Real Estate Law document which supplements the textbook by Jacobus.

Tennessee Real Estate Law Memphis Real Estate School 901-213-0300 Felicia Roddy 09.15
Tennessee Real Estate Law Memphis Real Estate School 901-213-0300  Felicia Roddy 09.15
www.memphisrealestateschool.com ◦ - Provides the education only Class text/voicemail: 901-401-0334 Twitter Facebook 28 31 33 34 35 36 38 39 40 54 56 www.facebook.com/memphisrealestateschool LinkedIn Page 3 6 10 11 14 16 17 18 19 20 21 22 @mresRE www.linkedin.com/company/memphis-real-estate-school Tennessee State Law Specifics for Licensing Who is eligible? License requirements Brokerage Firm License regulators and violations License Status Education and Recovery Fund Tennessee Real Estate Commission – TREC Broker Supervision Type of Licenses Applying for the License Continuing Education Affiliating with a Brokerage Listing Services Buyer Representation Advertising Compensation Agency Relationships in Tennessee Escrow Trust Account Disclosures Agent Duties TN Types of Agency Recognized Property Disclosures Errors and Omissions Insurance Tennessee Human Rights Commission Comprehensive Review Other Laws affecting Real Estate Land Description Married Couples Encumbrances Adverse Possession Elective Share Right Contracts and Offers 2
www.memphisrealestateschool.com      - Provides the education only  Class text voicemail  901-401-0334  Twitter Facebook  ...
Real Estate Licenses are granted only to persons who bear a good reputation for honesty, trustworthiness, integrity and competence … BACKGROUND CHECK AND ELECTRONIC FINGERPRINT SUBMISSION CANDIDATES FOR: Real Estate Affiliate Broker, Broker, Timeshare Salesperson and Acquisition Agent (A candidate may complete the fingerprint/background step any time prior to applying for a license.) All applicants are requested to utilize electronic fingerprint submission. The Commission must receive a legible set of fingerprints to qualify for a license. Applicants should submit payment for fingerprint processing directly to the provider. (Approximate Fee is $42.00) Attach a copy of the receipt for electronic fingerprint submission to the application. On-line Registration Available 24 hours a day, 7 days a week 1. Go to www.identogo.com and choose Tennessee 2. Click Online Scheduling and choose English 3. Enter first and last name 4. Choose Agency Name- DEPT. OF COMMERCE & INSURANCE 5. Choose Applicant Type- REAL ESTATE COMMISSION 6. And OR/enter number TN920784Z Morpho Trust USA will scan and transmit your fingerprints to the TBI and the FBI. You should make an appointment with MorphoTrust USA who will transmit the applicant’s fingerprints to the TBI and FBI for processing. The report will be received by this office. You will submit payment for fingerprint processing directly to MorphoTrust USA. Applicants must take approved identification documents to the appointment with MorphoTrust USA. Please refer to the list of acceptable identification at www.L1enrollment.com Call Center Scheduling: Available Monday-Friday, 8:30 A.M.-4:30 P.M. (Central) • If you do not have access to the internet you may call 855-226-2937 • Operators will collect required information and schedule your appointment 3
Real Estate Licenses are granted only to persons who bear a good reputation for honesty, trustworthiness, integrity and co...
Introduction: Initial Requirement for Tennessee Real Estate Licensing Candidates The 1973 Tennessee Real Estate Brokers Act, Rules, and Regulations, along with the Tennessee Timeshare Act, govern whether or not a candidate will be issued a license. ALL applicants will undergo a background check, be a resident of Tennessee for at least 45 days OR live within 50 miles of their employing brokerage firm. Successful completion of the examination does not guarantee the issuance of any license. Are you at least 18 years of age? Applicant must have a high school degree or equivalent; or higher education transcripts or degree certificates as proof at the time of application. What could keep me from obtaining a Tennessee Real Estate License? The Commission very carefully examines all applications. Applicants who have been convicted of, pled nolo contendere to, pled guilty to or been granted first offender treatment upon being charged with any criminal offense other than a traffic violation or applicants who have held professional licenses which have been disciplined are thoroughly scrutinized. If you have a history of any of the above, you may seek a preliminary decision from the Commission prior to spending time and money taking the prelicensing course and the examination by completing the ‘‘Application for Decision Regarding Prior Criminal Conviction (s) and/or Disciplinary Sanction(s)’’ and submitting it to TREC with required backup documentation. The documentation described in each case above will be required by the Tennessee Real Estate Commission at the time a candidate passes the examination and wishes to apply for a license. The information should not be sent to PSI, nor should it be brought to the examination center.   NOTE: Reckless Driving and/or DUI are misdemeanors and must be disclosed. You may petition the Commission prior to taking or completing pre-license education and/or the licensing examination by submitting the "Application for Decision Regarding Prior Criminal Conviction(s) and/or Disciplinary Sanctions(s)" which can be downloaded on the TREC website. This form along with all requested documentation will then be reviewed by the Commission and you will be notified of their decision. Commission rule does not allow anyone on parole or probation to be scheduled for an examination. Candidates must be released or off parole or probation for a minimum of two (2) years. Candidates who violate this policy will not be licensed and will not be entitled to a refund of the examination fee. Questions, call 1-800-342-4031 Website: http://tn.gov/commerce/section/real-estate-commission 4
Introduction  Initial Requirement for Tennessee Real Estate Licensing Candidates The 1973 Tennessee Real Estate Brokers Ac...
TCA 62-13-102 A License is required if…A person intends to receive or accept compensation or agrees to perform an act as defined in the license law – Typical acts include the sell, negotiation, rental, exchange, auction, or sales of timeshare intervals of real estate property You are EXEMPT from licensing requirements of the Broker Act, if you qualify as:  An attorney-in-fact (has power of attorney)  An attorney performing duties by law (other statutes which dictate legal processes)  Person under court order (persons assigned to handle probate, estate sale, or as trustee)  A resident manager hired by the owner (an employee that does not negotiate deposits or rents)  Officer of a corporation or partnership handling their own company properties Real Estate Licenses are granted only to persons who bear a good reputation for honesty, trustworthiness, integrity and competence to transact the business of…  "Broker" means any person who, for a fee, commission, finder’s fee or any other valuable consideration or with the intent or expectation of receiving a fee, commission, finder’s fee or any other valuable consideration from another, solicits, negotiates or attempts to solicit or negotiate the listing, sale, purchase, exchange, lease or option to buy, sell, rent or exchange for any real estate or of the improvements on the real estate or any time-share interval.  "Broker" also includes any person employed by or on behalf of the owner or owners of lots or other parcels of real estate, at a salary, fee, commission or any other valuable consideration, to sell the real estate or any part of the real estate, in lots or parcels or other disposition of the real estate. It also includes any person who engages in the business of charging an advance fee or contracting for collection of a fee in connection with any contract whereby the person undertakes primarily to promote the sale of real estate  Broker is the highest classification; licensed to perform in all fields of real estate  This employing broker of the firm is called the principal broker  "Affiliate broker" means any person engaged under contract by or on behalf of a licensed broker to participate in any activity included in subdivision (4); As defined in (4)(A) and (4)(B)  Tennessee issues an “affiliate broker” license to the salesperson or more commonly known as the real estate agent 5
TCA 62-13-102 A License is required if   A person intends to receive or accept compensation or agrees to perform an act as...
