LESSONS 3: DUTIES TO 3RD PARTIES Flashcards
What are the non-fiduciary duties of a broker to non-clients?
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.
What does TREC Rule 5535.144 cover regarding duties when acquiring or disposing of own property?
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.
What is the primary duty of a real estate agent regarding the client?
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.
How should a real estate agent treat a third party, such as a customer?
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.
What disclosures are required by the Texas Real Estate Licensing Act (TRELA)?
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.
What does “acting fairly” mean in real estate transactions?
“Fairly” means treating parties equitably and honestly, though not necessarily equally, especially when dealing with clients and non-clients.
What are the responsibilities of a broker when acting for themselves or their family?
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.
What are the common law duties of a real estate agent toward a customer?
The common law duties include honesty, fairness, and integrity in dealings, even if the agent does not represent the customer.
What is required to avoid misrepresentation in real estate transactions?
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.
What happens if a real estate agent violates TRELA guidelines?
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.
What happens if someone engages in the unauthorized practice of law in real estate?
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.
When is a license holder not considered engaged in the unauthorized practice of law?
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.
What actions can the commission take against a license holder?
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.
What can a license holder be required to do during probation?
They may be required to report regularly to the commission, limit their practice, or continue professional education to improve their skills.
Why is disclosure of representation important in real estate transactions?
Failing to disclose representation can lead to misunderstandings, liability, and errors, as it is crucial for all parties to understand who the agent represents.
What should be disclosed if an agent represents a seller in a property transaction?
The agent must disclose to potential buyers that they represent the seller when asked questions about the property.
What is the broker’s responsibility in a vendor transaction?
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.
What is the role of REALTORS® when representing a client?
REALTORS® are obligated to protect and promote their client’s interests, but they must also treat all parties honestly.
What is required when REALTORS® seek information from another REALTOR®?
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.
What must REALTORS® disclose when advertising property they own or lease?
REALTORS® must disclose their status as both the owner/landlord and a REALTOR® when advertising property they own or lease.
What is the disclosure requirement when REALTORS® buy or acquire property through their business?
REALTORS® must disclose their ownership interest in writing to the seller or the seller’s agent before signing any contract.
What must REALTORS® do when acting as a buyer/tenant representative?
REALTORS® must disclose their relationship with the client at first contact and provide written confirmation before the execution of any purchase or lease agreement.
What is a trust account in real estate?
A trust account is an account managed by one party for the benefit of another, where trust money such as client funds is kept.
What must brokers do when accepting trust money?
Brokers must maintain trust money in a designated trust account or deliver it to an authorized escrow agent.
When must trust money be deposited by a broker?
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.
How must brokers disburse trust money?
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.
How long must brokers keep documentation related to trust accounts?
Brokers must maintain records for four years from the date they are received or created.
What is required when REALTORS® recommend services with a financial interest?
REALTORS® must disclose any financial interest they have in services they recommend to clients or customers.
What are some important things agents must disclose about the property?
Agents must disclose information about zoning, inspection reports, history of repairs, MUDs, and septic tanks.
What is required for sellers of property located in a MUD?
The seller must provide a notice to the buyer regarding the MUD, including tax rate and bonded indebtedness, before entering into a sales contract.
What must a seller do when selling unimproved property outside a municipality’s jurisdiction?
The seller must provide a notice about the possible delays and additional costs of extending water and sewer services before the contract is executed.
What should agents avoid saying to avoid liability in property transactions?
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.”
How should REALTORS® present opinions to clients?
REALTORS® should clearly state when something is an opinion and advise clients to verify information with other sources, such as experts or third parties.
What must be disclosed about property boundaries?
REALTORS® should advise clients to get a survey to verify property boundaries if there is uncertainty.
What should agents do when uncertain about a title issue?
REALTORS® should advise clients to consult with a title company or attorney for legal questions or concerns.
What federal law requires the disclosure of lead-based paint hazards in homes built before 1978?
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.
What must sellers and landlords provide before signing a contract for sale or lease of a property built before 1978?
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.
What must be included in the contract or lease related to lead-based paint disclosure?
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.
What is the required period for homebuyers to conduct a lead-based paint inspection?
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.
How long must sellers or landlords retain a copy of the lead-based paint disclosures?
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.
What is the purpose of the lead-based paint disclosure requirement?
To protect families from exposure to lead from paint, dust, and soil in homes built before 1978.
What are some examples of property transfers that are exempt from the lead-based paint disclosure requirements?
Transfers involving court orders, foreclosure sales, bankruptcies, transfers to spouses or lineal relatives, and new residences that have not been previously occupied.
What should a seller do if they are unaware of lead-based paint or hazards in the property?
The seller should indicate that the information is unknown on the disclosure notice, and they will be in compliance with the law.
What is the general rule for disclosing stigmatized properties?
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.
What are examples of stigmatizing events that may need disclosure?
Events like murders, suicides, paranormal phenomena, criminal activity (e.g., drug dealing), and other unusual occurrences that could affect the property’s value.
What must sellers disclose if a property is involved in stigmatizing events?
Sellers must disclose phenomena like hauntings, murders, suicides, and other criminal activities that may materially affect the property’s value.
What does “caveat emptor” mean in property transactions?
“Let the buyer beware,” meaning the buyer is responsible for inspecting and investigating the property.
What exception to the “caveat emptor” rule exists for stigmatized properties?
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.
What must a seller disclose about debt related to a property?
In some states, sellers must disclose any outstanding debt on the property that could lead to creditor actions after the sale.
What is the required disclosure under Texas law for brokers?
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.
Which duty is not required for brokers acting as a salesperson?
The Duty of Confidentiality.
Which of the following is required under Texas law?
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.
Who has no agency relationship or fiduciary duty to a broker?
A Customer.
What duties do clients get from a broker?
Clients receive an agency relationship and fiduciary duties, including fairness, honesty, and full disclosure.
