splits. Any attorney licensed in
   a state other than Texas will need to be licensed in Texas (as an attorney) to handle a real
   estate transaction for a client for a fee in Texas.
2. Court appointed receivers, trustees, guardians, and sheriffs. Anyone engaged in or carrying
   out foreclosure sales.
3. Administrators and executors of a will.
4. On-site apartment managers.
5. New home sales agents working for one builder or owner.
6. Cemetery lot sales agents.
7. A person selling his own property.
8. An employee leasing or renting property for the owner.
9. Corporate employees buying/selling/leasing or renting corporate property.
10. Hotel/motel personnel.
11. An attorney-in-fact.
12. An auctioneer calling a real estate auction.
13. Anyone selling mobile homes.

Question 4

all business entities engaged in real estate brokerage activity, including
partnerships, need to be licensed.

Answer 4

Further, to receive or maintain a license, a business entity must
designate an individual holding an active Texas real estate broker license who is an officer, manager,
or general partner of the entity to act for it.

Question 5

Broker Assumed Business Name (DBA)

Answer 5

is another name for the broker’s business that can be used
by all sponsored sales agents and brokers associated with this broker. Another name that indicates a
broker’s line of business, e.g. property management or commercial is also a DBA.

Question 6

Team Name

Answer 6

is a name used only by a team or group of one or more sponsored sales agents or brokers
associated with this broker. Team names must end in “team” or “group” and cannot contain the
words “brokerage”, “company”, or “associates” or other similar terms

Question 7

Alternate Name

Answer 7

is a name used by an individual license holder other than the name on the individual’s
license, such as a middle name, married name, maiden name or nickname.

• You must have the legal authority to use an assumed business name in the State of Texas
before you can register the name with TREC.
• An individual broker can have an assumed business name.
• There is no provision under TREC Rules for a sales agent to have an individual assumed business
name or “brand name”– any such name falls under the definition of team name and must
meet those requirements.
• Nothing in TREC Rules prohibits a broker from using the word “team” or “group” anywhere
in a broker’s licensed or assumed business name.
• A name used by an associated broker working under another broker that is not the associated
broker’s licensed name must be a team name or alternate name.
• All three name types must be registered with TREC BEFORE you start to use them in
advertisements.

Question 8

TREC has the authority to license real estate inspectors in Texas

Answer 8

TREC’s jurisdiction over real
estate inspections is limited to inspections performed for a buyer or seller of real property in connection
with a transaction.

Question 9

The Texas Appraisers Licensing and Certification board – TALCB -

Answer 9

real estate appraisers
and administers the Texas Appraiser Licensing and Certification Act. TALCB is an independent
subdivision of TREC with its own board. TALCB is guided by nine board members - 4 licensed
real estate appraisers and 4 members of the general public - appointed by the Governor with the
concurrence of the Senate, and the Executive Secretary of the Texas Veterans Land Board as an
ex-officio member.

Question 10

STEPS IN OBTAINING A REAL ESTATE LICENSE:

Answer 10

1. Meet the educational requirements.
2. Submit an application with or without a sponsoring broker.
3. Submit the required fees.
4. Pass the state exam. Competency is determined solely by passing the state exam.
5. Demonstrate Honesty, Integrity and Trustworthiness. An application for a license will be
   denied if an individual is unable to satisfy TREC as to their honesty, integrity and trustworthiness

Question 11

An applicant who fails the examination three consecutive times may not apply for reexamination or
submit a new license application unless the applicant submits evidence satisfactory to TREC that
the applicant has completed additional mandatory qualifying education listed in TRELA as follows,
after the date the applicant failed the examination for the 3rd time:

Answer 11

1. Failing the national part of the exam must take 30 hours - Champions
   recommends Principles 2
2. Failing the state part of the exam must take 30 hours - Champions recommends
   Principles 1
3. Failing both parts of the exam must take 60 hours - Champions recommends
   Principles 1 and 2

Question 12

LICENSING REQUIREMENTS:

Answer 12

• Must be 18 years of age, or older.
• Be a citizen of the United States or a lawfully admitted alien.
• Comply with TREC requirements for a criminal background check. A license will not be
issued by TREC until this step is completed..

Question 13

SALES AGENT’S LICENSE EDUCATIONAL REQUIREMENTS:

Answer 13

180 qualifying course hours from the 6 required classes

Question 14

BROKERS LICENSE EDUCATIONAL REQUIRMENTS

Answer 14

900 – classroom hours, including 30 hours of Real Estate Brokerage. The brokerage course must be
taken within the 2 years prior to the broker application filing date.
4 years of active sales license holder experience during the 5 years preceding the date of the application.
3600 points – 300 points per sale.
A 6-hour broker responsibility course is required for any sponsoring broker or designated broker
of a business entity who sponsors one or more sales agents at any time during that broker’s current
license period.

