TX RE Broker cheat sheet

TREC administers the Texas Real Estate License Act (Occupations Code Chapter 1101) and adopts implementing rules in 22 TAC.

A Texas sales agent must be sponsored by a licensed broker; commissions are earned by and paid to the broker, who then splits with the agent.

The Information About Brokerage Services (IABS) form must be given at first substantive communication or before a contract is signed.

Brokers must keep trust and escrow records for at least four years; commingling trust funds with operating funds is prohibited.

An intermediary broker represents both parties only with each party's written consent and may not advocate for one side over the other.

Advertising by a sponsored agent must include the broker's licensed name; unlicensed assistants may not negotiate or discuss contract terms.

A broker is responsible for the brokerage acts of sponsored agents performed within the scope of the brokerage.

Texas licenses renew every two years and require 18 hours of continuing education, including TREC legal update and ethics courses.

A broker may not pay a commission for brokerage services to an unlicensed person.

Core fiduciary duties are care, obedience, loyalty, disclosure, confidentiality, and accounting (often remembered as COLDAC).

Loyalty ends when the agency relationship terminates, but the duty of confidentiality continues after termination.

Texas requires written agency agreements for buyer and tenant representation; agency is not presumed from the mere act of showing property.

Intermediary status requires written consent from both parties and fair, impartial treatment rather than advocacy for either side.

Texas does not permit undisclosed dual agency; a licensee must disclose in writing whom they represent.

A licensee must disclose known material defects about the property to all parties in the transaction.

A client receives fiduciary duties; a customer receives honesty, fairness, and disclosure but no fiduciary duties.

The accounting duty requires placing client funds in a trust account and providing an accounting of them on request.

Fiduciary duties arise when the agency relationship is created, not when the transaction closes.

Statute of Frauds: contracts for the sale of real property and leases longer than one year must be in writing and signed by the party to be charged.

Licensees must use TREC promulgated forms for covered transactions and may change them only by written addendum or strike-through where permitted.

Essential elements are offer, acceptance, consideration, capacity, lawful purpose, and a sufficient legal description of the property.

An option fee buys the buyer the unrestricted right to terminate during the option period; it is nonrefundable and separate from earnest money.

Earnest money must be deposited with the escrow agent within the time stated in the contract; failure to deposit is a breach.

The Seller's Disclosure Notice (Texas Property Code §5.008) is required for most residential resales, and the buyer may terminate for undisclosed defects within the stated period.

A third-party financing addendum makes the buyer's performance contingent on loan approval within the stated number of days.

TREC forms treat time as of the essence unless the parties agree otherwise; deadlines are calendar days unless stated as business days.

Amendments and notices must be in writing and signed by the parties to be effective.

LTV = loan amount divided by the lesser of the sales price or appraised value.

DSCR = net operating income divided by annual debt service; lenders commonly require 1.20 or higher for income property.

Texas Section 50(a)(6) home equity loans are capped at 80% combined loan-to-value and only one may be outstanding at a time.

Under the Homeowners Protection Act, PMI must be automatically terminated at 78% LTV based on the original value and amortization schedule.

TRID: the Loan Estimate is due within three business days of application; the Closing Disclosure is due at least three business days before consummation.

The APR includes interest, points, and certain finance charges, while the note rate reflects only the interest rate.

PITI = principal, interest, taxes, and insurance; escrow collects one-twelfth of annual taxes and insurance each month.

Discount points are prepaid interest; one point equals one percent of the loan amount and lowers the note rate.

Conventional conforming loans follow Fannie Mae and Freddie Mac limits; FHA loans require mortgage insurance premiums and have more flexible credit standards.

Texas is a community property state; property acquired during marriage is presumed community, while property owned before marriage or received by gift or inheritance is separate.

Fee simple absolute is the most complete form of ownership; a life estate ends at the death of the measuring life.

Tenancy in common has no right of survivorship; joint tenancy with right of survivorship does, and Texas requires clear language to create it.

A general warranty deed contains covenants of seisin, quiet enjoyment, warranty, and further assurance; a quitclaim deed conveys only the grantor's interest with no warranty.

A deed must be in writing, signed by the grantor, identify the grantee and property, and be delivered; recording provides constructive notice.

Texas homestead protection covers up to 10 urban acres or 100 rural acres (200 for a family), shielding the home from most creditors.

An easement appurtenant benefits a neighboring parcel and runs with the land; an easement in gross benefits a person or entity.

Title insurance insures against defects in title; the title commitment and survey are reviewed before closing.

Adverse possession in Texas generally requires 3, 5, 10, or 25 years depending on the statutory category and whether taxes were paid.

Sales comparison approach adjusts recent comparable sales to the subject; adjust the comparables, never the subject property.

Cost approach: value = replacement cost new minus depreciation plus land value.

Income approach: value = net operating income divided by the capitalization rate; cap rate = NOI divided by value.

Gross rent multiplier = sale price divided by monthly rent (or annual rent); it is a quick screening tool for income properties.

NOI = effective gross income minus operating expenses; debt service and income taxes are excluded.

Highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive.

USPAP requires independence, impartiality, and objectivity; a licensee's CMA is not an appraisal.

Depreciation appears as physical deterioration, functional obsolescence, or external (economic) obsolescence.

Adjustment rule: if the comparable is superior to the subject, subtract value; if inferior, add value.

Zoning is a municipal police-power regulation of use, height, bulk, and density; Texas has no statewide zoning code.

A variance grants relief from a dimensional standard such as a setback or height limit; a conditional or special use permit authorizes a use in a district.

A nonconforming use lawfully existed before the zoning change and may generally continue but not be expanded.

Extraterritorial jurisdiction gives a city platting authority outside its limits, ranging from about one mile to five miles based on population.

Subdivision platting requires local approval and compliance with infrastructure standards; impact fees may be imposed on new development.

Deed restrictions (CC&Rs) are private covenants enforced by owners or an HOA rather than by the municipality.

Eminent domain requires a public use and just compensation under the Texas and U.S. Constitutions.

Wetlands and floodplains trigger federal or state permits; FEMA flood maps drive insurance and building requirements.

CERCLA (Superfund) can impose liability on current owners and operators; a Phase I Environmental Site Assessment is the standard due-diligence screen.

In a gross lease the landlord pays operating expenses; in a net lease the tenant pays some or all of them (single, double, or triple net).

In a triple-net (NNN) lease the tenant pays base rent plus taxes, insurance, and maintenance, so base rent is lower.

Percentage rent = base rent plus a percentage of gross sales above a negotiated breakpoint.

Texas Property Code Chapter 92 governs residential tenancies; a landlord must give a three-day written notice to vacate before filing a forcible detainer suit.

Texas landlords must return a security deposit or provide a written itemized deduction list within 30 days after the tenant vacates and gives a forwarding address.

Fair Housing Act exemptions include owner-occupied buildings with four or fewer units and single-family homes rented without a broker or discriminatory advertising.

A property manager who leases or negotiates for others must hold a Texas real estate license; certain on-site managers of an owner's property are exempt.

A lease for more than one year must be in writing under the Statute of Frauds.

Common area maintenance (CAM) charges in commercial leases are reconciled annually, and caps, exclusions, and audit rights are negotiable.