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Frequently Asked Questions

What happens if a license holder is convicted of a crime?

If a license holder is convicted of a felony or a criminal offense involving fraud it is a violation of section 1101.652(a)(1) of the License Act. This section gives the Commission authority to suspend or revoke a license holder that has entered a plea of guilty or nolo contendere or has been convicted of a felony or any criminal offense that involves fraud (including misdemeanors). The Commission does not have the authority to revoke or suspend a license holder that has been only charged or accused of committing a felony or criminal offense that involves fraud. A license holder is required to notify the Commission not later than the 30th day after the final conviction or the entry of a plea of guilty or nolo contendere. Failing to timely notify may result in more severe or further disciplinary action. All license holders’ criminal backgrounds are rechecked upon renewal, however, this does not excuse a license holder from notifying the Commission not later than the 30^th day after the final conviction.

Is a starter course tab that is not sealed material, deficient and a required reporting item per TREC?

We assume you are referring to composition shingle roofing. Section 535.228(c)(3) of the Standards of Practice do require inspectors to report as a deficiency a starter course tab that is not sealed material. However, it is important to keep in mind that fastening of shingles is required to be checked by random sampling, so this condition is only required to be reported as identified though such sampling.

Are there any restrictions on the placement of a license holder's signs?

Yes. TREC may suspend or revoke a license if the license holder places a sign on a property offering it for lease or rental without the written permission of the owner or the owner's authorized agent. [TRELA §1101.652(b)(18)]. Also, although TREC does not regulate where a license holder places a sign, a license holder is responsible for compliance with any rules, restrictions, or regulations covering placement of a sign in their local area. Placement of signs in violation of city ordinance could be considered an act of negligence or incompetence that authorizes disciplinary action against the license holder as well as subject the license holder and possibly even their principal to enforcement actions by the appropriate authorities. [TRELA §1101.652(b)(1)] Typically, sign ordinances prohibit placing a sign on a utility pole, traffic signal box, or in a road median.

Does TREC require the use of a “contract” for inspections which would outline the responsibilities of the parties to the contract or have a form inspectors can use?

No. TREC does not require a pre-inspection or employment contract to be signed by the parties to the inspection. Inspectors are free to use or not use a contract. You may want to have a private attorney create a contract for you, or you may check with some of the inspector trade associations to see if they provide templates of pre-inspection contracts.

I am a Texas broker. Can I broker real estate located in another state?

We don't know, since you will be governed by the laws in that state. Please check with the licensing authority in the state where the brokerage activity will be performed.

I am a sales agent, Sally White. I am sponsored by a broker but want to use an assumed name for my advertisements. Can I use “Sally’s Spectacular Properties” or “White Real Estate” for my business name on my advertising?

You cannot use either company name because each implies that Sally, a sales agent, is in charge. An advertisement cannot in any way imply that a sales agent is the person responsible for the operation of a real estate brokerage. [TRELA §1101.652(b)(23) ]. A sales agent may use her name with the term “Team” or “Group,” so long as the advertisement also includes the broker’s name, and so long as the broker has registered the team or group name with the Commission.

I am a sales agent. Can TREC review my advertising and advise me whether my advertising complies with TREC Rules?

No. TREC does not review a sales agent’s advertising. TREC will only discuss advertising questions with a broker directly. Your sponsoring broker should review your advertising because your sponsoring broker is responsible for ensuring that your advertising complies with TREC’s advertising rules, and both you and your sponsoring broker can be disciplined if your advertising violates TREC rules. [See §§535.2(g), 535.154, and 535.155 (effective May 15, 2018); TRELA 1101.652(b)(23)]. Your broker must maintain, on a current basis, written policies and procedures to ensure that each sponsored sales agent complies with the Commission’s advertising rules. [See §535.2(i)(6)].

I am licensed as a real estate sales agent and as a professional home inspector. Can my broker's real estate office offer my inspection services to their clients?

Under Section 1102.303 of the Texas Occupations Code, an inspector may not act in a transaction in the dual capacity of inspector and either (1) broker or sales agent or (2) an undisclosed principal. Therefore, it would violate Section 1102.303 for you to inspect any property your broker has listed or where you were personally involved. Under Rule 535.156, a real estate license holder has a duty to disclose to a client any relationship the license holder has with an inspector performing an inspection on property that is the subject of a transaction involving the license holder. If you were to perform an inspection in connection with a transaction in which your broker was involved, your broker would need to disclose your relationship (as the broker’s sponsored agent), and if you were paid or received compensation or anything of value from anyone in your office in connection with the inspection, you would also need to disclose this fact and obtain the client’s prior permission.

I signed a buyer representation agreement, but I want to work with a different Broker. Can I cancel the agreement?

A buyer representation agreement is intended to be a legal and binding contract. You can ask the broker to release you from the buyer representation agreement. However, TREC does not have the authority to require a broker to release you from the agreement. If the broker refuses to release you from your buyer representation agreement, you should seek the advice of a private attorney.

If I am buying, selling or leasing property for a relative, do I need to disclose that I have a real estate license?

Yes. If you are acting on your own behalf or on behalf of your spouse, parent or child, you must inform any person with whom you deal that you are a licensed broker or sales agent acting on that relative’s behalf. This notice must be in writing. A license holder shall not use the license holder’s expertise to the disadvantage of a person with whom the license holder deals. [Rule 535.144(c)]

If a buyer's agent is required to disclose his or her status as the buyer’s agent to a listing broker when setting up a showing appointment, must the listing broker also disclose to the buyer's agent that the listing broker represents the seller?

Yes, on the first contact with the license holder representing the buyer. [TRELA §1101.558(b)].

If a licensed professional inspector is conducting a commercial inspection, is he or she required to use the inspection report form promulgated by TREC? Do the Standards of Practice apply?

A licensed TREC inspector is not required to use the promulgated form or the Standards of Practice when inspecting property other than one to four family residential. A TREC licensed inspector may perform inspections on commercial property, as long as no other laws prohibit the inspector from doing so (please check with the Texas Board of Professional Engineering to determine when a Professional Engineer license is required). All inspections would be subject to §1102.301 et seq. of the License Act (Subchapter G, Prohibited Acts), as well as 22 TAC § 535.220, Professional Conduct and Ethics.

Is a broker required to have a trust or escrow account?

No, not unless the broker agrees to hold money belonging to others or to act as an escrow agent. [Rule 535.146(b)(1)]

Is a water heater covered by an insulation cover deficient and a required reporting item?

No.

Is the inspector required to inspect a water metering device to determine if a leak may exist? Is the inspector required to perform any inspection of the meter?

Pursuant to Section 535.227(b)(3)(A)(vi) of the Standards of Practice, an inspector is not required to inspect or test metering devices.

Is the inspector required to inspect to trade or industry association standards? For example, ASTM, UL or ARMA?

Inspectors are not required to inspect to trade or industry association standards. However, an inspector who advertises or represents that he or she will inspect to a higher standard could be subject to disciplinary action for failure to do so.

Is the license holder required to provide the "written statement" (IABS Form) to buyer prospects at an open house?

No. A license holder is not required to provide the statutory written statement at the open house. [TRELA §1101.558(c)(3)].

I’m changing sponsoring brokers. Can I take the buyers I represent with me to the new broker if the buyers signed buyer representation agreements?

No. A buyer representation agreement is a private contract between the buyer and the real estate broker, not the sales agent. As such, the buyer would still be represented by the sales agent’s previous broker. The buyer may, however, seek to be released from the buyer representation agreement.

What are the steps to formation of an intermediary relationship?

Before a broker or sales agent sponsored by the broker can represent both the buyer and seller in a transaction, all of the following steps must occur:

both the buyer and seller are presented with the Information About Brokerage Services by their respective sales agent at the time of the first substantive communication;
the seller executes a Listing Agreement or other written document with the broker that authorizes the broker to act as intermediary and specifies in conspicuous bold or underlined print the conduct that is prohibited under TRELA §1101.651(d); and
the buyer executes a Buyer Representation Agreement or other written document that authorizes the broker to act as intermediary and specifies the conduct that is prohibited under TRELA §1101.651(d) in conspicuous bold or underlined print.

What is considered an advertisement?

Under Rules 535.154 and 535.155 (effective May 15, 2018), an advertisement is defined as “any form of communication by or on behalf of a license holder designed to attract the public to use real estate brokerage services and includes, but is not limited to, all publications, brochures, radio or television broadcasts, all electronic media including email, text messages, social media, the Internet, business stationery, business cards, displays, signs and billboards." An advertisement does not include a communication from a license holder to the license holder's current client.

Are inspectors required to inspect underground drainage systems or to test gutters or downspouts?

Inspectors are not required to inspect anything buried, hidden, latent, or concealed. Accordingly, the requirement that inspectors report deficiencies in installed gutter and downspout systems applies only to visible deficiencies in above-ground gutter and downspout systems and not to underground drain piping, cisterns, or other buried components. Furthermore, there is no requirement that inspectors test gutters or downspouts (by pouring water into them or through other means).

Are inspectors required to mark and or comment as deficient the absence of tamper resistant receptacles?

No. The Standards of Practice do not address tamper-resistant receptacles.

Are signs permitted which display the word "broker" or "agent?"

Yes. Although this is not mandatory, it may still be placed on a sign.

Are the disclosure and statutory information requirements applicable to commercial transactions, new home sales, farm and ranch sales or transactions other than residential sales?

Unless an exception applies, the requirements apply to all proposed real estate transactions. The exceptions to the representation disclosure are in TRELA §1101.558(c).

Are there exceptions when the disclosure notice about agency relationships (IABS) is not required?

Yes. The Information About Brokerage Services (IABS) representations disclosure is not required when:
(1) a transaction is for a residential lease less than one year and a sale is not being considered;
(2) a meeting is with a party currently known to be represented by another license holder; or
(3) the communication is at an open house and the communication concerns that same property.
[TRELA §1101.558(c)]

In addition, the IABS is not generally required when the license holder is acting solely as a principal in the transaction.

As a licensed inspector I would like to advertise that my company performs wood destroying insect inspections. Neither I nor anyone in my company is a licensed wood destroying insect inspector, but we recommend or provide one if requested by the client.

Under inspector advertising Rule 535.221, an inspector may not engage in false or misleading advertising. Including such information in your advertisement could be construed to be misleading in that a consumer may believe that you or members of your company are licensed to inspect for wood-destroying insects. Additionally, such advertising may also be in violation of the Structural Pest Control Service advertising rules.

As a licensed inspector in the State of Texas, am I supposed to charge a sales tax on the amount of my inspection fee?

TREC only handles the licensing and discipline of real estate inspectors, you would need to contact the state agency in charge of collecting state sales tax which is the Texas Comptroller of Public Accounts. The website for that agency is www.comptroller.texas.gov and their toll free number is 800.252.5555.

As an inspector, when do I have to show proof of E&O insurance?

A Certificate of Insurance form (promulgated by TREC), signed by the insurance agent, must be filed with TREC at the time the license is issued and with each renewal of the license. In addition, an inspector must retain sufficient records of professional liability insurance coverage, or any other insurance that provides coverage for violations of Subchapter G of Chapter 1102, to document to the commission continuous coverage for the preceding two year license period.

Can I advertise a service provider such as an inspector, moving company, or repair contractor on my website?

Yes, but if you offer, recommend, or promote the use of a service provider and expect to receive compensation from the service provider when a party uses the service, the ad must disclose that you may receive the compensation. [Rule 535.155 (effective May 15, 2018)] You may advertise an inspector’s services, however, an inspector may not pay a fee or other valuable consideration for (1) a referral, (2) inclusion on a list of inspectors or preferred providers, or a similar arrangement; or (3) inclusion on a list of inspections contingent on other financial agreements. [Rule 535.220(e)(3)] Also, acceptance of a fee from a service provider may violate the Federal Real Estate Settlement Procedures Act (RESPA), which prohibits certain referral fees and kickbacks.

Can I perform mold inspections under my TREC inspector license?

No. The Texas Department of State Health Services regulates mold inspections. You can contact them at www.dshs.texas.gov/mold for information on the requirements to obtain a license to inspect for mold.

