�ǿ��app�� - Enforcement

A Win for Protecting Texas Consumers

Sierra Pizarro — Tue, 10 Dec 2024 21:05:13 +0000

After combing through 1,100 complaints during his 11-year tenure with the Commission, �ǿ��app�� Chief Investigator Roy Minton wins Investigator of the Year for a second time. The first win was in 2019. Both recognitions, by the Association of Real Estate License Law Officials (ARELLO), were given for Minton’s work in uncovering rental fraud.

One of Minton’s latest rental fraud cases�� the one recognized for excellence by ARELLO this year—involved 300 pieces of evidence showing a repeated pattern of deception by one license holder for approximately eight months. During that time, 52 fraudulent lease applications were submitted to property owners in the Houston metropolitan area. The applications contained altered credit reports and paycheck stubs, and fraudulent contact information. The purpose of this scheme was to present individuals as qualified applicants to unsuspecting landlords. And the unqualified tenants were exploited by being charged excessive fees in exchange for lease approval.

Minton’s investigation led to the revocation of this person’s real estate license and a $15,000 penalty. It also led to interest by media members in working with him to raise awareness about this fraudulent behavior.

Minton is now using his skills for entrepreneurial endeavors outside the agency. Susan Miller takes his place as chief investigator. She was previously a real estate broker and has worked for �ǿ��app�� the past seven years. Her last role before Minton’s retirement was deputy chief investigator.

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Enforcement

Watch Out for Rental Fraud Scams in Texas

Sierra Pizarro — Fri, 24 May 2024 17:58:12 +0000

They are still happening: Real estate leasing scams continue to pose a threat to property owners in Texas, especially in the greater Houston area, prompting the Texas Real Estate Commission (�ǿ��app��) to issue warnings such as this press release sent to more than a dozen news outlets—most of them based in the southeastern part of the state—including The Houston Chronicle, Bisnow, and The Real Deal.

�ǿ��app��'s Enforcement Division, led by Director Michael Molloy, is tracking these fraudulent property leasing activities.

"Over the past two years, there's been a noticeable increase in rental scams, with a concentration in the greater Houston area. These scams are deceiving landlords, tenants, and even our license holders into fraudulent lease agreements," said Molloy.

Straight From the Case Files

�ǿ��app��'s 37-member enforcement division—which includes 10 attorneys, legal assistants, and investigators—is handling numerous rental fraud cases. Here are some real-life examples.

Hefty Violations Call for Hefty Penalties

A sales agent in Houston knowingly submitted lease applications with fake credit reports. �ǿ��app��’s investigation found the agent and co-conspirators were engaging in this type of conduct for several years. This activity resulted in a $115,000 administrative penalty, and the agent’s license was revoked.
A co-conspirator's license was also revoked and assessed a $48,750 administrative penalty.

Their scheme involved helping unqualified tenants obtain a lease by submitting inaccurate or falsified records regarding income, credit history, and prior evictions to property managers or landlords. Also, a false story included in applications would read in part:

“Let me know if my clients will work for you. I have deposit and 1st month rent in office. Will consider 2 year lease. They were approved on another property but owner decided to take an offer for sale. Thanks.��

Such misrepresentations are used as a ploy to distract and discourage the landlord or property manager from running a separate review of the applicant and may appear to bolster the legitimacy of otherwise fake documents.

Sales Agents, Sponsoring Broker Disciplined Together

Case 1

A sales agent engaged in a scheme placing unqualified applicants by submitting fraudulent lease applications for at least seven single-family homes between December 1, 2022, and May 12, 2023. Four leases were executed based on those fraudulent applications.
The Commission found the sponsoring broker failed to adequately supervise the agent and was reprimanded and ordered to pay a $1,000 administrative penalty.
The sales agent’s license was revoked.

Case 2

A Houston broker was sponsoring three sales agents who submitted fraudulent lease applications (incorrect credit scores, work histories, incomes) for at least 24 single family homes between May 2022 and September 2022.
After each lease was executed, someone other than the applicant would move into the property.
The broker was formally reprimanded and ordered to pay a $1,000 penalty.
- One agent’s license was revoked and assessed a $31,000 penalty.
- A second agent’s license was revoked and assessed a $26,500 penalty.
- A third agent’s license was placed on probated suspension.

