Texas Real Estate State Exam

Texas Real Estate (Dealers) License Act

Passed in 1939 and made it illegal to sell real estate in Texas without first obtaining a license

Texas Real Estate License Act

TRELA was passed in 1949 and created TREC. It consist of 9 members, 6 Brokers & 3 General public members; appointed by the governor and approved by 2/3 of the senate present. TRELA was codified as Title 7 of the Occupational code Chapters 1101 (broker and

What is TREC's authority?

to make rules and regulations, which have the full force and effect of law; to protect the public

TREC on education

TREC is authorized to inspect and accredit educational programs or courses of study in real estate and real estate inspection to establish standards.

TREC on Law

TREC can advise with reference to the laws it administers

TREC on Mediation

TREC does not mediate disputes between or among licensees concerning entitlement to sales commissions

TREC on Licensees

TREC does not recommend individual licensees to the public

TREC on Discipline

An employee of the commission specifically authorized by it pursuant to the Act, to conduct hearings and render final decisions in contested cases may suspend or revoke a license or reprimand or place on probation a licensee for a violation of the Act or

Real Estate Broker-Lawyer Committee

Drafts and revises TREC promulgated contracts. Thirteen members-6 lawyers, 6 Brokers, 1 public member.

TREC Investigations

TREC may, after receiving a written comlaint with proper evidence investigate the actions and records of a broker or sales agent. The complaint must be submitted within 4 years. If the complaint is to be paid from the recovery fund it must be filed within

TREC investigation of licensee

TREC may authorize a commission employee to file a signed written complaint against a licensee and to conduct an investigation if:
1. A judgement against the licensee has been paid from a recovery fund established under the Act.
2. The licensee is convict

Subpoena Power Investigations

TREC has the power of subpoena. TREC may compel by subpoena the attendance of witnesses for examination under oath and the production for inspection and copying of books, accounts, records, papers, correspondence, documents and other evidence relevant to

Subpoena Power Hearings

If the commission proposes to suspend or revoke a license, the person is entitled to a hearing before the commissioner. If that ruling is adverse to the license, they can appeal to a district court within 30 days.

TREC Complaints

A person may file a written complaint with TREC against a real estate licensee if the person believes the licensee violated TRELA. If TREC has jurisdiction, it will investigate the allegations by interviewing the persons, witnesses and relevant info. TREC

Complaint Priorities

TREC is required to maintain a system to act promplty and efficiently on complaints and must maintain a file on each complaint. TRELA requires that TREC assign priorities and investigate complaints using a risk based approach on the:
-Degree of potential

Refund to Consumer

TREC may order a licensee to pay a refund to a consumer as provided by an agreement resulting rom an informal settlement conference or enforcement order

TREC Advisory Letters

TREC may close a complaint file by issuing an advisory letter to the licensee. This is normally in more technical matters. An advisory letter is not a formal disciplinary action. The advisory letter is a notification that there were item reveled in the in

Informal Proceedings

In some cases the Deputy Director of Standards and Enforcement services (SES) may offer a complainant and respondent an opportunity to participate in an alternative dispute resolution process (ADR). The Deputy Director does not have the authority to compe

TREC Informal Case

TREC is required to adopt procedures governing informal disposition of contested cases. The informal contested case must provide the complainant and licensee the opportunity to be heard, which is similar to the ADR process. The contested case ADR requires

Temporary suspension

TREC's presiding officer for a case involving a consumer is required to appoint a disciplinary panel, consisting of 3 TREC members, to determine whether a person's license to practice should be suspended temporarily. The panel will temporarily suspend the

Citation Program

The Texas Association of Realtors (TAR) may issue a citation related to certain articles of the National Association of Realtors (NAR). If a citation is issued, the respondent is advised that he or she has the right to request a full due process hearing r

Hearings and Appeals: Hearings

TRELA subchapters O and P.
TREC may authorize a commission employee to file a signed written complaint against a licensee and to conduct an investigation if:
1. A judgement against the licensee has been paid from a recovery fund established under the Act.