Can a broker be the designated broker for more than one business entity?

Yes.

Can a broker pay all or a portion of a commission or fee to an unlicensed person?

In general, no. However, a license holder may rebate all or a portion of the fee or commission to the party being represented in the transaction, or, with consent of the party being represented, the license holder can also pay all or a portion to a party the license holder does not represent in the transaction. [Rule 535.147(d)]

Can a broker use the words "team" or "group" in the broker's licensed name or assumed business name?

Yes. TREC Rules do not prohibit a broker from using the word “team” or “group” anywhere in a broker’s licensed or assumed business name.

Can a license holder who negotiates a transaction also be employed by a lender and direct a purchaser to that lender to get a loan?

Only with appropriate disclosure and consent. If the license holder is an agent of the buyer, the license holder owes a fiduciary duty to the buyer. The license holder can work for a lender without breaching that duty, but the license holder can't direct a purchaser to any one lender. The license holder should inform the purchaser that the license holder is employed by the lender and give the names of several institutions to the purchaser. The primary duty of the agent is to represent the interests of the agent’s client, not the agent's own interests. [Rule 531.1]

Can a licensed inspector perform a hydrostatic test?

No, only a licensed plumber may perform a hydrostatic test on a system within a home.

Can a listing broker share a portion of the listing broker’s commission with an attorney who represented the buyer in a real estate transaction?

No. A broker is prohibited from sharing fees with or otherwise compensating the attorney acting as a buyer’s agent unless the attorney holds an active real estate license.

Can a name used in advertising be both an assumed business name and a team name?

No. It will be one or the other. See question regarding the difference between the types of names to figure out which one is appropriate for your situation.

Can a sales agent be the owner of a property management company?

A: Yes. A sales agent may own the firm but the business must be conducted through the sales agent's sponsoring broker.

Can a sales agent have a commission check written to the sales agent’s own corporation or Limited Liability Company? If so, does that entity have to be licensed as a real estate broker?

All commissions must be paid through the agent’s sponsoring broker.[TRELA §1101.651(b)] Further, a business entity that receives compensation on behalf of a license holder must be licensed as a broker. [TRELA §1101.355(c)]

Can a sales agent have an escrow account?

No. Rule 535.146(b)(2) prohibits a sales agent from having an escrow account. The sales agent must turn all money received over to the sales agent's sponsoring broker.

Can a sales agent own his or her own real estate business entity?

Yes, a sales agent can own his or her own business entity. The entity must, if it engages in real estate brokerage, hold a separate license. The entity must have a designated broker through whom all transactions must be handled and who is responsible for the entity's (and any sponsored sales agent’s) actions. The specific details of the supervision that the sales agent’s sponsoring broker exercises over the sales agent’s actions should take into consideration the sales agent’s experience and ability, acknowledging the fact that the broker is responsible for the sales agent’s actions, and should be described in a written agreement between the sales agent and the sales agent’s sponsoring broker. The sales agent’s agreement should also address how compensation is handled with the broker. For additional information, read Rule 535.2 regarding broker responsibility. See also Rules 535.154 and 535.155 regarding advertising.

Can a sales agent receive or pay a commission to a party in a real estate transaction?

No. A sales agent may not accept compensation for a real estate transaction from anyone other than the broker the sales agent was associated with at the time the commission was earned and may not pay a commission to a person except through the sales agent’s sponsoring broker. [TRELA §1101.651(b) and (c)]

Can a sales agent work in a different office than the sponsoring broker’s office?

A sales agent may work from an office location different from the main office of the sales agent's sponsoring broker, but the sponsoring broker is still responsible for the sales agent's actions. [TRELA §1101.803, Rule 535.2(a)] Despite this flexibility, a sales agent may not lawfully engage in brokerage activity unless the sales agent is associated with, and acting for, the sponsoring broker at all times. [TRELA §1101.351(c)] Thus, a sales agent may not work for a broker who is not the sales agent’s sponsoring broker or work for another broker or out of another broker's office.

Can an associated broker refer to himself or herself as a "broker" in an advertisement?

No. This could “tend to mislead” the public that the associated broker is in charge of the brokerage operation. The public needs to know the broker with whom they will have a legal agreement (remember listing agreements, etc. are taken in the name of the broker, not the sales agent or the associated broker). The associated broker could use “associated broker”, “broker associate” or “associate broker”, since that distinguishes his or her role. [TRELA §1101.652(b)(23)]

Can an associated broker use his or her own assumed business name in advertising?

No. A name used in advertising by an associated broker that is not the associated broker’s licensed name must be registered as a team name by the broker he or she is associated with and meet all the requirements for a team name. [TRELA §1101.652(b)(23) and Rule 535.154(a)(5)]

Can an attorney get a broker license without first being licensed as a sales agent?

No. A licensed attorney will need to meet all the standard requirements, including education, examination and experience, for issuance of first a real estate sales agent license and then a broker license. However, many of the college and law school courses completed by the attorney could count toward the education requirements. Transcripts would need to be evaluated to determine whether the attorney may receive credit for any applicable courses.

Can an inactive license holder negotiate the purchase, sale, or lease of real property between third parties?

No. An active real estate license is required to negotiate a real estate transaction between third parties. Conducting
real estate brokerage activity with an inactive license is considered a violation subject to sanctions. [TRELA §1101.351(c)]

Can an individual broker use an assumed business name in advertising?

Yes, as long as the broker has the legal authority to use that name in the State of Texas and it is registered with TREC before it is used in advertisements. [Rule 535.154(d)]

Can an individual sales agent use an assumed business name in advertising?

No. Any name used by an individual sales agent, other than the name on the license or a registered alternate name, is considered a team name under TREC rules and must meet the team name requirements. [Rule 535.154(a)(5)]

Can an unlicensed person own a real estate company and receive all or a portion of a commission paid to a licensed broker?

Yes, within certain limitations. The unlicensed person may share in the income earned by a real estate brokerage if the person engages in no acts for which a license is required. [Rule 535.147(b)]

Can the intermediary delegate to another license holder the authority to appoint license holders associated with the broker intermediary?

The intermediary may delegate to another license holder the authority to appoint license holders. If the intermediary authorizes another license holder to appoint associated license holders to work with the respective principals, that license holder cannot designate himself/herself as one of the appointed license holders. This is an improper combination of the different functions of intermediary and appointed license holder. It is important to remember that there will always be a single intermediary broker even if another license holder has been authorized to make the specific appointments. The intermediary is prohibited from acting so as to favor one principal over the other, and may not reveal confidential information obtained from one principal without the written instructions of that principal, unless disclosure is required by TRELA, court order, or the information materially relates to the condition of the property. The intermediary and any associated license holders appointed by the intermediary broker are prohibited from disclosing, without the written authorization from the seller, that the seller will accept a price less than the asking price or that the buyer will pay a price greater than the price submitted in a written offer. [TRELA § 1101.558]

Can the team name used by an associated broker be the same as the assumed name used by the associated broker when he or she is not associating with another broker?

Yes, if the assumed business name of the associated broker meets the requirements for a team name since a team name must be used when the associated broker is associating with another broker. Keep in mind that the associated broker registers the assumed business name that is used when they are not associating with another broker and the broker that they are associating with registers the team name being used when associating with that broker. [Rule 535.154(a)(5)]

Note on Exclusive Name Use: TREC does not, and is not, required to vet names submitted for registration as an assumed name or team name for exclusivity. A brokerage should decide whether it makes good sense from a liability exposure standpoint to allow an associated broker (or a sales agent who owns a business entity) to use the same name for a team name under the brokerage that they have registered as an assumed name under their own licensed business entity.

Do I have any recourse against the inspector for failing to note on his report that there was a gas leak outside the home due to a corroded gas line?

Probably not. TREC licensed inspectors are required to follow Standards of Practice when inspecting property. These may be found on our website about Rules Governing Inspectors. The Standards of Practice do not require an inspector to dig up gas lines in order to determine their condition. They are only required to conduct a visual inspection of the property, and buried gas lines are not required to be inspected.

Do partnerships need to be licensed if real estate brokerage activity is performed under the partnership name?

Yes. All business entities engaged in real estate brokerage activity, including partnerships, need to be licensed. [TRELA §1101.002] Further to receive or maintain a license, a business entity must designate an individual holding an active Texas real estate broker license, in good standing, who is an officer, manager, or general partner of the entity to act for it. [TRELA §1101.355 and Rules 535.50(5) and 535.53]

Do the Standards of Practice require inspectors to comment on the way a gas pipe enters a crawl space?

The Standards of Practice require only that the pipe entry be reported as deficient when the gas piping is concealed in a duct, plenum, or chase. See Section 535.230(d)(4).

Do the Standards of Practice require inspectors to determine the headroom clearance on stairs or to report inadequate clearance as a deficiency?

Inspectors are not required to measure the headroom clearance of every flight of stairs. The Standards of Practice do not establish a minimum headroom clearance height. Whether to report inadequate headroom clearance as a deficiency is up to the reasonable judgment of the inspector.

Do the Standards of Practice require inspectors to determine the headroom clearance on stairs or to report inadequate clearance as a deficiency?

Do the Standards of Practice require inspectors to report as deficient a gas log fireplace with a damper that has not been blocked open? If so, what is the minimum distance the damper should be open?

The lack of a damper clamp is required to be reported as a deficiency when a gas appliance or artificial gas logs (but not merely a log lighter pipe) is present. The Standards of Practice do not establish a minimum distance that the clamp should hold the damper open.

Do the Standards of Practice require inspectors to report as deficient a plumbing fixture that does not fully drain, retaining a slight amount (such as a few cups) of residual water?

A properly constructed and properly functioning bathtub or shower should drain virtually all water (with the exception of minimal amounts that remain due to the surface tension of the water). Amounts beyond this that remain due to indentations or improper slope in the tub or shower (including shelves, ledges, etc.) constitute deficiencies and should be reported as such.

Do the Standards of Practice require inspectors to report as deficient evidence of a past attic fire?

Evidence of a past fire is not, in itself, a deficiency. Accordingly, inspectors are not required to report mere evidence of a past fire or the presence of paint in the attic. If there are any deficiencies due to fire or other causes, those deficiencies must be reported.

Do the Standards of Practice require inspectors to report as deficient the absence of weep holes along the bottom course of brick and above steel lintels?

Lack of weep holes is only required to be reported as a deficiency when there is visible evidence of water penetration or a structural issue that may be related to the lack of weep holes.

Do the Standards of Practice require inspectors to report as deficient the lack of a dishwasher power receptacle in an adjacent cabinet (for example, under a kitchen sink)?

No.

Do the Standards of Practice require inspectors to report as deficient the presence of a commingled water heater drain pan drain line and a temperature/pressure relief drain line?

While this configuration does not comport with current codes, the Standards of Practice do not require inspectors to inspect to today’s code. A single drain line for a temperature/pressure relief valve and the pan is not required to be reported as a deficiency.

Do the Standards of Practice require inspectors to report as deficient the presence of a transite pipe to be reported?

Inspectors are not required to report the presence of transite pipe as a deficiency.

Do the Standards of Practice require inspectors to report copper gas lines as deficient?

Inspectors are not required to determine utility sources or to research codes and ordinances related to this issue. As copper gas line material is only a concern in areas where there may be corrosive additives in the gas supply, the presence of copper gas line material is not required to be reported as deficient.

Do the Standards of Practice require inspectors to report double-tapped neutral wires on a panel box terminal as deficient?

Yes, double-tapped grounded conductors (neutrals) are a deficiency and must be reported as such, unless otherwise approved and listed by the manufacturer.

Does TREC consider a license holder’s URL or domain name or email address to be advertising?

TREC does not consider URLs or email addresses to be advertisements in and of themselves. However, an advertisement that contains a URL or email address of a sales agent that includes a title that implies responsibility for a brokerage violates TREC Rule 535.155(d)(4). Further, TREC will consider all advertisements in their entirety and if an email address or URL] makes the advertisement misleading or deceptive, it violates the law. [Rule 535.155(b)(4) and TRELA §1101.652(b)(23)]

Does TREC consider a logo that contains the broker’s full name sufficient for the broker name requirement?

