LESSONS 3: DUTIES TO 3RD PARTIES

Question 1

What are the non-fiduciary duties of a broker to non-clients?

Answer 1

The non-fiduciary duties include: 1. Disclosure of significant defects in the property. 2. Advising the buyer to have the abstract of title examined or obtain title insurance. 3. Making clear the broker’s representation to all parties. 4. Advising parties when dealing on their own behalf that they are licensed. 5. Not using expertise to the disadvantage of others. 6. Providing a copy of documents to the signer upon request.

Question 2

What does TREC Rule 5535.144 cover regarding duties when acquiring or disposing of own property?

Answer 2

TREC Rule 5535.144 outlines that brokers must disclose in writing when acting on their own behalf or on behalf of family members or business entities. They must also not use their expertise to the disadvantage of others in these transactions.

Question 3

What is the primary duty of a real estate agent regarding the client?

Answer 3

The agent’s primary duty is to represent the interests of the client, but they must also treat all other parties to the transaction fairly and equitably.

Question 4

How should a real estate agent treat a third party, such as a customer?

Answer 4

The agent must act with honesty, integrity, and fairness toward the third party, even though they do not represent them. Fair treatment involves avoiding any misrepresentation or omission.

Question 5

What disclosures are required by the Texas Real Estate Licensing Act (TRELA)?

Answer 5

TRELA requires: 1. Advising the buyer to have the title examined by an attorney or obtain title insurance. 2. Disclosing commissions and representation. 3. Providing clear representation of who the broker represents in the transaction.

Question 6

What does “acting fairly” mean in real estate transactions?

Answer 6

“Fairly” means treating parties equitably and honestly, though not necessarily equally, especially when dealing with clients and non-clients.

Question 7

What are the responsibilities of a broker when acting for themselves or their family?

Answer 7

Brokers must disclose in writing that they are acting on their own behalf or for family members and ensure they do not use their expertise to disadvantage others.

Question 8

What are the common law duties of a real estate agent toward a customer?

Answer 8

The common law duties include honesty, fairness, and integrity in dealings, even if the agent does not represent the customer.

Question 9

What is required to avoid misrepresentation in real estate transactions?

Answer 9

Brokers must not make false statements, fail to disclose material defects, or withhold necessary information that could affect a party’s decision to enter into an agreement.

Question 10

What happens if a real estate agent violates TRELA guidelines?

Answer 10

Violations can result in license suspension or revocation, or other disciplinary actions for actions such as misrepresentation, failure to disclose information, or accepting undisclosed commissions.

Question 11

What happens if someone engages in the unauthorized practice of law in real estate?

Answer 11

The commission may suspend or revoke the license or certificate of a person who is not a licensed attorney but engages in activities like drafting instruments affecting real property or advising on legal sufficiency of documents.

Question 12

When is a license holder not considered engaged in the unauthorized practice of law?

Answer 12

When completing a contract form for a real estate transaction that is adopted by the commission, prepared by a licensed attorney, or prepared by the property owner or their attorney.

Question 13

What actions can the commission take against a license holder?

Answer 13

The commission can suspend or revoke a license, place the license holder on probation, or reprimand the license holder for violations of the chapter or commission rules.

Question 14

What can a license holder be required to do during probation?

Answer 14

They may be required to report regularly to the commission, limit their practice, or continue professional education to improve their skills.

Question 15

Why is disclosure of representation important in real estate transactions?

Answer 15

Failing to disclose representation can lead to misunderstandings, liability, and errors, as it is crucial for all parties to understand who the agent represents.

Question 16

What should be disclosed if an agent represents a seller in a property transaction?

Answer 16

The agent must disclose to potential buyers that they represent the seller when asked questions about the property.

Question 17

What is the broker’s responsibility in a vendor transaction?

Answer 17

The broker is typically not liable if the vendor knows who the property owner is, but the agent may be liable if acting outside their authority or if the vendor does not know the owner’s identity.

Question 18

What is the role of REALTORS® when representing a client?

Answer 18

REALTORS® are obligated to protect and promote their client’s interests, but they must also treat all parties honestly.

Question 19

What is required when REALTORS® seek information from another REALTOR®?

Answer 19

REALTORS® must disclose their status and whether their interest is personal or on behalf of a client, as well as their relationship with the client.

Question 20

What must REALTORS® disclose when advertising property they own or lease?

Answer 20

REALTORS® must disclose their status as both the owner/landlord and a REALTOR® when advertising property they own or lease.

Question 21

What is the disclosure requirement when REALTORS® buy or acquire property through their business?

Answer 21

REALTORS® must disclose their ownership interest in writing to the seller or the seller’s agent before signing any contract.

Question 22

What must REALTORS® do when acting as a buyer/tenant representative?

Answer 22

REALTORS® must disclose their relationship with the client at first contact and provide written confirmation before the execution of any purchase or lease agreement.

Question 23

What is a trust account in real estate?

Answer 23

A trust account is an account managed by one party for the benefit of another, where trust money such as client funds is kept.

Question 24

What must brokers do when accepting trust money?

Answer 24

Brokers must maintain trust money in a designated trust account or deliver it to an authorized escrow agent.

Question 25

When must trust money be deposited by a broker?

Answer 25

Trust money must be deposited into the trust account or delivered to an authorized escrow agent by the close of business on the second working day after receiving the funds.