Hearings and Appeals: Appeals

a. Appeal for Refusing to License: If the applicant is disapproved by TREC, the applicant may make an appeal within 10 days after reciept of the notice of disapproval. If no appeal is filed within 10 days, the ruling of the Commission stands
b. Appeal to

Penalties for Violaiton: Unlicensed Activity

A person acting as a real estate broker or sales agent without first obtaining a license commits an offense which is a Class A Misdemeanor. The penalty for each violation shall be set in an amount not to exceed $4000 and other penalties provided by law. E

Penalties for Violaiton: Authority for Disciplinary Actions

When in the judgment of the Commission a person has engaged in an act or practice which constitutes a violation of the Act, the County Attorney, District Attorney, or the Attorney General may maintain an action in the name of the State of Texas in the dis

Penalties for Violaiton: Penalties

A violation of the Act by any person (licensed or unlicensed) is a Class A misdemeanor. It is punishable by up to $4,000 fine or imprisonment for a term not to exceed one year or both. In case a person received money or the equivalent thereof, as a fee, c

Recovery Fund Creation

Created by TREC to pay aggrieved persons who suffer a monetary loss due to illegal acts of licensees. The fund is set up to protect the public. Brokers are required to display the "Consumer Information Form" to notify consumers of the recovery fund.

Recovery Fund Administration

The fund is administered by TREC. If a the end of the calendar year the fund is below $1 million, the commission is authorized to assess each real estate licensee on certification of their license during the following calendar year, a fee not to exceed $1

Recovery Fund Payment of Claims

Payment for claims arising out of the same transaction shall be limited in the aggregate to $50,000, regardless of the number of claimants and payments for claims based on judgments against any one licensed real estate agent may not exceed in the aggregat

Scope of Practice

Property, Real Property and Real Estate all have the same meaning when used in the license act. The terms broker and sales agent are used to describe those activities for which licensure is required. The Act makes no distinction as to the type of activity

Real Estate License Required:

1. Appraising non-federally related transactions. Licensees are allowed to give opinions of market value to assist the seller in establishing list price. Only licensed appraisers may give appraisals
2. Auctioneer selling real property. The auctioneer does

Easement or Right-of-Way

A person may not sell, buy, lease, or transfer an easement or right-of-way for another compensation, or with the intent or in the expectation or on the promise of recieving or collecting compensation, for use in connection with telecommunication, utility,

Real Estate License Exemptions

a. Attorneys in the state of Texas
b. Court appointed receivers, trustees, and guardians
c. Public officials in the conduct of their official duties
d. Auctioneer under the authority of a licensee
e. Executors and administrators of an estate.
f. On-site a

Real Estate License for Corporations

To be eligible for or renew a license, a corporation must designate one of its officers to act for it. The designated person must be a real estate broker as shown in the records of the commission.

Real estate License for a Non-Resident Broker

The Act permits Texas-licensed brokers to cooperate with and share earned commissions with persons licensed as brokers in other states (foreign brokers), but all negotiations within Texas must be handled by Texas licensees. A broker or salesman from anoth

Inspectors and Appraisers

1. A person may not act as a professional inspector for a buyer or seller of real property unless the person possesses a professional inspector license.
2. A person may not act as a real estate inspector unless the person possesses a real estate inspector

Licensing General Requirements

1. 18 yrs of age or older
2. Complete all educational requirements
3. Be a US citizen or legally admitted alien
4. Pass the State exam
5. Be a legal resident of Texas as the time of application
6. Satisfy the commission as to honesty, trust worthiness, in

Licensing Educational Requirements

Sales Agent: needs 180 core hours of real estate courses
Broker: 900 core hrs of real estate and 4 yrs active licensure

Transaction Document Verification:

While the applicant is not required to include copies of the transaction documents with the broker application the documents must be provided to TREC on request

Affidavit in Lien of Documentation

If an applicant is unable to obtain the appropriate documentation or signature of the sponsoring broker, the applicant must submit the following:
-a TREC Affidavit in Lieu of Documentation
-2 TREC affidavits in Support of Claimed Experience each affidavit


Competency as referred to in the Act shall be established by an examination prepared by or contracted for by the commission. It shall be of scope sufficient in the judgment of the commission to determine that a person is competent to act as a real estate

