Chpt 3 Law Of Agency

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Texas Board of Insurance also sets standard policy rates.

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Mortgagor is the borrower; mortgagee is the lender. If a buyer borrows to
purchase the property, most mortgagees (lenders) will require Title Insurance as a
condition of the loan.

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TREC-promulgated sales contracts specifically state that all surveys must be
made by a registered professional land surveyor acceptable to the Title Company and
any lender.

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TRELA 15 (c) states licensee not subject to criminal or civil prosecution for
failure to disclose; TRELA 15E states that the licensee has NO DUTY to inquire
about, or make disclosure related to; TREC Rule 531.19 (Canons of Professional
Ethics) however prohibits all such disclosures related to AIDS or HIV status.

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The federal law requires states to develop registration procedures but leaves
the methodology up to each state. Texas law requires released sex offenders to
register with local law enforcement officials. A district judge in Corpus Christi
actually ruled that certain offenders actually had to place a sign in their yard, but this
is under appeal.

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Texas law gives specific exemptions to owners of single-family residences
and real estate licensees from the duty to disclose. Many licensees feel compelled to
do so on ethical grounds, particularly if the licensee is a buyer’s agent. Regardless,
the TAR© version of the seller’s disclosure of property conditions points buyers to
the appropriate web site to conduct their own research

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The broker has an independent duty to avoid concealing material facts from
third parties (i.e. buyer-customers). It can be reasonably argued that drug activity
would be material to the reasonable buyer’s decision to purchase.

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TRELA 15F states that the licensee is not liable for a misrepresentation of a
party (in the case the seller) unless the licensee knew of the misrepresentation and
failed to disclose. However, under DTPA, courts have held that the buyer is entitled
to relief if the representation was a material inducement to the contract; in short,
“agency is no defense” if the broker merely passed along information that the seller
provided.

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“Stigma” refers to a perception of conditions or events (real or imagined)
related to a property that reduces the property’s marketability or value. This stigma
may be psychological or physical. The property may still be sold as long as there is
full disclosure to potential purchasers.

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A psychological stigma has no actual physical impact on the property but may
impact on a potential buyer’s perceived value of the property. Curable and Incurable
obsolescence are terms used by a licensed appraiser associated with the property
owner’s ability to financially address depreciation due to physical deterioration or
functional obsolescence.

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Duties to Third Parties

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Honesty & Fairness to ALL
Fair Does NOT Mean Equal
Non-Fiduciary Duties in Texas

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Non-Fiduciary Duties in Texas

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Honesty, Fairness, Competency, Good Faith
Disclosure of Material Facts
TREC Rules, promptly present offers
Avoid Misrepresentations & False Promises

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Avoid Problems….

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Misrepresentations
False Promises re: Material Facts
Failure to Disclose “Red Flags”
Liability
Materiality of Issue
Were Statements Fact or Opinion

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Avoid Problems…
Section 5.008 , Texas Property Code

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Required for MOST residential sales
Completed by seller, not agent
Not a guarantee or warranty
Responsibility for disclosure - SELLER

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Avoid Problems
Kessler v. Fanning

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Fact or opinion?
Statements specific rather than vague?
Parties possess the same knowledge?
Past rather than future conditions?

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Material Facts….

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Any fact that is relevant to a person making a decision. “

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Physical Material Fact

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Relates to negative conditions on the property
Advise buyers not to rely solely on sellers disclosure
Licensed property inspections are not warranties
Residential Service companies must register with TREC

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Material Facts….
Title Issues

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Types and quality of title
Abstract of Title & Title Insurance
Standard Coverage & Exceptions
Additional Coverage
Mortgagee’s Title Policy

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Material Facts
Survey Issues

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Exempted from standard title policy

Registered professional land surveyors

Complete before, not after, closing

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Stigmatized Properties….
Psychological Stigmas

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Real or imagined events
TRELA, Section 15E
HUD Guidelines
Texas law regarding death disclosure

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Stigmatized Properties….
Physical Stigmas

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Condition affecting health/safety
Impact on property value
EXAMPLES: asbestos, lead, EMFs, radon, USTs

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Stigmatized Properties
Guidelines For Disclosure

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Fact or fiction
State law
Materiality
Discuss with sellers
Sanchez vs. Guerrero

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Megan’s Law

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Texas data maintained by DPS
www.txdps.state.tx.us
Exempt from duty to disclose
Owners/landlords
Real estate agents

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Prohibited Disclosures

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Protected classes

Client’s negotiating position

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Misrepresentation - Liability

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Element of reliance
Was information material inducement?
“Agency” no defense
Watch what is said

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Agency is ----Agreement

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Agency is Two-Party Agreement