Instructor FAQs

Under the terms of the Short Form, the broker is only obligated to provide the client with access to property in the agreed upon market area. However, the broker must still comply with other legal and ethical duties found in the Code of Ethics, TREC Rules, and licensing laws. For example, Sec. 1101.557 of the TX Occupation Code requires license holders to, “at a minimum, answer the party’s questions and present any offer to or from the party”. 

You would only be able to show the property as a subagent of the seller. Under the NAR policy, REALTORS® are required to get a written agreement signed with a buyer when they are “working with a buyer”. In other words, when they are providing brokerage services or “representing” the buyer. Under Texas law, agents cannot practice in a “non-agency” capacity. Agents must represent someone in the transaction. So, if the buyer doesn’t want representation, the agent could only continue to help the buyer by working as a subagent of the seller. The agent would have to get the consent of the listing broker before acting as a subagent. If subagency is not available, the agent could not help the buyer. Because the buyer is refusing representation and the listing broker will not consent to subagency, the buyer would have to contact the listing broker to see the property. If faced with this situation, an agent should take the time to explain what “representation” means. A buyer may not fully understand that refusing to sign a buyer rep agreement means that no one is looking out for their best interest. And remember that the buyer representation agreement is flexible and can be completed with a term as short as one day and with no compensation. This may help a hesitant buyer feel more comfortable in signing a “representation” agreement to be shown a property.  

Agents and Brokers need to avoid any appearance of steering. MLS rules require agents to provide a list of all available properties based on their client’s objective criteria in the market area. The list of properties cannot be filtered based on compensation. Let the client decide which property they would like to see from the list. An agent should also explain that it’s possible a seller would consider paying buyer’s agent compensation through negotiations. A buyer would miss that opportunity if they only saw properties that offered a BAC upfront. 

A buyer has the right to choose whether they have representation in a real estate transaction. However, a seller can choose which offers to accept or reject. 

Yes. Under Texas law, a license holder must represent someone in the transaction. Either the seller, or the buyer, or both under intermediary. Texas law does not allow a license holder to practice in a “non-agency” capacity. An agent outside of the listing broker’s firm can host an open house as a subagent of the seller without getting written agreements with buyers. The agent would have to get the consent of the listing broker to act as a subagent. It’s important to remember that as a subagent, the fiduciary duty is to the seller. If the agent is not representing the seller as a subagent, they would have to represent the buyer. The agent is now “working with a buyer” and is required to get written agreements signed by each buyer. 

The title company will most likely continue with the closing and the buyer’s agent would have to seek enforcement of their agreement outside of the transaction. The buyer would be in default and the buyer’s broker can enforce the terms of the Buyer Representation Agreement. The broker has the right to terminate the representation when the buyer defaults. The broker could also file a civil action against the client for the agreed upon fee in the representation agreement. 

If the landlord is paying the tenant’s broker use the Compensation Agreement Between Broker and Owner (TXR 2401). The Addendum Regarding Brokers’ Fees (TXR 2406) is not used for lease transactions. Note: For broker-to-broker compensation with a lease, you can also use the Agreement Between Brokers for Residential Leases (TXR 2002). This form is written for lease transactions and has additional provisions specifically related to broker compensation with residential leases. 

There is no form for that. The parties can contact an attorney to draft language for that purpose. Also, this type of language would not be considered an “informational item”, and license holders should not write this kind of term in Special Provisions.

No. Seller is not obligated to pay the buyer’s agent unless they have agreed to pay in writing.

Yes. If TXR 2402 was negotiated and executed by the brokers, that agreement would create a binding contract for compensation. TXR 2406 is not required in this scenario. In this situation, where the Listing Broker is paying the Buyer’s Broker fees, TXR 2406 can still be used to provide information to the title company on how the parties are handling brokers’ fees but is not required. 

The amount inserted in paragraph 3 is a negotiable term. The parties should carefully consider what amount to insert, especially if that amount differs from the contract sales price, because it determines if the buyer has a right to terminate. Also, keep in mind that TREC rule 535.155(d)(11) states that an advertisement about the “value” of a property is false or misleading unless it is based on an appraisal that is disclosed and readily available upon request by a party or it is given in compliance with §535.17 regarding comparative market analysis. Listing brokers need to be careful when advertising the property as being “below value”.  

In general, it is a good idea to document what information was provided to the buyer and when that information was provided as a risk reduction practice, but the information from other sources form is not mandatory. It is up to the broker to determine when to use the form and what information to include in the form. 

No, assuming the buyer has signed a Texas REALTORS® Buyer/Tenant Representation Agreement (TXR 1501 or 1507). Permission from the buyer would not be necessary since they have already agreed, in Section 7. Broker Compensation, of the buyer rep agreement that their broker will be attempting to obtain payment of the agreed-upon compensation from the seller and/or the seller’s broker. 