Qualifying for the License You are you at least 18 years of age? You have a high school degree or equivalent; or higher education transcripts or degree certificates as proof at the time of application. You are a resident of Tennessee for at least 45 days or live within 50 miles of the brokerage firm 1. STEPS to acquire a license to become an affiliate broker a. Complete the 60 hour principles of real estate; pass with a 70%+ grade prior to be able to schedule appointment to take the exam. b. Complete and pass the 30 hour new affiliate course with a 70%+ grade prior to submitting the application for licensure. c. Pass the state licensing exam with a 70%+ score to obtain the real estate license application. d. Select a licensed broker to hold your license within six months of passing exam. 1) The broker must sign the PSI exam application; 2) The broker advises applicant of fees and which Errors & Omissions Insurance e. Submit the application, documents and fees to the Tennessee Real Estate Commission. 1) Documents include a copy of HS diploma (GED/college transcript, 60 and 30 hour certificates of completion; receipt for background check 2. Eligibility to take the exam  You are eligible when you pass the 60-hour Pre-License course with a 70+ exam score  The 30-hour course may be taken either before taking the exam or after the exam. Pre-License Education requirements: 90 hours of Real Estate education prior to license 3. • • A Sixty (60) hour course in basic principles required of all applicants for an affiliate broker’s license under T.C.A. §62-13-303. This course must be successfully completed prior to taking the exam. A 30 hour Course for New Affiliates which highlights the basic principles and reinforces how to work as a real estate agent must be completed prior to licensure. (See Rule 1260-05-.03(3) An applicant may be given credit for a college course if they have a degree major or concentration in real estate whereas the transcript shows successful completion of one 3 hour classroom real estate principles plus a minimum of two more courses which total at least 60 hours of classroom instruction in real estate. OR if major is for a law degree with classroom instruction for real property, contracts and agency. (See Rule 1260-5-.03(6) (a) (b) to define credit for 60 hour course). A license is issued for two years. A renewal fee and continuing education is required to renew the license every two years. 6
Qualifying for the License You are you at least 18 years of age  You have a high school degree or equivalent  or higher ed...
4. Tennessee State Exam Contractor  PSI 1-800-733-9267  www.PSIEXAMS.com  PSI handles the exam and guidelines for Tennessee. A downloadable bulletin which provides specific information for licensing is available on the website.  Schedule the exam by internet, 800# or Fax.  Tennessee Locations: Chattanooga, Clarksville, Dyersburg, Jackson, Johnson City, Knoxville, Memphis, Nashville  Two IDs must be presented at the exam station. (a photo ID and/or current address, and at least one must be government issued)  A basic calculator is allowed (no function keys; cannot use mobile phone) 5. Taking the Exam  Part One - National Sales & Marketing  80 questions – 160 minutes Successfully PASS WITH a 70% +  Part Two - State Law  40 questions – 80 minutes Successfully PASS with a 70% +  Total 240 minutes timed together for the real estate computerized exam  If you fail either part, you may re-take the failed part; the passing score of the other part is good for six months  After 6 months, the other passing score is invalid and you must re-take both parts.  Typically you may re-schedule the exam as early as the next day.  PSI has scheduling restrictions after failing to pass the second or third time.  Please contact PSI for all testing questions or specific details. 7
4.  Tennessee State Exam Contractor      PSI  1-800-733-9267      www.PSIEXAMS.com     PSI handles the exam and guidelines...
6. Tennessee Non-resident License I am licensed in another state. Can I visit Tennessee to list or sell real estate and ‘‘partner’’ or ‘‘cooperate’’ with a Tennessee licensee in order to avoid obtaining a Tennessee real estate license? NO. A real estate licensee from another state or jurisdiction cannot ‘‘cooperate’’ or ‘‘partner’’ with a Tennessee licensee in order to conduct business that requires a real estate license in this state without obtaining a license issued by the Tennessee Real Estate Commission (TREC). A licensed Tennessee broker may pay a commission to a licensed broker of another state provided such non-resident broker does not conduct in this state any of the negotiations for which a commission is paid. See: TCA § 62-13-302. If you have an active license in another state you may obtain a license in Tennessee by applying directly to the real estate commission. A state’s acceptance of a current active license or education from another state is called reciprocity. Some states may enter into reciprocity agreements to accept licenses from another state. License requirements and education vary from state to state. You may not practice real estate in another state unless you have a license for that state.  Tennessee requires a Certification of education and licensure history from the state holding the active license  Applicant may be exempt from the national part of exam based upon current license education – The exam is split into national and state portions to allow this process.  An applicant is required to take the Tennessee law portion of the exam  A consent order is required for TREC to enforce license law in any court or jurisdiction in the state of Tennessee. (also called a Notice of Consent) Tennessee Broker License 7. a. Affiliate Brokers must be licensed 3+ years to be eligible to become a broker (except if licensee has a degree in Real Estate and Finance; then a minimum of 2 years licensed qualifies) b. Requires 120 hours pre-license education (90 of the 120 hours is the affiliate broker education) c. The other 30 pre-license hours must be the Office Broker Management course (90+30=120). d. The office broker management course is required under TCA 62-13-303; Rule 1260-05.03(4). The course instruction is overview of theories, processes, and functions of management; planning; policy-making; setting objectives; transition to management role; organizing and staffing; recruiting, selecting, training, and retaining sales and office personnel; review of contracts and closing statements; written instruments; policy and procedures manual; contract between independent contractor and broker, and contract between salespersonemployee and broker; financial systems and records; processes, procedures, and methods 8
6.  Tennessee Non-resident License  I am licensed in another state. Can I visit Tennessee to list or sell real estate and ...
of control; stages of development in real estate firms; and governmental controls on real estate including the Tennessee Real Estate Broker License Act; and any additional subject which the Commission may require. e. TREC must process the exam application for approval to take the broker exam f. A score of 75% + is required to pass the exam. The broker application must be sent to TREC within 6 months of passing the exam. g. The broker applicant must return the affiliate broker license in exchange for the broker license. h. POST-LICENSE BROKER EDUCATION: after a broker license is issued. – Newly licensed Brokers must complete 120 additional continuing education hours – All 120 hours must be reported within 3 years of the issuance date for the broker license i. Any approved Continuing Education or designation courses are allowable for the 120 hours j. This 30 hour office broker course may not be used as continuing education for licensees The broker license will allow the newly licensed Broker to... a. Open a firm as a principal broker b. or be an associate broker (remain a salesperson) under a principal broker of a firm c. Or work as a sales or office manager, supervising other licensees for a firm A principal broker must be available to salespersons during daytime hours The Brokerage Firm a. The Broker’s license qualifies a brokerage firm to open for business b. A firm application must be completed with all documentation c. A zoning letter must be submitted to confirm a real estate business is permitted to operate in that location d. A firm license is issued for each brokerage location e. A minimum of two licenses must exist for every firm; the firm license and the broker license f. Broker holds the affiliate broker license under the name and license # of the firm g. All licenses must be displayed on a wall or placed in an available book at the firm 9
of control  stages of development in real estate firms  and governmental controls on real estate including the Tennessee R...
h. A firm must display a sign or be in a directory of a building to inform all persons they are in the business of real estate prior to entering the place of business. i. A principal broker signs each applicant’s application or transfer to certify they will actively supervise and train the applicant. The Broker Affiliation  The licensee is individually responsible for satisfying the license requirements.  However, a licensee must be supervised by a licensed Principal Broker  A Principal Broker is monitored by the real estate commission. Operating a brokerage a. The Broker decides the type business entity, real estate specialty and compensation scale. b. “TREC” holds the Broker responsible for the actions of the affiliate broker (advertising, conduct and paperwork). The Broker is audited and reprimanded by TREC. c. Broker sets policies on daily procedures for the firm; the affiliate must comply with these rules d. A broker employs agents to acquire business. An employment or compensation agreement is recommended. e. The Broker must control the escrow account, even if someone else owns the company f. Each location and branch office must have a principal broker as well as comply with zoning g. A firm can use a PO Box for mailings but not in ads unless the street address is included, whereas it may be misconstrued as a location. h. Brokers are audited and reprimanded under license law, policy, rules and regulations as well as actions of the affiliate brokers in which they supervise. i. Brokers are required to maintain records of all transactions for the firm for a minimum of three years. Therefore, affiliate brokers must also maintain their files for a minimum of three years. May a Principal Broker act as a Principal Broker for two (2) firms? YES. The PB can act as a PB for both firms as long as the firms are in the same location. Same location means that both firms are located at and use the same physical address. Does TREC allow home offices? A licensee may have the main office or branch office of a firm in his home if the zoning allows a real estate office at that location. The office must have a firm license and Principal Broker. 10
h. A firm must display a sign or be in a directory of a building to inform all persons they are in the business of real es...
Real Estate Regulators and Regulations The Tennessee State Legislature established the Real Estate Broker Act in 1973. Laws are created by the legislators which are located in the Tennessee Code Annotated (TCA) at TN.gov. The section of the law for Professions and Trades is under Title 62. Real estate brokerage is in Chapter 13 of Title 62; therefore all the laws are indexed as 62-13-____, then the paragraph of the law. Tennessee Real Estate Commission 500 James Robertson Parkway Nashville, TN 37243 615-741-2273 * 800-342-4031 Our Purpose To license and regulate real estate brokers and affiliate brokers, real estate firms, rental location agents, time-share salespersons and developments, vacation clubs and vacation lodging services. Our Mission The mission of the Tennessee Real Estate Commission is to protect the public through establishment and administration of minimum requirements for candidates and licensees, effective professional education of licensees and enforcement of professional. The Tennessee Real Estate Commission or TREC for short is on the internet under tn.gov, Regulatory Boards. Under another regulatory board, Tennessee may require a separate license for persons who are: – Auctioneers, home inspectors, loan originators and appraisers. – Only licensed persons may be hired to perform these duties in a real estate transaction. The real estate commission licenses and registers real estate firms, brokers and affiliate brokers. It is classified as a judicial body of government. It is given authority under this act to further create rules and regulations which are found under Chapter 1260. Rule could read: 1260-01-.01 The sole purpose of this chapter is to provide guidelines for disciplinary actions taken by the Tennessee Real Estate Commission against licensees found guilty of any violations listed in the Tennessee Real Estate License Law Manual. Operating without a license is a Class B Misdemeanor. A misdemeanor is not considered a felony charge; is typically punishable by assessing a fine. – This has a penalty of $1000 for each separate violation and each day continued – TREC has power to submit charges through the courts in the locale of the violation 11
Real Estate Regulators and Regulations The Tennessee State Legislature established the Real Estate Broker Act in 1973. Law...
Licensee Complaints:  The Public and licensees may file complaints regarding actions and conduct of agents based on license law  TREC reviews the complaint to determine if a license law compliance issue exists and will begin the investigation or the complaint is dismissed  Upon investigation; Licensees will receive a copy of complaint and must respond within 10 days  A hearing date is set to determine if a violation occurred or the case is dismissed  The hearing could confirm a violation which could be taken to a court. – A hearing decision may be to reprimand, revoke or suspend a licensee, as well as to – refuse an applicant or – downgrade a broker A Licensee may be assessed Penalties for a violation of license law a. Penalties range from $50 to $1000 b. Penalty may be assessed for each day the violation continues c. Penalties may be charged to unlicensed persons as well as licensees d. A Consumer has two years to file a complaint from the alleged incident e. Commissioners may submit cases for investigation without a consumer complaint. f. TREC does not handle monetary disputes between brokers or clients. Broker Supervision Furthermore, the principal broker may also be charged a penalty for the affiliate broker’s failure to maintain E&O Insurance. The broker fees would be the same up to the 120 days; whereas after 120 days the fees increase to $1000. A principal broker will be issued a consent order to settle this matter or proceed to a formal hearing. It is the duty of the agent to comply with license law as well as to report directly to the principal broker on matters of compliance and documentation in the performance of their duties. It is an administrative duty of the broker to assure compliance or release the licensee from the firm. 12
Licensee Complaints      The Public and licensees may file complaints regarding actions and conduct of agents based on lic...
ADDITIONAL TENNESSEE VIOLATIONS which could result in Violations (1) Making any substantial and willful misrepresentation; Any conduct, whether of the same or a different character from that specified in this subsection that constitutes improper, fraudulent, or dishonest dealing; (2) Misleading or untruthful advertising, including use of the term "realtor" by a person not authorized to do so, or using any other trade name, insignia, or membership in any real estate association or organization of which the licensee is not a member; (3) Being convicted in a court of competent jurisdiction of this or any other state or federal court of forgery, embezzlement, obtaining money under false pretenses, bribery, larceny, extortion, conspiracy to defraud or any crime or any similar offense or offenses, or pleading guilty or nolo contendere to any such offense or offenses; (4) Failing to disclose to an owner the licensee's intention or true position if the licensee, directly or indirectly through a third party, purchases for itself, or acquires or intends to acquire, any interest in or any option to purchase property that has been listed with the licensee's office to sell or lease; (5) For Brokers: In the case of a licensee, failing to exercise adequate supervision over the activities of any licensed affiliate brokers within the scope of this chapter; (6) For Brokers: In the case of a licensee, failing within a reasonable time to complete administrative measures that may be required by the commission upon the transfer or termination of any affiliate broker employed by the broker;  The Tennessee Real Estate Commission may refuse a license for cause or suspend, revoke a license where it has been obtained by false representation or by fraudulent act or conduct.  They may also order that a licensee be downgraded to affiliate broker status from broker status.  A principal broker who is selected for an on-site audit will be contacted by a TREC representative and must make the documentation available at their request. In the event the broker files electronic records, the broker must make such records available within 24 hours. The transaction records must be kept for three years.  A mandatory audit form may be requested instead of an on-site audit. In this case, all documents must be submitted to TREC timely or the broker is in violation of the audit provisions of the statute. 13
ADDITIONAL TENNESSEE VIOLATIONS which could result in Violations  1  Making any substantial and willful misrepresentation ...
Broker Release-- A licensee is placed in broker release status when the PB (Principal Broker) with whom they were affiliated, sends in a TREC 1 form, with or without the license, releasing the licensee from the affiliation with the firm. (No fee required). The licensee is sent a letter from TREC telling them that they have been broker released and advising them that they must send in a TREC 1 form, with the required fee, within 10 days from the broker release date, either to indicate affiliation with a new firm or to indicate their desire to retire their license. A license in a broker release status is not renewable. Delinquent--A delinquent license is an expired license. A licensee in a renewable status (active or retired), who has not met the requirements for renewal, will be automatically placed in a delinquent status during the first 60 days following the license expiry date. If, during the initial 60days following the expiry date, the licensee in a delinquent status completes all requirements for licensure and pays the required penalty, the license will be renewed. If not renewed during the initial 60 day period, on the 61st day following the expiry date, the license will be designated expired. Once a license is designated expired, a licensee must seek reinstatement of his license pursuant to the Reinstatement Policy, 2008CPS-001. Even though the licensee is in a delinquent status, this designation does not change the fact that the license is expired and therefore the licensee cannot legally engage in real estate activities. Expired--A license in an expired status is one which is no longer valid. The date for renewal has passed. The person has no license and therefore, cannot engage in real estate activities without being in violation of the law. Problem--This is a status in which TREC places licensees who have a material issue which needs to be addressed by the licensee. Issues such as failure to maintain E & O, failure to inform TREC of address or firm change, no PB at firm nor an approved plan to replace PB might cause a licensee to be placed in problem status. This is not a renewable status. Revoked—a revoked license status indicates that the Commission has taken an affirmative action, usually pursuant to a formal hearing, to take the license of the licensee. If a license has been revoked, there is no longer a license for that licensee and that licensee cannot engage in activities which require a license. A revoked licensee who desires to obtain a license must appear before the Commission. The Commission can grant or deny the request. Suspended—Licenses are usually suspended by the Commission for specific time periods or until certain conditions are met. While a license is suspended, the licensee cannot engage in activities which require a license, nor will a license be renewed if it is suspended. • By statute, other agencies can direct TREC to place a license in a suspend status. The agencies which are currently empowered by statute to order that a license be placed in a suspended status are: The Tennessee Department of Revenue; the Child Support Division of the Department of Human Services and the Tennessee Student Assistance Corporation. Any qualifications, certifications or designations that a licensee holds which require they maintain an active license will also become inactive, suspended or revoked. 14
Broker Release-- A licensee is placed in broker release status when the PB  Principal Broker  with whom they were affiliat...
LICENSE STATUS The Tennessee Real Estate Broker License Act of 1973 established two license statuses into which a licensee may request to place his license: ACTIVE and RETIRED. All other license statuses are subcategories which TREC utilizes to describe and modify the license status and are not statuses which may be chosen by the licensee and are not renewable statuses. Active—a license is placed in an active status when all requirements for licensure and/ or renewal have been satisfied. Affiliate brokers, brokers and real estate firms in this status can legally engage in real estate activities as defined by TCA 62-13-102(4)(A)(B); however, active status does not require that a licensee actively engage in real estate activities. A licensee can be in an active status and affiliated with a firm, but not be actively engaged in real estate activities. Active status is not based upon the level of activity of a licensee, but rather on compliance with the statutory requirements. Inactive—The inactive status is a “holding “status in which TREC places licensees who have requested to retire their license, but who have not met the educational requirements to do so. The Tennessee Real Estate Broker License Act of 1973 does not allow a licensee to choose an inactive status or to default to an inactive status simply because the licensee has decided to pursue other interests and/or professions. If a licensee does not want to practice real estate, but wants to retain the license, then that licensee must submit a TREC 1 Form requesting that the license be placed in retirement. If the licensee has not completed all of the required education, TCA 62-13-318 prohibits the retirement of the license. In such instances, the Broker Act requires that the license be placed in a “holding status” defined as inactive until the education requirements have been timely completed. Inactive is specifically defined in the Broker Act and does not mean an active licensee has decided by their actions or in their mind, to simply quit engaging in the practice of real estate. A licensee who has been placed in an inactive status cannot practice real estate at all and an inactive license cannot be renewed. Retirement – this license is not an active license and you cannot practice real estate in retirement. ◦ You must renew your license each period. ◦ E&O, association fees are not required. ◦ (Advisable to purchase special E&O for tail end coverage) ◦ Re-activate license by affiliating with a principal broker How do I retire my license? If you wish to stop practicing real estate for any reason, but do not want to give up your real estate license, you may place your license in retirement. In order to retire your license you must complete a TREC Form 1 and submit it to TREC along with any fees. You must have completed all educational obligations prior to retiring your license. While in retirement, you cannot participate in any real estate transactions; however, you may receive commissions from transactions completed prior to retirement. YOU MUST CONTINUE TO RENEW YOUR LICENSE AND PAY THE RENEWAL FEE. How do I reactivate my real estate license from an inactive or retired status? A TREC Form 1 should be completed in its entirety and mailed to TREC with the appropriate fee. You must obtain the required E&O coverage before your change to active status will be approved. 15
LICENSE STATUS The Tennessee Real Estate Broker License Act of 1973 established two license statuses into which a licensee...
Real Estate Education and Recovery Account: (Details are specified at T.C.A. § 62-13-208) • The real estate education and recovery account (“the account”) was established in order to compensate aggrieved members of the public who have been adjudged to have suffered monetary damages as a result of the violation of the Tennessee Real Estate Broker License Act of 1973 or any rules promulgated there under by a licensed broker, affiliate broker, or time-share salesperson. • The account is maintained by TREC with a minimum balance of five hundred thousand dollars ($500,000) • The maximum amount of possible recovery under the account is fifteen thousand dollars ($15,000.00) per transaction. This amount represents the maximum liability of the account for a transaction, regardless of the number of aggrieved persons or real estate parcels associated with the transaction. The liability of the account for the acts of a broker, affiliate broker or time-share salesperson shall be limited to an aggregate amount of thirty thousand dollars ($30,000-limit insurer will pay out during policy term). • At the commencement of any action which may result in a judgment requiring collection from the account, the aggrieved person commencing the action is required to promptly notify the Commission to that effect in writing via certified mail, return receipt requested. • An aggrieved person is eligible to recovery from the account when that aggrieved person has obtained a valid judgment in a court of competent jurisdiction and all or part of the judgment is unpaid after sixty (60) days after all proceedings have been terminated (including reviews and appeals) and the person has exhausted all remedies at law to satisfy the judgment. • Once a judgment has been obtained, proceedings terminated and attempts at obtaining payment of the judgment have been made, the aggrieved person may apply to the court which rendered the judgment for an order directing payment from the account in an amount representing the unpaid judgment. If the court is satisfied that all or part of the judgment has not been paid and all required attempts to obtain payment of the judgment have been made by the aggrieved person, the court will enter an order directing payment from the account. • Upon the order of a court of competent jurisdiction, the aggrieved person may recover actual or compensatory damages (not including interest and costs) from the account.   Licensees pays a deposit of no more than $30 to fund this account at the time of application ($10 currently) Free education for licensees may be provided and funded through this account as needed The licensee will be responsible to repay the claim payout or have their license suspended or revoked. 16
Real Estate Education and Recovery Account    Details are specified at T.C.A.    62-13-208       The real estate education...
The Tennessee Real Estate Commission The Governor appoints 9 Commissioners to serve on the real estate commission as a judicial body. a. Each Commissioner serves for five (5) years b. Seven (7) must be in the business of real estate c. Two (2) must not be in any field of real estate which provides a consumer view. Sometimes these two are called Public Members d. Of the nine commissioners, one must be at least 60 years of age or older e. AND at least one of the nine must be a minority The Real Estate Commission has authority to: 1. Oversee the license procedures 2. Make decisions regarding license law 3. Create rules and regulations to specify ethics, conduct and compliance 4. Handle complaints from consumers 5. Handle licensee issues according to license law The Governor also appoints a real estate director to oversee a real estate department for hired personnel who perform day-to-day activities to issue and maintain a license. This department processes applications; Issues and monitors licenses; and handles the licensing procedures as outlined under law. CANONS OF ETHICS  Whenever a licensee pleads guilty or is convicted of any offense in the chapter, the licensee must, within sixty (60) days, notify the commission of the conviction and provide them with certified copies of the conviction. The licensee’s license shall automatically be revoked sixty (60) days after the licensee’s conviction unless the licensee makes a written request to the Tennessee Real Estate Commission for a hearing during that sixty (60) -day period. If the licensee also holds a school or instructor approval and their license is suspended or revoked, that approval is also suspended or revoked. 17
The Tennessee Real Estate Commission The Governor appoints 9 Commissioners to serve on the real estate commission as a jud...
Advertising Licensing Laws – Tennessee Broker Supervision regarding Rule 1260-02-.12 All advertising, regardless of its nature and the medium in which it appear, which promotes either a licensee or the sale or lease of real property, shall conform to the requirements of this rule. The term "advertising," for purposes of this rule, in addition to traditional print, radio, and television advertising, also includes, but is not limited to, sources of communication available to the public such as: ◦ Signs, business cards, flyers, letterheads, e-mail signatures, websites, social media communications, and video or audio recordings transmitted through internet or broadcast streaming. Advertising does not include promotional materials that incidentally advertise a licensee such as hats, pens, notepads, t-shirts, name tags, and the like. The firm or licensee may use a post office box for return mail but not as a location address nor on promotional materials. The "firm name" shall mean either of the following: (a) The entire name of the real estate firm as licensed with the Commission; or (b) The d/b/a name, if applicable, of the real estate firm as licensed with the Commission. All advertising shall be under the direct supervision of the principal broker and shall conspicuously list the firm name and the firm telephone number as listed on file with the Commission. With regard to the size and visibility of the firm name and firm telephone number, all of the following shall apply: 1. The firm name must be the most prominent entity featured within the advertising, whether it be by print or other media; and 2. The firm's telephone number shall be featured in greater size and/or prominence than the telephone number of any individual licensee or group of licensees. 3. The licensee’s name shall not be larger than the firm name. 18
Advertising Licensing Laws     Tennessee Broker Supervision regarding Rule 1260-02-.12 All advertising, regardless of its ...