Question 15

Sales Agent Apprentice Education (SAE) Information

Answer 15

SAE must be completed before or during the first two years of licensure. A sales agent applying
for their first renewal must have a TOTAL of 270 qualifying real estate course hours, plus 4 hours
of TREC’s Legal Update 1 and 4 hours of TREC’s Legal Update 2 posted to their license records
prior to submitting a renewal application. (This means 180 qualifying hours to get the license + 90
additional qualifying hours of SAE for the renewal. TREC Legal 1 and 2 - 4 hours each, are not
considered qualifying hours.) A renewal application will be denied if these hours have not been
submitted and the license will expire.

Question 16

Continuing Education is required for

Answer 16

all sales agent license holders after the first renewal and for
all broker license holders.
Continuing education, or CE, is an 18-hour class taken once every 2 years. It includes 4 hours each
of Legal 1 and Legal 2 and the 6-hour TREC Broker Responsibility course (if needed), as mandated
by TREC. CE hours must always be taken within the 2-year renewal period. It is not permitted to
carry extra CE hours over to the next renewal period.
If TREC does not have proof of CE at the time the license holder renews, the fee for renewal will
include a $200 penalty. The renewal will be active for 60 days. After 60 days, if CE is not submitted
to TREC, the license will automatically become inactive.
To return to active status, the license holder will have to complete and submit CE, pay an additional
$250 penalty and apply to move the license back to active status.
The license holder will also have to submit a form stating, “he or she did not engage in real estate
while inactive.”
To summarize the above: an on time renewal with late education completed within 60 days results
in a $200 penalty. An on time renewal with late education completed after the 60-day period results
in a $450 ($200 + $250) penalty. (This summary describes an on-time renewal with late CE.)
The requirements for late renewal will be the same as for on-time renewal with the addition of late
fees.
An individual may not hold a Broker and a Sales agent license at the same time. Texas is a one
person, one license state. However, any licensed broker may act as a sales agent and a broker at the
same time.

Question 17

ADDITIONAL POINTS:

Answer 17

• There is no time limit for TREC to deny an application.
• If the Commission denies an application for a license, the Commission shall send the applicant
written notice of the denial. An applicant may accept the denial or make a written request
for a hearing on that denial. If an applicant fails to request a hearing in writing not later than
the 30th day after the date the notice denying an application is sent, the Commission’s denial
is final.
• If an applicant applies without a broker and passes the test, there is no time limit for choosing
a broker.

Question 18

INACTIVE STATUS

Answer 18

TREC allows inactive status. TREC will hold a broker or sales license for the licensed person.
• The license holder must still pay renewal fees and meet SAE requirements. Once past SAE
requirements, CE is not required for inactive status.
• The time spent as inactive does not apply toward the four-year requirement for a broker’s
certification.
• The inactive license holder may not engage in the real estate business.
• The inactive license holder does not need a sponsoring broker during this period.
• To activate an inactive sales license, apply through a broker and complete 18 hours of CE if
necessary. To activate an inactive broker license, apply with a business address, pay $50 and
complete 18 hours of CE if necessary

Question 19

THE SALE OF EQUITABLE INTERESTS

Answer 19

A party who owns an option or sales contract on real property is said to have an equitable interest.
That interest is an asset that can be sold. A license is not necessarily required to do that, but the
owner may choose to hire an agent to sell the interest. TREC rules address this situation as follows

Question 20

THE SALE OF EQUITABLE INTERESTS CONTINUED:

Answer 20

1. A person may acquire an option or enter into a contract to purchase real property and then sell or
   offer to sell the option or assign or offer to assign the interest in the contract without having a real
   estate license if the person:
2. does not use the option or contract to purchase to engage in real estate brokerage ; and
3. discloses the nature of their equitable interest to any potential buyer.
4. A person selling or offering to sell an option or assigning or offering to assign an interest in a contract
   to purchase real property without disclosing the nature of that interest to a potential buyer is
   engaging in real estate brokerage.
5. A license holder who is engaging in real estate brokerage by selling or buying or offering to sell or
   buy an option or assigning or offering to assign an interest in a contract to purchase real property
   must disclose to any potential seller or buyer that the principal is selling or buying an option or
   assigning an interest in a contract and does not have legal title to the real property.