Buying a home is often the single biggest investment a person can make. Selling a home can be an overwhelming and confusing transaction. Because of the size and complexity of buying or selling a home, most buyers and sellers hire a professional advisor to help them with the process. The Texas Real Estate Commission (TREC) is responsible for licensing real estate service providers in Texas to ensure they are qualified to advise consumers about these transactions.
There are two major categories of real estate professionals licensed by TREC.
- Sales Agents, who must be sponsored by a broker. Sales agents work with clients on behalf of the broker.
- Brokers, who are responsible for all brokerage activities, including acts performed by sales agents sponsored by the broker.
Why are brokers and sales agents required to be licensed?
Real estate brokers and sales agents are licensed for the protection of consumers. Before someone can be licensed to act for a buyer or seller in a real estate transaction, the person must meet certain requirements. To become licensed, each applicant must pass a background check to assess their honesty, trustworthiness, and integrity. Applicants must also complete qualifying education and experience, and pass the licensing exam before they are granted the authority to help guide you through the complicated process of buying or selling a home.
Each company that provides brokerage services must be licensed as a broker and must operate under the direct oversight of an individual who also holds a broker license. Every sales agent is sponsored and supervised by a broker. A broker or sales agent licensed by TREC is not required to become a REALTOR; although many do voluntarily join this private professional organization.
TREC enforces the laws and rules which govern sales agents and brokers. If you have issues or concerns with the broker or sales agent assisting you, or if you feel you are not being represented fairly, you can file a complaint with TREC. TREC has the authority to take action against a licensed broker or sales agent who is not in compliance with the rules and laws of Texas. Additionally, licensed brokers and agents are required by law to put the interests of their client (that is you) above all others, including the broker’s own interests. This is called acting as a “fiduciary”. It also involves providing certain minimum services to their client:
- inform the client of any material information about the property or the transaction received by the broker;
- answer the client’s questions and present any offer to or counter-offer from the client; and
- treat all parties to a real estate transaction honestly and fairly.
Finally, license holders are required to provide certain consumer notices to you. The first time you communicate about a specific property with a license holder, the broker or agent is required to provide you with a form called the “Information About Brokerage Services”. This form describes the different ways a professional can represent you, the minimum services they must provide to you, and key business names, licenses, and contact information for the sales agent, their sponsoring broker, and any delegated supervisor. All licensed professionals are also required to provide you with a copy of the “Consumer Protection Notice” that contains information about complaint filing processes and recovery funds.
Do your homework before choosing a broker or sales agent.
It’s important to make sure you work with an agent or broker that you believe will best meet your needs. Talk to a trusted neighbor, family member, or friend to get a recommendation. Be sure to interview any persons you may be interested in hiring and ask them questions about their services. Online research can also be a valuable aid in helping you decide. Check out any licensed sales agent or broker using TREC's License Holder Lookup tool. This tool will provide you information about a license holder’s background history; any prior violations of laws or TREC rules; education they have taken in connection with their license; and if the person is an agent, information about the broker who sponsors them.
Fees are not regulated by TREC.
TREC does not regulate the fees paid to any real estate license holder, including buyer’s agents, seller’s agents, brokers, inspectors, or appraisers. All fees are set by your agreement with each professional. Before you sign any representation agreement or service agreement, you should carefully review the fees each individual will be charging.
Standard Contract Forms
When buying or selling a home in Texas, professionals licensed by TREC are most often required to use standard form contracts drafted by TREC’s Broker-Lawyer Committee and adopted by the agency. These forms are carefully written to meet the needs of a typical home sale or purchase and to balance the interests of all the parties involved. A broker or sales agent is permitted to complete these form contracts to reflect the needs of their client, but cannot make recommendations or offer advice that exceeds their level of expertise. Complex or specialized situations may require the use of an attorney to express and protect the client’s interest.
Other persons involved in the buying and selling of a home?
In addition to brokers and sales agents, there are other persons involved in the buying and selling of a house. Some of these persons are also licensed by TREC.
Real estate inspectors are individuals licensed by TREC to perform inspections of real property that is part of a real estate transaction. Inspectors provide information on the performance of certain systems that are part of the property. They are required to use the TREC standard report form and are guided by their “standards of Practice” to ensure consistency throughout the home inspection process. There are three types of inspectors:
- Apprentice Inspector, who must be sponsored and directly supervised;
- Real Estate Inspectors, who must be sponsored and indirectly supervise; and
- Professional Inspectors, who can inspect without sponsorship or supervision
Whenever a loan is involved with a real estate transaction, the property will need to be appraised. An appraisal is essentially a written estimate of a home or property’s value based on current market conditions. This estimate is determined by a licensed appraiser and is delivered in an official appraisal report. In most cases, the appraisal will be requested by the buyer’s lender because the lender is looking for assurance that the property is sufficient collateral and worth the amount that the borrower has agreed to pay. Appraisers are licensed by the Texas Appraiser Licensing and Certification Board (TALCB), which is an independent subdivision of TREC. Information concerning licensed appraisers can be found on the TALCB website.
Residential Service Companies are licensed by TREC to offer contracts to consumers for services related to the maintenance of certain systems in the home. Typically, these contracts are offered at the point of sale of a home. The contract can cover a wide range of systems including appliances, plumbing, electrical, pools, and water heaters. Make sure you review each contract and its details before choosing the one. It’s important to note that a residential service company contract is not required when purchasing a home.
Title or Escrow Agents
Title closing is the final step in the real estate transaction. A title or escrow agent acts as a neutral third party and is there to serve both the buyer and seller in the transaction. The title agent is responsible for examining all closing documents and ensuring that all transaction details are complete. Title and escrow agents are license by the Texas Department of Insurance (TDI) and not by TREC. Information concerning title or escrow agents can be found on the TDI website.
Residential Mortgage Loan Originator
Residential mortgage loan originators (RMLOs) assist homebuyers in finding a loan/mortgage and act as the liaison between a financial institution and the buyer/applicant. RMLOs in Texas are licensed by The Texas Department of Savings and Mortgage Lending (TDSML). Information concerning RMLOs can be found on the TDSML website.