Tennessee Licenses for real estate include: 1. Broker 2. Affiliate Broker 3. Time-share Salesperson: Time Share Act of 1981; Title 66, Chapter 32 a. “Time-share salesperson” means any person acting as a seller of any time-share interval under contract with or control of a licensed real estate broker pursuant to a registered time-share program. i. Notwithstanding any law to the contrary, a licensed broker or affiliate broker is entitled to sell time-share intervals pursuant to a registered time-share program and training without re-testing b. Requires a 30 hour Time share course; and must pass an exam with 70% or better i. A licensee must be at a brokerage that is registered to sell timeshares ii. If currently a real estate licensee, then only the 30hr course is required without taking an exam iii. Continuing education is not required. c. A notice for the right of recession period allows for termination of the timeshare contract after it is signed; the cooling off (recession) period in Tennessee is i. 10 days with inspection, 15 days without an inspection d. Timeshares are also regulated by the Securities Exchange Commission (SEC) because of investor relations and funding of the offers to acquire funds for development and sales across state boundaries. 4. Acquisition Agent (performs in Time-share market only) a. "Acquisition agent" means a person who by means of personal inducement, solicitation, or otherwise attempts directly to encourage any person to attend a sales presentation for a time-share program. 5. Vacation Lodging Agent - means an owner, principal, officer, or upper level manager of a vacation lodging services firm. This licensee can only perform lodging services. This category is exempt from qualifying for a real estate license. Requires an 8 hour course with no exam. a. 62-13-104 Vacation Lodging Service - Residential property leased for not more than 14 days. Requires a firm license and a Designated Agent who is licensed every two years and may supervise multiple offices in a 50 mile radius of the principal office. 19
Tennessee Licenses for real estate include  1. Broker 2. Affiliate Broker 3. Time-share Salesperson  Time Share Act of 198...
Initial Cost to become licensed… – Tennessee License application fee $100 – No more than $30 deposit to Education and Recovery Fund ◦ – A requirement which assures the public, a licensee will uphold a good reputation as required by common law. Typically, a licensee is a non-employee or independent contractor; therefore a judgment cannot be filed with an employer. A claim to this fund would result in a license suspension. E & O Insurance average cost of $300 for two years under the state policy ◦ Errors and Omissions insurance covers unintentional document errors of the licensee. It is a professional liability insurance policy. All active licensees must carry Errors and Omissions insurance with no lapse in coverage. Only one Tennessee license may be issued for a period of two years; held under one brokerage. What do I need to send the Commission along with my application? Documents required for an affiliate broker’s license: • Application with picture - this is obtained at the testing center upon successful completion of • the examination • Proof of High School Graduation • Proof of completion of pre-license education • Proof of errors and omissions insurance policy • Payment of all fees due. • Documents required for a broker’s license: • Application with picture - this is obtained at the testing center upon successful completion of • The Tennessee Broker’s examination. • Proof of errors and omissions insurance policy. • Payment of all fees due. License status - Renewal  Every two years to renew a Tennessee real estate license, a resident of Tennessee must complete a minimum of 16 hours of education. – Including a TREC mandated CORE course as part of the 16 hours. – The remaining hours may be any other approved CE courses. – Renewal fee is $80 each two year period. – Failure to renew a license within 60 days may result in a penalty fee per month and reinstatement conditions 20
Initial Cost to become licensed         Tennessee License application fee  100       No more than  30 deposit to Education...
Education TREC approves education courses provided throughout the state by professional schools, colleges and state universities.  A list of approved schools and the courses they provide can be found at the TREC website.  Each course has an approved number which identifies the education provided.  Your licensee ID# is required for reporting completion of approved education.  Education must be completed by the license expiration date to renew your license for the next two year licensing period.  The sponsoring school must electronically report your completion to TREC within 10 days.  Courses may be completed in the classroom, by internet or workbook What is the TREC Core Course? • The TREC Core Course is a specific six (6) hour course designated by the Commission which is required to be taken by licensees who must complete the 16 hour continuing education requirement. Licensees should remember that a failure to complete the TREC Core Course will prevent renewal of the license even if the licensee completes a total of 16 hours of education. (The Commission could increase the number of hours in the required Core Course). I want to take an education course in another state for a designation I am working on. Will I automatically get credit because it was given by the national association? • NO. All courses must be pre-approved by the Commission. You are responsible for ensuring that the courses you complete are approved by the Commission. The sponsor must apply for course approval prior to the course being given. TREC does not give retroactive credit. Where can I check my Education Credits on file with TREC? • http://verify.tn.gov (follow prompts to access database, then input your information to search) Brokers licensed after Jan 1 2005 must also complete 16 CE hours to renew a license beginning the next two year period after the first three years of post-license education. Brokers already licensed prior to 1/1/2005 are grandfathered and are not required to complete any continuing education. A licensee that resides outside of Tennessee (a non-resident) is not required to complete continuing education to renew a Tennessee real estate license. Real estate education may not be provided in the same space as real estate business. Typically, a separate door or suite should define the location. Education may not be advertised or solicited in connection with a real estate brokerage firm. Other states may not require such restrictions or may impose different procedures. 21
Education TREC approves education courses provided throughout the state by professional schools, colleges and state univer...
AFFILIATING WITH A BROKER a. The student must interview and select a brokerage firm to hold their license b. You may select a firms based on location, training, type transaction or any needs you identify for needs and knowledge learned from the real estate course c. It is a TWO-WAY interview – You present yourself, attributes and goals (why you should be hired) – Broker provides benefits of being at the firm (why you should be at their firm) d. The selected broker must sign your application to affirm license assignment e. The actual license is sent to the brokerage firm address f. The Brokerage office must be within 50 miles of licensee’s home Affiliate Brokers Working as a Team under a principal broker… 1260-02-.41 Licensees Who Hold Themselves Out as a Team, Group, or Similar Entity within a Firm A principal broker shall not allow licensees who hold themselves out as a team, group, or similar entity within a firm to establish a physical location for said team, group, or similar entity within a firm that is separate from the physical location of record of the firm with which they are affiliated. Nor shall the broker allow an identity separate from the licensed firm. The principal broker shall not delegate his or her supervisory responsibilities to any licensees who hold themselves out as a team, group, or similar entity within a firm, as the principal broker remains ultimately responsible for oversight of all licensees within the principal broker's firm. Authority: T.C.A. §§ 62-13-203 and 62-13-312 22
AFFILIATING WITH A BROKER a. The student must interview and select a brokerage firm to hold their license b. You may selec...
Broker Termination-TREC Form 1 a. Affiliate Brokers may leave a firm by requesting their license from the Broker and completing a transfer form for TREC. (A broker may not withhold anyone’s license) b. When the licensee requests a release, the license must be provided to the licensee. c. TREC does not settle any debts between the broker and the licensee. It is recommended that the licensee evaluate their position and do an exit interview with the broker. d. The new broker must also complete the form certifying him or her as the new sponsoring broker e. The licensee may neither take nor use any listings secured by the terminating broker unless a specific authority has been granted by the principal broker f. Changes affecting the active license status must be reported within ten days. g. The licensee may not practice real estate until the transfer or change has been received and processed by TREC. h. Also reporting changes to your name, address or license status may be reported with this form. A licensee may not perform duties of an agent in the event of a change in brokerage; or the licensee may not use a name change, address or upgrade to broker status until received and processed by TREC. Franchised Firms: Any principal broker who is affiliated with a franchise trade name or advertising as a member of a cooperative group shall direct each licensee to use the following legend to appear on all advertisements: [Licensee name as it appears on the license] [Firm name and telephone as registered] "Each [enter Franchise Trade Name or Cooperative Group] Office is Independently Owned and Operated." Example: “Each Realty Office is Independently Owned and Operated.” 23
Broker Termination-TREC Form 1 a. Affiliate Brokers may leave a firm by requesting their license from the Broker and compl...
The Listing agreement in Tennessee The seller employment contract with the broker must state an expiration date and compensation as a fee amount or percentage of sale to be in compliance with license law. PROPERTY SIGNS Signage must meet the advertising requirements of containing the firm name telephone number as registered with the Tennessee Real Estate Commission. Tennessee requires a written agreement with the language confirming the owner authorizes the licensee to place a sign on the property. This includes any location advertising property for sale, purchase, exchange, rent or lease. Pointer signs which lead to the property must also include the firm name and telephone number. Limited Services or Advance Fee Services Tennessee allows duties to be waived by the client that limits the broker services by written instruction of the client. A principal broker must allow the unbundling of services. 62-13-404 (3) (B) Upon waiver of any of the duties in subdivision (3)(A), a consumer shall be advised in writing by the consumer's agent that the consumer may not expect or seek assistance from any other licensees in the transaction for the performance of the duties in subdivision (3)(A). A waiver of duties means the limited authority the agent has now moves to limited services that are specified by the client instead of all the duties a limited agent would provide in full service. Waiver of duties by client agreement summary of facts: 1) Selecting only one or more duties is allowed 2) Unbundling the transaction must clearly state which duties a licensee is performing and 3) All other duties are waived 4) Agreement must clearly state intentions 5) Each duty/service may be assigned a cost which are paid in advance 6) Other services available at a cost and may be added as agreed 24
The Listing agreement in Tennessee The seller employment contract with the broker must state an expiration date and compen...
