Saturday, 23 September 2017

TREC Passes New Limited Service Rule

Written by Posted On Wednesday, 23 February 2005 00:00

On Monday, February 21, 2005, the Texas Real Estate Commission (TREC) passed a rule that requires brokers to perform a minimum standard in services, which has the hope of raising overall service standards for the state. But "discount" brokers see the rule as the state's way of supporting the Realtor lobby to limit competition, which may lead to a contentious "public comments" period.

Arguments tend to be self-serving -- that consumers deserve to market their homes in the MLS without paying for the full service of a listing, or selling broker, which benefits those who want to operate a near-virtual business without supplying time-consuming and high-risk service. The MLS then would become a simple advertising vehicle that could kill the industry, suggests others. It was never intended to be a consumer pawn, and should remain a business-to-business broker cooperative. But limited service is a brokerage service, rejoin the discounters. It's not a service when the seller doesn't understand what they're getting into and asks help of the buyer's agent, who doesn't even represent the seller.

And so it goes, back and forth.

The new rule specifically addresses limited service in The Texas Administrative Procedures Act, under Section 535.2 -- Broker's Responsibility. The proposed rule changes are signaled by italics.

(a) A broker is responsible for the authorized acts of the broker's salespersons, but the broker is not required to supervise the salespersons directly.

(b) A real estate broker acting as an agent owes the very highest fiduciary obligation to the agent's principal, and is obliged to convey to the principal all information of which the agent has knowledge, and which may affect the principal's decision. A broker is obligated under a listing contract to negotiate the best possible transaction for the principal, the person the broker has agreed to represent.

(c) A broker is responsible for the proper handling of escrow monies placed with the broker, although the broker may authorize other persons to sign checks for the broker.

(d) In negotiating for his or her principal, a broker shall provide the following services:

  1. accept and present to the principal, offers and counter-offers to buy, sell, or lease the principal's property or property the principal seeks to buy or lease;

  2. assist the principal in developing, communicating, and presenting offers, counter-offers, and notices that relate to the offers and counter-offers; and

  3. answer the principal's questions relating to offers, counter-offers, and notices.

(e) Under §1101.652(b)(22) of the Act, a broker may not negotiate or attempt to negotiate the sale or lease of property with a principal with knowledge that, the principal is a party to an outstanding written contract that grants exclusive agency to another broker. Under §1101.652(b)(27) of the Act, a broker may not aid, abet, or conspire with another to circumvent the Act. A broker who represents a principal under a listing contract that grants an exclusive agency to the broker may not instruct or authorize another broker who represents another party in the transaction to negotiate directly with the principal.

(f) When a broker delivers an offer or counter-offer to another broker, the broker is not negotiating or attempting to negotiate, with a principal he or she does not represent by delivering a copy of the offer, or counter-offer to the principal he or she does not represent so long as, the broker representing the principal consents to the delivery and the broker who makes the delivery does not discuss or attempt to discuss, the terms or conditions of the offer or counter-offer with the principal he or she does not represent.

As the state's regulatory agency for real estate brokers and salespersons, among others, TREC has the state Attorney General's Office opinion that the commission does in fact have the authority to enact such a rule change, even though critics of the rule changes suggest that the Federal Trade Commission may be looking over the organization's shoulder while it does so.

Realtor Aaron Farmer, owner of Texas Discount Realty, plans to ask the FTC for comments on whether a rule that requires brokers to supply a minimum number of services to consumers is anti-consumer and anti-competitive.

"It's basically a watered-down version of the previous rule they tried to enact," says Farmer. "What they didn't take into account is that there are a lot of mainstream brokers doing limited service, particularly on behalf of builders. The actual listing agent isn't involved and the buyer negotiates with the builder's rep. I've heard Realtors get up and say 'We don't want FSBOs doing this,' but it is a slippery slope because some builders only build one home a year, and a lot of my clients are attorneys, and they want access to the MLS. It is cheaper for them to come through me."

But Farmer is an isolated objector who admits that other limited service brokers have not come forward publicly and seem willing to let him take the arrows in the back alone. In fact, the momentum to support the new rule is significant. It was no less than the chairman of the board of the Texas Association of Realtors Lance Lacy who pled the case to the TREC, say witnesses to the Monday event.

Says TREC general counsel Loretta Hays, "The Texas Administrative Procedures Act provides for a 30-day notice and comment period for proposed rule revisions. The proposed rule revisions will be subject to the notice and comment period, and final action to adopt the revisions could take place at the April 25 commission meeting. The earliest effective date after adoption would be 20 days after the date filed with the Secretary of State."

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