Stay Out of Trouble!

Texas REALTORS® instructor Steve Stovall teaches the course 43 Ways to Lose Your License. The broker/owner of Stovall, REALTORS® with Berkshire Hathaway HomeServices in Abilene developed the material based on The Real Estate License Act.

And that’s just one set of regulations. You must also adhere to TREC rules, local regulations, MLS rules, the Real Estate Settlement Procedures Act (RESPA), and the NAR Code of Ethics.

This has surprised some of the agents Stovall taught. “They don’t know the Code of Ethics. They don’t really understand their local MLS rules. Maybe they hit some of the highlights in their classes, but they don’t talk about them over and over. The knowledge doesn’t stick.”

Where Many Agents Have Challenges

Property sales generate the largest category of TREC complaints. These complaints could be based on earnest money, negligence, rebates, or referrals.

Understanding your sales contracts inside and out is essential, Stovall says.

“The contract is the foundation of the real estate transaction, and TREC has been cracking down lately on agents practicing law,” he says. “Just read the contract. Most of the information you need is in there.”

The survey provision of the One to Four Family Residential Contract (Resale) (TXR 1601, TREC 20-17) can sometimes be a problem area for agents. In Paragraph 6, there are three boxes, only one of which needs to be checked, to state who will be responsible for paying for and providing the survey of the property.

Often, seller’s agents receive the contract with the box next to Paragraph 6C(1) marked by the buyer’s agent, who has assumed the seller has an existing survey. This box obligates the seller to provide an existing survey of the property and a Residential Real Property Affidavit promulgated by the Texas Department of Insurance (T-47 Affidavit).

If the seller does not have an existing survey and Paragraph 6C(1) is marked, then the seller will be responsible for paying for the survey that the buyer orders. Therefore, it is best for seller’s agents to go over Paragraph 6 with their seller before allowing the seller to sign the contract, and if they don’t have an existing survey, it is best to direct them to mark either Paragraph 6C(2) or (3).

Repairs are another challenging topic. “Repairs are an area where, if there’s going to be a lawsuit, it comes down to the seller making repairs and the buyer not feeling like they’ve been done correctly,” Stovall says. Agents need to be aware that this is a problem area and always provide receipts from qualified repair people who will stand behind their work.

Not including a full and complete legal description for the property can be another pitfall for agents, he adds, noting a recent TREC complaint on the topic.

This Could Happen to You

“After we look at the Texas Occupations Code, we look at the actual complaints that have happened,” Stovall says. “It’s like watching a train wreck: you’re sort of interested but it’s horrible.”

TREC disciplinary actions can be found at trec.texas.gov by selecting the Public dropdown menu and clicking Disciplinary Actions. There, you can search by name or license number, city, type of violation, and other options.

Stovall encourages agents and brokers to search the TREC violations. “It’s eye-opening,” he says. “They may realize, I’ve been doing that. I recommend they take very seriously their work with the contract, paperwork in general, and their interactions with clients.”

Chapter 1102 of the Texas Occupations Code describes the penalties and fines TREC may impose for violations. Penalties include reprimands, cease and desist notices, administrative penalties and fines, putting a real estate license on probation, temporary license suspension, and revocation of a real estate license. Some violations are considered misdemeanors and may be referred to criminal proceedings.

Fines for violations can be in the hundreds or thousands of dollars.

Training, Training, Training

Overall, agents put themselves at risk when they do business without enough training. Stovall advocates getting the training you need and making sure you understand it. There’s no magic number of courses or amount of time required. What matters is taking enough training to understand the rules and regulations.

“I’ve been licensed since 1989, and I’ve supervised quite a few agents,” he says. “I can tell you it depends on the person. Some agents pick up the training quickly and build a confidence level. It may just take them some basic training and on-the-job learning over three or four transactions to get to where they need to be. Other agents take years to get there, and I’m constantly looking over their work. It may not be because they intend to do things incorrectly. It just happens.”

Common mistakes can include overconfidence, talking too much, and unintentionally misrepresenting things, Stovall says. Some agents think interactions with other agents should be adversarial.

Newer agents—and their clients—can be better protected if they use forms provided by TREC and Texas REALTORS®. Checklists can be very helpful, even for longtime practitioners. Texas REALTORS® has a Residential Listing Checklist (TXR 1415) to assist with residential transactions.

More experienced agents are not immune from violating rules and receiving disciplinary action. Stovall says seasoned agents can become sloppy with paperwork if they become too busy. Keeping up with paperwork is key. TREC rules require that license holders keep the required paperwork for at least four years from the date of closing, termination of the contract, or end of a real estate transaction.

This is where the broker’s role is so important. Stovall recommends that brokers reinforce key topics in meetings. “Most brokers are not concentrating on the legal and contract aspects of the job. They’re focusing on prospecting, advertising, social media, and all of that. But we’ve got to have these foundations in place or else we’ll lose our professionalism.”

Training and supervision are essential components of a broker’s responsibilities, as described in TREC Rule 535.2. “It’s serious business when helping someone with the sale of a home,” he continues. “The rules are there to protect the customers. We need to follow the rules so not just the consumers are protected; we protect ourselves, too.”