How To Avoid Trouble

As these property rental scams persist, �ǿ��app�� staff emphasizes the importance of due diligence, even if you use a real estate license holder to find a tenant. Be sure to review the details you receive in a rental application. If something feels off, don’t be afraid to ask questions, or consult with another license holder or an attorney. �ǿ��app�� urges all Texans to stay informed and be proactive in combating real estate fraud.

About Disciplinary Actions

License revocation: The individual’s license is stripped and means they cannot practice real estate activity.

License suspension: The individual cannot practice real estate activity for a defined period.

Probated suspension: The individual can practice real estate activity but if the license holders violate the terms and conditions of the order, the license will be suspended for the defined period.

Administrative penalties: Fines for violations of �ǿ��app�� rules or The Real Estate License Act.

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What Texas Inspectors Should Know About �ǿ��app�� Complaints

Sierra Pizarro — Fri, 26 Apr 2024 18:05:19 +0000

The Texas Real Estate Commission’s Enforcement Division has 37 people��10 attorneys, legal assistants, and investigators. They enforce the laws and rules that regulate real estate brokers, sales agents, real estate inspectors, and timeshare plans, through the investigation of consumer complaints. They also review the fitness of an applicant for licensure.

The only way enforcement can initiate an investigation is through a filed complaint, which can be done by anyone.

In 2023, the Texas Real Estate Commission (�ǿ��app��) opened 6,307 enforcement cases. 86 of those involved inspectors.

The Commission has jurisdiction to investigate a complaint that is filed within four years from the date of inspection. Because of this, inspectors should maintain copies of the inspection report in a format this is readily available. Also, keep photos, emails, and other documents. They may serve as further evidence that could help an inspector’s case.

Common Inspector Violations

Using the wrong report form (Property Inspection Report form here).
Conducting an inspection with an expired/inactive license.
Failure to register a business name (DBA).
Engaging in false/misleading advertising.
Failure to note in report the reason a system of a component was not inspected.
Failure to report a deficiency.
Performing an inspection in a negligent/incompetent manner.
Failure to render a written opinion as to the foundation performance.
Failure to provide vantage point from which crawlspace was inspected.
Failure to report evidence of water penetration.

How Should I Respond to a Complaint Filed Against Me?

Cooperate with the investigation.
Provide organized records and documents.
Share any corrective actions made since.
Cite any applicable Texas Real Estate Commission rules or standards of practice in response and provide the investigator a written chronology/timeline of events.

Tips to Avoid a Complaint

Kindness may avoid a complaint. Remember, consumers may be emotional about the inspection process.
Be competent. Have the necessary education, training, and experience to perform an inspection.
Be careful. Leave the property in the same condition as it was upon arrival.
Be clear. Inspectors are required to explain findings in the corresponding section of the report. Anything incorrect, incomplete, unclear, or confusing is a frequent cause a consumer files a complaint.

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Articles

Enforcement

88th Texas Legislative Session Update, and the Impact on License Holders

Sierra Pizarro — Sat, 27 May 2023 15:24:28 +0000

The 88th Texas Legislature, Regular Session, began January 10, 2023, and ends May 29, 2023. This session opened with the Texas Real Estate Commission (�ǿ��app��) and Texas Appraiser Licensing Board (TALCB) following 358 bills relevant to the administration of the agency. A much smaller number will become law, one of relevance to Texas real estate license holders.

Senate Bill 1577: Texas Real Estate Research Center, Real Estate Research Advisory Committee, �ǿ��app��, TALCB

Changes Impacting �ǿ��app�� License Holders

Broker Education Experience

Currently, the education hours required to become a broker are specified in statute, which means any edits to the hours to address changes in the market or to modernize the education needs must be made by the legislature. SB 1577 grants rule-making authority to the Commission, so that these changes can be made through a simpler, more nimble process. License holders can easily follow the rule making process and comment on changes.

Wholesaling

Wholesaling is described as anyone who does not own a property for sale but is marketing an option or an equitable interest in a contract to purchase that property. Current law requires that this be disclosed to any potential buyer.

A person engaged in wholesaling who does not provide notice is engaged in unlicensed brokerage activity.

SB 1577 requires that the notice be provided to a potential buyer in writing, and that the same written notice be given to the seller of the property.