Grounds to Reject Application

The commission may reject any application for failing to meet any of the requirements listed above

Application Appeals

If the applicant is disapproved by TREC, the applicant may make an appeal within 10 days after receipt of the notice of disapproval. If no appeal is filed within 10 days, the ruling of the commission stands. If the applicant doesn't prevail at the appeal

Continuing Education

Sales Agent: 90 hrs for the 1st 2 yrs. 18hrs each yr after

Place of Business Requirements

1. Each resident broker shall maintain a fixed office within this state. The address of the office shall be designed on the broker's license.
2. If a broker maintains more than place of business he/she shall apply for, pay the required fee for and obtain

Change of Sales Agent Sponsorship

When the association of a sales agent with his/her sponsoring broker is terminated, the broker shall immediately return the sales agent license to the commission after notifying the sales agent in writing of the termination. The sales agent license then b

Inactive Status

A broker or sales agent that wants to be inactive must apply for inactive status before expiration of their license. If the broker has agents under his/her sponsorship, he/she must terminate sponsorship of those agents by giving written notice to the agen

Late Renewal Periods

Licensees may only late renew within six months of the expiration date of their license. After six months the person may obtain a new license by submitting to re-examination and meeting the requirements and procedures for obtaining an original license.

Assumed Names

When a person operates a business under a name other than his/her own, he/she must register that name with the county and the stae real estate licensing authority. A broker MUST notify TREC within 30 days of starting or stopping the use of an assumed name

Business Entity Licensing and Registration

A corporate broker's license is required to operate as a corporation. A sole proprietorship will not have to have a license. All Business Entities will be required to register in Texas with the Secretary of State

Business Entity Insurance Requirements

If the designated broker owns less than 10% of the business entity they are required to maintain E&O insurance of at least $1M

Unlicensed Assistants and Unlicensed Office Managers

Allowable Activities:
1. May sit at an open house as a hostess, attendant, or custodian but may not point out features of the property buy may distribute flyers or brochures about the property
2. Set appointments to show a listing and may "drive" the purc

Professional Ethics and Conduct: Fidelity

MOST IMPORTANT! .....A real estate broker of a sales agent, while acting as an agent for another, is a fiduciary. Special obligations are imposed when such fiduciary relationships are created.

Professional Ethics and Conduct: Interest of Client

The primary duty of the agent is to represent the interests of the client and the agent's position should be clear to all parties in a transaction. The agent, in performing duties to the client, shall treat other parities fairly.

Professional Ethics and Conduct: Faithful & Observant

The agent must be faithful and observant to trust placed in the agent, and be scrupulous and meticulous in performing the agent's functions.

Professional Ethics and Conduct

The agent must place no personal interest above that of the agent's client.

Professional Ethics and Conduct: Integrity

A broker or sales agent has a special obligation to exercise integrity in the discharge of their responsibilities, including employment of prudence and caution so as to avoid misrepresentation by acts of commission or omission

Professional Ethics and Conduct: Competency

It is the obligation of a real estate agent to be knowledgeable as a real estate brokerage practitioner. The agent should:
1. Be informed on market conditions affecting the business and pledged to continue education in the intricacies involved in marketin

Single Act

A single violation of the TRELA by a person required to be licensed is a violation of the Act

Grounds for suspension and revocation of License

1. Commingling of money
2. Offering real property for sale or lease without consent or knowledge of the Owner
3. Failing to specify in a contract a definite termination date that is not subject to prior notice
4. Acting in the dual capacity of a broker an

Unlawful Practice of Law

A licensee, not being licensed to practice law in this state, who, for consideration, drew a deed, note, deed of trust, will, or other written instrument that may transfer or otherwise affect title, unlawfully practiced law in violation of the Act. To adv

Trust Accounts

Brokers who hold funds for others, must maintain a separate trust account for the temporary placement of those funds. To mix those funds of other peoplewith the broker's personal funds is referred to as commingling. Likewise, a broker may not use such fun

Splitting Fees

A broker may divide a fee with other brokers licensed in Texas, with sales agents under the broker's sponsorship, or with brokers licensed in other state or country, provided the nonresident broker did not conduct any of the negotiations within Texas. Tex

Broker Price Opinions

Lecensees may do BPO's as long as they comply with the following requirements:
-Not referred to as an appraisal
-Is provided in the ordinary course of the person's business
-Related to the actual or potential management, acquisition, disposition, or encum


A licensee under the Act who represents a party in a proposed real estate transaction shall disclose (oral or written) that representation at the time for the licensee's first contact with another party to the transaction or another licensee who represent

Information about Brokerage Services

The Real Estate License Act requires that a licensee shall furnish to a party in a real estate transaction at the first conversation of substance with regard to real property, a written statement that sets forth generalized information relative to seller

Consumer Protection Notice

The Consumer Protection Notice must be posted at your place of business and on any and all websites and Facebook pages

Information About Brokerage Services Exceptions

The Information About Brokerage Services is not required if:
1. The transaction is for a residential lease for not more than one year and no sale is being considered
2. The licensee meets with a party who is represented by another licensee
3. The prospect

Sellers disclosure of property condition

1. Required on all single family property, regardless if the seller may have not occupied it recently
2. Also required by the For Sale By Owner sellers
3. Must be delivered by seller to buyer prior to the buyer making an Offer on the property
4. If not de

Seller's Disclosure Not Required

1. For property sold pursuant to a court order
2. By a trustee in a bankruptcy
3. For transfer to a mortgagee by a mortgagor or in successor in interest
4. In a foreclosure sale
5. In a decendant's estate, guardianship, conservatorship, or trust
6. For tr


Aids, HIV related inllness: An agent has NO duty to inquire about, make a disclosure of, or release info related to whether a previous or current occupant had or has such illness

Death on the Property

Murder or death caused by the property's condition MUST be disclosed to any potential buyer

Sex Offenders

Neither the owner (seller) nor the real estate agent have a duty to disclose that a nearby resident is a registered sex offender to any purchaser of a single family home

Water Penetration

The seller is not required to inform the purchaser of prior water penetration if the issue has been corrected and is no longer a defect. If the water penetration has not been corrected, then disclosure is required

Prior Inspection Reports

There is no statute or law that specifically states the prior inspection report must be provided to a purchaser of a property. Any known material fact noted in the prior inspection report must be disclosed to any purchaser to avoid any allegations of nond

Intermediary Practice

A broker may act as an intermediary between the parties if the broker complies with the Act and obtains the WRITTEN consent of each party to the transaction.
The broker acting as the intermediary shall:
1. Treat all parties honestly
2. May not disclose th

Intermediary Appoints

-There must be a written authorization from both parties. This is usually included in the Listing Agreement and the Buyers Representation agreement
-The intermediary may not appoint himself to either party
-The intermediary cannot make appointments to one

Intermediary Duties to Client

The creation of the agency relationship creates a duty between a licensee and aa principal called a Fiduciary Duty. The fiduciary duty is a relationship of trust and confidence between principal and agent. The law imposes on the agent duties of Obediance,

Intermediary Minimum Services

According to TRELA the broker who represents a party in a real estate transaction or who list real estate for sale under an exclusive agreement for a party is that party's agent. The broker must inform the party if the broker receives material information

Enforcing Compensation Agreements

1. A person may not bring an action for the collection of compensation for the performance in this state for real estate activity authorized by the Act without alleging and proving that the person was a licensed broker or sales agent at the time the servi

Broker's Responsibility for Acts of Sales Agent

1. Each real estate broker licensed pursuant to the Act is responsible to the commission, members of the public, and the broker's clients for all acts and conduct preformed under the Act by the broker or by a sales agent associated with or acting for the

Vicarious Liability

The 1995 Legislature made an attempt to limit some of the licensee's liability through an amendment to the TRELA. Te Act no provides the licensee is not liable for misrepresentation or concealment of material facts made by a party in a real estate transac

Termination of Agency Representation Agreements

At any time, the agency relationship may be terminated by either party; However an early termination without cause might expose the terminating party to liability under the representation agreement. Upon early termination of an agency agreement Might be d

Use of standard contract forms

Forms promulgated by TREC are REQUIRED to be used by licensees specifically for the type of real estate transaction the form is prepared for. These standardized contracts must be used by all licensees except when the services of a lawyer are used to prepa

