Agency Relationships and Ethics in Texas Real Estate

Information About Brokerage Services brochure

Not a contract and does not create an agency relationship; simply informational.

Substantive dialogue

Includes face-to-face meetings via email, phone, and/or text.

Written notice

Must be provided during the first substantive communication about a specific real property transaction, detailing broker representation, duties, and contact information in at least a 10-point font.

IABS form

Not a contract but a tool to explain representation and agency roles in real estate transactions.

Sections of IABS

Divided into five sections: Types of Real Estate License Holders, A Broker's Minimum Duties Required by Law, Representation, Written Agreements and Commissions, and License Holder Contact Information.

Broker's responsibilities

Responsible for all brokerage activities, and sales agents work on behalf of their broker.

Representation

Begins with a written agreement; a license holder can represent an owner, a buyer, or a tenant or act as an intermediary with written consent from all parties.

Sub-agency

Occurs when a license holder assists a buyer without representing them and prioritizes the seller's interests, as defined under TRELA Section 1101.002(8).

Written agreements

Clarify the broker's duties, the client's obligations, and payment terms, reducing the risk of disputes.

Agency

Someone who acts on someone else's behalf at that person's request.

Agent

An individual authorized to act on behalf of another in a business transaction.

Fiduciary

A person who has the legal responsibility to act in the best interest of another party.

Client

Someone represented by a real estate professional.

Principal

A party to a transaction (e.g., the buyer or seller, whether or not an agent represents them).

Customer

Someone with whom you agree to act as their agent.

Consumer

People who are usually just browsing may come to an open house, look around quickly, and then leave.

Non-Agent

A licensee with a unique relationship with a consumer, acting as a 'middle man' in a transaction and assisting either party with clerical or ministerial tasks.

Express Agency

Created through a written or oral agreement.

Implied Agency

Created through the behavior of the participants.

Licensee

Refers to both a licensed sales agent and a licensed broker.

Universal Agent

Someone empowered to do anything the principal could do personally means their authority is unlimited.

General Agent

Has the responsibility to handle all details of a specific transaction.

Special or Specific Agent

Has a limited scope of authority.

Designated Agent

A licensee is someone the broker appoints to represent one party in an in-house transaction.

Fiduciary Duties

Using the mnemonic 'Old Cars': Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Skill and Care.

Obedience

Obey all of the client's lawful instructions.

Loyalty

Put a client's interests ahead of all others.

Disclosure

Disclose all facts pertinent to the transaction.

Confidentiality

Keep any confidential information the client shares confidential.

Accounting

Promptly account for all money and property entrusted by the client.

Reasonable Skill and Care

Provide clients with quality, knowledgeable, and prudent service.

Ethics

Dependent on conscience and values, basis for laws.

Morality

Varies by person (religious or cultural beliefs).

Laws

Made by government to safeguard citizens, based on ethics, can be punished for violation.

National Association of REALTORS® Code of Ethics

Widely accepted as a guideline for real estate professionals.

Minimum Ethical Standards

Laws are the minimum standard of conduct.

Licensees' behavior

Must be ethical in all situations.

The 'right thing'

Is always the ethical thing to do.

Texas Canons of Professional Ethics and Conduct

All Texas real estate licensees are bound by these canons.

Canon of Fidelity

Requires that licensees put their client's interests ahead of their own, disclose personal interest in any transaction, and all compensation.

Canon of Integrity

Means using caution, being honest and fair, cooperating when it's in the best interests of one's client, and using one's best judgment.

Canon of Discriminatory Practices

Prohibits making and responding to inquiries or making disclosures which indicate a preference or limitation based on race, color, religion, sex, national origin, ancestry, familial status, or disability.

Canon of Competency

Includes staying informed, investigating and disclosing material facts, proper handling of paperwork, and keeping track of deadlines and other contractual obligations.

Canon of Consumer Information

Requires all licensed real estate brokers and inspectors to prominently display a copy of Consumer Information Form 1-1 in each place of business.

Consumer Information Form 1-1

A form that must be prominently displayed by licensed real estate brokers and inspectors.

TRELA

Primary law that regulates real estate profession in Texas

TREC

Oversees and administers TRELA

Civil Rights Act of 1866

Recognized all persons born in the U.S. as citizens, regardless of race or color, and protected the rights of every U.S. citizen to buy, sell, convey, inherit, and possess property, as well as to enter into contracts and makes it illegal to discriminate based on race or color, without exception

Fair Housing Act of 1968

Prohibited discrimination in the sale, rental, and financing of housing and housing-related transactions based on race, color, national origin, and religion and created the Office of Fair Housing and Equal Opportunity (FHEO) under the Department of Housing and Urban Development (HUD). This agency is charged with enforcing fair housing laws and holding all parties accountable for compliance with these laws and regulations

Housing and Community Development Act of 1974

Amended the Fair Housing Act of 1968 to add sex to the list of protected classes

Fair Housing Amendments Act of 1988

Provided consumers with remedies if they believed they were victims of discrimination in the sale, rental, or financing of housing and added familial status and disability (both physical and mental) to the existing protected classes

Americans with Disabilities Act

Prohibits discrimination based on disability in programs, services, and activities provided or made available by public entities. It strengthened the 1988 amendments regarding disabilities. Title II of the act applies to public housing, housing assistance, and housing referrals. HUD is responsible for enforcing Title II

Housing for Older Persons Act of 1995

States that communities and facilities that meet certain criteria for providing housing to older persons are legally exempt from familial status discrimination. The housing must have one person who is age 55 or older residing in at least 80% of its occupied units, and the housing provider must demonstrate that the housing is intended for persons 55 and older

Protected Classes

The seven federally protected classes are: Race, Color, National Origin, Religion, Sex, Familial Status, Disability

Federal Exemptions to Fair Housing Laws

Owner-occupied buildings with no more than four units ('Mrs. Murphy' exemption), Single-family housing sold or rented without the use of a broker, if owner does not own more than three such single-family homes at one time, Housing operated by organizations and private clubs that limit occupancy to members, Housing designated for senior use that meets specific requirements

Texas Fair Housing Act

Fair housing regulated at city, state, federal level and enforced by TWCCRD

TWCCRD

Governed by Texas Commission on Human Rights

The Equal Credit Opportunity Act of 1976

A 1974 federal law that prohibits discrimination based on protected class status when providing credit

The Home Mortgage Disclosure Act (HMDA)

A 1975 law that requires financial institutions to make mortgage data available to the public

The Community Reinvestment Act (CRA)

Created in response to the practice of redlining (lenders' refusal to finance housing in specific neighborhoods)

The Truth in Lending Act (TILA)

Requires disclosure of all financing terms when specific trigger terms are used in advertising