Agency

Yes. The solo broker may act as an intermediary, but that broker cannot make appointments of associated license holders to each of the parties.

The Real Estate License Act contains provisions that impose requirements on all brokers and agents regarding client communications and negotiations. At a minimum, brokers or agents must ...

1. inform their client if they receive material information related to the transaction
2. answer their client’s questions
3. present any offer to or from their client.

These duties exist regardless of the agreed-upon compensation payable to the broker. Agents cannot avoid these requirements by removing themselves from negotiations. The minimum-services provisions also prohibit a seller’s agent from instructing a buyer’s agent to negotiate directly with the represented seller. Likewise, a buyer’s agent is prohibited from instructing a seller’s agent to negotiate directly with the represented buyer.

There are certain circumstances in which an agent may deliver an offer to a represented party without violating the Real Estate License Act, but the agent must have the other broker’s consent to the delivery and send him a copy of the offer. At no time may the agent cross the boundary into negotiations with the represented party.

If seller’s brokers aren't fulfilling the minimum duties required of them, there’s not much you can do in the short-term. You have a fiduciary duty to look after your client’s best interests; however, you may not interfere with the other broker’s agency relationship or do anything to prevent the transaction from closing. Continue to make every effort to contact the seller’s broker to discuss your concerns, and keep a record of your communications.

If you believe the seller’s broker violated any rules or the REALTOR® Code of Ethics, you may take steps to file a complaint with the Texas Real Estate Commission or Texas REALTORS®.

If you believe that you deserve an additional fee, you may seek compensation through arbitration or other legally available means after the transaction closes.

Yes, on the first contact with the licensee representing the buyer.

The appointed licensee may not, except as permitted by Section 1101.651(d) of the Real Estate License Act, disclose to either party confidential information received from the other party. A licensee representing one party would not be prohibited from revealing confidential information to the licensee’s principal, and if the information were material to the principal’s decision, would be required to reveal the information to the principal.

At the time of the first substantive dialogue with a seller or a prospective buyer, a license holder must provide the party with a copy of the Information About Brokerage Services (TXR-2501, TREC IABS 1-0) as required by The Real Estate License Act (TRELA). The IABS form includes an explanation of the intermediary relationship.

Before a broker may act as intermediary, TRELA requires the broker to obtain written consent from both parties. A written representation agreement between a broker and a seller or buyer will satisfy the consent requirement if the agreement: 1) authorizes the broker to act as an intermediary between the parties; 2) lists the conduct an intermediary is prohibited from performing in conspicuous bold or underlined print; and 3) states who will pay the broker. The agreement must also authorize the broker to appoint associated license holders if the broker intends to make appointments when the intermediary relationship arises. The Texas REALTORS® promulgated listing agreements and buyer/tenant representation agreements contain language necessary to fully comply with TRELA when creating an intermediary relationship.

When it becomes evident that the buyer represented by the firm wishes to purchase property listed with the firm, the intermediary status comes into play.

There are two alternatives for the brokerage firm and the parties to consider in an intermediary relationship:

1) If the firm has obtained permission in writing from both parties to be an intermediary and to appoint associated license holders to work with the parties, the intermediary broker may appoint one associated license holder to the seller and a different associated license holder to the buyer. The associated license holders may provide opinions and advice during negotiations to the party to whom the license holder is appointed.

2) If the firm has obtained permission in writing from both parties to be an intermediary but does not appoint different associated license holders to work with the parties, then neither the broker nor any associated license holder may give advice or opinions to the parties. Instead, the broker and all associated license holders must remain neutral and not favor one party over the other.

The intermediary is required to treat the parties fairly and honestly and to comply with TRELA. The intermediary is prohibited from favoring one party over the other and may not reveal confidential information obtained from one party without the written instructions of that party, unless disclosure of that information 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 are prohibited from disclosing, without written authorization, 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.

