LESSON 4: SELLER AGENCY Flashcards
What is the “statute of frauds” in Texas real estate law?
It is a law that requires certain contracts, such as those involving real estate sales, loans over $50,000, and certain medical care contracts, to be in writing to be enforceable.
What are some contracts that are subject to the “statute of frauds” in Texas?
- The sale of real estate, 2. Loan agreements over $50,000, 3. Commissions from oil, gas, or mineral sales, 4. Contracts that cannot be performed within one year, 5. Contracts to pay someone else’s debts, 6. Leases for more than one year, 7. Certain medical care contracts, 8. Contracts related to marriage or cohabitation
What does “promissory estoppel” do in relation to the statute of frauds?
It allows enforcement of an otherwise unenforceable oral agreement if a promise leads to definite and substantial injury, and enforcing the promise would prevent that injury.
What is the “partial performance” exception to the statute of frauds?
It allows enforcement of an oral agreement if the actions taken to partially perform the agreement are unequivocally referable to the agreement and would prevent fraud.
What is required to enforce a commission agreement in a court of law?
A written agreement between the parties must exist before a court will enforce the commission agreement.
What is an Exclusive Agency Listing?
It is an agreement where the listing broker is the only one authorized to act as the owner’s agent for selling the property, but the owner can still sell it themselves without owing the broker a commission.
What is the main difference between an Exclusive Right to Sell Listing and an Exclusive Agency Listing?
In an Exclusive Right to Sell Listing, the broker is guaranteed a commission regardless of who sells the property. In an Exclusive Agency Listing, the broker only gets a commission if they sell the property; the owner can sell it themselves.
Can an owner sell their property directly without paying a commission under an Exclusive Agency Listing?
Yes, the owner can sell the property without involving the broker and avoid paying a commission, as long as the buyer wasn’t introduced through the broker’s efforts.
How can you resolve a situation where a client wants an Exclusive Agency Listing but also wants to sell to a friend without paying a commission?
You can suggest an Exclusive Right to Sell Listing with a reservation for the friend for a short period, so the broker still gets a commission if the friend buys during that time.
What is a disclosure issue related to seller agency that may come up in a transaction?
One issue could be failing to disclose a personal relationship with the seller to all parties, which could lead to conflicts or questions about impartiality.
What is an open listing?
An open listing allows the owner to list the property with multiple brokers and sell it themselves without owing a commission to any broker unless that broker is the one to produce a buyer.
Why might a broker agree to an open listing, even though it limits their potential commission?
A broker might agree to an open listing to quickly show the property to buyers they already have in mind, preserving a potential commission even if the owner lists with others.
What is a net listing in real estate?
A net listing is an agreement where the owner establishes a desired amount to “net” from the sale, and the broker keeps any amount over that as their commission.
What does the Texas Real Estate Commission rule say about net listings?
A net listing can only be accepted if the principal requests it and understands current market values. The broker must modify the agreement to ensure the principal receives the desired price and limit the broker’s commission.
What is an exclusive right-to-sell listing?
It is an agreement where the broker has exclusive rights to sell the property and receive a commission, even if the seller finds a buyer themselves.
What is the benefit of an exclusive right-to-sell listing for the broker?
The broker is guaranteed a commission, regardless of who finds the buyer, which incentivizes them to aggressively market the property.
What is an exclusive seller agency listing?
It is a listing where the seller agrees to use only one broker for the sale of the property, and all offers must be presented to the seller through that broker.
How does an exclusive right-to-sell listing benefit the seller?
The listing guarantees that the broker is motivated to secure the highest possible sale price, as they are guaranteed the commission, unlike with open listings where brokers may hesitate to invest effort.
How can a broker protect themselves if a seller wants an exclusive right-to-sell but has a potential buyer already in mind?
The broker can add an amendment to the listing that releases the seller from commission obligation if the seller’s friend buys the property.
What is the difference between open listings, exclusive agency listings, and exclusive right-to-sell listings?
Open listing: The seller can list with multiple brokers. Exclusive agency listing: The seller lists with one broker but can sell the property themselves. Exclusive right-to-sell listing: The broker is guaranteed a commission no matter who sells the property.
What is “zone marketing” in real estate?
Zone marketing involves targeting specific markets or neighborhoods for property listings, using technology to focus efforts effectively.
What is a Broker Price Opinion (BPO) or Comparative Market Analysis (CMA)?
It is an opinion or analysis provided by a real estate license holder to assess a property’s market value, but it must include a disclaimer stating it is not an official appraisal.
What must a real estate license holder include when providing a Broker Price Opinion or Comparative Market Analysis?
They must include a written statement that it should not be considered an appraisal or opinion of value, as they are not licensed appraisers.
