III. STANDARDS OF CONDUCT (7 ITEMS) Flashcards
Professional Ethics and Conduct
The Texas Administrative Code includes six canons of professional ethics and conduct to be applied
to all real estate license holders:
- Fidelity - the license holder is a fiduciary to his client. As such the real estate agent must
be faithful and observant to trust placed in the agent. The fiduciary must be scrupulous
and meticulous in performing functions for the client. - Integrity -The license holder will employ prudence and caution to avoid misrepresentation
by commission or omission. - Competency – the license holder will be knowledgeable, educated and informed in performing
his work. This will include being informed regarding local market issues and conditions
affecting real estate in the geographic area where a license holder provides services
to a client in addition to being educated in the characteristics involved in the specific type
of real estate being brokered for others. - Consumer Protection Notice 1-4 - Notifies the public of the recovery trust account
* Applies to both real estate license holders and inspectors
* Must be displayed in a prominent place in the broker’s office. - Discriminatory Practices – no license holder shall inquire about, respond to or facilitate
inquiries about or make disclosures indicating any discriminatory preferences or limitations. - Information About Brokerage Services – the TREC IABS form is a mandatory form to be
presented at first substantive dialog. The completed IABS Notice can be provided: - by personal delivery by the broker or sales agent;
- by first class mail or overnight common carrier delivery service;
- in the body of an email; or
- as an attachment to an email, or a link within the body of an email, with a specific
reference to the IABS Notice in the body of the email.
A link to a completed IABS Notice may NOT be in a footnote or signature block in an email.
Grounds for Suspension and Revocation
- Guaranteeing future profits.
- Sales agents receiving commissions directly from selling, leasing, negotiating, appraising, or
auctioning real estate. - Failing to specify a definite termination date in a Buyer’s Representation Agreement or a
Listing contract that is not subject to prior notice. - Selling real estate by lottery.
- Giving legal advice.
- Not advising a purchaser in writing to get an attorney’s opinion of title on the abstract or to
obtain an Owner’s Title Policy. - Placing a sign offering to sell, rent, or lease real estate without first obtaining the written
permission of the owner. - Acting in the dual capacity of broker and undisclosed principal. A license holder must disclose
if he is representing his spouse, parent, or child. - Knowingly making a substantial misrepresentation. Puffing is not misrepresentation.
- Advertising without the brokerage information - broker or company name.
- Commingling money - earnest money must be placed in an escrow account, not in with
broker personal or operating accounts. Conversion - spending commingled funds is also
prohibited. - Threatening to sue for a commission you have not earned.
- Not furnishing copies of a document to one of the signatories, upon demand.
- Steering of prospective buyers. You are also subject to federal and state prosecution.
- Disbursing money deposited in a trust account before the transaction concerned has been
consummated (at closing) or finally otherwise terminated. - Enters a plea of guilty or nolo contendere to, or is convicted of a felony or a criminal offense
involving fraud. - Fails to honor within a reasonable time a check issued to TREC after the TREC has sent, by
certified mail, a request for payment to the license holder’s last known business address. - Fails to notify the Commission not later than the 30th day after the date of a final conviction
or the entry of a plea of guilty or nolo contendere to a felony. (NOTE: a second DWI conviction
in TX is NOT a felony).
If a license is revoked by TREC, the individual must wait at least 2 years before trying to obtain a
new license.
Unauthorized Practice of Law
It is a violation of TREC rules to practice law without a law license. We do not prepare forms, rather
we fill in the blanks on already prepared TREC and TR (Texas Realtor©) forms.
When a license holder is working with a client on an already prepared form, such as a TREC or TR
(Texas Realtor©) form, the agent helps the client to fill in the blanks and provides an explanation
of all preprinted paragraphs.
A license holder can be held financially responsible for any loss a client suffers if it is determined that
the loss was a result of the license holder’s unlawful practice of law.
A license holder cannot draft a form, advise about the sufficiency or validity of a form, advise about
title, add details for which there is a TREC addendum, or use an out-of-date form.
A license holder
cannot write a contingency into a form, add “time is of the essence” to a form, or cross out provisions
of a TREC form, except under the direction of a client. In any/all of these situations, the best course
would be to recommend that the client speak with an attorney.
Trust Accounts
Three entities may accept earnest money/option fee deposits: Title Companies, Attorneys and Brokers.
All three deposit these funds in some type of Escrow Account.
Most commonly, the earnest
money/option fee payment goes to the Title Company and must be delivered by the close of the
third day after the effective date of the contract but this deadline may be extended if the third day
falls on a Saturday, Sunday or holiday. (See paragraph 5 of the sales contract).
If the broker accepts the earnest money/option fee (associated with a sale) or security deposits (associated
with a lease) and is using his/her own escrow account the funds must be deposited by the
close of business of the second business day after the broker receives the money.
Splitting Fees
A broker may pay a commission to any salesperson he sponsors. He may also pay a commission to
another broker.
A commission can never be paid to any unlicensed person in Texas.
A license holder may share or rebate a portion of the commission to a client within a transaction.
For example: list at a lower than expected commission rate or contribute to a buyers’ closing costs
on the CD.
A license holder may rebate a portion of the commission to a customer with the client’s permission.
A license holder may give a referral gift up to $50 in value (not cash) to an unlicensed individual who
provides a referral. Gift cards that cannot be converted to cash are acceptable.
Advertising Rules
All ads must contain the brokerage information – the broker or company name. All license holders’
advertisements must include the license holder’s name or team name. Ads also must include the broker’s
name in at least half the size of the largest contact information for any sales agent, associated
broker, or team name contained in the advertisement.
Post a link to the Consumer Protection Notice labeled “Texas Real Estate Commission Consumer
Protection Notice” On your business website homepage in a readily noticeable place in at least
10-point font. A link in 12-point font can be used with the following wording: “TREC Consumer
Protection Notice.”
