TREC TREC Ethics and Professional Conduct 2 — Questions and Answers
Question 1: A licensee may share a commission with an unlicensed person:
- If the unlicensed person referred a client
- Under no circumstances — only licensed individuals may receive commission (Correct answer)
- If the broker approves in writing
- Only if the amount is under $500
Correct answer: Under no circumstances — only licensed individuals may receive commission
Texas law prohibits paying commission or compensation to anyone who does not hold an active real estate license, regardless of the circumstances.
Question 2: When must a Texas licensee provide the 'Information About Brokerage Services' (IABS) notice?
- Only at closing
- At the first substantive dialogue about a specific property (Correct answer)
- Only when the client signs a representation agreement
- Only for commercial transactions
Correct answer: At the first substantive dialogue about a specific property
TREC requires licensees to provide the IABS notice at the first substantive communication with a prospective buyer or seller about a specific property.
Question 3: What action should a listing agent take if a buyer's agent submits an offer that includes a material misrepresentation?
- Ignore it and submit to the seller anyway
- Refuse to submit the offer and report the issue to the appropriate party (Correct answer)
- Accept it on the seller's behalf
- Counter the offer without informing the seller
Correct answer: Refuse to submit the offer and report the issue to the appropriate party
A licensee must not facilitate a transaction involving a known material misrepresentation and should inform their client and take appropriate action.
Question 4: Under Texas law, a salesperson may receive compensation for real estate services only from:
- The client directly
- Their sponsoring broker (Correct answer)
- The title company
- Either the client or the broker
Correct answer: Their sponsoring broker
A salesperson may only receive compensation through their sponsoring broker — never directly from a client or third party.
Question 5: The concept of 'fiduciary duty' in real estate means a licensee must:
- Always get the highest commission possible
- Put the client's interests above their own (Correct answer)
- Disclose all offers to both parties simultaneously
- Recommend only properties listed by their brokerage
Correct answer: Put the client's interests above their own
Fiduciary duty requires a licensee to act in the client's best interest, placing the client's needs above the licensee's own financial gain.
Question 6: If a Texas licensee has a personal financial interest in a property they are selling on behalf of a client, they must:
- Withdraw from the transaction immediately
- Disclose that interest in writing to all parties (Correct answer)
- Obtain TREC approval before proceeding
- Only disclose if the interest exceeds 10%
Correct answer: Disclose that interest in writing to all parties
Any personal financial interest a licensee has in a transaction must be disclosed in writing to all parties to ensure transparency.
TREC TREC Ethics and Professional Conduct 2
A licensee may share a commission with an unlicensed person: