Agency and Brokerage

Who is presumed to be represented without agreements

Absent a buyer representation agreement or a signed agreement to act as an intermediary, the broker and cooperating brokers are presumed to represent the seller [P2-U7]

Sales agents' working status

Associated brokers and sales agents work for the sponsoring broker as employees or independent contractors; the work agreement should specify any commission reductions [P2-U7, P3-U9]

Broker oversight of independent contractors

Brokers may review all aspects of independent contractors' work, including setting and periodically reviewing performance goals [P2-U7]

Sales agent's relationship to the broker

A sales agent is usually considered a general agent of the broker [P2-U7]

Information About Brokerage Services (IABS)

Broker or sales agent gives the seller a written IABS form at the first substantive dialogue or written communication; it explains seller representation, buyer representation, and the intermediary position [P2-U7]

Disclosing representation to other parties

A broker or agent who represents a party must disclose that representation at first contact with another party or another license holder who represents another party [P2-U7]

Dual agency in Texas

Has been replaced by intermediary agency [P2-U7]

Minimum services

A license holder must provide the minimum services required by law, which are detailed in the License Act [P2-U6]

Broker responsibility for sales agents

Brokers are responsible for their sales agents' authorized acts [P3-U1]

What a client is entitled to

Accurate information, advice, informed opinions, and advocacy; fiduciary duties [P3-U1, P3-U7]

What a customer is entitled to

Fair treatment, honesty, accurate information, disclosure of material facts (including the seller's honest disclosure of the property's condition and defects the agent knows of), and referral to other sources when the circumstances and the consumer's sophistication call for advice or advocacy [P3-U1, P3-U7]

Risks of an undisclosed, underdisclosed, or accidental agency relationship

May create unauthorized representation of more than one party; possible consequences: lawsuit for rescission, forfeiture of commission, money damages, loss of license, or disciplinary action [P3-U1]

Client vs. customer: duty and liability

A fiduciary owes greater duties to a client than to a customer, so the risk of liability is greater [P3-U2]

Who receives the IABS notice

The written IABS Notice must be given to all parties in most cases [P3-U2]

Commission paid to another broker

Any commission the listing broker pays to the other broker in a transaction must be disclosed to the principal [P3-U2]

License holder buying or selling for their own account

Must inform any person they deal with that they are licensed [P3-U3]

Benefit of early disclosure of seller agency

Lessens the chance that the buyer will later claim the broker also represented the buyer [P3-U4]

Treating the buyer-customer: fairly, not impartially

Written disclosures help clarify that the buyer is the customer and the seller is the client; a seller's agent must treat the customer fairly by law, but NOT impartially or equally relative to the client; do not substitute impartially or equally for fairly [P3-U4]

Seller's subagent duties

General duty of fairness and honesty to the buyer (customer); full fiduciary duties to the seller (client) [P3-U4]

Subagency under an MLS

Offering subagency is optional; as a matter of routine, the listing office should clarify the subagency status of any other broker; some cooperating brokers treat certain buyers as customers, making subagency to the seller the appropriate relationship [P3-U4, P3-U9]

Danger of treating customers like clients

Leads buyers to believe they are clients and creates an accidental, undisclosed agency relationship [P3-U4]

Choosing whether to represent a buyer

The agent then owes the full range of fiduciary duties, so a license holder may be selective and not represent every buyer; buyer brokerage is usually one option within single-agency or nonexclusive-agency practices [P3-U5]

Showing buyers in-house listings

Brokers must take care to avoid unintentional and unauthorized representation of more than one party [P3-U5]

Buyer's agent duties at initial contact with the listing broker

Disclose that the license holder is a buyer's agent and clearly reject any offer of subagency; the listing broker is often authorized to share fees with buyers' agents and allow them equal access for showings [P3-U5]

When to give a buyer the IABS form

At the first substantive dialogue about a specific property, even if the contact is by email [P3-U5]

When a broker must act as an intermediary

When representing more than one party in a transaction [P3-U6]

Selling your own listings without intermediary brokerage

Possible if the brokerage does not establish agency relationships with the buyers (expressly or accidentally) and the buyers remain customers, not clients [P3-U6]

Intermediary brokerage in Texas: authority and purpose

Authorized with the option of appointed license holders for each party; effective January 1, 1996; duties limited to those in TRELA Section 1101.559 and 1101.651(d); major purpose is to reduce broker liability when the same broker represents both principals [P3-U6]

Laying the foundation for an intermediary transaction

Discuss the possibility of in-house sales at initial interviews with both the potential seller and buyer; never spring it on a client after the relationship is established; consent must be in writing (listing contract, buyer/tenant representation agreement, or a separate agreement); the listing and representation agreements are the easiest, most logical place [P3-U6]

Intermediary vs. single agency: services

Intermediary brokerage offers reduced services; partly offset because the broker can appoint associates who may give advice and opinions to their respective parties [P3-U6]

Intermediary brokerage: benefits and risks

Broker may be exposed to liability for not following the guidelines carefully but benefits from in-house sales to represented buyers; the parties may not benefit as much as with true agents on both sides [P3-U6]

A broker representing a party is a fiduciary

Regardless of how or when the agency is created (22 TAC Section 531.1); fiduciary duties are truncated in an intermediary situation [P3-U7]

Confidentiality after agency ends

The duty of confidentiality continues after termination of an agency (with some exceptions) [P3-U7]

Agency roles and follow-through

Once roles are decided for a transaction, the license holder must give full disclosure to all participants, document all aspects of the transaction, and follow through and perform as agreed [P3-U8]

Written company agency policy

Should outline the firm's basic agency philosophy, how to handle common real estate situations, dealing with other firms, and use of agency forms [P3-U8]

Broker's duties to sponsored agents

Performance, compensation, indemnification, and reimbursement [P3-U9]

Sales agents and brokerage activities

Sales agents cannot perform brokerage activities independently; all activities must be under the direction of the sponsoring broker [P3-U9]

Independent contractor requirements

(1) A written contract with the broker, (2) freedom to determine how they carry out brokerage functions, and (3) paying their own income and Social Security taxes [P3-U9]

Subagency contracts between brokers

Brokers may contract with other firms to represent their clients as subagents, through an MLS or directly with selected brokers for a particular property or an agreed period [P3-U9]

Preventive brokerage

Use written disclosures, clarify roles of associated license holders, develop written office policies and procedures, and use the services of others when needed [P3-U12]