LESSON 8: CLARIFYING AGENCY RELATIONSHIPS

Question 1

Question 2

Question 3

What type of agency relationship is established when a broker sponsors a new licensee?

Answer 3

It establishes a “general agency” relationship, where the sales agent or broker associate performs services exclusively for the broker.

Question 4

Can a sales agent or broker associate engage in business or property management without the broker’s consent?

Answer 4

No, they cannot engage in business or property management without the broker’s knowledge and written consent. If they want to start a property management company, the broker must be the broker for that company unless the agent has a broker’s license.

Question 5

What is a special agency relationship in real estate?

Answer 5

A special agency relationship occurs between a broker and a client for a specific transaction. The broker provides advice and opinions but does not make decisions or sign documents on behalf of the client.

Question 6

What are the Canons of the Texas Real Estate Commission?

Answer 6

The Canons are Fidelity, Integrity, Competency, Consumer Information, Discriminatory Practices, and Information about Brokerage Services.

Question 7

What is the primary duty of a real estate agent in a fiduciary relationship?

Answer 7

The primary duty is to represent the interests of the client and treat other parties fairly in the transaction.

Question 8

What is the broker’s duty of faithfulness in the fiduciary relationship?

Answer 8

The broker must be faithful and observant of the trust placed in them, acting scrupulously and meticulously in performing their duties to the client.

Question 9

Can a broker place their personal interest above the client’s interest?

Answer 9

No, the broker must not place their personal interest above the client’s interest unless the client’s opinion is legally liable. In such cases, the broker must explain to the client why their opinion is not appropriate.

Question 10

What must a broker disclose to a client regarding conflicts of interest?

Answer 10

The broker must disclose any conflict of interest, such as a personal relationship with the buyer, landlord, tenant, or seller, and seek the client’s written permission to proceed if necessary.

Question 11

How must a broker represent themselves in a transaction?

Answer 11

A broker must clearly disclose to all parties whom they represent, such as informing a tenant that they represent the landlord or informing a buyer that they represent the seller.

Question 12

What is the broker’s duty regarding contracts and legal documents?

Answer 12

The broker must ensure that all contracts, leases, and listing agreements are filled out with accurate, complete information, and must verify details such as legal names and property descriptions.

Question 13

What must a broker do regarding material information in a transaction?

Answer 13

The broker must keep the client informed of all material information, including the receipt of offers and other relevant transaction details, without withholding anything.

Question 14

What is the broker’s responsibility regarding client communication?

Answer 14

The broker must respond promptly to all calls, texts, and emails from the client, ensuring timely communication throughout the transaction.

Question 15

What is the broker’s duty regarding the proper accounting of funds in a transaction?

Answer 15

The broker must provide the client with a proper accounting of all funds received and must deliver any earnest money, option money, or other funds to the appropriate party within three days.

Question 16

Can a broker commingle funds from a property management account with their own business or personal account?

Answer 16

No, the broker must maintain a separate escrow account for the management of clients’ money and cannot commingle those funds with their personal or business operating accounts.

Question 17

What happens if the broker receives earnest money or option money that is not received from the buyer?

Answer 17

The listing agent must disclose to the seller if either the earnest money or option money is not received as agreed.

Question 18

What are the duties of sales agents and broker associates regarding the broker’s policy and procedure manual?

Answer 18

Sales agents and broker associates must follow the broker’s policy and procedure manual for all transactions, ensuring they only transact real estate business as authorized by the broker.

Question 19

Can a sales agent or broker associate sign listing or representation agreements on the broker’s behalf?

Answer 19

Yes, sales agents or broker associates can sign listing agreements and buyer or tenant representation agreements on the broker’s behalf, as long as they comply with the broker’s policy and procedure.

Question 20

What happens if a brokerage service agreement is to be canceled or terminated?

Answer 20

A brokerage service agreement may not be canceled or terminated without the broker’s approval.

Question 21

How should a broker handle funds received for property management?

Answer 21

Funds for property management must be held in a separate escrow account and not mixed with the broker’s personal or business funds.

Question 22

What is “disclosure” in real estate?

Answer 22

Disclosure refers to the requirement to reveal certain information to potential buyers, customers, clients, and other brokers regarding agency relationships, compensation, material defects, and conflicts of interest in a real estate transaction.

Question 23

Why is it important to disclose agency relationships?

Answer 23

Disclosing agency relationships helps to prevent implied agency, ensures that all parties understand whom the broker is representing, and reduces legal risks for agents and brokers.

Question 24

What is the definition of “substantive dialogue”?

Answer 24

Substantive dialogue refers to a meeting or written communication that involves a detailed discussion regarding specific real property. It does not include open houses or discussions after the signing of a contract.

Question 25

When must written disclosure of agency be made?

Answer 25

Written disclosure of agency must be given during the first substantive dialogue with an unrepresented party, unless the transaction is for a residential lease or the party is represented by another license holder.

Question 26

What is required of brokers and sales agents regarding the IABS form?

Answer 26

Brokers should have a policy requiring agents to provide the Information About Brokerage Services (IABS) form to all unrepresented customers during the first substantive dialogue, explaining it clearly. Training on the form is often provided.

Question 27

What does the broker's agency policy cover?

Answer 27

The broker's agency policy should include when and how to use IABS forms, how to handle conflicts of interest, and when to disclose material defects. It should also include guidance on buyer-broker relationships and fiduciary duties.

Question 28

What are federal antitrust laws designed to do?

Answer 28

Federal antitrust laws, including the Sherman Antitrust Act, aim to promote competition in an open marketplace by preventing anti-competitive practices like price fixing and market monopolization.

Question 29

What penalties can result from violating antitrust laws?

Answer 29

Violations of antitrust laws can lead to criminal penalties, including fines up to $100,000 and three years of imprisonment for individuals. Corporations can face fines up to $1 million, and civil damages may be owed to injured parties.

Question 30

What is price fixing, and why is it illegal?

Answer 30

Price fixing is when brokers or businesses agree to set prices at certain levels, which is illegal because it eliminates competition and distorts the market. Even discussing fees with other brokers can be considered price fixing.

Question 31

What is boycotting in the context of antitrust laws?

Answer 31

Boycotting occurs when brokers unfairly exclude others from the market, often through restrictive membership rules or practices that create an unfair competitive advantage. This is prohibited under the Sherman Antitrust Act.

Question 32

What is required of brokers regarding their sales agents' activities?

Answer 32

Brokers must provide written notification to sales agents outlining the scope of authorized activities under the Real Estate License Act and ensure that agents are trained and competent to perform these tasks.

Question 33

What is considered an "authorized act" in real estate?

Answer 33

An authorized act is any real estate activity performed for another person in exchange for valuable consideration, such as listing, selling, or leasing property. Actions done for the license holder's own account do not qualify as brokerage unless fraud or misrepresentation is involved.

Question 34

Can a license holder buy, sell, or lease property for their own account?

Answer 34

Yes, but they cannot engage in fraud, deceit, or misrepresentation when doing so. TREC may discipline license holders who fail to follow regulations when dealing with property for their own account.

Question 35

What does the scope of authorized acts include for sales agents?

Answer 35

Sales agents must only engage in activities defined and authorized by their broker, which must be outlined in the broker's written policies and procedures. Brokers are responsible for the acts of their agents when they operate within the defined scope.