Buyer Representation: 1260-02-.36 - An exclusive buyer representation agreement is an agreement in which a licensee is engaged to represent a buyer in the purchase of a property to the exclusion of all other licensees. When entering into any such agreement a licensee must advise and confirm in writing to such buyer the following: (1) the buyer should make all arrangements to view or inspect a property through the licensee and should not directly contact other licensees; (2) that the buyer should immediately inform any other licensee the buyer may come into contact with (for example, at an open house) that he or she is represented by the licensee; and (3) whether the buyer will owe a commission in the event the buyer purchases a property without the assistance of the licensee through another licensee or directly from an owner. Furthermore, a licensee should also provide information to the buyer: a) About viewing of open houses or new construction locations b) How financing terms affect negotiations and the need for the licensee to have that knowledge c) Regarding which database of homes will reflect the best listings for the buyer’s conditions: such as the MLS, foreclosures or for sale by owner listings d) Explaining their duty to cooperate and not hinder the performance of the agent’s duties Market Exposure: State and Federal Laws a. Do-not-call registry has both state and federal regulations. www.donotcall.gov and state website www.tn.gov/attorneygeneral/cpro/donotcall.html TCA 65-4-401 b. Your broker may subscribe to the list or prohibit you from making such marketing calls. c. A public advertisement may be answered for the reason it is posted but not for other solicitations if the owner is on the registry. (FSBO wants a buyer; is okay to call about a buyer) d. 90 days allowed for inquiry contacts who are on the registry – persons who contact you but you have no other business with them – Such as calls on properties or visitors at open houses e. Violation could range from $500 – $16,000 in penalties (typically marketing firms at higher fee) f. Can-Spam laws control use of Commercial electronic marketing to the consumer. Electronic marketing includes Fax, emails and text messaging. g. Such ads must include an opt-out mechanism which allows a recipient to unsubscribe. They also must include a legitimate email and postal address on fax and emails. 25
Buyer Representation   1260-02-.36 - An exclusive buyer representation agreement is an agreement in which a licensee is en...
Internet Advertising The principal broker shall monitor Internet Advertising for compliance with advertising rules including, but not limited to, social media: (a) The firm name and the firm telephone number listed on file with the Commission must conspicuously appear on each page of the website. (b) Each page of a website which displays listings from an outside database of available properties must include a statement that some or all of the listings may not belong to the firm whose website is being visited. (c) Listing information must be kept current and accurate. This requirement shall apply to "First Generation" advertising as it is placed by the licensee and does not refer to such advertising that may be syndicated or aggregated advertising of the original by third parties outside of the licensee's control and ability to monitor. Authority: T.C.A. §§ 62-13-203, 62-13-301, 62-13-310(b), and 62-13-312. IDX (internet data exchange) through the MLS provides broker listings that can be searched on the firm or licensee’s website. This must be in agreement with the local MLS and must meet the thumbnail criteria of basic information under internet advertising for websites. A blog may not have postings of anything that infringes on the rights of any third party or if copyrighted material is used, then the licensee must have authorization. If third-party sites are linked, then a disclaimer must be shown. Nothing illegal, harassing or discriminatory may be posted or anything that is considered objectionable material. Social media must adhere to the advertising and applicable laws. Comments on the social media site must be monitor regularly with misleading or false comments removed. 26
Internet Advertising The principal broker shall monitor Internet Advertising for compliance with advertising rules includi...
Real Estate COMPENSATION A Licensee may only be paid by their broker based on the brokerage commission scale. • Compensation is always turned over to the employing broker ◦ Agent Split is paid based on the compensation agreement of the employing broker Commissions earned from a transaction may legally be paid as long as the agent is licensed at the time of the transaction even if: a. an affiliate transfers to another firm, b. he/she retires their license, c. the affiliate license expires, or d. the affiliate is deceased You must have a license to be compensated for real estate services. • • • A licensee cannot pay referral fees directly to anyone. Referral fees received by the licensee must be turned over to the broker. Only the broker can pay a referral fee to a licensee. Relocation Transaction issues It is Unlawful to solicit an agent for a referral when an employment agreement is already in place. Typically happens with a relocating employee as a client(s). A relocation company arranges for an employee to move from one location to a residence near the new employment position. A relocation package assists the employee in the move. Typically, there is a limited time frame to perform for listings or the company may buy out the employee. This may impact if you will remain the listing agent for the property. A buyer transaction could have a fee due at closing payable to the relocation company for the employee’s move assistance. CASH PAYMENTS ARE PROHIBITED - A real estate licensee shall not give or pay cash rebates, cash gifts or cash prizes in conjunction with any real estate transaction. T.C.A. §62-13-302 (b) Gifts are limited non-cash closing gifts to clients/customers of a transaction. (Visit www.irs.gov for more information). A pre-paid Visa/MC is considered money. A gift card to a specific store is a gift. Solicitation and Termination: Representation of a client is protected by law. o It is unlawful to interfere with an agency relationship of another agent’s client or to advise them how to terminate an agreement. It is wise to ask a prospect: Are you in an agreement or working with an agent? TCA 62-13-604 27
Real Estate COMPENSATION A Licensee may only be paid by their broker based on the brokerage commission scale.      Compens...
Agency Relationships in Tennessee Personal Interest Disclosure: Tennessee requires that an Agency coupled with an interest be disclosed to all contacts and the phrase “owner/agent” in advertising and on the property. Disclosure also applies to a licensee’s relatives and company ownership interests if involved in the transaction. 62-13-401. Creation A real estate licensee may provide real estate services to any party in a prospective transaction, with or without an agency relationship to one (1) or more parties to the transaction. Until such time as a licensee enters into a specific written agreement to establish an agency relationship with one (1) or more parties to a transaction, the licensee shall be considered a facilitator and shall not be considered an agent or advocate of any party to the transaction. An agency or sub-agency relationship shall not be assumed, implied, or created without a written bilateral agreement that establishes the terms and conditions of the agency or sub-agency relationship. The negotiation and execution of either an exclusive agency listing agreement or an exclusive right to sell listing agreement with a prospective seller shall establish an agency relationship with the seller. 62-13-402. Limited Agency. (Special Agency - authority to provide a specific service) (a) If a real estate licensee is engaged as an agent, the real estate licensee serves as a limited agent retained to provide real estate services to a client. The licensee shall function as an intermediary in negotiations between the parties to a transaction unless the parties negotiate directly. Transactions exempt from the Law of Agencythe transfer or lease of commercial properties, the transfer of property by public auction, the transfer of residential properties of more than four (4) units, or the lease or rental of residential properties shall not be subject to the disclosure requirements The Agency law of 1992 requires disclosure of how the licensee is working with the parties in the transaction. This identifies the licensee’s level of responsibility to the client or customer. a. Requires a written disclosure of agency status to all parties in a transaction b. The agent is not a party in the transaction. Parties include the Buyer(s) & Seller(s). Agents work on behalf of the parties as a fiduciary; whereas when the agent is notified, then the party is deemed notified. 28
Agency Relationships in Tennessee Personal Interest Disclosure  Tennessee requires that an Agency coupled with an interest...