During negotiations, the associated license holder who is appointed to one party may provide advice and opinions to the party. An associated license holder who has not been appointed must act in the same manner as the intermediary, not giving opinions and advice and not favoring one party over the other.

The intermediary broker is authorized to facilitate a transaction between the parties but may not give advice or opinions to either party in negotiations. An associated license holder who is appointed to a party may provide advice or opinions to that party. Both intermediaries and associated license holders who are appointed to parties are obligated to treat the parties honestly and are prohibited from revealing confidential information.

Yes, but the duties and obligations of an intermediary are different than for exclusive, or single, agents.

No.

No. The broker could represent one of the parties and work with the other party as a customer rather than a client. For example, the buyer may agree to terminating the buyer representation agreement and the broker will represent the seller and work with the buyer as a customer. When a broker represents the seller only, the seller is the broker’s client, and the buyer is a customer. In those instances, the broker is obligated to act in the seller’s best interests.

No. In the case of a for-sale-by-owner or other seller who is not already represented by a broker, the broker representing the buyer is not considered an intermediary. When a broker represents the buyer only, the buyer is the broker’s client, and the seller is a customer. In those instances, the broker is obligated to act in the buyer’s best interests. Alternatively, the broker could secure the consent of both parties to act as an intermediary and have the seller sign a representation agreement.

Only a broker can contract with the parties to act as an intermediary between them. In that sense, only a broker can be an intermediary. If, however, the broker intermediary does not appoint associated license holders to work with the parties in a transaction, any associated license holders of the intermediary who function in that transaction would be required to act just as the intermediary does, not favoring one party over the other.

The question appears to be, "May an associate show property listed with the associate’s broker while representing the buyer without first being appointed by the intermediary, and if so, why?" Yes. Only showing property does not require the associate to be appointed, because it does not require the licensee to give advice or opinions (only an appointed associate may offer opinions or advice to a party). If no appointments will be made, of course, the associate will be working with the party and will not be authorized to provide opinions or advice.

No. Appointing yourself, the firm’s broker, to represent one party and appointing an associated license holder to represent the other party in an intermediary situation is not considered fair and impartial under TRELA.

Yes.

No. The law requires the intermediary to appoint different associated license holders to work with each party.

No. A subagent in another firm cannot be appointed as one of the intermediary’s associated license holders.

Yes. If the intermediary authorizes another associated license holder to make the appointments, that person must not appoint himself or herself, as this would be an improper combination of the different functions of intermediary and associated license holders.

No. A second written consent is not required by TRELA, but a written notice of any appointments is required. A broker is not prohibited from obtaining a second consent as a business practice to identify and resolve potential conflicts.

The Intermediary Relationship Notice (TXR 1409) is used for two purposes:

1) It serves as a reaffirmation by the seller and the buyer of the prior consent they both gave in writing to the broker to act as an intermediary in the transaction.

2) It is used by the broker to satisfy the requirement to give written notice to all parties of the appointment of associates to each side of the transaction if such appointments are to be made.

This form is not a substitute for the initial written consent that both parties gave when they each signed brokerage agreements with the broker. The Intermediary Relationship Notice should only be used if the seller and the buyer have given their written consent to the broker to act as an intermediary in the listing and buyer representation agreements. This form may also be used when the broker is acting as an intermediary in a landlord-tenant situation.

This is a judgment call for the intermediary. The intermediary relationship does not exist until the parties who have authorized it are beginning to deal with each other in a proposed real estate transaction; an example would be when the buyer begins to negotiate to purchase the seller’s property. Prior to the creation of the intermediary relationship, the broker will typically be acting as an exclusive agent of each party. If appointments are going to be made, they should be made before the buyer begins to receive advice and opinions from an associated license holder in connection with the property listed with the broker. If the broker appoints the associated license holders at the time the listing agreement and buyer representation agreement are signed, it should be clear that the appointments are effective only when the intermediary relationship arises. It is important to remember that both parties must be notified in writing of both appointments. If, for example, the listing agent is “appointed” at the time the listing is taken, care must be taken to ensure that the buyer is ultimately also given written notice of the appointment. The Intermediary Relationship Notice (TXR 1409) can be used for this purpose. When a buyer client begins to show interest in a property listed with the firm and both parties have authorized the intermediary relationship, the seller must be notified in writing as to which associate has been appointed to work with the buyer.

