7 Rules for Texas Real Estate Deals

Every state has its own rules, policies, and procedures for real estate.

The Lone Star State is no exception – Texas officials have put together quite a few “rules of the road” for accomplishing real estate deals.

Listing all of the Texas real estate laws would require a lot of space.

There are abundant safeguards and policies put into the process to make sure that the handling of real estate parcels in the state is not abused.

Some of the common types of laws, which you will see below, show what you can expect when dealing with Texas legal requirements for real estate.

1. Individuals Must Be Qualified and Meet Standards to Practice Real Estate

One of the biggest players in Texas real estate regulation is the Texas Real Estate Commission (TREC).

The Texas Real Estate Commission applies procedures for licensing and certification.

TREC also provides a lot of rules for license holders – sales agents or brokers who will be facilitating a deal.

A good real estate training program will go over all of the TREC requirements for getting licensed as an agent or broker.

Beyond that, license holders have to be prepared for various rules that govern their behavior.

Some of these rules relate to the vetting of individuals who are involved in the process.

Others apply to the ways that the license holders work through a particular process or task.

All of them are aimed at creating a standard for real estate practice in Texas.

Besides mandating specific levels of education, Texas laws direct agents and brokers to set up and advertise their businesses in certain ways.

They offer guidelines and standards for interacting with potential customers and for closing a deal.

Along the way, license holder rules aim to ensure that the process happens fairly and transparently, as well as proceeding according to state commercial standards.

2. Texas Real Estate Curriculum Has to Meet a Standard

The TREC Education Standards Advisory Committee considers curriculum for real estate training. The committee is composed of license holders and has an impact on what the requirements are to become licensed in Texas.

For instance, the ESAC can help to provide guidelines on moral character requirements.

In applying moral character requirements, TREC looks at an applicant’s past.

A criminal record can block someone from licensing.

So can a history of practicing real estate without a license in another state, or violating state principles in the past.

Those are just some of the rules for license holders that the TREC sets up.

Aside from getting involved in qualifications, real estate curriculum helps show what a person will know when they have acquired an agent or broker license.

By combining ethical training with technical training, the state gets the outcomes that it wants in terms of skilled and knowledgeable candidates for this kind of real estate work.

That’s what’s behind a lot of this curriculum design, and behind TREC requirements for licensing. The governing boards want to know that they have a handle on who is getting licensed, and how they will work after licensing is obtained.

3. Texas Real Estate Appraisals Must Be Applied to a Deal

TREC also presents various rules for the real estate appraisal process.

The appraisal is a big part of qualifying a real estate deal – it’s making sure that a property has inherent worth to back the deal itself.

Here’s an example – the commission maintains resources for a form called “addendum concerning right to terminate due to lender’s appraisal.”

Parties have to have a way to terminate a deal if an appraisal doesn’t match what’s in the sale agreement.

To that end, TREC provides this rule in documentation.

Recently, the commission revised language around appraisal rules to make them easier to understand.

Obviously, state guidelines set up rules for who may appraise a property and how that appraisal is accomplished.

There are also rules on a timeline for appraisals since the appraisal is part of the overall deal and acts as a safeguard against improper pricing.

In a sense, an appraisal is a kind of “firewall” for home value – and that makes it a very important real estate rule.

People say that a property is “worth what someone will pay for it” – but there has to be a standard. Anything less creates chaos in the market.

By having appraisal standards, the market coalesces and provides a universal system.

4. Property Inspector Rules – Inspectors Must Report Deficiencies

Among the rules for Texas home inspections, one such requirement is that an inspector has to report a variety of situations that are constituted as deficiencies.

Prior damage to a property from a fire or other emergency may be deficiencies under Texas real estate policy.

There are other disclosure rules that go along with this general requirement.

The bottom line is that a home inspector needs to be properly licensed and certified.

He or she needs to do a thorough inspection of the building.

He or she also has to recognize deficiencies and other aspects of the building’s condition and report them as necessary.

Since the home inspection is a significant component of the Texas real estate process, it’s something that inspectors, agents, and brokers should know quite a bit about.

As such, it should be covered in a good real estate training school curriculum.

5. Multiple Listing Service: Listing Procedures Must be Consistent

Another set of Texas real estate rules has to do with the multiple listing system or MLS that has traditionally been so important in real estate.