What is the difference between a real estate agent’s opinion and an appraiser’s opinion of value in Texas?
Real estate agents cannot give an official “opinion of value”; they can only provide a Broker Price Opinion or Comparative Market Analysis, whereas appraisers must be licensed to provide an opinion of value.
What is required for a real estate license holder to perform an appraisal in Texas?
The license holder must be licensed or certified under Texas Occupations Code, Chapter 1103.
What is the purpose of the Texas Association of REALTORS® listing agreement?
It provides standardized forms for listing agreements, ensuring compliance with current legal requirements and helping real estate professionals use up-to-date documentation.
What is the importance of precision in language for real estate professionals?
Precision in language helps avoid misleading clients and ensures clear communication, especially in advertising and distinguishing terms like “tax value,” “market price,” “sale price,” and “market value.”
What is the difference between “price” and “value” in real estate?
“Price” is the amount the buyer agrees to pay and the seller agrees to accept, while “market value” is a more complex determination that takes into account various factors, including zoning, use potential, and easements.
What factors affect “market value”?
Market value is influenced by factors like zoning classification, easements, potential property use, and other restrictions, which must be analyzed using recognized valuation methods like income potential, comparable sales, and replacement costs.
How should a real estate professional answer when asked about the value of a property?
A real estate professional should say, “In today’s market, I think it would sell for $XX,” to avoid offering an “opinion of value,” which is legally reserved for licensed appraisers.
What does Article 1, Standard of Practice 1-3, require REALTORS® to do?
REALTORS® must not deliberately mislead the owner about market value when attempting to secure a listing.
What does Article 12, Standard of Practice 12-4, state about REALTORS® advertising properties?
REALTORS® must not offer or advertise properties for sale/lease without proper authority and must not quote a price different from what was agreed upon with the seller/landlord.
What are the requirements when REALTORS® prepare opinions of real property value or price?
They must be knowledgeable about the property, have access to necessary resources, and be familiar with the property’s location unless disclosed otherwise.
What information must be included when preparing an opinion of value or price?
The opinion must include identification of the property, date prepared, defined value or price, limiting conditions, basis for the opinion, market data, a statement if it’s not an appraisal, inspection details, and any conflicts of interest.
What does the Texas Real Estate License Act Section 1101.652 specify regarding contract termination dates?
It requires that contracts specify a definite termination date that is not subject to prior notice, except for property management contracts.
What does the MLS Rules and Regulations of North Texas Real Estate Information Systems, Incorporated (7.11) state about listing expiration?
Listings must specify a definite expiration date, and if extended, the renewal must be filed with the MLS within 72 hours of the expiration.
Can a salesperson pay commission to another person without the broker’s consent?
No, a salesperson cannot pay a commission or valuable consideration to anyone without the written consent of their sponsoring broker.
What are the rules for splitting a commission with an unlicensed person?
A broker or salesperson cannot share a commission with an unlicensed person unless that person does not engage in licensed activities and does not mislead the public.
What is the protection period in a listing agreement?
The protection period ensures the listing broker is owed a commission if buyers introduced during the listing period try to contact the owner directly after the listing expires.
What happens if the owner lists with another broker during the protection period?
The protection period no longer applies, and if another broker brings a buyer, the seller must owe the other broker a commission.
What are transaction fees and reimbursable expenses in real estate?
Transaction fees are paid for expenses incurred before closing, and reimbursable expenses are marketing-related costs like aerial photos or drone use, which require written authorization from the broker.
What does “Access to the Property” entail?
It involves the seller giving permission for brokers, buyers, inspectors, appraisers, and others to access the property at reasonable times as determined by the broker. It includes the right to make additional keys and place a key box.
What is the role of the broker in determining access times and scheduling appointments?
The broker determines reasonable access times and can choose the scheduling company to make appointments for property access. The name of the scheduling company is included in the agreement.
What must be considered when using a keybox for property access?
The broker determines the type of box (e.g., keybox, lockbox) for both occupied and vacant properties. You must have written permission to place any box, and errors and omissions insurance is essential to cover risks like unauthorized access, theft, or damage.
What is the protocol if there is a tenant in the property regarding a keybox?
Written permission from the tenant is required before placing a keybox. If permission is not granted, showings must be by appointment with the tenant present to allow access.
What is included in the liability and indemnification clause when authorizing access to the property?
The seller assumes the risk for any loss, damage, or injury. The broker, other brokers, and scheduling companies are not liable, but the seller must indemnify and hold the broker harmless, except in cases of broker-caused loss.
What are scheduling companies used for?
Scheduling companies are used to schedule appointments and authorize access to the property. The broker determines which company to use.
What is a keybox and its risks?
A keybox is a locked container on the property holding the key, which allows authorized access. It can increase showings but carries risks, such as unauthorized entry, theft, or injury.
What happens if the tenant does not authorize a keybox?
If the tenant doesn’t authorize the keybox, it cannot be placed on the property. Showings must be arranged by appointment with the tenant present for access.
What should be advised to the seller/owner(s) to reduce risk when showing a property?
Sellers should be advised to remove valuables, jewelry, and money to reduce the risk of theft or damage during showings.
Who determines commission fees for buyer’s agents and subagents?
The broker determines commission fees, not the sales agent or broker associate. These fees are based on the broker’s business expenses and income needs.
Can sales agents negotiate commission fees independently?
No, sales agents need the broker’s permission to negotiate commission fees, and all commission payments go through the broker.
What is subagency in real estate, and who decides if it applies?
Subagency refers to cooperation between brokers, but it is not automatic. The listing broker decides whether to cooperate with subagents, and the broker determines fees and cooperation terms.
What is intermediary status in real estate transactions?
Intermediary status allows a broker or associate to represent both the buyer and seller in the same transaction under specific disclosure requirements. It’s applicable if the broker is selling or another agent in the same company is involved.
What does “No Intermediary Status” mean in a real estate transaction?
No Intermediary Status means that no one in the company can represent both the buyer and seller. The broker may appoint separate associates for the buyer and seller.
What are the broker’s authorities related to property marketing and sale?
The broker is authorized to advertise, place “For Sale” signs, market the property, accept earnest money, disclose sales information, and more.
What must a broker do to advertise a property online?
The seller must grant permission for the broker to upload the property to the internet. The seller can also choose whether to display the property’s address or not.
What are the seller’s representations regarding the property title?
The seller represents that they have fee simple title, meaning complete ownership with the right to sell. Any issues or “clouds” on the title must be resolved before transferring ownership.
What must a seller disclose about other listings or encumbrances on the property?
The seller must disclose that no other listings are active during the listing period and that the property is free of any unknown liens or legal issues.
What is the seller’s responsibility regarding laws and ordinances when selling the property?
The seller must ensure compliance with relevant laws and ordinances, particularly regarding safety features like pool gates, which must be secure.
What are the seller’s additional promises in the listing agreement?
The seller agrees to cooperate with the broker, not lease the property without approval, not enter into another listing agreement, and comply with applicable laws during the listing period.
What additional documents or information must the seller provide to the broker?
The seller must provide copies of any existing leases and explain in writing the terms with tenants regarding showings and selling. The seller must also complete the “Seller Disclosure Statement” and sign any relevant contracts. If an existing survey is provided, the seller must fill out and notarize a T-47 Affidavit.
What must the seller do if there are changes to any paperwork during the listing period?
Any paperwork that changes during the listing period must be updated in writing. This includes updating the “Seller Disclosure Statement” if new issues, like foundation problems, are discovered.
What does the seller agree to under “Seller’s Additional Promises” regarding cooperation with the broker?
The seller agrees to cooperate with the broker to facilitate the showing, marketing, and sale of the property.
Can the seller rent or lease the property during the listing?
No, the seller cannot rent or lease the property during the listing without the broker’s prior written approval.
What should the seller do if a prospective buyer contacts them directly?
The seller must refer all prospective buyers to the broker and not negotiate with them directly.
Can the seller enter into a listing agreement with another broker during the current listing?
No, the seller cannot enter into a listing agreement with another broker for the property without the broker’s prior written approval.
What is the seller’s responsibility regarding the property’s pool and enclosures?
The seller must maintain any pool and all required enclosures in compliance with applicable laws and ordinances.
What must the seller provide the broker regarding leases and tenants?
The seller must provide the broker with copies of any leases or rental agreements and advise the broker of any tenants moving in or out of the property.
What disclosures must the seller complete?
The seller must complete any disclosures or notices required by law or contract to sell the property.
What should the seller do if there is a material change during the listing period?
The seller must amend any applicable notices and disclosures if a material change occurs during the listing.
What is the broker’s liability regarding the property if it becomes vacant?
The seller is responsible for contacting their insurance company for coverage, and the broker is not liable for the property’s security or inspections.
Is the broker liable for injuries or damages caused by others on the property?
The broker is not liable for injuries or damages caused by other brokers, agents, tenants, or third parties unless caused by the broker’s negligence.
Who is responsible if pipes freeze on the property?
The seller is responsible for maintaining the property, including ensuring the heat is on to prevent pipes from freezing. If the broker is negligent, they may be held liable.
Can the broker be held liable for dangerous conditions on the property?
The broker is not liable for conditions such as sinkholes or mold unless caused by the broker’s negligence.
What is the seller’s responsibility regarding compliance with laws and ordinances?