Yes, as long as the size of the broker’s name itself (not the whole logo) is at least ½ the size of the largest contact information. [Rule 535.155(b)(3)]

Does TREC consider a roof with roofing felt ending short of the drip edge and the rake not overlapped over the drip edge a required reporting deficiency? If yes, is the inspector required to inspect 100% of the materials under the edge of the roof?

Section 535.228(c)(3)(D) of the Standards of Practice requires inspectors to report as deficient deficiencies in flashing details. Drip and rake edge flashing materials are recommended by most shingle manufacturers but are not required. If installed and if visible, the installation described in your question is required to be reported as a deficiency. However, the inspector is not required to inspect every inch of the material under the roof and may “spot check” for this condition.

Does TREC consider a sign on a building to be an advertisement?

Yes. If a sales agent’s name or team name is on a building sign, the broker’s name must also be present (in at least half the size). A broker’s name alone is okay. [Rule 535.155(b)(1)]

Does TREC consider promotional items and sponsorships to be advertising?

Yes. If a sales agent’s name or team name is on them, the broker’s name must also be present (in at least half the size). A broker’s name alone is okay. [Rule 535.155(b)(1)]

Does a broker have to supervise the daily activities of a sales agent?

A broker is not required to directly supervise sponsored sales agents; this responsibility may be delegated to another person with the required level of experience and expertise to provide proper supervision under the law. [Rule 535.2(e)] However, the broker remains responsible for the authorized acts of the broker’s sales agents [TRELA §1101.803, Rule 535.2(a) ] and has many affirmative duties regarding written policies, record keeping and advising, training, approving advertising for and responding to sales agents. Brokers should be familiar with and follow the duties set out in Rule 535.2 . A broker should also be aware that a complaint filed against a sponsored sales agent is also a complaint against the broker for the purpose of determining the broker’s involvement in the alleged violation and whether the broker properly supervised the sales agent. [Rule 535.141(c) and (d)] A business entity can only provide the proper supervision by the personal involvement of the broker or by the broker’s delegation to a qualified supervisor.

Does the designated broker own 10% or more of a licensed business entity if the designated broker owns 10% or more of another business entity that owns 100% of the licensed business entity?

Yes because the designated broker own 10% or more of the licensed business entity through the broker's ownership of the other entity.

How can I start a real estate brokerage referral business or Limited Function Referral Office (LFRO)?

The real estate brokerage referral business, commonly called a Limited Function Referral Office (LFRO), must have a business entity brokerage license because the business is assisting in procuring property or clients to effect the sale, exchange, or lease of real estate [TRELA §§1101.001(A)(viii) and (ix)]. Only an active licensed sales agent sponsored by a licensed business entity may make a referral on behalf of the brokerage, and any referral fee must be paid to the sponsoring broker. A key distinction between a limited function referral office and another brokerage is the agreement between the agent and the broker to limit the agent’s actions to generating referrals. We do not provide advice on how to run or set up a referral-based brokerage business (or LFRO).

How long does a license holder have to keep financial and real estate transactions on file?

When a broker maintains a trust account, documentary records of each deposit or withdrawal for that account must be retained for four years. [Rules 535.146((c)(6) and (e)] TREC requires a broker to maintain for at least four years from the date of a closing or termination of a contract eight specific types of records in a format that can be readily made available to the Commission. [Rule 535.2(h)]

How shall an inspector ascertain with any degree of accuracy if the fire separation between a residence and its attached garage is in place?

The Standards of Practice require inspectors to perform a visual inspection. If it is not visibly apparent whether proper fire separation is present, the inspector must make clear to the client that he or she was not able to ascertain whether proper fire separation was in place.

I am a 25% stockholder in a corporation that holds title to a number of investment properties. I typically negotiate the resale of the properties for the corporation. Must I disclose my licensed status?

Yes. If you participate in a transaction and hold more than a 10% interest in the corporation or other business entity, you are subject to the disclosure requirements. Additionally, you may not use your expertise to the disadvantage of others with whom you deal. [Rule 535.144(b)]

I am a licensed professional inspector. I am also a licensed real estate sales agent. May I both inspect the home for and sell to the same person?

No. The Texas Occupations Code, Real Estate Inspectors, Chapter 1102, §1102.303 specifically prohibits an inspector from acting in the capacity of an inspector and real estate agent in the same transaction.

I am not currently performing inspections, but I'd like to maintain my license. Is there a way for me to do that without going to the expense of obtaining insurance?

An inspector may request inactive status in writing at any time. An inspector who meets all other renewal requirements but does not show proof of insurance will receive an inactive license (which does not permit the inspector to perform inspections). To become active, a professional inspector would need to send in the Return to Active Status form (or, for apprentice or real estate inspectors, the sponsorship form) along with the applicable fee and the required proof of insurance.

I have moved my sponsorship to a new broker, can my prior sponsoring broker pay me a commission directly for a transaction or referral?

Yes, Commission Rule 535.3 permits you to receive any compensation through your current sponsoring broker or the broker who sponsored you at the time you earned the right to the compensation.

I only represent buyers. Can I advertise that I will rebate a part of my compensation to the buyer?

Yes, as long as the advertisement complies with Rule 535.155 (effective May 15, 2018) regarding any restrictions that might apply. However, a rebate to a buyer from a license holder may be subject to restrictions by the buyer’s lender. You should contact your broker or private attorney to find out how you should notify and obtain the consent of the buyer’s lender to address any impact the rebate may have on the determination regarding the buyer’s creditworthiness.

I recently purchased an older home that was inspected before the purchase. After living in the home a few weeks, the dishwasher started leaking and had to be replaced. Shouldn’t the inspector have told me this unit was about to fail?

Mechanical components like dishwashers can and will break down. A home inspection tells you the condition of the component at the time of the home inspection. The inspector is not required to determine life expectancy of any system or component. [Rule 535.227(b)(3)(C)(i)]

I think my inspector was negligent in performing the inspection. My brother-in-law says I might be able to recover a judgment. Do I have to file a complaint first?

Disciplinary action by TREC is not a prerequisite for pursuing a lawsuit against a license holder. Your rights against the license holder may be subject to a two-year statute of limitations. You should consult with a private attorney to determine whether you have a claim and what deadlines may apply to your claim.

If I have a licensed limited partnership, can the general partner be an LLC if a manager of the LLC is a designated broker?

No. The designated broker acting as a general partner must be an individual, not another business entity. [See TRELA §1101.355 and Rules 535.50(5) and §535.53(a)]

If I represent the seller, can I advertise that I will rebate part of my compensation to the buyer?

Yes, but the ad must disclose that payment of the rebate is subject to the consent of the seller and if the rebate is contingent upon certain restrictions, such as the use of a particular service provider, the ad must contain a disclosure that payment of the rebate is subject to restrictions. [Rule 535.155 (effective May 15, 2018)] A sales agent must also have their sponsoring broker's authorization to offer a rebate.

If a broker does not have a written agreement to represent the buyer, what recourse does the broker have if another broker “steals” a client?

A buyer can choose the broker with whom the buyer wants to work. TREC does not determine what constitutes "procuring cause" or who is entitled to a commission or other compensation. Like a listing agreement, the buyer representation agreement must be in writing and signed by the buyer to be binding.

If a homeowner wanted to hire a consultant to perform a cursory, major defect visual inspection, including the foundation, roof, plumbing, electrical, and major appliances, would TREC require any written report?

If the inspection you are proposing relates to a purchase or sale transaction, then TREC's Standards of Practice would apply, and a written report would be required. If the inspection you are proposing is not in anticipation of a purchase or sale, then TREC's requirements would not apply, and the parameters of the inspection would be governed by the agreement between the inspector and his or her client. For further information, please see Sections 1102.001 and 1102.002 of the Texas Occupations Code and Rule 535.223.

If a real estate broker has an escrow account, can the broker keep any interest that is earned on the money on deposit?

Not unless the person depositing the money has signed an agreement authorizing the broker to keep the interest. Otherwise, the interest must be treated in the same manner as the deposited money. The broker is responsible for accounting for the interest and disbursing it to the person whose money is held by the broker. [Rule 535.146(c)(3)] Accounting is more simple if the broker puts all escrow money into a non-interest bearing account

If a sales agent’s last name is contained in the broker’s licensed or assumed business name, how can the sales agent let the consumer know the agent is not the broker?

To avoid an advertisement that implies the sales agent is responsible for the operation of the brokerage in this situation, the sales agent should make sure that the ad clearly indicates that the sales agent is not the broker. One simple way to accomplish this is to put “sales agent” next to the agent’s name. Using “REALTOR” or “agent” is insufficient to distinguish the license status of sales agent. [TRELA §1101.652(b)(23) and Rule 535.155(d)(7)]

Is a TREC inspector required to report the presence of CSST as a deficiency? Is the TREC inspector required to inform the client of the CSST litigation history?

The mere presence of corrugated stainless steel tubing (CSST) is not, in itself, required to be reported as a deficiency, nor are inspectors required to notify the client of the litigation history or the risks associated with CSST.

Is a broker required to act as an escrow agent or hold the money of others?

No, not unless the broker agrees to do so.

Is a broker responsible for the actions of a sales agent who owns his or her own real estate business entity?

Yes, if the real estate business entity holds a real estate license and the sales agent is sponsored by that entity. In such a situation, the designated broker for the entity is still responsible for the sales agent's actions, even when the sales agent owns the licensed business entity. [TRELA §1101.803, Rule 535.2(l), ] A sales agent may not engage in real estate brokerage activity unless the sales agent is associated with, and acting for, a sponsoring broker. [TRELA §1101.351(c)]. When the sponsoring broker is a licensed business entity, it must have a designated broker to be active.

Is a broker responsible for the actions of a sales agent who transacts business from a separate location?

Yes. The sponsoring broker is still responsible for the sales agent's actions, even when the sales agent does not work out of the broker’s main office. [TRELA §1101.803, Rule 535.2(a)] A sales agent may not lawfully engage in brokerage activity unless the sales agent is associated with, and acting for, a sponsoring broker at all times. [TRELA §1101.351(c)]

Is a corroded bathroom fixture that remains operable a defect and required reporting item per TREC?

Purely cosmetic corrosion is not required to be reported as a deficiency.

Is a hand rail that is not continuously deficient a required reporting item per TREC?

Section 535.228(h)(1)(B) of the Standards of Practice requires inspectors to report deficiencies in steps, stairways, landings, guardrails, and handrails as deficient. In some circumstances, a break in a handrail would be considered a deficiency; however, this would depend on the specific design of a particular set of stairs (e.g., a landing in the middle of a flight of stairs would not be considered deficient simply because it lacked a continuous handrail).

Is a keyed deadbolt on the interior of an exterior egress door deficient and a required reporting item per TREC?

The Standards of Practice do not require double-cylinder deadbolts to be reported as deficient unless such a deadbolt would impede functional emergency escape from a sleeping room.

Is a license holder acting as a principal required to provide a party with written information relating to agency?

No, but a license holder is required to provide a written notice to the other party that the license holder is licensed as a real estate broker or sales agent before entering into a contract, including a lease. Additionally, the license holder may not use the license holder’s expertise to the disadvantage of the other party. [See Rule 535.144]

Is a license holder required to provide a party with written information relating to agency?

Yes. At the time of first substantive communication with a party relating to a proposed transaction regarding specific real property, a license holder must provide a written notice regarding agency, commonly referred to as “Information About Brokerage Services” or IABS Form. [TRELA §1101.558(b-1)]. TREC publishes the Information About Brokerage Services Form, TREC No. IABS 1-0, that license holders must use to comply with the statute.

Is a license holder required to put their license number on a sign or other advertising?

No.

Is a link to the IABS form required on my website?

Yes. Rule 531.20(b) states that each broker and sales agent must provide a link on its homepage to the IABS Form labeled "Texas Real Estate Commission Information About Brokerage Services". The link must be in at least a 10 point font and in a readily noticeable place on the homepage of the business website of the broker and sales agent. The link can also be "TREC Information About Brokerage Services," in at least 12 point font.

