TREC TREC Ethics and Professional Conduct 1 — Questions and Answers
Question 1: Under the Texas Real Estate License Act, what is the primary duty of a licensee acting as an intermediary?
- To represent the buyer exclusively
- To represent the seller exclusively
- To facilitate the transaction while treating both parties fairly and honestly (Correct answer)
- To act solely in the broker's financial interest
Correct answer: To facilitate the transaction while treating both parties fairly and honestly
An intermediary must treat both parties fairly and honestly and may not disclose confidential information of either party without consent.
Question 2: A Texas licensee must disclose their license status when:
- Only when asked by the client
- Whenever they are buying or selling property on their own behalf (Correct answer)
- Only during the first meeting with a client
- Only if the transaction exceeds $500,000
Correct answer: Whenever they are buying or selling property on their own behalf
TREC rules require licensees to disclose their license status in writing whenever they purchase, sell, or lease property for their own account.
Question 3: What does the Texas Real Estate License Act prohibit regarding 'net listings'?
- They are allowed if both parties consent
- They are prohibited because they create a conflict of interest (Correct answer)
- They are only allowed for commercial properties
- They must be approved by TREC in advance
Correct answer: They are prohibited because they create a conflict of interest
Net listings are prohibited in Texas because they create a conflict of interest where the broker profits more by obtaining a higher price, regardless of the seller's needs.
Question 4: A licensee who discovers a property has an undisclosed material defect is required to:
- Keep it confidential to protect the seller
- Disclose it to the buyer regardless of the seller's wishes (Correct answer)
- Only disclose it if the buyer specifically asks
- Report it only to the broker, not the buyer
Correct answer: Disclose it to the buyer regardless of the seller's wishes
Texas licensees have a duty to disclose known material defects to buyers even if doing so is contrary to the seller's instructions.
Question 5: Under TREC rules, commingling refers to:
- Mixing client funds with the broker's personal or business funds (Correct answer)
- Combining multiple client files into one folder
- Sharing a commission with an unlicensed person
- Advertising multiple listings in a single ad
Correct answer: Mixing client funds with the broker's personal or business funds
Commingling is the illegal practice of mixing client trust funds with a broker's personal or business operating funds.
Question 6: What is 'conversion' in the context of TREC ethics?
- Changing a property from residential to commercial use
- The unauthorized use of client funds by a licensee for personal purposes (Correct answer)
- Converting a client's lease to a purchase contract
- Switching a client from one broker to another
Correct answer: The unauthorized use of client funds by a licensee for personal purposes
Conversion is the illegal act of a licensee using client trust funds for their own personal benefit, and it is grounds for license revocation.
TREC TREC Ethics and Professional Conduct 1
Under the Texas Real Estate License Act, what is the primary duty of a licensee acting as an intermediary?