The Texas Association of Realtors maintains rules about using the MLS.

There are rules for who can enter data, and what timeline should be used. There are rules for how a listing should be made and various categories of real estate including:

• Single-family homes
• Vacant residential lots
• Multiple family residential buildings
• Farms or ranches

There are rules on change of status or listing withdrawals.

There are also rules on contingencies and listing procedures.

All of these rules applied to the MLS also make Texas real estate deals consistent and universal in process.

Having a fundamental listing tool like the MLS creates a framework and standard for deals.

However, it’s important to understand that with new technology, the real estate world is becoming more diverse.

The MLS is not the central repository that it used to be in some senses.

New platforms support MLS data and send it to other places, predominantly online, making data visual and changing the way that we view real estate investment.

With that in mind, some consider the MLS to be significantly obsolete.

Others feel like the MLS plays as important a role now as ever.

Do research on MLS listing procedures as part of overall real estate license training, and you’ll be better able to wade into markets with an understanding of how that property data gets handled – and how that’s changing!

The MLS is so central in real estate that it makes sense to research it fully. Ask a real estate training school to go over how the MLS has been used in the past, how that’s changing, and how that will apply to your career.

6. Texas Real Estate Wholesaling Must Be Properly Advertised

Another set of Texas real estate rules have to do with a process called wholesaling

Real estate wholesaling involves a party that gets a state contract with the seller at one price, finds a buyer at a higher price and pockets the difference.

Suppose you find a distressed property where the seller is willing to unload the real estate for $100,000.

If the wholesaler can find an interested buyer, for example, an investor who will pay $120,000 or $140,000, that deal can generate capital for the wholesaler.

Real estate wholesaling in Texas is legal with some important conditions.

The most fundamental rule on Texas real estate wholesaling is that the wholesaler cannot misrepresent the deal.

It’s illegal to practice real estate without a license, so there are lists of things that wholesalers cannot say or do.

The wholesaler has to disclose that the offer by the buyer is only interest and not an actual sales deal.

All parties have to know that the wholesaler is wholesaling and not acting as a broker or sales agent.

The language in the law is somewhat clear, but that doesn’t mean the situation can’t get tricky.

It’s important to set up advertising as a wholesaler that carefully complies with both the letter and the spirit of the Texas wholesaling real estate law.

Anything else is likely to get a wholesaler in trouble.

Take a look at this language in Texas real estate law:

(a) A person may acquire an option or an interest in a contract to purchase real property and then sell or offer to sell the option or assign or offer to assign the contract without holding a license issued under this chapter if the person:
does not use the option or contract to purchase to engage in real estate brokerage; and
discloses the nature of the equitable interest to any potential buyer.
(b) A person selling or offering to sell an option or assigning or offering to assign an interest in a contract to purchase real property without disclosing the nature of that interest to a potential buyer is engaging in real estate brokerage.

Chapter 1101 of the Occupations Code / Texas Real Estate Licensing Act

In this passage, state officials are ensuring that wholesalers do not skirt the edge of the process of acting as an agent or broker in a transaction.

In addition to advertising, there are other rules about Texas wholesaling.

Some of these rules have to do with a process called self-dealing, and others are related to how a real estate transaction is reported and documented.

If you’re getting involved in real estate wholesaling, make sure to pay attention to any and all applicable state regulations.

7. Texas Real Estate Hierarchy Must Be Recognized

Here’s an additional set of rules on Texas real estate that you should know about if you’re looking at going to a real estate school or getting training to become an agent or broker in the state of Texas.

Texas has rules and regulations for a suite of licensure chains that sets up a relationship between various levels of professionals.

In sales, Texas discriminates between the real estate sales agent and the real estate broker.

The real estate sales agent is the entry-level certification.

First, someone completes the mandatory requirements to get licensed as a real estate sales agent.

After that, the sales agent has to work under a professionally certified Texas real estate broker.

In time, with more classroom experience and other qualifications, a sales agent can apply to become a real estate broker.

The idea of having a Texas real estate sales agent work for a broker sets up a multistage process of apprenticeship.

Real estate brokers act as the mentors or head professionals in real estate transactions.

The sales agent role becomes a stepping stone to the role of Texas real estate broker.