Is a real estate license necessary in order to be an apartment locator?

Yes. TREC requires licensure if the person seeks or has an expectation of compensation for offering to locate a unit in an apartment complex to a prospective tenant. [TRELA §1101.002(6)] In addition, a person may not engage in business as a residential rental locator (apartment locator) unless the person is licensed as a real estate broker or sales agent. [TRELA §1101.351(a)(2), Rule 535.4(k)]

Is a receptacle on a garage ceiling that is not GFCI protected deficient and a required reporting item per TREC?

Pursuant to Section 535.229(b)(3)(A)(ii), a garage receptacle that does not have GFCI protection is deficient and must be reported as such. Note, however, that the Inspector Committee may consider a change to the Standards to create an exception for garage ceiling receptacles serving garage door openers.

Is an egress window with a sill greater than 44 inches from the floor a required reporting item and deficient? Will advising the client to place a climbable object (such as the chest) supersede the need to identify the item as deficient?

The answer to the first question is “No”. The standards of practice are not based on a specific requirement such as those promulgated by model building codes. The requirements for emergency escape and rescue openings in sleeping rooms and the sill heights and sizes of the emergency escape openings in sleeping rooms have varied through the years. The inspector must use “reasonable judgment” in determining if the emergency escape and rescue openings are sufficient for the intended purpose of the openings for the inspector’s client. In response to the 2nd question, an inspector must keep in mind that his role is primarily to document the condition of the home at the time of the inspection per §535.227(b)(1). An inspector is not required to recommend “fixes”.

Is an inspector required to determine if a light fixture is approved for its location over a bathtub or shower?

The Standards of Practice do not require inspectors to determine if light fixtures are approved for wet locations or to report such installations as a deficiency.

Is an inspector required to report as deficient an electronic sensor in a garage door that is more than six inches above the garage floor even though the general limitations section states that an inspector is not required to inspect a photoelectric sens

Yes. The specific requirement to report the deficiency takes precedence over the general limitation against inspecting an photoelectric sensor.

Is it illegal or unethical for an agent to present two offers to the seller at the same time?

The listing agent represents the seller and has a duty to present all offers in a timely manner to the seller. There is no prohibition against a license holder presenting more than one offer at a time to a seller. A seller may receive, review and negotiate several offers simultaneously.

Is it true that home inspectors licensed in Texas, cannot inspect plumbing in a home nor report plumbing deficiencies in the TREC inspection report? Can the inspector advertise that he inspects plumbing?

It depends. Under the Standards of Practice found in Rules 535.227 - 535.233, a home inspector is required to perform a visual check of plumbing fixtures and associated items and report as in need of repair deficiencies in the type and condition of all accessible and visible water supply and waste-water and vent pipes, as well as others listed in Rule 535.231. Please see the Texas State Board of Plumbing Examiners (TSBPE) website to determine whether any of your activities may be in violation of their statutes or rules governing plumbers, such as advertising that you specifically inspect aspects of plumbing systems that may require a license from the TSBPE. Also, please review the advertising rule for inspectors found at Rule 535.221.

Is observance of gas shut-off valves and connections with a digital camera placed behind or under appliances considered a reasonable method for discovering deficiencies in inaccessible areas?

Pursuant to Section 535.227(a)(1) of the Standards of Practice, inspectors are not required to move appliances in order to inspect behind them. However, it is often possible to locate gas shut-off valves either behind or near appliances (such as in the cabinet next to the range). If a gas shut-off valve cannot be located, this should be reported. As the question suggests, it is sometimes also possible to use a digital camera to “see” in areas that are not otherwise accessible and there are multiple means of detection of gas leaks in existence, such as through the use of hand held detectors (however, these would be considered specialized tools and are not required to be used in performing inspections).

Is observance of gas shut-off valves and connections with a digital camera placed behind or under appliances considered a reasonable method for discovering deficiencies in inaccessible areas?

Is olfactory detection of methane/natural gas odorant the only reasonable method of discovering gas leaks when the connectors are not accessible?

Is removal of the blanket required by TREC for inspection reasons?

No.

Is the Information About Brokerage Services Form promulgated by TREC mandatory?

For all practical purposes, yes. A license holder may reproduce the IABS Form for the purpose of prefilling the Broker Contact Information section. If a license holder prefills this information, the license holder must ensure that the text of the IABS Form is copied verbatim and that spacing, borders and placement of text on the page appear identical to that in the promulgated IABS Form. [Rule 531.20(e)]

Is the absence of a dirt or drip leg, 1. a deficiency? 2. a required reporting item? 3. unsafe?

No. The SOP does not address the absence of a “trap” in a gas line. Please note that an inspector is not required to designate a condition as safe.

Is the absence of an anti-entrapment cover in a spa deficient and a required reporting item per TREC? 2. Is the presence of a single drain or suction opening in a pool spa deficient and a required reporting item per TREC?

The absence of an anti-entrapment cover in a spa is not a required reporting item. Section 535.233(2)(B)(i), however, requires an inspector to report as deficient the presence of a single blockable main drain.

Is the absence of combustion air in the bottom of the closet a required reporting deficiency? Is a screen combustion air opening a required reporting deficiency? Is the proximity of the return to the gas fired appliances a required reporting deficiency?

Section 535.230(2)(J)(vi)(I)of the Standards of Practice requires inspectors to report as deficient, in gas HVAC units, deficiencies in combustion, and dilution air. None of the issues you listed would necessarily be required to be reported as deficiencies; this determination depends on several factors, such as the design of the system.

Is the absence of gutters a defect and required reporting item per TREC?

No. Unless specifically indicated otherwise, the Standards of Practice only address items that are present at the time of the inspection. If gutters are present, they are required to be inspected under §535.228(b)(1)(C).

Is the absence of weather-strip on the door a required reporting deficiency?

Yes, Section 535.228(f)(2)(E)(i) requires inspectors to report deficiencies in weather stripping.

Is the definition of accessible, as applied to gas appliance connections, left to the reasonable judgment of the inspector?

Is the inspector required by the SoP to be knowledgeable of local requirements?

Pursuant to Section 535.227(b)(3)(C)(i), inspectors are not required to determine code compliance, utility sources, or regulatory requirements except as specifically required by the standards.

Is the inspector required by the Standards to state or explain a condition as a hazard to the consumer?

It is up to the “reasonable judgment” of the inspector to determine if the situation encountered during the inspection is or is not a hazard for the inspector’s client.

Is the inspector required to be report the mere presence of an FPE panel as deficient? 2. Is the inspector required to warn or advise of the alleged risks if TREC determines the panel is not required to be reported as deficient?

No. The standards of practice do not address this condition.

Is the inspector required to comment on or report as deficient those gas appliance shut-off valves and connectors not visible or accessible without moving the gas appliances?

Is the inspector required to determine the presence of Chinese drywall? Is the inspector required to report the symptoms of Chinese drywall? Is the inspector required to warn of the risk of Chinese drywall?

Pursuant to the general limitations in the Standards of Practice, inspectors are not required to determine the presence of “Chinese drywall” or to report its symptoms or risks. As an example, if corrosion to copper tubing lines or copper wires were found, that could in the opinion of the inspector constitute a deficiency, the inspector is not required to determine or report the cause of the corrosion, such as from “Chinese drywall."

Is the inspector required to inspect to manufacturer requirements, specifications or instructions?

Pursuant to Section 535.227(b)(3)(C)(i) of the Standards of Practice, inspectors are not required to report manufacturer requirements except as specifically required by the Standards. Section 535.227(b)(3)(H) further provides that inspectors are not required to review installation instructions.

Is the inspector required to report water heaters that are covered with an insulation blanket as obstructed if they did not remove the blanket?

Yes. The Standards of Practice do not address insulating covers or blankets on water heaters. Inspectors are not required to remove water heater covers to inspect the water heater. However, if the cover is not removed, and its presence interferes with the inspection of any part of the water heater, the inspector must advise the client and report the resulting limitations of the inspection in accordance with the departure provision, Section 535.227(b)(5).

Is the presence of a gas shut off valve that requires a tool to turn off deficient?

Question is not clear. Some gas shut off valves are safety or emergency shut off devices and some are not. As the type of valve in question is not defined, no answer can be provided.

Is the presence of carpet on an attached garage floor deficient and a required reporting item per TREC?

The presence of carpet in a garage is not required to be reported as a deficiency.

Is the use of a “net” listing agreement a breach of the broker’s fiduciary duty?

It could be. The use of net listing agreement places the broker’s interest above the principal’s interest with regards to obtaining the best possible price. A broker may not enter into a net listing agreement unless the principal requires a net listing and the principal is clearly familiar with the current market values of real property. [Rule 535.16(b)]

Is wrinkled loose carpet a defect and required reporting item per TREC? 2. Presuming an upstairs floor or the ceiling below does not exhibit obvious evidence of failure, is a squeaky floor a defect and required reporting item per TREC?

Section 535.228(e)(3)(A) of the Standards of Practice states that inspectors are not required to report cosmetic damage or the condition of floor, wall, or ceiling coverings. Neither loose carpet nor floor squeaks, without further evidence of deficient conditions, is required to be reported as deficient.

It appears that the inspector who inspected my home before my purchase missed major termite infestation. The damage from the termites has cost me thousands of dollars to repair. Shouldn’t the inspector have noted this problem on his report?

In Texas, any person who reports on wood destroying insects in a home must be licensed by the state as a wood destroying insect inspector. These licenses are issued by the Texas Structural Pest Control Service of the Texas Department of Agriculture at www.texasagriculture.gov. Some TREC licensed home inspectors are also licensed wood destroying insect inspectors, and therefore, may inspect a home for termites, etc. if hired for that purpose. However, under the home inspector license issued by TREC, the inspector MAY NOT comment on whether termite infestations exist. They should comment on visible damage regardless of the underlying cause and note it as a deficiency on their report, but may not assess that the damage was specifically caused by wood destroying insects.

May a broker act as a dual agent?

No. Texas law does not permit dual agency. A license holder may not represent both principals as a dual agent under the revisions to TRELA. Under the current law, a broker must agree to act as an intermediary in accordance with the statute if the broker agrees to represent more than one party in a transaction. [TRELA §1101.561(b)] To the extent a dual agency relationship is created by accident or otherwise, a license holder must resolve the matter by immediate compliance with the notice and consent requirements under TRELA §§1101.558-561 and act as either an intermediary or represent only one of the principals in a transaction while working with the other principal only as a customer.

May a license holder who is a rental locator advertise that they will pay a prospective tenant a portion of their fee received from an apartment complex if the tenant uses the locator’s services?

Yes, as long as the ad complies with Rule 535.155 (effective May 15, 2018), which requires the consent of the party the license holder represents in a transaction. When a rental locator represents an apartment complex, the locator needs the consent of the apartment complex. When the rental locator represents a tenant and not an apartment complex, as demonstrated by a written representation agreement or other evidence of representation, the locator is not required to obtain the consent of the apartment complex because the complex is not his client. Regardless of representation, however, it is misleading advertising to advertise a rebate for an apartment complex that the locator knows has a “no rebate” policy.

Must a person be licensed to locate apartment units for prospective tenants and be paid by the owner of the apartments?

Yes, unless the person is an employee of the owner of the apartments or otherwise exempt, residential rental locators are required to be licensed as either a real estate broker or sales agent.

On my inspection report, the inspector reported certain things in the house as “safety hazards” or “code violations”. Can TREC give me information about what codes the inspector is referring to?

There are many different codes that can figure into the construction of a house, depending on when it was built and local amendments. TREC does not require inspectors to inspect to any of the various building codes and cannot assist you in determining what code provisions were applied in a particular situation. Instead, TREC has established Standards of Practice for inspectors to follow. [Rule 535.227-535.233] However, an inspector is free to inspect to a higher standard (such as to various codes or based on recognized safety hazards), as long as they do so competently. If you have questions about your inspection report, you should ask your inspector for the basis of his statement. You may also wish to contact your local code enforcement authority for more information about relevant codes.