Yes. If the intermediary makes appointments, the law provides that the appointments are made by giving written notice to both parties. To give notice, the intermediary must identify the party and the associated license holder(s) appointed to that party. The Intermediary Relationship Notice (TXR 1409) can be used for this purpose. The law does not require notice if no appointments are made.

Both. Initially, the broker makes a decision in determining the policy of the firm. If the broker does not wish to act as an intermediary, nothing requires the broker to do so. If the broker’s policy is to offer services as an intermediary, both parties must authorize the broker in writing before the broker may act as an intermediary or appoint license holders to work with each of the parties.

Yes.

When the listing agreement or buyer representation agreement has come into existence but no intermediary status yet exists, the broker may advise the parties generally on these matters. Once the intermediary status has been created, the intermediary broker may not express opinions or give advice during negotiations. When asked questions by the client, the intermediary broker may supply information about matters that do not constitute an opinion or advice. For example, the intermediary could tell the buyer what the prevailing interest rate is without expressing an opinion or giving advice. These same rules apply to an associated license holder acting as an intermediary without appointments made by the intermediary broker. If appointments have been made, the associated license holder who has been appointed to a party may provide opinions and advice during negotiations to that party.

Nothing in TREC rules prohibits the co-listing of property. However, anyone wishing to co-list property would need to check with their local MLS to verify that co-listing is permitted since it is up to individual MLS boards to decide whether their rules will allow for co-listing. Texas REALTORS® does not have a co-listing form so brokers would need to consult with a private attorney who could draft one for them to address each broker’s obligations, liabilities, division of commission, and any other issues. Additionally, the NAR Code of Ethics provides that they cannot knowingly require a party to pay more than one commission except with their informed consent.

The TAR Buyer/Tenant Representation Agreement does contain language that states that the broker will seek to obtain payment of the broker's fees from the seller, landlord, or their agents, but provides that if the buyer agent does not receive all or any of the specified commission from those sources, then the buyer/tenant is obligated to pay that commission (or the difference in the amount specified in the agreement and the amount paid by the seller, landlord, or their agent). This provision can also establish a legal claim to a fee from a buyer who has purchased a home during the term of the agreement using some other agent to complete the purchase contrary to the buyer's agreement to use the broker named in the buyer representation agreement. Brokers should clearly explain the buyer's potential fee obligations under this paragraph of the agreement when they first present the representation agreement to the buyer for signing. Clarity of the parties' rights and obligations in the broker/client relationship is one of the main reasons for having a written brokerage agreement.

No. The Real Estate License Act requirements apply to other types of real estate transactions, including leasing, commercial, new home, and farm and ranch sales.

No. These are two separate requirements. The IABS form is does not meet the law’s requirement to disclose representation of a party.

A license holder must disclose which party she represents at the first contact with another party or another license holder representing a party in a proposed transaction. For example, disclosure must be provided when a seller’s agent meets the buyer (who is unrepresented or working with an agent), or when a buyer’s agent meets the seller’s agent. In either scenario, the disclosure can be oral or in writing, but it’s easier to prove you’ve made the disclosure if it’s in writing. There is no required language for this disclosure.

To meet the requirements of Section 1101.558 of The Real Estate License Act, you will need to disclose either orally or in writing who you represent at first contact with the buyer. Of course, it will be easier to prove you’ve provided this disclosure if it’s in writing. You’ll also need to provide the buyer with the Information About Brokerage Servicesform upon first substantive communication regarding a property.

