© 2014 OnCourse Learning Texas Real Estate Commission Ethics MCE

© 2014 OnCourse Learning Canons of Professional Ethics Fidelity Integrity Deftenus V. Dallas Bayue Bend, LTD

© 2014 OnCourse Learning Competence Licensee is knowledgeable and is informed on market conditions, continues education, stays informed about national, state and local issues and developments, and exercises judgment and skill in performance of their work Questions the Licensee should ask

© 2014 OnCourse Learning CASE STUDY Owner entered into property management agreement. Broker advised owner to accept Section 8 voucher for less than rental rate. Broker prepared lease showing lower rent and higher security deposit and also indicated rents were past due when they were not. Owner filed a complaint with TREC. TREC reprimanded broker, assessed $500, and ordered broker take 30 hr. course.

© 2014 OnCourse Learning Canons of Professional Ethics Consumer Information Form – Broker or inspector must display Consumer Information Form 1-1 in each place of business. Discriminatory Practices - No licensee shall discriminate based on protected classes - race, color, religion, sex, national origin, ancestry, familial status and handicapped status.

© 2014 OnCourse Learning TREC Complaints A person may file a complaint with TREC against a licensee if person believes licensee violated TRELA. If appropriate, TREC will investigate Most frequent issues: Misappropria­tion, commingling, general negligence, false promises, broker supervision, general negligence, false promises, rebates, improper referrals. Intermediary/IABS – no written consent.

© 2014 OnCourse Learning Payments made from the Real Estate Recovery Trust Account were at an all-time high. TRELA requires investigating using risk- based approach Refund TREC Advisory Letters Not formal disciplinary action. Informal Proceedings Temporary Suspension Association Complaints

© 2014 OnCourse Learning Citation Program TAR has citation policy for faster resolution. Only certain complaints qualify. A grievance tribunal determines if complaint is subject to citation. If citation is issued, respondent has right to full hearing rather than pay the fine. Sanctions include fines and education.

© 2014 OnCourse Learning Chapter 2 Agency Relationships

© 2014 OnCourse Learning Customer or Client? Customer What Broker owes customer What Broker cannot provide to customer Client Fiduciary Duties Information About Brokerage Services and Agency Disclosure (IABS) When IABS is not required

© 2014 OnCourse Learning Intermediary Broker could be in position of assisting two principals involved in same transaction. If so, must be an intermediary and must obtain written permission Intermediary may appoint different licensees Example 1 Example 2

© 2014 OnCourse Learning Intermediary Example 3 Alternative 1 Alternative 2 Example 4 Broker is solo practitioner? May broker act as intermediary?

© 2014 OnCourse Learning Intermediary Example 5 When broker owns small firm and actively sells, may broker appoint himself? Example 6 I have a listing, and an unrepresented buyer wants to make an offer, must I act as an intermediary?

© 2014 OnCourse Learning Conflicts Arising in Early Termination of Agency Representation Agency relationship is highly personal requiring continuing consent of parties. Early termination might create liability. Case Study - Kim v. Ahn Early Termination Compensation and Release of Contractual Obligation Representing a Party Who is Subject to a Prior Agency Relationship

© 2014 OnCourse Learning Working Both Sides of One Transaction Refer to the chart in the text book that portrays the scenario where one broker is representing both the buyer and the seller.

© 2014 OnCourse Learning Chapter 3 Contract Issues

© 2014 OnCourse Learning Effective Date Effective date is most crucial date in contract. Who determines effective date? – May be seller’s or buyer’s broker Four elements must be satisfied. 1. Final contract must be in writing. 2. Both buyer and seller must sign final. 3. Acceptance must be unequivocal. 4. Last party to accept must communicate acceptance.

© 2014 OnCourse Learning Effective Date If the effective date is not filled in, is there no contract? – No, parties have mutually instructed broker to fill in final date. Is effective date the first day? - No. Buyer has right to terminate within 5 days of effective date of 1/1. Buyer may terminate until 11:59 p.m. on 1/6. Is the effective date Saturday or Monday? Elements of final acceptance can be satisfied on Saturday.

© 2014 OnCourse Learning Paragraph 11 — Special Provisions Licensee may insert only factual statements and business details into contracts. Inserting a provision that materially affects legal rights or duties may be unauthorized practice of law. Licensees may use TREC adopted Non- Realty Items Addendum. (Voluntary) Case Study - Lewis v. Foxworth Case Study - Johnson v. Conner

© 2014 OnCourse Learning Paragraph 11 — Special Provisions As-Is Clause Brokerage Fees Poorly Drafted Clauses Factual Statements and Business Details Matters that may be appropriate

© 2014 OnCourse Learning Multiple Offers In Texas, seller does not have to do anything. Licensees might argue but seller has several choices regardless of which offer was first Deal With Multiple Offers Before You Receive Them

© 2014 OnCourse Learning Chapter 4 Defect Disclosure

© 2014 OnCourse Learning Seller’s Disclosure of Property Condition Property Defects- some irregularity that mars a property’s appearance or causes some aspect of property to weaken or fail. Involves appearance or structure. (Coldwell Banker Whiteside v. Ryan Equity). Exceptions to the Seller’s Disclosure Form

© 2014 OnCourse Learning Disclosure Seller and broker must disclose any known defect regardless of whom broker represents. Applies to residential and commercial. Texas Property Code provides that a seller of not more than one residential unit is to complete and deliver a seller’s disclosure notice.