The Standards of Practice require inspectors to inspect attic ventilators and report deficiencies but do not require that they be operated. How should an inspector identify deficiencies in the power ventilators without operating them?

In inspecting an attic with a powered ventilator, which is not required to be operated, the inspector should perform a visual inspection and consider the totality of the ventilation system.

The Standards of Practice require inspectors to report as deficient the lack of a 1-3/8” solid wood or fire-rated door between a house and garage. How should an inspector positively identify fire-rated doors when the markings are covered by paint?

Information regarding fire ratings of doors is often obscured by paint. In that case, inspectors are required to do their best to determine whether the door is fire-rated and to report accordingly. In some instances, the inspector will only be able to report that he or she was not able to determine whether the door was fire-rated or that the door appeared to be (or did not appear to be) fire-rated.

The Standards of Practice require inspectors to report as deficient the lack of exhaust ventilators in required areas. What are the required areas for exhaust ventilators?

At a minimum, bathrooms and water closets that that do not have an operative window must be reported as deficient if they lack an exhaust fan that vents to outside air.

What are inspectors required to report regarding AFCI’s?

Section 535.229(a)(1)(G)(vii) requires an inspector to report a deficiency in the operation of an installed ground-fault or arc-fault circuit interrupter device. Section 535.229(a)(2)(B) states that an inspector is not required to test an arc-fault circuit interrupter device when the property is occupied or when damage to personal property may result, in the inspector’s reasonable judgment.

What are inspectors required to report regarding gas supply lines?

Section 535.231(a)(2)(E)(ix) requires inspectors to report deficiencies in the condition of the gas distribution system. Section 535.231(a)(3)(D)(iii) does not require inspectors to inspect inaccessible gas supply system components for leaks. Section 535.231(a)(3)(A) states that inspectors are not required to operate any main, branch, or shut-off valves.

What are the agency disclosure requirements for a real estate license holder?

A license holder must disclose the fact that he or she represents a party upon the first contact with another party or a license holder representing another party. This disclosure may be oral or in writing.

What can unlicensed office personnel or an unlicensed assistant do?

An unlicensed person may not engage in any activity for which a license is required. [TRELA §1101.002(1) and Rules 535.4 and 535.5]. For a more detailed discussion of what an unlicensed person can and cannot do, see the article on our website titled “Use of Unlicensed Assistants in Real Estate Transactions.”

What if a license holder does not comply with the requirements for forming an intermediary relationship?

Failure of the intermediary broker or the sponsored sales agents to comply with the Intermediary Provisions of TRELA §§ 1101.558-561 may subject them to disciplinary sanctions by the TREC, including but not limited to, revocation, suspension, reprimand and/or an administrative penalty.

What is an associated broker?

Associated broker means a broker who associates with and is paid through another broker under a relationship that is intended to be a continuous relationship, including but not limited to, an employment or ongoing independent contractor relationship. [Rule 535.154(a)(3)]

What is an intermediary?

An intermediary is a broker who negotiates the transaction between the parties when the broker or a sales agent sponsored by the broker has obtained consent from the parties to represent both the buyer and the seller. The broker intermediary may, with the written consent of the parties, appoint separate individual license holder associated with the broker to work with and advise the party to whom they have been appointed. [TRELA §§ 1101.558-1101.561 and §1101.651(d)]

What is proof of legal authority to use an assumed business name in Texas?

Generally, in Texas, filing an assumed business name is required to put the public on notice that you are doing business under a name other than your legal name. For most business entities, the assumed business name is filed with the Secretary of State. For a general partnership or individual broker, the assumed business name is filed with the county clerk in the county or counties where you do business. See https://www.sos.state.tx.us/corp/namefilingsfaqs.shtml

Evidence of registration of the assumed business name with the Secretary of State or in the county or counties where the broker does business is adequate proof of authority to do business under that name. [Rule 535.154(d)]

What is the definition of an “accepted industry practice”?

The definition of “accepted industry practice” is situation-specific and may depend on the context in which the question is being asked. We are unable to provide a general definition.

What is the difference between an assumed business name and a team name?

Assumed Business Name (also known as a dba) is another name for the broker’s business that can be used by all sponsored sales agents and brokers associated with this broker. Another name that indicates a broker’s line of business, e.g. property management or commercial, is also an assumed business name of the broker, even though it may not be available for use by all sponsored agents and associated brokers. [Rule 535.154(a)(4)]

Team Name is a name used only by a team or group of one or more sponsored sales agents or brokers associated with this broker. Team names must end in “team” or “group” and cannot contain the words “brokerage”, “company”, “associates” or other similar terms. [Rule 535.154(a)(5)]

What is the difference if a broker appoint sales agents to represent the buyer and the seller or if the broker makes no appointments to the principals in a real estate transaction?

If the broker appoints an associated license holder to represent the seller and another associated license holder to represent the buyer, the individual agents may offer advice and opinions regarding the real estate transaction to the party each has been appointed to represent. If the broker does not appoint associated license holders to represent the buyer and seller respectively, then the broker and/or agent may not offer advice and opinions relevant to the real estate transaction to either party and must not favor one principal in the transaction over the other principal. Appointments provide the agents the opportunity to provide a higher level of service to their clients.

What is the required information that must be provided in advertisements such as signs, email and business cards?

All advertisements must comply with TRELA §1101.652(b)(23) and Rules 535.154 and 535.155.

Rule 535.155 requires each advertisement to include the following items in a readily noticeable location in the advertisement:

The name of the license holder or team placing the advertisement; and
The broker’s name in at least half the size of the largest contact information for any sales agent, associated broker, or team name contained in the advertisement.

Notes:

A broker’s name includes a broker’s assumed business name that has been registered with TREC.
Requirements for an assumed business name and team name are set out in Rule 535.154
There is no requirement that a phone number or email address included in an advertisement belong to the broker.

What level of precision is expected for the “approximation” of average insulation depth?

Section 535.228(d)(1)(B) requires an inspector to report “approximate average depth of attic insulation.” We are unable to prescribe a certain "level of precision” that would satisfy this requirement; any of the examples you presented would satisfy the requirement to report the depth of insulation, as long as they accurately reflect the conditions.

What qualifies as proof of ownership of the business entity?

A resolution, minutes or other official record of the business entity. We also accept copies of tax records which indicate ownership.

What requirements does TREC impose on inspectors/consultants who perform maintenance consultations?

TREC's jurisdiction over real estate inspections is limited to inspections performed for a buyer or seller of real property in connection with a transaction.

When can an agent say that they “sold” a property in an advertisement?

Any agent who worked with the seller or the buyer in a transaction that resulted in the sale of a property may correctly state in an advertisement that they “sold” the property. If the license holder did not participate in that specific transaction, he cannot state or imply that his actions resulted in the sale of that property. An example of a misleading advertisement of this nature would be if a license holder sent out “Just Sold” postcards with her contact information and a picture of a recently sold property that she did not help to sell. She didn’t state that she sold it but an average person reading the card could surely and reasonably imply an erroneous claim of involvement. Another potential example of a misleading advertisement is a license holder who included a list of “Recently Sold Homes” in his advertisement that included many properties where he had no role in the transaction, but he failed to make it clear in the ad which – if any – of those transactions he was involved in. Under Texas law, a license holder may not “create a misleading impression” in their advertisement. A broker must review all ads to ensure this result is avoided.

When does a license holder dealing in property in the license holder's own name have to disclose the fact that they have a real estate license?

It is best to disclose it as early as possible but it must be disclosed in the contract, lease, or in another written document given to the other principal before the agreement is signed. [Rule 535.144(b)] The disclosure is required even if the license holder is on inactive status.

Who registers an assumed business name, team, or alternate name?

Assumed Business Name: Broker [Rule 535.154(d)(1)]

Team Name: Broker [Rule 535.154(c)(3)]

Alternate Name: Individual License Holder [Rule 535.154(b)(1)]

Remember -- all these types of names must be registered with TREC before use in advertising.

Are gas ranges, built-in wall ovens, or clothes dryers considered to be large, heavy, fragile objects which could be damaged or cause damage while being moved, and an undue hazard and risk to the inspector?

How do I change my business physical address?

Log on to your My License Services account.

From the Start Menu page, click on the to change your business physical address. If you prefer, you can also submit the Change of Main Address form by email.

Log on to your My License Services account.
From the Start Menu page, click on the dropdown menu under the "Change your license information and manage relationships" category.
Click "Change/Verify Contact Information" and click "Select".
Read the information on the "Change/Verify Contact Information" introduction page and click “Next”.
Update contact information and “Place of Business” (business physical) address on the Contact Information page and click "Next".
Verify contact information on the Application Summary page and click “Submit”.
On the Statement of Applicant page, select "Yes" to certify the address information is accurate and correct, and click "Next" to process the request.

How do I request inactive status for my sales agent license?

Request inactive status by following the steps below:

Log on to your My License Services account.
From the Start Menu page, click on the dropdown menu under the "Change your license information and manage relationships" category.
Click on the "Manage my Sponsorship (Sales)" and click on the "Select" tab.
Click on the "Next" tab after reading the information on the "Manage my Sponsorship (Sales)" introduction page.
Under Actions for the sponsoring broker, click "Terminate" and then click "Next".
Verify the sponsoring broker information on the Summary page and click "Submit".
On the Attestation page, read the certification, select "Yes", and click "Submit" to process the request.

If you prefer, you can also submit the Application for Inactive Broker or Sales Agent Status form by email.

I am a broker licensed in another state and would like to apply in Texas. Can I apply online?

No. To apply as an out of state broker, you must submit the paper Application for Broker Licenseby an Individual along with requested documents and the applicable fee.

I am renewing my license for the first time. Am I required to complete the Legal Update I and Legal Update II courses?

Yes. You are under the Sales Apprentice Education (SAE) requirements. Before you can renew your license, you are required to have completed a total of 270 hours of qualifying course hours, and the Legal Update I and II courses.

To determine how many hours have posted to your license record, you may visit the license holder info search feature on our website.

I am renewing my license. How do I know how many classes I need to take for renewal?

License holders must meet Continuing Education (CE) requirements during each two- year license period. CE must include 4 hours of Legal Update I, 4 hours of Legal Update II, 3 hours of Contract-Related coursework, and 7 hours of elective CE courses for a total of 18 hours. To determine how many hours have posted to your license record, you can visit our license holder search.

A broker or designated broker of a business entity who sponsor one or more sales agents or a delegated supervisor of one or more license holders must complete the six-hour Broker Responsibility Course as part of the 18-hour CE requirement.

I discovered the appliance gas connector was missing while inspecting the gas range. Should I report this in Section IV. Plumbing Systems or Section V. Appliances in the Property Inspection Report form (REI 7-6)?

TREC Rule 535.231 (d)(B)(iii) requires inspectors to report as deficient “the absence of a gas appliance connector or one that exceeds six feet in length.” An inspector should report this deficiency in Section IV. Plumbing Systems. Based on Rule 535.231, the missing appliance gas connector should be reported in Section IV. E. Gas Distribution Section.

However, TREC defines gas distribution system as “all gas lines between the point of delivery and appliance shutoff valves” (Section 535.227(b)(7)), and some inspectors believe the appliance gas connector should be considered a part of the appliance with deficiencies reported in Section V. Appliances. Based on Rule 535.227, TREC Enforcement staff has taken the position that reporting the missing appliance connector in Section V is also a reasonable interpretation of the rules.

As long as the deficiency is reported in one of these two sections, you would not face disciplinary action.

I have completed several courses for my law degree. Can any of these courses be used towards the required qualifying courses to obtain a sales agent license?

No. All sales agent applicants must complete the required education.

I want to renew my sales agent or broker license active but am unable to complete my CE hours by the license expiration date. Can I get an extension to complete my hours?

Yes. If TREC records do not show that you have completed your CE at the time you submit your renewal application, you must pay a $200 CE deferral fee, or renew in inactive status. Paying the deferral fee allows you to continue to be active in real estate activities and provides an additional 60 days from your expiration date to complete your CE.