Real Estate Recovery Trust Account

SB1577 grants the Commission rulemaking authority to set and collect fees to cover maintenance of the Real Estate Recovery Trust Account. This law also increases the statutory amounts for the Trust Account related to claims to account for inflation and increased claim costs. Those amounts had not been updated since 2003. They have been raised from $50,000 to $125,000 per claim; and $100,000 to $250,000 cap per license holder.

Licensure Exemption for Certain Business Entities

SB 1577 exempts a business from licensure if it is an LLC or S Corporation; established for the sole purpose of receiving compensation earned by a license holder while engaged in real estate brokerage and is at least 51% owned by the license holder on whose behalf the entity receives compensation.

This type of business is not required to be licensed unless engaged in any other brokerage activity. This type of business, however, is required to register with �ǿ��app��. SB 1577 grants �ǿ��app�� authority to develop the registration process for these types of businesses.

Texas A&M Real Estate Research Center Fee

This change clarifies the statute to ensure the agency collects the pass-through fee for the Texas A&M Real Estate Research Center for both initial and renewal applications.��

Remove Statutory Language Establishing Requirements for Non-Residents

SB 1577 conforms with a previous sunset requirement and removes statutory language pertaining to non-resident applicants. ��

�ǿ��app�� and TALCB Study Guides for Licensing Exams

SB 1577 repeals the requirement that �ǿ��app�� and TALCB publish study guides for the licensing exam. This requirement is duplicative of exam prep courses already offered by many education providers, who are better equipped to prepare prospective students to take the exam. Additionally, the agency does not have input in creation of the national portion of the �ǿ��app�� exam and the entire TALCB exam is developed of the federal level.

Effective January 1, 2024

SB 1577 was made law when signed by Texas Governor Greg Abbott on May 19 and will go into effect January 1, 2024. �ǿ��app�� will begin the process of implementing the changes over the next several months, to include seeking stakeholder input.

The entirety of the bill’s language can be found online.

News and Article Category:

Ongoing Fraud: There's Another Scheme License Holders Should Be Aware Of

Sierra Pizarro — Fri, 19 May 2023 19:43:25 +0000

The Texas Real Estate Commission is assisting the Texas Land Title Association (TLTA) in educating license holders of trending fraud schemes.

Over the last several months, TLTA is seeing more people fall victim to seller impersonators. Prime target properties are vacant land or investment property such as vacation homes, second homes, rental properties, and any other instance where the tax mailing address is different than the property owner’s address.

Here's How It Starts

A typical scenario includes the impersonator calling a sales agent for a property to be listed below market value, so that the potential buyer thinks the purchase is a bargain. To lure the agent into taking the listing, the fake seller might say, “This is a quick sale."

“This type of fraud is terrifying because of how much it has increased and how quickly," said David Tandy, chair of TLTA's Seller Impersonation Fraud Task Force. “Until that real seller decides to do something like refinance or sell the property, they are not aware of the fraudulent transaction involving their property. And by that point, the duped buyer has lost all their money, the real estate agents have lost their commissions, and the entire transaction is void.��

Red Flags

The property in question involves vacant land or an owner not living on property.
Imposter Seller wants a quick sale.
Imposter Seller wants a cash sale.
The property is listed below market value.
Imposter Seller only wants to communicate by email or text and does not want to meet in person.
Imposter Seller's phone area code is unrecognizable or foreign.

What To Do

Before listing a property, make sure property owners are verified. Start by getting a copy of two forms of ID. Ask for a recent utility bill. Ask questions about the property that only the true owner would know. Look for the red flags above and trust your gut.

“This just suddenly exploded. We’ve seen similar forged deed fraud in the past, but this new type of fraud is just pervasive" said Leslie Midgley, executive vice president and CEO of TLTA. "These criminals are highly sophisticated with their schemes and hard to detect if you aren’t vigilant. Title agents and underwriters have implemented many best practices to try and shut these transactions down, but there is much work to be done as significant losses have already occurred and the criminals seem to be increasing their efforts, not retreating."

"Realtors are also at risk of representing someone who is not the rightful owner to the property they are trying to sell. Realtors can be a huge part of the solution if they know the red flags to look for and understand how important their role is."

Reporting Fraud

Fraud can be reported online to the Federal Trade Commission. This type of crime is also being tracked by the United States Secret Service.

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Enforcement

ESAC reviews rule language, recommends 30-hour brokerage course for sales agents

Sierra Pizarro — Fri, 12 May 2023 21:02:37 +0000

The Texas Real Estate Commission's Education Standards Advisory Committee (ESAC) met April 3.

ESAC addressed comments received regarding proposed changes to 22 §TAC 535.64, Content Requirements for Qualifying Real Estate Courses. �ǿ��app�� staff clarified that the rule proposal simply cleans up the rule language to remove the references to topics required for each course, rather, pointing specifically to each qualifying course approval form to define content.

The committee also discussed comments received on proposed revisions to the 30-hour Real Estate Brokerage course and the 30-hour Property Management course, renamed Residential Property Management. Non-substantive changes, to include consistency with listing of acronyms, were made to the course approval forms that were presented this day for adoption.

The committee voted unanimously to move both recommendations forward.

ESAC then addressed proposed amendments to 22 TAC §535.55, Education and Sponsorship Requirements for a Sales Agent License and 22 TAC §535.56, Education and Experience Requirements for a Broker License. After discussion and consideration of comments received, the committee voted unanimously to require the revised 30-hour Real Estate Brokerage course to be included as part of the 90 hours of sales agent apprentice education required in the first two years of licensure.

In response to a request from ESAC members at the last committee meeting, staff presented data regarding first-time pass rates for students going back two, four and six years as it relates to when they completed their qualifying courses. The resulting data indicated that nearly 92% of test takers completed all qualifying courses within 2 years of taking the licensing exam.

Lastly, the committee opened the qualifying course outlines for Principles I and II for discussion and possible action to make recommendations for revisions. ESAC is charged with regularly reviewing and revising course content, as appropriate. These courses will continue to be discussed at future ESAC meetings.

Where to Find Meeting Materials

Watch a video recording of this meeting and find meeting materials on the meeting page.

The next ESAC meeting is scheduled for July 10, 2023.

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Articles

Education

Enforcement

TREIC April Meeting Recap: New Evaluation Form, Licensing Rule

Sierra Pizarro — Tue, 18 Apr 2023 22:10:09 +0000

The Texas Real Estate Inspector Committee (TREIC) met April 18.

Discussion started with a public comment submitted online to committee members expressing confusion over the Standard Inspection Report Form. This form falls under �ǿ��app�� rule §535.223 and was recently amended to clarify that when multiple boxes are checked for a particular item on the Property Inspection Report Form (REI 7-6), the inspector must also document the reason for checking multiple boxes. The committee reiterated there is an online instruction sheet to provide guidance to anyone with questions.

A New Vice Chair

Inspector member Mike Morgan was elected as vice chair of the committee. The previous vice chair, Scott Regan, resigned from the committee in March. Chair Lee Warren thanked Mr. Regan for his service and noted his invaluable contributions to the committee during his tenure.

Apprentice Inspector License

The Inspector Education Subcommittee sought input from the committee regarding a recommendation to eliminate the real estate inspector license. The subcommittee noted that its recommendation for apprentice education hours and supervised inspections would need to contemplate that recommendation.

The subcommittee meets again on June 20.

Increase in Education Providers, Committee Discusses Texas Practicum Evaluation

In the last two years, the total number of qualified inspector education providers increased from 7 to 10, which means more options are available to inspector applicants. Information on providers and available courses can be found on �ǿ��app��'s website.

Committee members reviewed a draft course manual for the mandatory Legal, Ethics, and SOP Review course. This draft will go before commissioners in May.

Committee members also discussed and reviewed a draft of the Texas Practicum Evaluation Form. The Inspector Education Subcommittee created this new form as a tool for students to provide feedback after completing the Texas Practicum. The Education Subcommittee will continue to develop this form.

Recommended Rule Changes

Important license expiration changes

TREIC discussed 22 TAC 535.216, Renewal of License. This rule is currently out for proposal as part of a commission initiative to update the late renewal process to better protect the consumer. The committee discussed the importance of this change and recommended the rule with minor changes made to clarify references to other rules related to insurance and reactivation of license.

This recommendation will go before commissioners. If approved, it will be effective October 1.