Community Property

Property acquired after marriage. The concept is that the husband and wife contribute jointly and equally to their marriage and should share equally in any property purchased during marriage

Separate Property

Property acquired before the marriage or property acquired by gift, devise, or descent after marriage


If the owner of the property also resides on the property (owner occupied) the property is considered homestead property. No filing of any official documents are required. This protects the owner from the forced sale of their property due to outside debt

Deceptive Trade Practices Act (DTPA)

In Texas a consumer is protected by the DTPA. The act is designed to protect the consumer agains false, misleading, ordeceptive acts or practices when selling or leasing real estate. The consumer has two years from the date of discovery of the deception t

Decent and Distribution and Intestate Succession

If a person dies testate (have a will) the property is distributed according to the will. If a person dies intestate (not having a will) the property passes to his heirs. All community property passes to the surviving spouse if 1)there are no children 2)

Seller Disclosure Requirement

The seller of a property must disclose all material facts relating to the property and the title of the property

Landlord-Tenant Issues

The Texas Property Code contains many laws relating to landlords and tenants issues:
1) Interruption and exclusion by the landlord to lockout a tenant from the premises. A landlord may lockout a tenant only after proper notice (7 days) for non-payment of


A legal process by which the mortgagee's right to redeem a mortgage property usually because of non-payment of the mortgage payments. The property is foreclosed in the county where the property is located. The mortgagee must give a 30 day notice of the de

Short Sale

A transaction in which the seller's lender agrees to accept a payoff of less than the balance due on the loan. The lender may agree to this if the seller owes more on the property than the property is worth

Recording Statues

All documents are recorded in the county clerk's office in the county where the property is located. All documents must be acknowledged before a notary public. No document can be recorded unless it is first acknowledged. Recording gives legal priority to

Mechanic's and Materialman's Liens

Are liens that are placed on a property by persons or companies that have furnished labor and/or materials for the demolition or improvements of a property. In order to be entitled to a lien the contractor (provider of the service) must have had a contrac

Veteran's Land Board (VLB)

The Texas Veteran's Land Board was created in 1946 and allows Texas veteran's to borrow money at below market interest rates for the purchase of land in Texas. There is a minimum of 5% down payment and the VLB originates all land loans, not private invest

Holographic Will

A will that is completely handwritten, dated and signed is recognized in Texas. It is not required to be witnessed.


A written supplement or amendment to a will. Used to change a will without rewritting


A licensee may not call a number on the national do-not-call-list registry


A dispute resolution procedure where as an impartial person designed to encourage communication between the parties. The mediator does not need to be a judge, attorney or have any kind of license. The mediator is a neutral third party that for a fee hears


Much more formal than mediation. The arbitrator need not be licensed. Any parties to the dispute must agree in writing to arbitrate. If the parties cannot agree then the arbitrator may render a specific reward to the prevailing party. The winning party ma

M.U.D. District

A Municipal Utility District (MUD) is a political subdivision of the State of Texas authorized by the Texas Commission of Environmental Quality (TCEQ) to provide water, sewage, drainage and other services within the MUD boundaries. In addition to their co

Mold and Mold Remediation

The property is first checked for mold and mold remediation plan that specifies the quantities and location of the materials to be re-mediated is developed. After remediation has been performed a post assessment is done to ensure that the location is free


Is a naturally occurring fibrous mineral that has high tensile strength and is resistant to heat and most chemicals. Exposure to the airborne fibers may result in lung diseases including lung cancer. a seller is not required to have testing done but must

Radon Gas

I a gaseous radioactive element and is present in most all rock, soil, and water. The EPA states that radon causes lung cancer. A seller is not required to have a home tested, but must disclose radon if know to the seller.

Uniform Standards of Professional Appraisal (USPAP)

Is the document that can be considered the quality control standards applicable for real property analysis and reports in the United States. First developed in the 1980s

Member of the Appraisal Institute (MAI)

Is a membership designation give by the Appraisal Institute to appraisers who are experienced in the evaluation of properties, and who advise clients on real estate investment decisions.