Texas Real Estate Broker Exam - State Portion

Key Concepts

Commission membership. The Texas Real Estate Commission consists of nine members appointed by the governor with the advice and consent of the senate: six who have been engaged in the brokerage business as licensed brokers as their major occupation for the five years preceding appointment, and three who represent the public. Each member must be a qualified voter (TRELA Sec. 1101.051(a), (b)).

Terms and vacancies. Members serve staggered six-year terms, with the terms of three members expiring January 31 of each odd-numbered year. If a vacancy occurs during a term, the governor appoints a person to fill the unexpired term (Sec. 1101.055).

Grounds for removal. Including: lacking or failing to maintain the qualifications of Sec. 1101.051(a)/(b) or 1101.052; ineligibility under Sec. 1101.053; inability to discharge duties for a substantial part of the term; or absence from more than half of the regularly scheduled commission meetings the member is eligible to attend during each calendar year, unless excused by majority vote of the commission. The validity of a commission action is not affected by the existence of a ground for removal (Sec. 1101.057(a), (b)).

Key Concepts

Activities requiring a license / exemptions - A person may sell or offer to sell an option, or assign an interest in a contract to purchase real property, without a license only if the person (1) does not use the option or contract to engage in real estate brokerage and (2) discloses in writing the nature of the equitable interest to any seller or potential buyer. Omitting that written disclosure means the person is engaging in real estate brokerage (TRELA §1101.0045). - An attorney in fact holding a valid power of attorney recorded in the county where the property is located and specifically describing the property may act for the owner unlicensed, provided the person does not use powers of attorney for more than three real estate transactions per calendar year (22 TAC §535.32; see also §1101.005(2)). - A Texas-licensed attorney is exempt from the Act but cannot sponsor sales agents or act as designated broker unless also licensed as a broker (22 TAC §535.31). Public officials are exempt while performing official duties (§535.33). - A business entity must designate one of its managing officers as its broker and must carry errors and omissions insurance with a…

Key Concepts

Canons of Professional Ethics and Conduct (22 TAC Ch. 531) - Fidelity (§531.2): a license holder acting as agent is a fiduciary; primary duty is to represent the client's interests, treat other parties fairly, and place no personal interest above the client's. - Integrity (§531.3): special obligation to exercise integrity, "including employment of prudence and caution so as to avoid misrepresentation, in any way, by acts of commission or omission." - Competency (§531.4): be informed on local market issues and conditions in the geographic area served; be informed on national, state, and local industry issues and developments; exercise judgment and skill in brokerage activities; be educated in the characteristics of the specific type of real estate being brokered for others. - Discriminatory practices (§531.19(a)): no inquiry about, response to or facilitation of inquiries about, or disclosure indicating preference, limitation, or discrimination based on race, color, religion, sex, national origin, ancestry, familial status, or disability. "Disability" includes AIDS, HIV-related illnesses, or HIV infection as defined by the CDC (§531.19(b)).

Key Concepts

Written buyer agreements (TRELA §1101.563). A license holder performing any act of brokerage for a prospective buyer of residential real property must sign a written agreement before showing any residential real property, or, if none will be shown, before presenting an offer (§1101.563(b)). The agreement must state the services, termination date, whether it is exclusive or non-exclusive, the representation status, and the amount or rate of compensation and how determined — and must disclose in conspicuous language that broker compensation is not set by law and is fully negotiable (§1101.563(c)). A showing-only agreement under §1101.562 may not be exclusive and may not state a termination date more than fourteen days from the date entered into (§1101.563(e)); a separate agreement is required if additional brokerage acts follow the showing (§1101.563(d)).

Showing without representation (§1101.562). Permitted only if the broker has no oral or written agreement to represent, is not otherwise the party's agent, gives no opinions or advice about the property or transactions generally, and performs no other brokerage act. Subsection (c) allows the broker to confirm size, price, and terms of the property.

Key Concepts

Mandatory use of TREC forms and exceptions (22 TAC §537.11(a)). When negotiating contracts binding the sale, exchange, option, or lease of any interest in real property, a license holder shall use only Commission-approved mandatory-use forms, except: (1) the license holder is functioning solely as a principal, not as an agent; (2) an agency of the United States government requires a different form; (3) the form was prepared by the property owner or prepared by an attorney and required by a property owner; or (4) no form has been approved for mandatory use and the license holder uses an attorney/trade-association-prepared form meeting §537.11(a)(4)(A), or a Broker-Lawyer Committee form approved for voluntary use.

Unauthorized practice of law (§537.11(b)). A license holder may not practice law; give legal advice; opine on legal effect or title status; draft or recommend language defining or affecting the rights, obligations, or remedies of the principals, including escalation, appraisal, or contingency clauses (b)(5); add informational items to a Commission form if the Commission has approved another form for mandatory use for that purpose (b)(6); discourage employing an attorney; or obtain legal advice from an attorney, directly or indirectly, for a principal in a transaction where…

Key Concepts

Homestead protections (constitutional) - Urban homestead: lots amounting to not more than 10 acres, contiguous, with improvements; may be used both as an urban home and as a place to exercise a calling or business (Tex. Const. Art. XVI, Sec. 51). A homestead not in a town or city is limited to 200 acres and may be in one or more parcels. - Homestead shall not be partitioned among the heirs of the deceased during the lifetime of the surviving husband or wife, or so long as the survivor may elect to use or occupy it as a homestead, or so long as the guardian of the minor children is permitted, under order of the proper court, to use and occupy it (Tex. Const. Art. XVI, Sec. 52). - Spousal joinder: whether the homestead is separate or community property, neither spouse may sell, convey, or encumber the homestead without the joinder of the other spouse (Family Code Sec. 5.001). - Homestead improvement lien: contract must be in writing, signed by both spouses, executed before material is furnished or labor performed, and filed with the county clerk (Property Code Sec. 53.254(a)–(e)); it must be signed at the office…

Key Concepts

Trust money and records (broker narrative cases) - Trust money must be deposited in a trust account or delivered to an authorized escrow agent not later than the close of business of the second working day after the date the broker receives it, unless the principals expressly agree in writing to a different time (22 TAC §535.146(b)(3)). - On a party's written demand for trust money, the broker must pay the party entitled to it within a reasonable time, which the Commission has determined to be not later than the 30th day after the date the demand is made (22 TAC §535.146(d)(2)). - Trust account documentation: retain four years from the date the document is received or created by the broker (22 TAC §535.146(e)). - Transaction records (disclosures, commission agreements, substantive communications, offers, contracts and related addenda): readily available to the Commission at least four years from closing, termination of the contract, or end of the transaction (22 TAC §535.2(h)).