© 2014 OnCourse Learning Defect Disclosure FAQ What if I learn there is a defect, but the seller does not want it disclosed? Why do multiple variations of seller’s disclosure notice exist? Must every seller deliver seller’s disclosure notice to a prospective buyer? Is relocation company required to deliver notice?

© 2014 OnCourse Learning Defect Disclosure FAQ Must a seller disclose previous death at a property? Must a seller disclose prior water penetration in a property? Must seller or broker disclose registered sex offender resides in neighborhood? Is an off-site condition considered a defect (eg., roadways, landfills, feed lots, etc.)?

© 2014 OnCourse Learning Defect Disclosure FAQ Must listing broker or seller provide copy of a prior inspection report? May a listing agent instruct a buyer or buyer’s agent not to provide a copy of the inspection report the buyer may obtain? Case Study

© 2014 OnCourse Learning Chapter 5 Advertising

© 2014 OnCourse Learning TRELA prohibits licensee from publishing an advertisement that: misleads or is likely to deceive the public tends to create a misleading impression fails to identify person causing the advertisement as a licensee “Advertisement” updated to encompass broad variety of electronic communications Information on a website and behind a firewall requiring a password or registration, is not considered an “advertisement.”

© 2014 OnCourse Learning Including Broker’s Name Rule requires licensees to clearly include broker’s name in all advertising. Broker must notify commission within 30 days of starting or stopping use of assumed name. See text for examples of correct and incorrect advertisements.

© 2014 OnCourse Learning Advertising Issues Teams Teams & Assumed Names Corporations & Trade Names Signs

© 2014 OnCourse Learning Chapter 6 Intellectual Property

© 2014 OnCourse Learning Copyright Infringement Giving credit to newspaper NOT good enough for copyrighted material. Apply to blogs, websites and social media postings as well as printed materials. Licensee wishing to give opinion about an article may simply refer to the article and should NOT cut and paste entire article. Copyright FAQs available at

© 2014 OnCourse Learning Other Copyright Issues Private Industry Association Forms - created by associations such as TAR, may be used only by association members. Photographs and Music - frequently copyright protected so licensee should be certain to read all the fine print. Software - Use licensed software on all equipment because copyright infringement lawsuit will eliminate money saved by not purchasing a license

© 2014 OnCourse Learning Chapter 7 Dispute Resolution

© 2014 OnCourse Learning Mediation One of the five recognized types of Alternative Dispute Resolution (ADR). Mediation resolution procedure - a forum before an impartial person (mediator) to facilitate communication to promote reconciliation, settlement or understanding. Mediators - no decisions or awards. In a successful mediation, parties agree on a settlement in writing.

© 2014 OnCourse Learning Mediation Mediation has been used to settle a high % of disputes - many Texas judges require mediation before hearing a case. Numerous mediation service providers, county supported mediation services, private mediators, university law schools, and professional and trade associations. Mediators should remain neutral, but their expertise can provide valuable guidelines for settlement.

© 2014 OnCourse Learning Arbitration - forum where parties and counsel present their positions before an impartial third party who renders a specific award. Parties must agree to arbitrate a dispute. Arbitration procedure calls for complaint or petition to be filed describing the dispute. Prevailing party may seek to enforce award and awards may be appealed on procedural or due process grounds. Arbitration

© 2014 OnCourse Learning Chapter 8 Unlicensed Assistants

© 2014 OnCourse Learning Assistants Determining Brokerage Activity – Is the activity “real estate brokerage” done “for another” with intention of collecting something of value. Two categories of activities: Direct: - Where person helps buy, sell or lease property, negotiating, showing. Indirect: Licensure required of those who procure or assist in procuring prospects

© 2014 OnCourse Learning Assistants May an unlicensed person host an open house? May assistants set appointments? May assistant drive a buyer to a listing and let the buyer into the home? May unlicensed assistant answer phone; place signs; open a property, accompany inspectors, or place advertisements as directed by the broker?

© 2014 OnCourse Learning Assistants May assistant answer phone; place signs; open a property, accompany inspectors, or place newspaper ads? Which functions may an office manager perform? Does a bookkeeper need to be licensed?

© 2014 OnCourse Learning Assistants May unlicensed assistants assist in arranging financing? May unlicensed persons serve as property managers? What can a licensee do to avoid criminal or disciplinary actions?

© 2014 OnCourse Learning TREC Cases Chapter 9

© 2014 OnCourse Learning TREC Cases Misidentifying a Trust Account Result: Broker entered into agreed order TREC reprimanded and assessed $1,500 Not-So-Timely Condo Documents Both agents didn’t read or understand contract terms Result: All licensees entered into individual agreed orders with TREC

© 2014 OnCourse Learning TREC Cases False Promises Result - TREC issued advisory letter that short sale negotiators not subject to TREC’s jurisdiction. Roof Repairs Result: Buyer’s broker entered into an order with TREC and was formally reprimanded and paid penalty of $1,000. Also agreed to take 30-hour agency course

© 2014 OnCourse Learning TREC Cases Missing Rent Payments Result: Broker entered into agreed order to a probated suspension of license for one-year and agreed to take 30-hour agency law course and paid an administrative penalty of $5,500 Ignoring the Client Result: Broker entered into order admitting he leased property on terms not authorized and engaged in dishonest conduct, and agreed to surrender his license