information about brokerage services

Information About Brokerage Services

January 21, 2016 by khproperties Leave a Comment

We’ve talked about Information About Brokerage Services in the past on this site, but The Texas Real Estate Commission has launched a new version of the form, that is already in use and will be required use by all Texas real estate agents on February 1, 2016. This form is informational in nature and is not a contract between agent and client. It serves to inform the public about how real estate agency works in the state of Texas, so that buyers and sellers (as well as landlords and tenants) can fully understand how the agents can represent them in a real estate transaction. The new Information About Brokerage Services form should help clear up some of the issues found in the past iterations of the form and also now provides a clear and concise set of contacts for consumers should an issue arise. Let’s take a look at the new form, shall we? (You can download the form (PDF file) if you’d like to follow along.)

The New Information About Brokerage Services Form

The first section covers Types of Real Estate License Holders – either a broker or a sales agent. All real estate agents in Texas must be sponsored by a broker and all transactions are actually done through the broker, with the agent acting as their representative. It’s important to know that when you sign a Buyer Representation Agreement or a Listing Agreement, you might be sitting with an agent and talking to them, but you are actually signing a contract between you and the broker.

The second section covers a Broker’s Minimum Duties Required by Law. There are four duties that all brokers (and by extension their agents) must always adhere to: putting the interests of the client above all other interests (including their own), informing the client of any material information about the property or transaction that the broker has received, answer the client’s questions and present any offers or counter offers from the client, and treat all parties in a real estate transaction honestly and fairly. It should be noted that a client is defined as a person or party that the broker represents (typically through a written agreement such as the Buyer Representation Agreement or Listing Agreement).

The third and largest section of the Information About Brokerage Services covers how a real estate agent can represent a party in a transaction. This is the heart of the form and the reason the form exists. Let’s separate each part out and cover them separately:

As Agent for Owner (Seller/Landlord): This section covers what we would call a “listing agent.” When a real estate agent lists a home for sale (or lease), they become the agent of the owner through an agreement (typically and preferably through a written listing agreement) with that owner. At this point, an agent-client relationship is formed and the agent must perform the broker’s minimum duties (in the second section of this form) and must inform the owner of any material information about the property or transaction. The agent must do this even if the source of the information is the buyer or their agent. This is a crucial part of agency, as the agent representing the seller must pass on anything they know or discover. This is why a buyer or their agent should never tell the listing agent anything they don’t want the seller to know.
As Agent for Buyer/Tenant: Much like when the agent represents the seller, the buyer (or tenant) enter into an agreement to begin the agent-client relationship, typically and preferably in written form, such as the Buyer Representation Agreement. Once again, anything the real estate agent knows about the property or transaction must be passed to the buyer, including information given to the agent by the seller or their agent.
As Agent for Both – Intermediary: Intermediary is Texas’ form of disclosed dual agency. This situation can often be very confusing for buyers and sellers and we suggest you read our post on intermediary to get a better understanding of how it works. It is important to note, all parties to the transaction must agree in writing to allow intermediary and the written agreement must state who will pay the broker and in bold or underlined print outline the broker’s duties as an intermediary. These obligations for the broker are: they must treat all parties to the transaction impartially and fairly; they may, with the parties’ written consent, appoint a different license holder (agent) associated with the broker to each party to communicate with, provide opinions and advice to, and to carry out the instructions of each party (buyer and seller or tenant and landlord); and they must not, unless authorized in writing by the party, disclose the following: that the owner will accept a price less than the asking price, that the buyer (or tenant) will pay a price greater than the asking price, and any confidential information or information that a party specifically instructs the broker in writing not to disclose (unless required by law).
As Subagent: Subagents are license holders (agents) who aid a buyer in a transaction without any agreement in place to represent the buyer. This agent can assist the buyer, but does not represent them, and most importantly, the agent must place the interests of the owner (the seller or landlord) first. This is why we highly encourage any buyer to seek true representation through a written agreement, since according to the law of subagency, if you are not represented, everything you say as a buyer should be passed onto the seller. Confidentiality is a huge part of hiring an agent and moving through the process of a real estate transaction.