If an unrepresented buyer presents an offer on a home where you represent the seller, the buyer is a customer—not a client—and intermediary rules do not apply to the situation. A broker acts as an intermediary when representing the buyer and the seller in the same transaction.

At the first substantive communication with a party about a property, a license holder must provide the Information About Brokerage Services form (TAR 2501, TREC IABS 1-0). The IABS form is promulgated by TREC to satisfy The Real Estate License Act’s requirement that a license holder provide written notice in at least 10-point font that:

• Describes the ways a broker can represent a party to a real estate transaction, including as an intermediary

• Outlines the basic duties and obligations a broker has to a party the broker represents

• Provides the name, license number, and contact information for the license holder and the license holder’s supervisor and broker, if applicable.

Yes. A license holder is not required to provide the notice if any of these situations applies:

• The proposed transaction is for a residential lease of less than one year and a sale is not being considered

• The license holder meets with a party who the license holder knows is represented by another license holder

• The communication occurs during an open house for any prospective buyer or tenant and the communication concerns that specific property.

Yes. The IABS form can be delivered in the following ways:

• Personally delivered by a broker or sales agent

• Through first-class mail or overnight common carrier delivery service

• In the body of an email

• As an attachment to an email, or a link within the body of an email, with a specific reference to the form in the body of the email, which is the part above your name and contact information in your signature block.

Yes. You may do so in the body of an email. You can also add it as an attachment to an email or a link within the body of an email, as long as there is a specific reference to the form in the body of the email above your name and contact information. License holders can reproduce the IABS form provided that the text is copied verbatim and the spacing, borders, and placement of the text appears identical to that of the published IABS form, except you should complete the Broker Contact Information section.

Here’s an example of an appropriate way to link to the IABS form in an email:

Hi John,

I’m thrilled Sally referred you to me and I’d love to help sell your home. I always give a listing presentation to prospective clients. Do you have time to meet on Saturday so I can explain what my services entail?

By the way, Texas law requires all license holders to provide the Information About Brokerage Services form to prospective clients. Please review the linked document before we meet.

Thanks,
Jane Doe, REALTOR®
1234 Main St.
800-555-1213

Note that the hyperlink above goes to a blank IABS form. You must link to an IABS form that has your information in the Broker Contact Information section to comply with the law. Find information on how to link to your completed form in the May 2016 issue of Texas REALTOR® magazine.

No. A link to the IABS form in a footnote or email signature block does not meet The Real Estate Licensing Act’s requirements.

Yes. TREC rules require all active real estate brokers and sales agents to provide a link to the IABS form in a readily noticeable place on the homepage of their business website. The link must say “Texas Real Estate Commission Information About Brokerage Services” and must be in at least 10-point font. This requirement is in addition to the delivery requirements.

It depends. Brokers and agents must provide a link to the IABS form on their business website. According to the Texas Real Estate Commission, a business website means a website used to attract or conduct real estate brokerage activity. This may include a business Facebook page or other social media channels you use for business.

No. If you’ve provided a link on your business website and delivered the form electronically according to the requirements (see TREC rule 531.20), you do not have to provide it again in person.

Follow this order of signing documents so you have written agreements for payment of your fee before the parties sign a contract:

1. Have your buyer sign a buyer’s representation agreement. If the buyer signs the Residential Buyer/Tenant Representation Agreement (TAR 1501), you may want to point out that under Paragraph 11B, the buyer may be obligated to pay you if the seller refuses or fails to pay your fee.

2. Provide the seller with the Information About Brokerage Services form (TAR 2501, TREC OP-K) and discuss the agency relationships involved in this purchase. You may want to use the Representation Disclosure (TXR 1417) to memorialize in writing that the required representation disclosure has been made to the seller.

3. Complete the Registration Agreement Between Broker and Owner (TAR 2401) and check the box (Section 4) in the broker’s representation section that indicates you are representing the prospect only. Have the seller sign this document.