My business entity is a series LLC. What documents are required to be submitted with the Franchise Tax Account Status page?

If the business entity is a series LLC, you must include a copy of the Certificate of Filing from the Secretary of State's Office with the Franchise Tax Account Status page. The Certificate of Filing must show that the business entity is a registered series of the business entity listed on the Franchise Tax Account Status page.

Online Services is not accepting my temporary password. What do I do?

Copy the temporary password from the email message you received when you registered. Paste it into the “Online Services – Login and Registration” web page when you log in. You will be prompted to create a new password of your own. Once you create your password, you must save it to have future access to your online account.

When should a license holder provide the Disclosure of Relationship with Residential Service Company form?

A license holder should fully complete and provide the Disclosure of Relationship with Residential Service Company (RSC-3) when the license holder will receive a fee from a residential service company because a party to the transaction purchases a contract from that company.

Many transactions do not require use of this form. For example,

If there is no residential service company contract as part of the transaction, you do not need to provide this form.
If you are not being paid a fee by a residential service company, you do not need to provide this form.
If a residential service company contract is part of the transaction but you do not receive a fee from that specific company, you do not need to provide this form.

Generally, the only reason you might fill out this form if you do not receive a fee from a residential service company is because the other agent or broker in your transaction is providing their own disclosure. In this situation, you would fill out the appropriate portion of the form and check the box that says you "will receive no compensation from a residential service company." Your signature in this situation is merely disclosure and is not an endorsement, approval, or otherwise binding.

Can I use a power of attorney to engage in a real estate brokerage transaction without a real estate license?

Yes, but with limitations. [Rule 535.32]. The person may not use the power of attorney to engage in more than three real estate transactions per calendar year. [TRELA §1101.005(2) and Rule 535.32]

Do I need a license to sell a manufactured (mobile) home?

While the sale of a manufactured home (no real estate) requires a separate license from the Texas Department of Housing and Community Affairs (TDHCA), under a TDHCA exemption a TREC license holder can sell one manufactured home during a 12-month period without a TDHCA license (see Tex. Occ. Code 1201.003(24)). In addition, once an owner of a manufactured home has completed the detailed TDHCA process to treat the manufactured home as real property, the TDHCA licensing requirement does not apply to a TREC license holder.

Do I need a license to sell or lease mineral or mining interests?

No.

Does TREC have a promulgated buyer representation agreement?

No. A buyer representation agreement is a private contract between a real estate broker and a buyer and is not promulgated or regulated by TREC. You should consult with a private attorney. The Texas Association of Realtors (TAR) provides certain forms to its members. If you are a member, TAR may have a form that fits your needs.

I am the listing broker. An attorney has presented an offer from a buyer that the attorney represents and wants me to share my commission. Can I do this?

No. A licensed broker is prohibited from sharing compensation with anyone who acts in the capacity of a broker but is not licensed as a broker [TRELA §1101.651(a) and §1101.652(b)(11)]. In cases such as this, the listing broker still needs to present the offer to the seller. The listing broker should inform the seller that the broker is prohibited from sharing compensation with the attorney. Assuming the attorney is licensed in Texas, the seller and buyer may work something out between themselves regarding any compensation to be paid to the Texas attorney. The listing broker can agree to reduce the commission if requested by the seller without violating the prohibition on splitting.

I loaned Broker Smith $10,000 to build his real estate office and now he won't repay me. Can you help?

No. Failure to repay a loan constitutes a breach of your private agreement with the license holder and is not a violation of TRELA or the Rules. In addition, since it is not a violation of §1101.652(a-1)(1) or §1101.652(b) of the License Act, any judgment obtained would not be eligible for payment from the Real Estate Recovery Trust Account.

I went on a tour to inspect unimproved lots. The guide was not licensed, but she showed us the lots and told us about possible developments on the land. Is this legal?

It depends. If the guide is an employee of the owner of the lots, she would not be required to be licensed. [Rule 535.5(d).] Otherwise, the guide needs to be licensed in accordance with §1101.002(1) of TRELA. For example, if the owner is a parent corporation, an employee of a subsidiary corporation selling for the parent corporation would need to have a license. [Rule 535.4(i).]

If someone’s criminal history has been expunged, can the information still appear on the background check?

The information is not supposed to appear on a background check; however it still may by mistake. If it does, TREC will ask you to provide a copy of the Order of Expungment or Non-disclosure and upon receipt will not consider that offense in determining a person's fitness for licensure.

I’ve been harmed by a license holder. Can TREC recover damages for me?

No, TREC does not have the authority to require a license holder to pay another person for monetary damages. Recovery of these losses is a civil action and should be discussed with a private attorney. In limited circumstances, TREC may order a license holder or registrant or certificate holder to pay a refund to a consumer. The refund cannot exceed the amount paid by the consumer to the license holder or registrant or certificate holder for a service or accommodation regulated by TREC. The order must be the result of a complaint matter that resulted in an agreement with the license holder or registrant or certificate holder from an informal settlement conference or an enforcement order.

My corporation owns property. Does an employee of the corporation need a license to sell or lease the property?

No. A real estate license is not required for an individual employed by a property owner for the purpose of buying or selling real property on behalf of the owner. [Rule 535.5(c)]

Are locators subject to the agency disclosure requirements of The Real Estate License Act?

It depends. Unless an exception applies, a locator representing either party must disclose that representation on the first contact with the other party. If the transaction concerns a residential lease of less than one year and a sale is not being considered, the locator is not required to provide the tenant with a copy of the statutory information about agency (Information about Brokerage Services). [TRELA §1101.558(c)]

As a broker, am I the only person who can sign a check written on my trust account?

No. A broker may authorize another license holder to withdraw or transfer money from a trust account. The broker, however, remains responsible and accountable for the trust account and for the proper handling of trust money received by the broker. [Rules 535.2(c), 535.146(c)(7).]

Can I be paid a commission or referral fee if my license is inactive or expired?

Yes, as long as your license was active when you engaged in brokerage activity. For example, being active when negotiating a lease or sales transaction or when making a referral. Additionally, if you are a sales agent, Rule 535.3 permits you to receive compensation through your current sponsoring broker or the broker who sponsored you at the time you earned the right to the compensation.

Can I find out online if there have been any disciplinary actions against an agent?

Yes. At the top of TREC’s homepage go to “Search Licensee Info / Education” and type in the license holder’s name and click. Then click on the license holder’s name from the list that you are given. Under the result box that you receive will be a line entitled “Disciplinary Search”. Click on this to see what disciplinary actions have been taken. If no “Disciplinary Search” line appears under your name search result, then there have not been any disciplinary actions taken against that license holder

Can TREC obtain reimbursement of commissions paid by buyers and sellers to brokers and sales agents for compensation in real estate transactions?

No, unless a refund is ordered by TREC in conjunction with an agreement resulting from an informal settlement conference or an administrative order. However, the amount ordered may not exceed the amount the consumer actually paid to the license holder for the services subject to TREC regulation and may not require payment of other damages or estimate harm. [TRELA §1101.659] In addition, TREC has no jurisdiction or authority to enforce collection of such amounts.

Can TREC provide legal advice?

TREC attorneys can provide general advice about the applicability or interpretation of the provisions of The Real Estate License Act and TREC Rules but cannot, with few exceptions, give advice pertaining to specific matters or transactions, other laws, or civil matters.

Can a broker share a commission or other compensation with an attorney when the attorney is a principal in the transaction?

It is not a violation of TRELA or the Rules for a license holder to rebate a portion of their compensation to a party in the transaction. If the rebate is to a party the license holder does not represent, the license holder must obtain the consent of the party the license holder represents. This must be done before making the payment. [Rule 535.147(d)].

Can a license holder be disciplined for paying a commission or a fee to or dividing a commission or fee with an unlicensed person for services as a real estate agent?

Yes. The Commission may suspend or revoke or take other disciplinary action against a license holder who pays any portion of a commission or fee to anyone other than a licensed Texas broker or a broker licensed in another state. [TRELA §1101.652(b)(11)]

Can a license holder donate a portion of his commission to a church if one of the church members refers a client to the license holder?

Yes, as long as the church member who made the referral receives nothing that may be defined as valuable consideration from the church or the license holder.

Can a license holder hold a gift giveaway of any prize regardless of its value as long as entry into the giveaway is not limited to only those that refer a prospect for a real estate transaction?

Nothing in TRELA or the Rules would prohibit this. However, the license holder should verify that the giveaway is not considered an illegal lottery under Sections 47.01(7) & 47.03(5) of the Texas Penal Code.

Can a license holder offer or pay cash to an unlicensed person for referring a potential lessee or buyer?

No. The person who made the referral and received cash would be considered an unlicensed person engaged in the business of real estate brokerage [TRELA §1101.351(a)] and could be subject to administrative penalties and criminal charges. The license holder who offers to or actually pays cash to an unlicensed person for a referral is subject to disciplinary action. [TRELA §1101.652(b)(11) & (26)] However, a license holder may compensate an unlicensed person from a foreign country or state that does not require a license to engage in real estate brokerage activities, if the person otherwise complies with the law of the foreign country and practices there as a real estate broker. [Rule 535.131(b)]

Can a license holder offer to enter an unlicensed person in a drawing to win a cruise for referring a potential lessee or buyer?

No. Since the cruise would have a value greater than $50, it is defined as valuable consideration. Although entering a name into a drawing may not have a cost associated with it, whoever won the drawing would be receiving valuable consideration. In addition, a “referral” drawing may be considered a contest defined as an illegal lottery under Sections 47.01(7) & 47.03(5) of the Texas Penal Code.

Can a license holder offer to give a $50 gift card to an unlicensed person for referring a potential lessee or buyer?

Although a license holder may not pay an unlicensed person valuable consideration for referring a potential lessee or buyer, gifts of merchandise with a retail value of $50 or less are not considered valuable consideration. [Rule 535.20(a)] Therefore, a $50 gift card that is only redeemable for certain merchandise (e.g. a gift card to a restaurant or department store) is not defined as valuable consideration and is permissible. A gift card from a bank (e.g. Visa or American Express), however, which can be converted to cash is not permissible. Any amount of cash or a credit or bonus toward rent owed is also not allowed as a reward for a referral.

Can a license holder rebate a portion of his commission to a seller? What about a buyer?

Yes. It is not a violation of TRELA or the Rules for a license holder to rebate a portion of the license holder’s commission to a party to a real estate transaction. If the rebate is to a party the license holder does not represent, the license holder must obtain the consent of the party represented by the license holder before making the payment. [Rule 535.147(d)]

Can a license holder rebate a portion of the license holder’s commission to a church or other non-profit organization of the license holder’s choosing or one of the principals’ choosing?

Yes. This is a donation and not a rebate.

Can a non-license holder use the promulgated contract forms?

Yes. The contract forms are available for public use. A TREC contract form, however, is intended for use primarily by licensed real estate brokers or sales agents who are trained in their correct use. A mistake in the use of a form may result in financial loss or an unenforceable contract. A person using a TREC form assumes all risks associated with its use.

Can a real estate license be revoked because a license holder files for bankruptcy?

No. A license holder's bankruptcy does not affect a pending complaint or limit disciplinary action by TREC. If the underlying conduct violates §1101.652(a-1)(1) or §1101.652(b) of TRELA, disciplinary action can be taken against the license holder for the underlying conduct. Further, a judgment that involves conduct that violates §1101.652(a-1)(1) or §1101.652(b) of TRELA may be eligible for payment from the Real Estate Recovery Trust Account even if the debt was discharged in bankruptcy.

Can a rental locator rebate a portion of the rental locator’s fee received from the apartment complex to a prospective tenant if the tenant uses the locator’s services?

Yes, but a locator will be required to first obtain the consent of the apartment complex if the locator does not represent the tenant.

Can all or part of the educational hours be waived in view of a person's business experience?