Sales isn’t the only area in which these apprenticeship rules apply.

Texas also recognizes entry-level certifications for Texas home inspectors.

After completing the original requirements, the home inspector can qualify for a subsequent level of certification that provides more opportunities for professional real estate work within the state of Texas.

Texas real estate appraisers also become licensed according to multiple stages or professional criteria.

One thing that’s accomplished by these hierarchies is the idea of consistent standards for skills and experience.

In other words, when a Texas home buyer or seller meets with a broker or a top-level professional in inspection or appraisal, that party will understand that the individual has met the additional top-level requirements.

What to Do About Texas Real Estate Rules

Some Texas real estate rules might sound burdensome or onerous, but they’re really in place for a reason.

In gearing up to take an exam and become licensed as a Texas real estate sales agent, you can use knowledge of these rules to your advantage.

Some of these rules will be included in the research that you do in the classroom.

Other items you will essentially learn on the job.

Here are some tips for complementing your classroom real estate training with additional real-world experience:

Checking Out Neighborhoods

One great introductory activity for any person pursuing a Texas real estate license for the first time is a neighborhood evaluation.

Walk in a neighborhood – get familiar with the types of properties that are there, their valuations, their amenities, and their age.

Talk to other stakeholders – agents, buyers, sellers, inspectors, appraisers, hard money lenders or anyone else.

Get to know the way that local deals are done, and what they hinge on in terms of property value. Some neighborhoods have particular value attractions to buyers. Others have specific challenges.

By making your way around the neighborhood and assessing all of its unique characteristics, you’re getting a real-world lesson in how to conduct real estate research and how to become a Texas real estate professional.

Along with assistance from a great local Texas real estate school, your real-world experience will prepare you for helping to make your first deals.

Another great rule of thumb is to remain very knowledgeable about the average property and what makes it tick.

Homes and investment properties are significant assets with significant complexities.

They’re made of brick or stone or wood or concrete, but they are also built on systems – heating and cooling systems, plumbing systems, ventilation systems and setups that enhance the livability and value of the property.

When you start training for an online Texas real estate school, learn more about the systems.

That will prepare you to offer the Texas real estate world more as a young professional.

So often, questions come up in the Texas real estate process around the condition and performance of home systems.

Some of these questions come up in a seller disclosure form. Other questions come up in the process of evaluating a home inspection.

As a real estate professional, you will become more valuable when you’re able to answer these questions proactively and be the authority or the source of a solution.

In practice, you’ll use what you learned training in a real estate school, but you also use your practical ability to problem-solve and assess systems which will be a valuable resource to your clients.

Here’s another great tip for handling rules on Texas real estate.

It’s always a good idea to understand how new technology applies to the real estate process.

In addition to neighborhood research and home system research, take a look at what’s hot in real estate IT.

For example, new real estate platforms have different ways of bringing accurate information to investors and other stakeholders.

That means if you know about these tools, you’ll be able to use them to your advantage.

New real estate tools can help you work more quickly or more efficiently, or help you find deals better.

Your skills-based on these technologies will be valuable to your clients.

Ask a real estate training school in Texas about how they go over cutting-edge technology for real estate.

For example, suppose you have a real estate platform that automates the process of doing some of that neighborhood research.

There may be rules and procedures that go along with using technologies, so make sure that the ethics of technology are also covered in your real estate training course.

Different Types of Real Estate Deals

You may also want to spend time discussing new real estate equities such as real estate investment trusts (REITs).

Real estate investment trusts and similar funds are different than traditional strategies of buying properties.

Instead, individuals are buying a stake in a real estate property.

One of the best and most high-profile examples is the phenomenon of stakeholders in Gulf Coast countries like Qatar or Saudi Arabia buying up parts of New York skyscrapers like the Empire State Building through real estate investment trusts.

Again, the more you know about these types of deals, the more valuable you’ll be to clients.

It’s reasonable to ask a real estate school to go over how REITs and other real estate financial vehicles are treated in Texas.

The bottom line is that a good solid grounding in Texas real estate takes a well-rounded education.

Classes should really go over all of the above categories and more and help you to understand how to work with the rules, not against them. That way, you proceed toward licensing and the rest of your career on solid ground.

Jordan Fabel

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