The fourth section is a basic warning to the consumer to always enter into any agreements in writing. This helps avoid disputes and also establishes the broker’s duties and responsibilities to you, your obligations under such an agreement, who will pay the broker for services, when payment will be made, and how that payment will be calculated.

The final section of the Information About Brokerage Services form contains the name, license number, and contact information (email and phone) for the brokerage, the broker of the real estate company, the supervisor of the agent, and the agent themselves. This gives the consumer a clear set of contacts for the company and their representatives should the need arise. It also clearly states their license numbers, which you can look up on the Texas Real Estate Commission website and will give you quite a bit of information about the agent or broker (including information about their continuing education and license status).

Remember, the Information About Brokerage Services is an informational form. The real estate agent will ask you to initial and date it, but it does not create any sort of contractual relationship or representation between the agent and you. The agent will ask for the initials/date for documentation purposes – to show that they did present you with the information (it’s required by law for an agent to provide you with this information).

Information About Brokerage Services: What’s All the Fuss?

April 8, 2014 by khproperties Leave a Comment

The Information About Brokerage Services form has been updated and is mandatory for use as of February 1, 2016. We advise you to take a look at the new form and our breakdown of what it all means.

The Information About Brokerage Services form is used in Texas real estate to help explain the ways in which a real estate agent works – who they represent and what their basic duties are when representing parties in a real estate transaction. It is a simple one page form that is required by Texas law to be given to prospective buyers, tenants, sellers, and landlords. If you’re talking about real estate with an agent, they should give you an Information About Brokerage Services form and you should sign it. It is not a contract and does not mean that person is your agent, rather it is an informational form and your signature acknowledges your receipt of that information.

Information About Brokerage Services: A Closer Look

Let’s break down the form into paragraphs and take a look at what it means…

Before working with a real estate broker, you should know that the duties of a broker depend on whom the broker represents. If you are a prospective seller or landlord (owner) or a prospective buyer or tenant (buyer), you should know that the broker who lists the property for sale or lease is the owner’s agent. A broker who acts as a subagent represents the owner in cooperation with the listing broker. A broker who acts as a buyer’s agent represents the buyer. A broker may act as an intermediary between the parties if the parties consent in writing. A broker can assist you in locating a property, preparing a contract for lease, or obtaining financing without representing you. A broker is obligated by law to treat you honestly.

The first paragraph of the Information About Brokerage Services form serves as a preamble and sets the stage for the explanations and definitions that follow. There are a couple of important takeaways in this paragraph.

The paragraph mentions a broker who acts as a subagent. In Texas, all agents work on behalf of the seller unless they have a written agreement with a buyer. This is called subagency – the agent is not directly hired by the seller, but works for them in finding a buyer for the home. This is a somewhat antiquated and confusing topic for many, but the way real estate law is written, this is how it works. However, a buyer may seek representation from an agent. This is done through a Buyer Representation Agreement. It’s interesting to note that buyer agency didn’t always exist and at one point in history all agents worked for the sellers no matter what. Luckily, buyer agency was created to give buyers more rights and representation during the home buying process.
The paragraph also mentions intermediary, which we have covered in depth before. Check out these articles: Inter-what? Intermediary in Texas Real Estate and Intermediary: Is it Right for You? for more information about intermediary and how it works in Texas real estate.

If the broker represents the owner:

The broker becomes the owner’s agent by entering into an agreement with the owner, usually through a written listing agreement, or by agreeing to act as a subagent by accepting an offer of subagency from the listing broker. A subagent may work in a different real estate office. A listing broker or subagent can assist the buyer but does not represent the buyer and must place the interests of the owner first. The buyer should not tell the owner’s agent anything the buyer would not want the owner to know because an owner’s agent must disclose to the owner any material information known to the agent.