No. A person's license in another state or experience in real estate brokerage or any related business does not substitute for the educational requirements. [Rule 535.63(a)] To be eligible for a Texas license, an out-of-state license holder must meet all current Texas licensing requirements found on our website. In addition, an applicant may not have to take the national portion of the licensing examination if the applicant maintains a license equivalent to the license being applied for and has already passed a comparable national examination that is accredited by a nationally recognized real estate regulatory association such as ARELLO.

Can an out-of-state broker conduct brokerage business from another state by mail, phone, the Internet, or other medium?

When the real property concerned is located wholly or partly in Texas, the broker must obtain a Texas license or associate with a Texas broker.

Can listing agreements be extended?

Listing agreements are private contracts between a real estate broker and a seller. The terms of the contract and/or desires of the parties would determine whether the listing agreement can be extended. You should contact a private attorney if you have any questions about extending a listing agreement.

Do I need a license to act as an on-site manager of an apartment complex?

No, but this exemption only applies to apartments; managers of condominiums or town homes need to be licensed. Note, also, that the "on-site" requirement means that you have an office at the apartment complex, not that the manager has to live there.

Do I need a license to lease or rent real property if I am an employee of the property owner?

No. Rule 535.34 provides guidelines to determine if evidence of an employer/employee relationship exists.

Do I need a license to sell a builder's new houses?

No, provided you are an employee of the new home builder (being an independent contractor is not enough). Rule 535.34 provides guidelines to determine if evidence of an employer/employee relationship exists.

Do I need a license to sell or lease cemetery lots?

No.

Do I need a real estate license to sell a campground membership?

No. Campground membership sales are regulated by the Texas Secretary of State’s Office, Statutory Documents Section, under the provisions of the Texas Camping Membership Resort Act [Chapter 222, Texas Property Code] and you should check with that agency regarding its requirements.

Do I need to file a complaint with TREC first before I can obtain funds from the Real Estate Recovery Trust Account or the Real Estate Inspection Recovery Fund?

No, filing a complaint with TREC is not a prerequisite to obtaining funds from one of the two recovery accounts maintained by TREC for paying judgments taken by consumers against real estate license holders or inspectors. Learn more about the two recovery accounts maintained by TREC.

Does TREC determine which brokerage business names may be registered with the agency if a name is similar to others already registered?

In Texas, business names and "DBA"s are regulated under common law (deceptively similar names may give rise to a private cause of action) and "notice" laws which may provide certain presumptions or tacit protections to names recorded at the local county clerk's office or with the Secretary of State. The agency's sole interest in requiring all brokerage business names to be disclosed to TREC and reflected in the agency's database is to provide a resource to consumers who need to know which individuals and licenses are associated with any particular business name; therefore all names are "searchable" from our agency website. TREC leaves the determination of "similar" names to the Secretary of State's rules or to common law remedies.

Does TREC have a promulgated listing agreement form?

No. A listing agreement is a private contract between a real estate broker and a property owner and is not promulgated by TREC. The Texas Association of Realtors (TAR) provides certain forms to its members. If you are a member, you may find a listing agreement form that meets your needs through TAR. Otherwise, you should consult with a private attorney.

Does TREC have an improved commercial earnest money contract form?

No. You must use a form drafted by an attorney or a form supplied by either the buyer or seller. [Rule 537.11(a)] If you are a member of The Texas Association of Realtors (TAR), you may use a form prepared by TAR attorneys.

Does TREC require a trust or escrow record to be maintained for a specific period of time?

Yes, for four years from the date a trust or escrow document is received or created by the broker. [Rule 535.146(e)]

Does a lease for a term of longer than one year and a contract for the sale of real estate need to be in writing to be enforceable?

Yes. The Statute of Frauds, as defined by Chapter 26 of the Business and Commerce Code, requires that certain agreements be reduced to writing to be enforceable. However, you should consult with a private attorney for advice on this matter.

Does a license holder have to use TREC's contract forms? Does TREC ever discipline a license holder who fails to use an adopted form?

Yes and yes. A license holder is required to use contract forms adopted by TREC. [TRELA §1101.155, Rule 537.11, etc.] Some exceptions for when a license holder does not have to use a form are in Rule 537.11(a). A license holder should also be familiar with Rules 537.11(f)-(g). Those rules prohibit a license holder from adding anything except factual matters or business details to a form adopted by TREC for mandatory use. Contract forms adopted for mandatory use are on our website.

Does a link to the IABS Form in my email signature satisfy the representation disclosure required by TRELA §1101.558?

No. Rule 531.20(d) states that providing a link to the IABS Form in a footnote or signature block of an email is insufficient. The IABS Form can be provided by:
(1) personal delivery;
(2) first class mail or overnight common carrier delivery service;
(3) in the body of an email; or
(4) as an attachment to an email or as a link in the body of an email so long as there is a specific reference to the IABS Form in the body of the email.

Does a property manager have to be licensed?

It depends on what the property manager is doing for the property owner. If the duties include showing or leasing the property for the owner for which the manager gets paid, a license is required. A license is also required for any person who controls the acceptance or deposit of rent from a resident of a single-family residential real property unit. See TRELA §1101.002(1)(A)(x) and Rule 535.4(h)

Does a trust account have to have a special name?

Yes. If a broker maintains a trust account, it must be clearly identified as a trust account. [Rule 535.146(c)(1)]

Does the buyer have to deliver the earnest money to the escrow agent for a contract to be binding?

TREC contract forms require the buyer to deliver any earnest money to the escrow agent. If the buyer fails to deliver the earnest money within the time required, the seller may terminate the contract, exercise the remedies under Paragraph 15 of the contract, or both.

The formation of a real estate contract requires "consideration" for the contract to be binding. In general, the buyer's promise to buy and the seller's promise to sell is consideration. Therefore, any questions regarding the validity of your contract should be discussed with a private attorney.

How are days counted in a TREC contract?

Starting with the effective (final execution) date of the contract, the first day of the period starts the next day. Each day is counted as calendar day.

How can an out-of-state broker sell land in Texas?

The foreign broker must either associate with a Texas broker who handles all the negotiations and other acts that require a license in Texas, including showing the broker’s listings or soliciting listing of real property, or obtain a Texas real estate license. See, for example, Rules 535.4, 535.5, and 535.131.

How long does an agent have to deposit the earnest money once a binding contract has been negotiated?

The earnest money must be deposited by the close of business of the second working day after execution of the contract by the principals, unless a different time is agreed upon in writing by the principals to the transaction. [Rule 535.146(b)(3)]

I already have a license. Do I have to tell you about my crime?

Yes. You are required to tell us within 30 days of a felony. Section 1101.652(a)(7) of the License Act provides that if you have entered a plea of guilty or nolo contendere or have been convicted of a felony or any criminal offense that involves fraud (including misdemeanors), you must disclose this to the Commission not later than the 30th day after the final conviction or the entry of a plea of guilty or nolo contendere. The minimum penalty is $500; maximum is $3,000 per failure to report. This means that if you wait until your renewal to notify the Commission of your felony, you could be subject to the penalty, in addition to any disciplinary action related to the crime. If you do have an unreported felony, or an unreported criminal offense involving fraud, report it to the Commission as soon as possible.

I am a sales agent and am not sure how to fill out the listing agreement form. Can you help me?

No. TREC is unable to advise you on how to fill out a private contract form. You should direct your questions to your sponsoring broker. If your sponsoring broker is unable to help you with your questions about a Texas Association of Realtors (TAR) listing agreement form, you can direct your questions to TAR.

I am a seller and I signed a contract with a buyer. Before the earnest money was deposited, the buyer backed out. Am I entitled to the earnest money?

The Commission does not have jurisdiction to decide which party is entitled to the earnest money. However, a real estate license holder's failure to deposit earnest money in accordance with the terms of the contract could form the basis of a complaint. Please note that TREC cannot order a license holder to pay money damages. You will need to consult a private attorney about monetary damages or other civil remedies.

I am a tenant and having problems with my landlord getting him to make repairs. Also, I sent the landlord the rent on time but the landlord is still threatening me with eviction and late charges. What are my rights as a tenant?

Landlord and Tenant disputes are not within our jurisdiction. You may want to call one of the tenant assistance associations for help or contact a private attorney. The Real Estate Center at Texas A & M has a Landlord-Tenant Guide that you can view for free at https://assets.recenter.tamu.edu/Documents/Articles/866.pdf

I am changing sponsoring brokers. Do I get to take my listings with me?

No. Listing agreements are private contracts between the property owner and the real estate broker, not the sales agent.

I am having a dispute with my Homeowner Association (HOA) regarding violating neighborhood restrictions.

TREC does not have jurisdiction over Homeowner Associations or Association Management Companies. You may wish to consult with a private attorney regarding your legal rights as a homeowner. See also Chapter 209, Property Code.

I am having problems with a manufactured home that I purchased recently and wish to file a complaint against the manufacturer and broker/dealer.

TREC does not have jurisdiction over manufacturers or dealers of manufactured homes. You may file a complaint with the Texas Department of Housing and Community Affairs. TREC only has jurisdiction in situations where the manufactured home is attached to the real estate when you purchased it and your complaint is against a real estate license holder that was involved in that purchase.

I bought a house from Sam Seller through broker Bob Brown three months ago. I did not get it inspected since the seller and the broker said everything was in good shape. Yesterday, I discovered a big problem with the house that was never disclosed to me.

If you feel the broker knew about the problem with the house and didn't tell you about it, you can file a written complaint with TREC. A license holder who makes a knowing misrepresentation or fails to disclose a latent defect can be disciplined by the Commission. [TRELA §1101.652(b)(3)] Should you want to take legal action against the seller and/or the broker for damages, you will need to consult with a private attorney

I bought a house from a builder and the builder gave me a 12-month warranty. I have given the builder a list of things that need to be repaired but the repairs have not been made and my warranty is about to expire. How can I make the builder do the repair

TREC does not have jurisdiction over builders. You may wish to file a complaint with the Better Business Bureau or the Texas Attorney General’s Office, Consumer Protection Division. You may also wish to consult with a private attorney before any possible warranties or other legal remedies expire.

I discovered that a real estate license holder is also a licensed mortgage broker. Is this legal? With what agency should I file a complaint?

TRELA and the Rules do not prohibit an individual from having other licenses. If the individual is acting in both capacities, he or she should have informed you in writing and obtained your consent before receiving any compensation from another party involved in the transaction. If the individual was acting in both capacities, you could file a complaint with both TREC and Texas Department of Savings and Mortgage Lending. If the individual was only acting in one capacity, you should file the complaint with the agency that regulates that function

I have a property management company and engage in leasing activity. May I have some of my unlicensed employees solicit business for me?

No. A rental agent who solicits a prospect by phone must be licensed.

I just bought a house and noticed that the title company I used made a mistake at closing.

TREC does not have jurisdiction over title companies. If you wish to file a complaint against a title company in Texas, you need to contact the Texas Department of Insurance.

I listed my property for sale with a broker and the broker has done nothing about selling the house. Can I break my contract and list with someone else?

Your listing contract with the broker is a private legal contract. TREC is unable to advise you on private contractual matters. If you feel that the broker has not fulfilled the broker's part of the agreement, i. e. advertising, holding open houses, etc., then you may have grounds to terminate the contract but you would need to contact a private attorney for help in making that determination. You could also ask the broker to agree to cancel or release the listing. If the broker agrees, then the contract can be mutually rescinded.

I signed a Property Management Agreement and do not understand some of the terms. Can you explain them to me?

No. A Property Management Agreement is a private contract and TREC is unable to advise you in private contractual matters. You should discuss the terms of the agreement with a private attorney.

I signed a contract to purchase a timeshare interest yesterday. Last night I reconsidered. Can I back out?

Yes. You have to provide the appropriate cancellation notice to the developer before the sixth day after you signed the contract. Consult the contract or the timeshare disclosure statement you received for instructions on how to proceed.

I signed a listing agreement with a broker and don’t understand some of the terms in the agreement. Can you explain the terms to me?

No. TREC is unable to advise you in private contractual matters. You should discuss the terms of the listing agreement with a private attorney.

I was trying to buy a house and the earnest money was deposited in the broker's escrow or trust account. The transaction has fallen through and now the broker won't return the earnest money.