62-13-403. Duty owed to all parties. (Fiduciary duties owed to both Customers & Clients) A licensee who provides real estate services in a real estate transaction shall owe all parties to the transaction the following duties, except as provided otherwise by § 62-13-405, in addition to other duties specifically set forth in this chapter or the rules of the commission: (1) Diligently exercise reasonable skill and care in providing services to all parties to the transaction; (2) Disclose to each party to the transaction any adverse facts of which the licensee has actual notice or knowledge; (3) Maintain for each party to a transaction the confidentiality of any information obtained by a licensee prior to disclosure to all parties of a written agency or sub- agency agreement entered into by the licensee to represent either or both of the parties in a transaction. This duty of confidentiality extends to any information that the party would reasonably expect to be held in confidence, except for information that the party has authorized for disclosure, information required to be disclosed under this part, and information otherwise required to be disclosed pursuant to this chapter. This duty survives both the subsequent establishment of an agency relationship and the closing of the transaction; (4) Provide services to each party to the transaction with honesty and good faith (5) Disclose to each party to the transaction timely and accurate information regarding market conditions that might affect the transaction only when the information is available through public records and when the information is requested by a party; (6) Timely account for trust fund deposits and all other property received from any party to the transaction; and (7) (A) Not engage in self-dealing nor act on behalf of licensee's immediate family or on behalf of any other individual, organization, or business entity in which the licensee has a personal interest without prior disclosure of the interest and the timely written consent of all parties to the transaction; and (B) Not recommend to any party to the transaction the use of services of another individual, organization, or business entity in which the licensee has an interest or from whom the licensee may receive a referral fee or other compensation for the referral, other than referrals to other licensees to provide real estate services under this chapter, without timely disclosing to the party who receives the referral the licensee's interest in the referral or the fact that a referral fee may be received. (A licensee can only represent themselves when they have an interest in the property; the licensee cannot be a facilitator in this situation. This is commonly known as a personal interest disclosure) 29
62-13-403. Duty owed to all parties.  Fiduciary duties owed to both Customers   Clients   A licensee who provides real est...
All prospects in Tennessee are considered to be customers until they become clients. Therefore, Tennessee does not recognize the condition of implied agency which is based on a person’s actions to determine agency relationship. (If you show a house, you are not a person’s agent) Therefore, Non-agency is practiced in Tennessee from first contact as a facilitator. Establishing an agency relationship 62-13-404. Duty owed to licensee's client. (Including duties in 62-13-403) A customer becomes a client upon signing a written agreement. Any licensee who acts as an agent in a transaction regulated by this chapter owes to the licensee's client in that transaction the following additional duties, to: (1) Obey all lawful instructions of the client when the instructions are within the scope of the agency agreement between the licensee and licensee's client; (2) Be loyal to the interests of the client. A licensee must place the interests of the client before all others in negotiation of a transaction and in other activities, except where the loyalty duty would violate the licensee's duties to a customer under § 62-13-402 or a licensee's duties to another client in a dual agency; and (3) (A) Unless the following duties are specifically and individually waived, in writing, by a client, a licensee shall assist the client by: (i) Scheduling all property showings on behalf of the client; (ii) Receiving all offers and counter-offers and forwarding them promptly to the client; (iii) Answering any questions that the client may have in negotiation of a successful purchase agreement within the scope of the licensee's expertise; and (iv) Advising the client as to whatever forms, procedures, and steps are needed after execution of the purchase agreement for a successful closing of the transaction. 30
All prospects in Tennessee are considered to be customers until they become clients. Therefore, Tennessee does not recogni...
Escrow Trust Account – is other people’s money for which a principal broker is responsible a. All funds received with a contract must truthfully represent the agreement of the parties. b. All earnest money must be delivered to the broker immediately upon receipt c. Each contract shall state the terms of holding the funds including 1) the amount of Earnest money received (and how accepted…check/money order) 2) who will hold the funds and 3) under what conditions it may be disbursed (or any other conditions agreed) d. Sales: Earnest Money funds must be deposited in a trust account e. Rentals: Security deposits for rents must be in a separate trust account from sales f. No postdated check shall be accepted for payment of a deposit or earnest money unless otherwise provided in the offer. Parties must agree to terms within the contract agreement. g. Tennessee has a “Good Funds Law” which requires all money to be good upon presentation into an escrow account. A broker may risk the responsibility for a personal check but a closing agent cannot, therefore all funds at closing must be guaranteed funds. h. Earnest money shall be deposited into an escrow or trustee account promptly upon acceptance of the offer unless the offer contains a statement such as "Earnest money to be deposited by”. i. Interest bearing accounts are allowed with a(n); 1) Allocation of interest disclosed 2) Agreement to depositor regarding interest 3) Detailed records of funds and interest j. Broker files must have documentation showing proof in the file: (1) The depositor of the funds; (2) The date of deposit; (3) The date of withdrawal; (4) The payee of the funds; and (5) Such other pertinent information as the commission may require 31
Escrow Trust Account     is other people   s money for which a principal broker is responsible a. All funds received with ...
Disbursement of Funds A Broker may not disburse escrow funds to anyone without documentation based on the contract. Funds may be disbursed if mutually agreed; otherwise, a dispute requires legal action by the broker. Interpleader: The broker has 21 days to disburse the funds or is a dispute arises, the broker must start this court action to solve disputes not covered under the breach of the contract paragraph as outlined in Rule 1260-2-.34. The Court may be General Sessions, Chancery or Civil Court in that local area. The Broker pays the court cost to initiate an interpleader. The Broker is reimbursed by deducting cost from earnest money once the court has ruled on the disposition of the Earnest Money. T.C.A. § 62-13-312(d) authorizes TREC to randomly audit a firm trust account. An authorized representative may at all reasonable hours, examine and copy such books, accounts, documents or records as are relevant to a determination of whether a licensee has properly maintained and disbursed funds from trust accounts required under this law. Typical documents requested by the audit may include but are not limited to the following: • • • • • • • • • • Bank Statements Copies of Bank Reconciliations List of individual ledger balances or individual tenant security deposits List of earnest money amounts held, disbursed and interpleaded HUD-1 statements for all closings Copies of Purchase/Sales agreements Release of earnest money form Copies of the journal or check registers, including a record of daily balances List of outstanding checks and deposits by month List of all licensees affiliated with your firm currently A principal broker who is selected for an on-site audit will be contacted by a TREC representative and must make the documentation available at their request. In the event the broker files electronic records, the broker must make such records available within 24 hours. The transaction records must be kept for three years. A mandatory audit form may be requested instead of an on-site audit. In this case, all documents must be submitted to TREC timely or the broker is in violation of the audit provisions of the statute. On-site records should be kept secured to protect the confidential information of the parties. A licensee only has the right to view their transaction file but not the other licensee files. Electronic record keepers should develop safeguards for retention and security of the records. 1260-02-.40 Electronic Records; T.C.A. § 62-13-312(b)(6) 32
Disbursement of Funds A Broker may not disburse escrow funds to anyone without documentation based on the contract. Funds ...
Disclosure to a Customer Agency status disclosure must be confirmed in writing with an unrepresented buyer prior to the preparation of an offer to purchase. Fiduciary Duties for a customer in Tennessee are extended beyond the General duties of: Reasonable skill and care (use your expertise) Honesty and Fairness (operate in good faith) Disclosure Tennessee requires the seven duties in 62-13-403. Misrepresentation: Liability TCA 62-13-407 A client or other party to whom a real estate licensee provides services as an agent, subagent or facilitator shall not be liable for damages for the misrepresentations of the licensee arising out of such licensee’s services unless the client or party knew, or had reason to know, of the misrepresentation. If the agent has knowledge, they must disclose. If the agent has no way of knowing and passes along the information, the agent may not be held liable under license law but common law may impose negligent misrepresentation when another authority could easily provide such information. Furthermore: Tennessee requires that all written offers must be presented to the seller. Regardless of pricing or conditions, the agent must present all written offers. Under the statue of frauds law, all real estate agreements must be in writing to be enforceable. Anyone can verbally state an offer but unless it is written, it is not binding in real estate transactions for Tennessee. EXCEPTION: If a seller provides written instructions to the agent not to work an offer based on specified conditions, the agent is within law to inform the buyer that offer is unacceptable for the seller. However, because sellers could change their minds, legally, agents should at least inform the seller of the receipt of such an offer. NO DISCLOSURE REQUIRED • • Tennessee does not require disclosure of sex offenders so requests should be directed to the authority in the area. (Megan’s Law) Disclosure of death or ghosts, (stigmatized property) is not required but may affect value. 33
Disclosure to a Customer Agency status disclosure must be confirmed in writing with an unrepresented buyer prior to the pr...