The seller is responsible for complying with laws and ordinances. The broker is not liable if the seller fails to do so, but the broker must be aware of these laws.
What does the seller agree to in the event of damage caused by their actions?
The seller agrees to protect, defend, indemnify, and hold the broker harmless from any damages, costs, attorney fees, and expenses caused by the seller.
What happens if the seller breaches the listing agreement?
If the seller breaches the agreement, they will owe the listing broker the full commission based on the listed price.
What is the role of mediation in disputes under the listing agreement?
Mediation is required before going to court and helps resolve issues without involving attorneys or a jury, saving costs for all parties.
What is stated about attorney fees in the event of a lawsuit?
The prevailing party in a lawsuit will have their attorney fees and court costs paid by the non-prevailing party.
What is required in the “Addenda and Other Documents” section of the listing agreement?
The seller must check the appropriate boxes for addenda relevant to the listing, such as the Information About Brokerage Services and Seller Disclosure Notice.
What addenda might be required for properties built before 1978?
The seller must provide the Addendum for Seller’s Disclosure of Information on Lead-Based Paint and Lead-Based Paint Hazards.
What is the seller required to disclose regarding property insurance?
The seller must provide information about the property’s insurance, including any special flood hazard areas and on-site sewer facilities.
What does “Severability” mean in the listing agreement?
If a paragraph in the agreement is found invalid, it is removed, but the rest of the agreement still applies.
What is the significance of “Additional Notices” in the listing agreement?
These notices address commissions, fair housing laws, and the seller’s responsibility to contact their mortgage company, among other items.
What should the seller do regarding valuables during showings?
The seller should remove valuables, jewelry, firearms, medicine, and money before showings.
What responsibilities does the broker have regarding the property’s MLS information?
The broker must ensure the information submitted to the MLS is accurate and the seller must review and approve the input sheet.
What happens if a non-attorney license holder drafts an instrument that affects real property?
The Texas Real Estate Commission shall suspend or revoke the license or certificate of registration of a non-attorney license holder who drafts such an instrument for consideration, reward, or pecuniary benefit.
What are the exceptions to the rule against unauthorized practice of law by license holders?
A license holder is not engaged in the unauthorized practice of law if they complete a contract form adopted by the commission, prepared by an attorney, or prepared by the property owner or attorney.
What are the responsibilities of a sales agent in a listing agreement?
The sales agent must represent the principal in accordance with the law of agency, and the principal must pay the broker’s commission or fee for their expertise and service.
What should a listing agreement include at a minimum?
The agreement should include parties, property legal description, list price, term of the listing, broker compensation, protection period, MLS access, cooperation with other brokers, intermediary status, seller representations, mediation, attorney fees, and agency law explanation.
When is the broker’s commission payable?
The commission is payable at closing and funding, the seller’s refusal to sell, or the seller’s breach of the contract.
What defines a “subagent” in real estate?
A subagent is a license holder who represents a principal through cooperation with and consent of a broker representing the principal, without being sponsored by the principal’s broker.
Who is liable for misrepresentation or concealment in a real estate transaction?
A party is liable for misrepresentation or concealment if they knew of the falsity and failed to disclose it. A license holder is also liable if they knew of the falsity and failed to disclose it.
What is the responsibility of an agent when a seller is completing a disclosure form?
The agent should not assist the seller in completing the form, as doing so may take on liability for the answers. The agent should encourage the seller to disclose fully.
What should an agent do if a seller has foundation issues?
The agent should ask if the seller has had an engineer’s or foundation company report and ensure that any reports or invoices are disclosed to potential buyers.
What is required when a broker negotiates a listing or offers to buy the property?
The broker must provide either a Broker Price Opinion (BPO) or a Competitive Market Analysis (CMA) to the property owner.
What happens if a license holder receives compensation from more than one party without consent?
If a license holder receives compensation from more than one party without full knowledge and consent of all parties, the Texas Real Estate Commission may suspend or revoke their license.
What should a broker discuss with a client about sub-agency relationships?
A broker should discuss potential risks, compensation, and liabilities that can arise from sub-agency relationships, and whether the client wishes to allow it.
How should a listing agent handle a potential buyer who approaches about a property?
The listing agent must immediately disclose that they represent the seller, and may provide the IABS form to educate the buyer on brokerage services.
What should an agent do when asked for an opinion on a property?
The agent should avoid giving personal opinions and instead refer the buyer to a specialist (e.g., property inspector or attorney) for unbiased advice.
What is the agent’s responsibility regarding facts and opinions about a property?
The agent must provide known facts, not personal opinions, about the property and should avoid statements that could lead to liability.
What should an agent do to protect themselves from litigation or investigation?
The agent should keep detailed notes of the entire transaction, including all communications and actions from the first meeting to closing.