If the broker used a Commission promulgated form, it contains provisions permitting the broker to require the buyer and seller to agree on who gets the earnest money and to sign a release before the money is disbursed. See Rule 535.146(d) for proper procedures for handling earnest money disputes where the broker is holding the money in a trust or escrow account.

I will be holding the security deposit for an owner whose property I am managing. In what type of account should a security deposit be placed?

You are prohibited from commingling this money with your own money. [TRELA §1101.652(b)(10)] The money should be deposited in a trust or an escrow account where other money from the managed property or properties is kept. A security deposit can also be deposited in an account separate from the trust or escrow account, but this is not a requirement. [Rule 535.146(c)(2)] The Commission can take disciplinary action against you if you fail within a reasonable time to properly account for or remit money that you receive on behalf of another person. [TRELA §1101.652(b)(9)] Further, paying an operating expense or making a withdrawal from a broker’s trust account for any purpose other than proper disbursement of trust money is prima facie evidence of commingling. [Rule 535.146(b)(5)]

If a broker has an exclusive listing with a seller, may another broker solicit a listing from the same seller that would begin after the other listing expired?

Yes. Rule 535.153 states that §1101.652(b)(22) of TRELA does not prohibit a license holder from soliciting a listing from the owner while the owner's property is subject to an exclusive listing with another broker, provided the listing does not commence until after the current listing expires.

If a buyer wishes to have a hydrostatic test performed on a home, what is required for a seller to consent to such a test?

Both TREC forms 20-14 and 30-12, The One to Four Family Residential Contract (Resale) and Residential Condominium Contract (Resale), state, “Any hydrostatic testing must be separately authorized by Seller in writing.”

Therefore, there must be a separately signed document of authorization by the seller for a hydrostatic test. Thus, for example, any authorization language in the special provisions of the standard Resale contract is not separate consent by a seller.

Is TREC interested in compliance by residential rental locators?

Yes. The Commission members have instructed the staff to enforce the law vigorously. Unlicensed individuals who conduct residential rental location activity are subject to administrative penalties and criminal charges. [TRELA §1101.757 & §1101.759]

Is a license required to sell a timeshare interest in Texas?

It depends. If the sales agent is an employee of the owner of the timeshare, the employee would not be required to be licensed. [Rule 535.5(d)] Otherwise, the sales agent needs to be licensed

Is a licensed attorney required to hold a real estate license to act as a broker?

Generally no. As long as the attorney is licensed in Texas, they are exempt from the licensure requirements. [TRELA §1101.005(1)] The Texas licensed attorney can do everything a broker can do except sponsor sales agents, or act as the designated broker for a business entity licensed by TREC. [TRELA §1101.355(b)] In addition, attorneys should be aware that Texas law prohibits a license holder from splitting a commission or fee for brokerage services with any person who is not a license holder. [TRELA §1101.652(b)(11)]

Is a locator permitted to rebate a portion of the locator's fee to the tenant?

Yes, as with all license holders, this can only be done with the prior consent of the person the locator represents. [Rule 535.147(d)] In addition, if advertising a rebate to the tenant of a portion of the license holder’s commission, the ad must disclose that the rebate is subject to consent of the party the license holder represents. [Rule 535.155(d)]

Is a real estate broker's license required to call an auction involving real property?

No. A real estate license is not required for a person who calls an auction of real property, provided the person is licensed as an auctioneer by the Texas Department of Licensing and Regulation. [TRELA §1101.005(4)] However, it is clear from the statute that an auctioneer may not perform any act of a broker or sales agent, such as the preparation of a written agreement for the transaction.

Is hydrostatic testing a mandatory part of the inspection of a resale of real property?

No, a hydrostatic test is not mandatory in the inspection of a property.

Is it permitted to submit an invoice to an apartment complex falsely claiming that the locator has procured a tenant for the apartment complex?

No. The Commission can issue an order revoking the license of a locator found to have engaged in this practice. [TRELA §1101.652(b)(24)]

I’m buying a house. Do I have to have pay for an option period to be able to buy the house?

No. The termination option is a negotiable contract term. However, if you pay the seller an agreed option fee, you have the unrestricted right to terminate the contract for any reason if you give written notice to the seller during the option period. A buyer can use the option period to perform an inspection of the property and negotiate an amendment to the contract for any necessary repairs as a result of the inspection.

Must the permission of the owner authorizing the agent to offer the unit for rent be in writing?

No, the permission may be in writing or oral. If the permission is given over the telephone, for example, the license holder should document who gave the permission and how it was given in case that information is later requested by TREC in connection with a complaint.

My agent moved to another broker’s office and I want them to continue to handle my listing. Can I switch my listing to the new broker’s office?

No. Listing agreements are private contracts between the property owner and the real estate broker, not the sales agent. You can ask the original broker to release you from the agreement or contact a private attorney to advise you if you can terminate the listing agreement in some other fashion. TREC does not have the authority to require a broker to release you from a listing agreement.

My broker did not fill out our contract properly and the effective date is blank. Does this mean that the contract is invalid or void?

The Commission can not make a determination about the validity of your contract. You should consult a private attorney regarding this issue. A license holder’s failure to properly complete a TREC promulgated form completely and accurately could be considered negligence and subject the license holder to disciplinary action. [TRELA §1101.652(b)(1)]

My client does not want to accept the property “as is”. Can I just leave both boxes in Paragraph 7D of the One to Four Family Residential Contract (Resale) blank or can I check 7D 2 and write in “repairs to be listed following inspection”?

Neither option is permissible. Leaving both boxes in blank in Paragraph 7D or altering the contract terms by adding language that does not enumerate specific repairs in Paragraph 7D2 could be considered to be acting negligently or incompetently if a complaint were to be filed in connection with the transaction [TRELA §1101.652(b)(1)]. The buyer should only choose Paragraph 7D2 if there are specific repairs known at the time of the contract that the buyer wants the seller to pay for. Otherwise, the buyer should check Paragraph 7D1. Most buyers in your client’s situation will then also elect to pay an option fee pursuant to Paragraph 23 in exchange for the right to terminate for any reason within a negotiated number of days. During this option period, an inspection can be performed and if specific repairs are identified, the parties can negotiate to amend the contract to address these items, or the buyer can terminate the contract.

My wife and I signed an offer to buy a house over the weekend. Now we have changed our minds and don't want to buy the house after all. Can we get out of the deal?

If the seller has accepted your offer, you may have a binding contract. There is no automatic three-day or 72 hour cooling off period for you to change your mind like in some other consumer contract situations. Any rights that you have to terminate the contract will be contained in the contract. For example, you may have paid a fee to obtain an “option” period in the contract. You should consult with a private attorney for advice regarding termination of your contract.

We are selling our house and the buyer never paid the option fee. Can the buyer still terminate the contract by exercising the option period of the contract?

Probably not. Paragraph 5A of the One to Four Family Residential Contract (Resale) (TREC 20-17) states that the buyer must the deliver the earnest money and the option fee to the escrow agent within three days of the effective date of the contract. Paragraph 5D provides "If no dollar amount is stated as the Option Fee or if Buyer fails to deliver the Option Fee within the time required, Buyer shall not have the unrestricted right to terminate this contract under this paragraph 5."

We tried to buy a house but our loan application was not approved. Our $500 earnest money had been deposited with a title company and they said they wouldn't return it without a release signed by the seller, which the seller won't sign. Help!

The Commission does not have jurisdiction over title companies. While a license holder is encouraged to assist the parties in the exchange of the necessary earnest money release and need to sign the release as appropriate, there is nothing in TRELA or the Rules to determine who is entitled to the earnest money. You will need to consult a private attorney.

What are the penalties for unlicensed brokerage activity?

Practicing real estate without an active license is a criminal offense, specifically, a Class A misdemeanor punishable by confinement of up to one year in a county jail and a fine of up to $4,000. [TRELA §1101.756] TREC can also pursue administrative penalties not to exceed $5,000 for each violation. Each day a violation continues can be considered a separate violation for imposition of the administrative penalties. [TRELA §1101.702] The Commission may also issue a “cease and desist” order. [TRELA §1101.759] Finally, as a State Agency represented in civil court proceedings, TREC can obtain injunctive relief, including court costs and attorneys fees incurred in obtaining such relief. [TRELA §1101.751]

What is a hydrostatic test?

A hydrostatic test is a way in which pipeline, plumbing, gas cylinders, boilers, and fuel tanks can be tested for strength and leaks. The testing pressure is always higher than the normal operating pressure of the system.

What is the definition of a “commission”?

A commission or fee includes any form of compensation received for engaging in an act for which a license is required, essentially anything of value. [See Rules 535.1(5) and 535.20(a)]

What is the estimated time frame to process an Fitness Determination (FD) form?

After an Fitness Determination (FD) request is filed and all required documentation is obtained (either initially or following subsequent requests for additional information), TREC will investigate the information and make a determination. Once TREC makes a determination, TREC has 30 days to notify the person of the determination. Providing a complete form and promptly sending any requested documentation will decrease the processing time of an Fitness Determination (FT).

What kind of criminal matters will prevent an applicant from obtaining a real estate license?

To be eligible for a real estate license, applicants must prove to TREC that they have the required honesty, trustworthiness & integrity. [TRELA §1101.354(2)] Each applicant is evaluated individually and TRELA does not contain a list of crimes or number of crimes that would automatically disqualify an applicant from obtaining a license. However, Rule 541.1(a) does list the types of criminal offenses that TREC considers directly relate to the duties and responsibilities of a license holder and tend to demonstrate a person’s inability to represent the interest of another with honesty, trustworthiness and integrity. Rule 535.52(b) also addresses conduct that tends to demonstrate that an applicant does not possess the requisite honesty, trustworthiness or integrity. In addition, pursuant to Chapter 53 of the Texas Occupations Code (www.statutes.legis.state.tx.us/) and Rule 541.1(c), TREC will consider evidence of certain mitigating factors and rehabilitation. It is the responsibility of the applicant to provide that evidence to TREC. [Rule 541.1(d)] Before applying for a license, a person may request TREC to determine whether the person’s fitness complies with the requirements for licensing by filing a Fitness Determination (FD). This form is on our website here.

What should I do if TREC doesn’t promulgate a form that I need?

The Texas Association of Realtors (TAR) provides certain forms to its members. However, if you are not a member of TAR, you should have an attorney draft the necessary documents. It is a violation of the law for a license holder to draft an instrument that transfers or otherwise affects an interest in real property. [TRELA §1101.654]

When I purchased my house there were repairs made before closing that I requested but were not performed properly. The seller gave me the receipts of the licensed repair people who performed the repairs. What can I do?

TREC does not have jurisdiction over licensed repair providers. You may want to check with Texas Department of Licensing and Regulation to see if they regulate the providers. You may also want to consult with a private attorney regarding your legal rights as a homeowner.

When a broker holds earnest money or any money from property management activities in a trust account, how often is a broker required to account for that money?

The broker must provide a monthly accounting of trust money if there has been any activity in the account. [Rule 535.146(c)(6)]

When a broker holds money from property management activities in a trust account, how often is a broker required to account for that money?

The broker must provide a monthly accounting of trust money if there has been any activity in the account. See [Rule 535.146(c)(6)]

When a contract falls through, can part of the earnest money be held to pay the commission fee for the other real estate license holder?

No, unless the parties agree in writing otherwise.

When a license holder files a reinstatement application and answers “yes” to the criminal questions, does TREC require the license holder to resubmit legal documents that have already been submitted in the past?

A “yes” answer to the criminal questions on a reinstatement application requires an applicant to submit a Background History form along with copies of the offense court records and a written explanation. If the required documents were previously submitted in a prior application, the applicant may explain this fact. However, because TREC must dispose of certain documents in accordance with a records retention plan, TREC may no long have those documents and an applicant should be prepared to resubmit documents and the explanation previously submitted.

Would it be permissible to use a promulgated contract form as a contract for deed or contract of sale by making appropriate changes in Paragraph 11?

No. None of the forms promulgated by TREC are intended for use as a contract for deed. An attorney will need to prepare an appropriate form.

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