Again subagency is mentioned in this paragraph. Although this paragraph is about owners (sellers), it is an important one for buyers to understand as well. It lays out the basic reason for wanting an agent representing you in a real estate transaction – without a Buyer Representation Agreement, the agent does not work for the buyer and therefore is required to disclose material information to the seller and/or seller’s agent. This is not beneficial to a buyer. Being represented by an agent as a buyer provides certain protections that are essential, particularly when negotiating a real estate contract.

If the broker represents the buyer:

The broker becomes the buyer’s agent by entering into an agreement to represent the buyer, usually through a written buyer representation agreement. A buyer’s agent can assist the owner but does not represent the owner and must place the interests of the buyer first. The owner should not tell a buyer’s agent anything the owner would not want the buyer to know because the buyer’s agent must disclose to the buyer any material information known to the agent.

This paragraph covers the buyer’s side of things. Again, representation by an agent (broker) gives the client a one-on-one connection with the agent. The buyer now has the peace of mind that their interests (as opposed to the seller’s) come first.

If the broker acts as an intermediary:

A broker may act as an intermediary between the parties if the broker complies with The Texas Real Estate License Act. The broker must obtain the written consent of each party to the transaction to act as an intermediary. The written consent must state who will pay the broker and, in conspicuous bold or underlined print, set forth the broker’s obligations as an intermediary. The broker is required to treat each party honestly and fairly and to comply with The Texas Real Estate License Act. A broker who acts as an intermediary in a transaction:
(1) shall treat all parties honestly;
(2) may not disclose that the owner will accept a price less than the asking price unless authorized in writing to do so by the owner;
(3) may not disclose that the buyer will pay price greater than the price submitted in a written offer unless authorized in writing to do so by the buyer; and
(4) may not disclose any confidential information or any information that a party specifically instructs the broker in writing not to disclose unless authorized in writing to disclose the information or required to do so by The Texas Real Estate License Act or a court order or if the information materially relates to the condition of the property.
With the parties’ consent, a broker acting as an intermediary between the parties may appoint a person who is licensed under The Texas Real Estate License Act and associated with the broker to communicate with and carry out instructions of one party and another person who is licensed under that Act and associated with the broker to communicate with and carry out instructions of the other party.

This section is one of the longer sections as intermediary is slightly more complicated. Read the previously mentioned articles for a great look at intermediary. Basically, it’s good to remember that all agreements between agents and clients are actually between the broker and the client, with the agent acting as a representative of the broker. Because of this, it becomes difficult to separate the duties to buyer and seller when the broker represents both. The last paragraph covers what we call “intermediary with appointments” which is arguably the better way to do things. This allows two agents from the same brokerage to represent their respective clients, so that both the seller and the buyer can both have full representation during the real estate transaction. Without it, one party would not get full representation when a brokerage’s buyer-client wishes to buy a brokerage’s owner-client’s home. In all situations, the agent must treat all parties honestly and to comply with The Texas Real Estate Licensing Act.

If you chose to have a broker represent you, you should enter into a written agreement with the broker that clearly establishes the broker’s obligations. The agreement should state how and by whom the broker will be paid. You have the right to choose the type of representation, if any, you wish to receive. Your payment of a fee to a broker does not necessarily establish that the broker represents you. If you have any questions regarding the duties and responsibilities of the broker, you should resolve those questions before proceeding.

The final paragraph wraps it all up. The big takeaway here? If you’re going to be represented, do it in writing. Whether you’re a buyer or seller, you should always seek to gain representation through a written contract, which your agent can provide to you. In the standardized contracts we use, the details of each parties obligations are laid out so that agent and their client know exactly what is expected of both, including information about how and by whom a broker will be paid.

The Information About Brokerage form is nothing to fear – it is simply an informational form that helps owners and buyers to understand how real estate brokerages function. It sets the stage for everything to follow once a brokerage takes on a buyer or seller as their client. It is educational in nature, which is why it is required by law in Texas to be given to the prospective client at the “first substantive meeting” so that they may be better informed about the role of the brokerage within their upcoming real estate transaction.