Question 26

How must brokers disburse trust money?

Answer 26

Trust money must be disbursed according to the agreement under which it was received, and any disbursement must be made within 30 days of a demand.

Question 27

How long must brokers keep documentation related to trust accounts?

Answer 27

Brokers must maintain records for four years from the date they are received or created.

Question 28

What is required when REALTORS® recommend services with a financial interest?

Answer 28

REALTORS® must disclose any financial interest they have in services they recommend to clients or customers.

Question 29

What are some important things agents must disclose about the property?

Answer 29

Agents must disclose information about zoning, inspection reports, history of repairs, MUDs, and septic tanks.

Question 30

What is required for sellers of property located in a MUD?

Answer 30

The seller must provide a notice to the buyer regarding the MUD, including tax rate and bonded indebtedness, before entering into a sales contract.

Question 31

What must a seller do when selling unimproved property outside a municipality's jurisdiction?

Answer 31

The seller must provide a notice about the possible delays and additional costs of extending water and sewer services before the contract is executed.

Question 32

What should agents avoid saying to avoid liability in property transactions?

Answer 32

Agents should avoid making definitive statements about property conditions, such as "this is the best house," "the roof will last another 25 years," or "property values will increase."

Question 33

How should REALTORS® present opinions to clients?

Answer 33

REALTORS® should clearly state when something is an opinion and advise clients to verify information with other sources, such as experts or third parties.

Question 34

What must be disclosed about property boundaries?

Answer 34

REALTORS® should advise clients to get a survey to verify property boundaries if there is uncertainty.

Question 35

What should agents do when uncertain about a title issue?

Answer 35

REALTORS® should advise clients to consult with a title company or attorney for legal questions or concerns.

Question 36

What federal law requires the disclosure of lead-based paint hazards in homes built before 1978?

Answer 36

The Residential Lead-Based Paint Hazard Reduction Act of 1992 (Title X) requires the disclosure of lead-based paint hazards before the sale or lease of housing built before 1978.

Question 37

What must sellers and landlords provide before signing a contract for sale or lease of a property built before 1978?

Answer 37

They must provide an EPA-approved pamphlet ("Protect Your Family From Lead In Your Home"), disclose known information about lead-based paint, and provide any available records or reports concerning lead-based paint or hazards.

Question 38

What must be included in the contract or lease related to lead-based paint disclosure?

Answer 38

A Lead Warning Statement and a confirmation that the seller/landlord has complied with all notification requirements. Both parties must sign and date the attachment.

Question 39

What is the required period for homebuyers to conduct a lead-based paint inspection?

Answer 39

Sellers must provide a 10-day period for buyers to conduct an inspection or risk assessment, though this period can be adjusted by mutual written agreement.

Question 40

How long must sellers or landlords retain a copy of the lead-based paint disclosures?

Answer 40

Sellers and landlords must retain a copy of the disclosures for at least three years from the date of sale or the start of the leasing period.

Question 41

What is the purpose of the lead-based paint disclosure requirement?

Answer 41

To protect families from exposure to lead from paint, dust, and soil in homes built before 1978.

Question 42

What are some examples of property transfers that are exempt from the lead-based paint disclosure requirements?

Answer 42

Transfers involving court orders, foreclosure sales, bankruptcies, transfers to spouses or lineal relatives, and new residences that have not been previously occupied.

Question 43

What should a seller do if they are unaware of lead-based paint or hazards in the property?

Answer 43

The seller should indicate that the information is unknown on the disclosure notice, and they will be in compliance with the law.

Question 44

What is the general rule for disclosing stigmatized properties?

Answer 44

Sellers do not need to disclose stigmas unless they affect the value of the property, such as a murder or criminal activity on the premises.

Question 45

What are examples of stigmatizing events that may need disclosure?

Answer 45

Events like murders, suicides, paranormal phenomena, criminal activity (e.g., drug dealing), and other unusual occurrences that could affect the property’s value.

Question 46

What must sellers disclose if a property is involved in stigmatizing events?

Answer 46

Sellers must disclose phenomena like hauntings, murders, suicides, and other criminal activities that may materially affect the property’s value.

Question 47

What does “caveat emptor” mean in property transactions?

Answer 47

"Let the buyer beware," meaning the buyer is responsible for inspecting and investigating the property.

Question 48

What exception to the “caveat emptor” rule exists for stigmatized properties?

Answer 48

Sellers must disclose material facts that affect the price or desirability of the property, especially when a buyer wouldn’t reasonably know to ask about them.

Question 49

What must a seller disclose about debt related to a property?

Answer 49

In some states, sellers must disclose any outstanding debt on the property that could lead to creditor actions after the sale.

Question 50

What is the required disclosure under Texas law for brokers?

Answer 50

Brokers must disclose to all parties who they are representing, advise them to examine the abstract of title, and inform them if they are licensed.

Question 51

Which duty is not required for brokers acting as a salesperson?

Answer 51

The Duty of Confidentiality.

Question 52

Which of the following is required under Texas law?

Answer 52

All of the above: disclosure of who the broker represents, advising parties to examine the abstract, and informing all parties when engaging in real estate.

Question 53

Who has no agency relationship or fiduciary duty to a broker?

Answer 53

A Customer.

Question 54

What duties do clients get from a broker?

Answer 54

Clients receive an agency relationship and fiduciary duties, including fairness, honesty, and full disclosure.