4. Give the seller the Seller’s Disclosure Notice (TAR 1406) to complete and sign.

5. Present your buyer’s offer for the seller’s consideration and signature.

Remember, even though your client is the buyer, you have an obligation to treat the seller fairly and honestly. Avoid actions that might be construed as pressuring the seller to sell the property to your client.

License holders have two requirements under Section 1101.558, Representation Disclosure, of The Real Estate License Act:

• To disclose which party they represent to other parties or license holders who represent another party in a proposed real estate transaction

• To provide information about brokerage services to prospective buyers, sellers, tenants, and landlords.

The first requirement is a disclosure, which can be provided orally or in writing. The second requirement is a written notice, which must be provided to prospective parties to a proposed transaction for a property through the Information About Brokerage Servicesform promulgated by the Texas Real Estate Commission.

No. A buyer-representation agreement is a contract between a buyer and a broker, not a salesperson. As such, your buyers would still be represented by your previous broker. However, your buyers can ask to be released from the buyer-representation agreements with your previous broker.

No. A relationship between a broker and a client can legally exist without a written document. However, there are four good reasons why a broker-client relationship should be in writing, whether it’s with a buyer, seller, landlord, or tenant:

1. A broker cannot sue for a commission unless there is a written agreement signed by the party agreeing to pay that commission.

2. If office policy permits a broker to act as an intermediary (the broker has a broker-client relationship with both the seller and the buyer in the same transaction), then the broker must obtain the written consent of each party and it must state who will pay the broker. The Texas REALTORS® buyer's representation agreements and listing agreements include the necessary written consents and other statutory requirements for a broker to act as an intermediary.

3. Written agreements between a broker and his client help ensure that all parties have mutually agreed on the terms of representation.

4. Article 9 of the Code of Ethics requires that REALTORS®, for the protection of all parties, assure whenever possible that all agreements related to real estate transactions are in writing.

While it is proactive for you to provide the form on your Web site, Section 1101.558(c) of the Real Estate License Act requires that a licensee furnish the written statement contained in the form to a party to a real estate transaction at the time of the first substantive dialogue with the party. The Real Estate License Act defines "substantive dialogue" to mean a meeting or written communication that involves a substantive discussion relating to specific real property. The term does not include a meeting at an open house or a meeting or written communication that occurs after the parties to a transaction have signed a contract or lease. In the situation you describe, the Real Estate License Act would require you to provide the form to the prospective buyer when you first meet him at the listed home. Note: A licensee is not required to provide the written statement (the form) if the proposed transaction is for a residential lease for not more than one year and no sale is being considered, or the licensee meets a party who is represented by another licensee.

Assuming an agreement with the listing broker as regards cooperation and compensation, you may represent the buyer as an exclusive agent. You cannot be appointed by the intermediary because you are not an associate of the listing broker, and from the facts as you describe them, no intermediary status is going to arise. Confidential information obtained from the seller when you were acting as the seller's agent, of course, could not be disclosed to your new client, the buyer.

At the time a property is listed, the licensee is obligated to advise the owner as to the licensee's opinion of the market value of the property. Once appointments have been made, the appointed associates are permitted, but not required, to provide the party to whom they have been appointed with opinions and advice during negotiations.

It depends. If you have created an agency relationship in which you’re representing the buyer—even if you haven’t signed a representation agreement—then you have a fiduciary duty to the buyer and you are not a subagent of the seller. 

A subagency relationship is not as common as it used to be, but it usually arises when a buyer who is not represented uses the services of a broker to view a property. That broker then owes a fiduciary duty to the listing broker and the seller—not the buyer—and the buyer is treated as customer of the broker. It is important that a broker in this situation obtain permission from the listing broker, and explain his or her role to the buyer to avoid any confusion.    

To disclose their representation of a party upon the first contact with a party or a licensee representing another party.

Section 1101.561 of the Real Estate License Act provides that if the broker will represent both the buyer and the seller in the transaction, the broker must act as an intermediary. One may not agree to act as a dual agent and comply with the Real Estate License Act.