Inspection Reports

The committee also voted to recommend changes to rule §535.222, Inspection Reports. These changes clarify that inspectors must deliver reports to clients within two calendar days of payment. This recommendation will go before commissioners in May.

Upcoming Meeting Information

The next TREIC meeting is July 17 at 10 a.m. at �ǿ��app�� headquarters. It will also be live streamed.

In accordance with normal commission practice, any meeting materials will be available on the �ǿ��app�� website before the meeting. To participate by providing public comment virtually during the meeting, please [email protected]?subject=TREIC%20Public%20Comments%20for%20April%202023%20Meeting">email us by 5 p.m. CT on July 16 with the agenda item number you wish to speak on.

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Escalating to Trouble

Christine Anderson — Tue, 05 Oct 2021 17:50:54 +0000

There may be instances where a client wants to add language to a real estate contract. In a “hot market,�� it is not uncommon for a buyer to want an escalation clause added to the contract (for example, language stating the buyer will pay “X amount more than the highest offer if other offers are present��). Typically, an escalation clause such as this will be added to “Paragraph 11, Special Provisions�� (which is reserved for factual statements and business details) of the One to Four Family Residential Contract, but it might also be drafted as an addendum to the contract.

It is important to remember that a real estate contract is a legal document and any changes to the contract can impact the rights of the parties to the contract (the buyer and the seller). A license holder cannot draft an addendum or add language to the contract that defines or affects the rights, obligations, or remedies of the parties, and the Real Estate License Act and �ǿ��app�� Rules—specifically �ǿ��app�� Rule 537.11(b)(5) -- prohibit this. A license holder who adds these terms to the contract in any manner, including drafting an escalation clause, is engaged in the unauthorized practice of law.

To avoid violating the law, a license holder whose client wants this type of language added to the contract, or has questions regarding the impact of specific language (such as an escalation clause) should always recommend the client consult with their attorney. Remember, a license holder who violates this may be subject to disciplinary action, which could include an administrative penalty between $500 - $3,000 per violation per day and/or possible license suspension or revocation.

We recently published a helpful video from our General Counsel, Vansessa Burgess on this important topic:

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Articles

Enforcement

�ǿ�����app���� - Enforcement

A Win for Protecting Texas Consumers

Watch Out for Rental Fraud Scams in Texas

Straight From the Case Files

Hefty Violations Call for Hefty Penalties

Sales Agents, Sponsoring Broker Disciplined Together

Case 1

Case 2

How To Avoid Trouble

What Texas Inspectors Should Know About �ǿ�����app���� Complaints

Common Inspector Violations

How Should I Respond to a Complaint Filed Against Me?

Tips to Avoid a Complaint

88th Texas Legislative Session Update, and the Impact on License Holders

Senate Bill 1577: Texas Real Estate Research Center, Real Estate Research Advisory Committee, �ǿ�����app����, TALCB

Changes Impacting �ǿ�����app���� License Holders

Broker Education Experience

Wholesaling

Real Estate Recovery Trust Account

Licensure Exemption for Certain Business Entities

Texas A&M Real Estate Research Center Fee

Remove Statutory Language Establishing Requirements for Non-Residents

�ǿ�����app���� and TALCB Study Guides for Licensing Exams

Effective January 1, 2024

Ongoing Fraud: There's Another Scheme License Holders Should Be Aware Of

Here's How It Starts

Red Flags

What To Do

Reporting Fraud

ESAC reviews rule language, recommends 30-hour brokerage course for sales agents

Where to Find Meeting Materials

TREIC April Meeting Recap: New Evaluation Form, Licensing Rule

A New Vice Chair

Apprentice Inspector License

Increase in Education Providers, Committee Discusses Texas Practicum Evaluation

Recommended Rule Changes

Important license expiration changes

Inspection Reports

Upcoming Meeting Information

Escalating to Trouble

We recently published a helpful video from our General Counsel, Vansessa Burgess on this important topic:

�ǿ��app�� - Enforcement

What Texas Inspectors Should Know About �ǿ��app�� Complaints

Senate Bill 1577: Texas Real Estate Research Center, Real Estate Research Advisory Committee, �ǿ��app��, TALCB

Changes Impacting �ǿ��app�� License Holders

�ǿ��app�� and TALCB Study Guides for Licensing Exams