Correct. Under this scenario, the seller has already agreed to compensate the buyer’s broker using TXR 2401. The buyer’s agent would have seen that the compensation in TXR 2401 was not enough to cover the broker’s fee when it was first signed. If the buyer’s agent is trying to re-negotiate the compensation, they would need to get a new TXR 2401 signed. On form TXR 2406, paragraph D(2) states to “(Check one box only)”. If the seller will pay the buyer’s broker directly, the parties should either use a separate agreement such as TXR 2401 or use paragraph D(2)(b) in TXR 2406, but not both.

Depositing of the earnest money is not required for the buyer to be allowed access to perform their inspections. Once the parties have executed the contract, the parties must comply with their obligations. Section 7(A) of the One to Four Family Residential Contract (Resale) (TXR 1601) requires the Seller to “permit Buyer and Buyer’s agents access to the Property at reasonable times. Buyer may have the Property inspected by inspectors selected by Buyer…” Allowing access to the property for inspections is one of the seller’s obligations once the contract is executed and continues through the time the contract is in effect. The contract is effective when signed by the parties, even if earnest money has not been deposited yet. Note: We don’t currently have an FAQ on this specific topic. We will consider adding this topic in the future. 

It depends on the contract and the law. Generally, the contract should spell out if there is any cure period or opportunity to cure after a notice is delivered. Contracts that have such a notice provision will specify how long the cure period is after notice is delivered. If the contract lacks a notice of default requirement, the non-defaulting party may immediately pursue default remedies if desired. Additionally, depending on the subject matter of the contract, there may be statutory provisions that require a party provide an opportunity to cure after notice has been given. 

It depends on the facts. The easy situation is when the contract or a paragraph says, “time is of the essence”. This phrase indicates that the parties consider the contract or paragraph to be a “material” part of the contract, and a court will strictly enforce any time deadlines. If the contract or paragraph doesn’t say, “time is of the essence”, then the court will use its discretion to determine if a provision is a “material” term. If so, the court can still treat a time deadline as “time is of the essence”, even if the contract doesn’t contain those exact words. If the court determines the provision is “immaterial”, the court has discretion to insert a reasonable time standard. 

The equitable interest rule under 535.6 does not specify how this disclosure is to be made other than it must be in writing. It would not be appropriate to attach this notice to the contract as an exhibit. The wholesaler should maintain a copy of the notice and document the date and manner in which the notice was provided. If they fail to make the disclosure, a complaint may be filed with TREC. 

Possibly. Brokerages that actively recruit new agents, and offer them tangible assistance, need to be familiar with the Business Opportunity Rule (BOR). If the BOR is implicated, then the brokerage must make certain required disclosures. In order to be subject to the BOR there are three elements that must be met:

1. A seller must solicit a prospective purchaser to enter into a new business (i.e. soliciting new agents to join your brokerage)
2. The purchaser must make a “required payment”; and
3. The seller must promise to provide one of three types of listed assistance:
   1. Provide locations for the use or operation of equipment, displays, vending machines, or similar devices, owned, leased, controlled, or paid for by the purchaser; or
   2. Provide outlets, accounts, or customers, including, but not limited to, Internet outlets, accounts, or customers, for the purchaser’s goods or services (i.e customer lists or leads); or
   3. Buy back any or all of the goods or services that the purchaser makes.

The “assistance” element is the most important consideration for brokerages that actively solicit new agents.  The BOR is triggered when the solicitation to join the brokerage promises “assistance” to the “buyer” (in this case, the salesperson) in return for a payment. “Providing accounts, including but not limited to, Internet outlets, accounts, or customers for prospective purchaser” would all be considered as “assistance” under the BOR. The BOR also states that “advertising and general advice about business development and training shall not be considered” as providing the assistance which would implicate the BOR.  Brokerages need to be careful about what kind of tangible assistance is promised to new agents, such as customer lists or leads, as this is what may trigger the required disclosures per the BOR. Brokerages that need to comply with the BOR should work with their attorney when making the required disclosures. For more information on compliance with the BOR please visit NARs site and speak with your brokerage attorney.

Standard of Practice 3-1 requires buyer’s agents to determine what, if any, compensation is being paid by the listing broker when initiating discussions to submit an offer. Keep in mind, there may be changes to the Code of Ethics, especially Article 3, when NAR next meets in November. There is no requirement that the buyer’s agent determines if there is compensation before showing the property. SoP 3-1 states that terms of compensation be ascertained “before beginning efforts to accept an offer of compensation”. There is an MLS rule that prohibits REALTORS® from filtering the list of properties provided to the buyer based on compensation. REALTORS® must provide the buyer with all properties that meet the buyer’s criteria. The agent can then discuss with their client when to find out if there is compensation available. A buyer may want to know compensation information before they visit property. A broker can also set an office policy regarding when to find out about compensation. Regardless of which approach is used; after providing the entire list of properties, agents should let the buyer decide which properties they actually want to visit. 

If this language is providing showing instructions, this is permissible. The seller can determine the rules regarding access to their listed property. If this language is referring to a condition a buyer’s agent must follow to receive compensation, it may violate MLS rules. NAR policy does not prohibit agents from setting conditions for receiving compensation. However, compensation information cannot be included in an MLS. Check with your local MLS to determine if they would consider this language permissible to include in agent remarks.