The disclosure may be oral or in writing. Licensees must provide the parties with the written statement titled Information About Brokerage Services at their first substantive meeting. This information simply defines several types of agency relationships. The licensee should clarify which party he represents and make that representation clear to all parties. The Information About Brokerage Services form encourages the consumer to enter into a written agreement with a broker if the consumer wants to be represented.

Your broker may represent the buyer if your broker has chosen to offer intermediary services. You and your broker must take a few steps to comply with the requirements of the Texas Real Estate License Act (TRELA) and to ensure all parties understand the situation.

You must provide the buyer with the Information About Brokerage Services (IABS 1-0, TXR 2501) form upon first substantive dialogue, which in this case is when the buyer approaches you about representation. You must also disclose—verbally or in writing—that your broker is representing the seller.

If the buyer chooses to have your broker represent him or her, the buyer can enter into a representation agreement with the broker. Written consent that specifies the source of the broker’s compensation is required from all parties before a broker can serve as an intermediary. The Residential Real Estate Listing Agreement, Exclusive Right to Sell (TXR 1101) and the Residential Buyer/Tenant Representation Agreement (TXR 1501) satisfy this requirement.

Next, the broker should notify the buyer and seller of whether the broker will appoint licensed associates to provide advice and opinion to each of the parties by providing the Intermediary Relationship Notice (TXR 1409) and having the buyer and seller sign it. The broker would then appoint an associated license holder to the buyer and a different associated licensed holder to the seller. You could be one of the agents appointed. If the broker is not going to make appointments then the broker would be the intermediary and any associated license holders of the intermediary would be required to function as an intermediary, would not be permitted to provide advice or opinion to either of the parties, and would not be allowed to favor one party over the other.

Standard of Practice 1-9 requires that REALTORS® preserve confidential information provided by clients in the course of the agency relationship after the termination of the relationship. But it seems clear that sales data provided to the MLS upon the sale of the property would not be considered confidential information protected under this obligation. Publication of the sold data in the MLS would remove any possible confidentiality protection that might be given to that information under agency law. A more difficult issue might be presented if the former sale was conducted outside of an MLS and no sales data was made available to parties outside the transaction. Under those circumstances, an argument could be made that the sales price might be entitled to confidentiality treatment by the buyer's agent, and he should obtain the consent of the former client to release that information to the potential buyer. Absent some confidentiality agreement between the buyer and seller and their agents in the former transaction, the sales data probably would not be considered to be protected confidential information since it was known to the seller and his agent. Furthermore, Section 1101.804 of the Real Estate License Act specifically provides that a licensee shall not be liable to any other person for providing sales prices or terms of sale information for the purpose of facilitating the sale of real property unless the disclosure of that information is otherwise specifically prohibited by statute.

Yes, it is OK for you to represent the seller in this situation. However, you should make it clear to this new client that you cannot reveal to him any confidential information provided to you by your former client unless that client consents to the release of that information to the seller. While there may be little confidential information obtained from the buyer that would be of interest to the seller, it should be noted that information about material defects in the property is not considered confidential information under the Code of Ethics or the Real Estate License Act. Thus, if you had obtained material information about the property while representing your former buyer client, you would be required to disclose that information to the seller and any subsequent buyer of the property during your representation of the seller.

No, there isn’t a form available for this purpose. Past agency disclosure forms led to misuse and misunderstandings about the nature of those forms and their intended purpose. Don’t confuse this representation disclosure with the written notice about brokerage services.

Verbal or written disclosure of representation is acceptable, but it should be done upon first contact with another party to the transaction or with another licensee representing a party to the transaction. In this scenario, your call or email response will be the first contact with this prospective buyer.

If a contract is subsequently executed by your seller client and this prospective buyer, a written notation of who you represent will be provided in the Broker Information section of the TREC contracts.