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Note: I am a real estate professional, not a lawyer. Nothing herein should be construed as legal advice or instructions. We previously discussed the Sales Price and Financing terms of the sales contract. This week will be short little section 5 — Earnest Money! Paragraph 5. When you purchase a home, the seller will almost always want to see some earnest money. Earnest money is money out-of-pocket that the buyer deposits with a third party escrow agent, usually a title company here in Texas, that is forfeit if the buyer reneges or, in legalese, defaults on the contract.
That money is held by the escrow agent until either closing, when the buyer will get it credited back, or the contract terminates, in which case, depending on why it terminated, the escrow agent will return the money to the buyer, or award it to the seller. When the seller takes their home off the market during the contract period, which can easily last two months, they are taking a huge risk that the buyer does not ultimately close.
A license holder's bankruptcy does not affect a pending complaint or limit disciplinary action by TREC. Yes, but a locator will be required to first obtain the consent of the apartment complex if the locator does not represent the tenant. A: Yes. A sales agent may own the firm but the business must be conducted through the sales agent's sponsoring broker.
Rule The sales agent must turn all money received over to the sales agent's sponsoring broker. 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. For additional information, read Rule See also Rules 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.
A person's license in another state or experience in real estate brokerage or any related business does not substitute for the educational requirements. 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.
The public needs to know the broker with whom they will have a legal agreement remember listing agreements, etc. 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.
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. 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. 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.
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. 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. Listing agreements are private contracts between a real estate broker and a seller.
You should contact a private attorney if you have any questions about extending a listing agreement. The intermediary may delegate to another license holder the authority to appoint 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. 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. 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.
Probably not. 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. 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.
No, provided you are an employee of the new home builder being an independent contractor is not enough. 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. Additional information about the two recovery accounts maintained by TREC are on our website. All business entities engaged in real estate brokerage activity, including partnerships, need to be licensed.
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 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. 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. 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.
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. 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.
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.
Yes, double-tapped grounded conductors neutrals are a deficiency and must be reported as such, unless otherwise approved and listed by the manufacturer.
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 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.
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.
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. A listing agreement is a private contract between a real estate broker and a property owner and is not promulgated by TREC.
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. You must use a form drafted by an attorney or a form supplied by either the buyer or seller. The Mediator, acting as a facilitator between the complainant and license holder, assists the parties in trying to reach an agreed settlement. If the parties reach an agreement, the Commission closes the complaint without further investigation.
The agreed settlement may or may not include some form of disciplinary action against the license holder. If the process does not result in an agreed settlement, the case proceeds through the normal complaint process. The dispute resolution process is kept confidential from each party and from other Commission staff.
TREC offers an informal settlement conference for any contested matter involving a license holder or registrant or certificate holder. The process is voluntary and must include the license holder, registrant or certificate holder, at least one public member of the Commission, and two staff members of TREC.
While the complainant may be present at the conference, they are not a party to the proceeding. At the conclusion of the informal conference, the Commission member or TREC staff may propose an informal settlement. The license holder, registrant or certificate holder may accept or reject the settlement offer. A final agreed order based on the settlement recommendation would conclude a contested case matter. Yes, for four years from the date a trust or escrow document is received or created by the broker.
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.
Brokers should be familiar with and follow the duties set out in Rule 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. A license holder is required to use contract forms adopted by TREC. A license holder should also be familiar with Rules 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.
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.
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.
If a broker maintains a trust account, it must be clearly identified as a trust account. 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. 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.
We do not provide advice on how to run or set up a referral-based brokerage business or LFRO. See, for example, Rules There are instructions and a complaint form on our website. Please note that although the complaint form is in a fillable pdf format, once you have completed the form, you need to sign it before sending it to TREC. For more information, see the Complaint Overview manual. When a broker maintains a trust account, documentary records of each deposit or withdrawal for that account must be retained for four years.
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. You are required to tell us within 30 days of a felony. 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. Additionally, you may not use your expertise to the disadvantage of others with whom you deal. 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.
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. 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.
Listing agreements are private contracts between the property owner and the real estate broker, not the sales agent. You may wish to consult with a private attorney regarding your legal rights as a homeowner. See also Chapter , Property Code. TREC does not have jurisdiction over manufacturers or dealers of manufactured homes.
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. 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. 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.
TREC does not have jurisdiction over builders. You may also wish to consult with a private attorney before any possible warranties or other legal remedies expire. 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 only acting in one capacity, you should file the complaint with the agency that regulates that function. Yes, Commission Rule 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. 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.
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. Yes, as long as the advertisement complies with Rule 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.
You should discuss the terms of the agreement with a private attorney. 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. TREC is unable to advise you in private contractual matters.
You should discuss the terms of the listing agreement with a private attorney. 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 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 You are prohibited from commingling this money with your own money. A security deposit can also be deposited in an account separate from the trust or escrow account, but this is not a requirement. The designated broker acting as a general partner must be an individual, not another business entity.
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. 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. Thus, for example, any authorization language in the special provisions of the standard Resale contract is not separate consent by a seller. 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 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. 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.
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.
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. 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.
When the sponsoring broker is a licensed business entity, it must have a designated broker to be active. 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.
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.
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. IABS , that license holders must use to comply with the statute. If the sales agent is an employee of the owner of the timeshare, the employee would not be required to be licensed. Generally no. As long as the attorney is licensed in Texas, they are exempt from the licensure requirements.
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. Yes, as with all license holders, this can only be done with the prior consent of the person the locator represents.
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.
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. 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.
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 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. The specific requirement to report the deficiency takes precedence over the general limitation against inspecting an photoelectric sensor. 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. The Commission can issue an order revoking the license of a locator found to have engaged in this practice. Under the Standards of Practice found in Rules 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 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. This form RSC-2 is required only when a residential service company agrees to pay a license holder for a service provided to or on behalf of the company. The form should indicate which license holders have received or will receive the payment.
If a license holder is not receiving a payment from the company, this should be noted as well. For all practical purposes, yes. 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. Please note that an inspector is not required to designate a condition as safe.
The absence of an anti-entrapment cover in a spa is not a required reporting item. 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. Unless specifically indicated otherwise, the Standards of Practice only address items that are present at the time of the inspection.
Yes, Section 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 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. It could be. 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.
Neither loose carpet nor floor squeaks, without further evidence of deficient conditions, is required to be reported as deficient. 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. Some TREC licensed home inspectors are also licensed wood destroying insect inspectors, and therefore, may inspect a home for termites, etc.
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.
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.
Texas law does not permit dual agency. 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. Yes, as long as the ad complies with Rule 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. 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.
The formation of a real estate contract requires "consideration" for the contract to be binding. In general, the buyer's promise to buy and seller's promise to sell is consideration.
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