∞ Licensee Duties Licensees are responsible for all Real Estate duties, but may allocate administrative duties to employees or Real Estate Assistants as approved by the broker-.  Un-licensed assistants/employees may not be paid on commission or per transaction.  Licensed Assistants may be salaried and/or paid on commission and can perform all duties since they are licensed. They must be in an agreement with the hiring licensee and at the same firm. A Licensee must have broker authorization to hire an assistant as the broker is held responsible. An unlicensed assistant may not: (these activities require a license) 1. 2. 3. 4. Make cold calls by telephone or in person to potential clients; Show properties for sale and/or lease to prospective purchasers; Host open houses, home show booths or fairs; Discuss or explain listings, offers, contracts, or other similar matters with persons outside the firm; 5. Negotiate any terms of a real estate transaction; or 6. Negotiate or agree to any commission split or referral fee on behalf of a licensee; 7. Be paid any compensation which is dependent upon, or directly related to, a real estate transaction. An unlicensed assistant may perform such duties as: 1. Answer the phone, forward calls and give information contained only on the listing agreement as limited by the broker; 2. Fill out and submit listings and changes to any multiple listing service; 3. Follow up on loan commitments after a contract has been negotiated and generally secure status reports on the loan progress; 4. Assemble documents for closing 5. Secure public information from courthouses, utility districts, etc. 6. Have keys made for listings 7. Place ads which have been approved by the Principal Broker; 8. Receive, record and deposit earnest money, security deposits and advance rents under the direct supervision of the Principal Broker; 9. Type contract forms for approval by licensee and Principal Broker; 10. Monitor licenses and personnel files; 11. Calculate, print or distribute commission checks 12. Place signs on property; 13. Order repairs as directed by the licensee; 14. Prepare for distribution fliers and promotional information which have been approval by the Principal Broker; 15. Deliver documents and pick up keys; 16. Place routine telephone calls on late rent payments; 17. Gather information for a comparative market analysis (CMA); 18. Unlock property under the direction of a licensee; and 19. Disclose the current sales status of a listed property. 34
    Licensee Duties Licensees are responsible for all Real Estate duties, but may allocate administrative duties to employ...
SUBAGENCY In 1992 Tennessee established the Law of Agency. Prior to 1992, the owners would hire a broker and sign a listing agreement. The broker would market the property to other firms and the public. The seller was the only party that signed an agreement with a broker, therefore was the only represented party. Buyers were not represented. The broker that sold the property (selling broker) worked with the buyer but was contractually bound to the listing agreement signed by the listing broker. Therefore, both the listing broker and the selling broker worked for the seller. This is sub-agency and is still legal. BUYER AGENCY or SELLER AGENCY The most common type of agency relationship is Single agency. The agent is representing either the buyer or the seller. An agreement may include sole representation or a no default to another status. A default provision allows the agent to change their status by agreement in an effort to perform their duties required to complete the transaction. A statement in the contract authorizing the agent to default or transition to a different agency status within the transaction. Dual agency is permitted in Tennessee as consensual or with informed consent of all parties – undisclosed dual agency is prohibited in Tennessee Designated Agency (Tennessee) – the principal broker assigns a licensee to represent the client to the exclusion of any other licensee at firm. (Commonly used to distinguish which location the assigned agent is working from as well as the exclusive right of the agent with the client.) 35
SUBAGENCY In 1992 Tennessee established the Law of Agency. Prior to 1992, the owners would hire a broker and sign a listin...
∞Tennessee Property Condition Disclosure TCA 66-5-201 Title 66 “Property” a. Sales of any single family residence (one – four unit dwellings) requires a seller disclosure form b. Owners of residential 1-4 units must complete the disclosure (including a for sale by owner) c. Agent must inform seller of law but is not held responsible for contents of the form unless they have knowledge of adverse facts. (visual condition constitutes knowledge to question the facts) d. "Adverse facts" means conditions or occurrences generally recognized by competent licensees that have negative impact on the value of the real estate, significantly reduce the structural integrity of improvements to real property or present a significant health risk to occupants of the property e. Disclosure is not required for certain transfers; an Exemption form must specify the exemption: 1) Transfers pursuant to court order 2) Tax sales, probate, estate, trustee 3) Relatives, spouses in divorce 4) If non-owner occupied for at least 3 years 5) New construction first sales 6) Foreclosures f. Property disclosures TCA 66-5-210 must be Signed and Certified by Owner 1) The signed disclosure must be provided to prospective buyers 2) It Informs them about the condition, modifications & personal property g. Failure of the seller to disclose known defects is fraud h. Misrepresentation of facts allows buyer to terminate contract i. Contract should not be final without the receipt of the property condition disclosure j. However, the contract is not invalidated if the form is missing. k. Non-disclosure is grounds for the buyer to file suit for up to one year later, if they have reason l. Selling as-is does not relieve the owner of this disclosure unless: 1) A Property Condition Disclaimer or AS-IS form is signed by the buyer acknowledging acceptance of the as-is condition. 36
   Tennessee Property Condition Disclosure TCA 66-5-201 Title 66    Property    a. Sales of any single family residence  o...
All Sellers must disclose Homeowner associations and rules per law of TCA 66-27-502.  TCA 66-5-213 effective in 2009, requires the seller to disclose in writing if the property is located in a PUD (Planned Unit Development) and make available to the buyer a copy of the restrictive covenants, homeowner bylaws and master deed upon request. – A PUD is an area of land, controlled by one or more landowners with unified plan of development for a number of dwelling units, commercial, educational, recreational or industrial uses or combinations. The plan does not correspond in lot size, bulk or type of use, density, lot coverage, open space or other restrictions to the existing land use regulations. Restrictive covenants place limitations or conditions on the use of the property such as size, location or height of structures, materials to be used in structure exterior, activities carried out on the property or restrictions on future subdivision or land development. Bylaws are guidelines for the operation of a homeowner’s association and their membership rights.  Water and Soil Disclosures TCA 66-5-212 – Disclosure of water supply and septic system is required – unless public water/sewer is present – A Certified well driller & pump installer is required to locate/install a private water well – Private septic systems are regulated; access to a public septic system may require an owner to connect to that system  Disclosure of known percolation tests or soil absorption rates – Disclosure of foundation move – This statute requires the seller to disclose in the contract itself, including an acknowledgement of receipt, the presence of any known exterior injection well, and the results of any known percolation test or soil absorption rate tests performed on the property. This disclosure must be made prior to entering into a contract with a buyer. The documentation must be acceptable for the department of environment and conservation. – The seller also must disclose if any single family residence on the property has been moved from an existing foundation to another foundation. 37
All Sellers must disclose Homeowner associations and rules per law of TCA 66-27-502.     TCA 66-5-213 effective in 2009, r...
Rule 1260-1-.15 Errors and Omissions Insurance Coverage It shall be a requirement for an active licensee to carry errors and omissions insurance to cover all activities contemplated under the Tennessee Real Estate Broker License Act unless the Commission is unable to obtain coverage pursuant to T.C.A. §62-13-112(g) which would void the requirement of coverage under the applicable contract period. (1) (2) (3) (4) A licensee who places his license in an inactive or retired status is not required to carry errors and omissions insurance until such time as his license is activated. New licensees, licensees who activate their license from an inactive or retired status, and licensees who reinstate their license from an expired status at a time other than the beginning of the licensing period shall pay a prorated premium in accordance with a schedule provided by the insurance provider. The Commission shall perform random audits to assure that licensees have met the requirements of this rule. Any independently obtained errors and omissions insurance policy shall, at a minimum, be issued upon the same terms and conditions as the policy obtained by the Tennessee Real Estate Commission, including, but not limited to, the limits of coverage, the permissible deductible, the permissible exemptions and the term of the policy. This program is designed exclusively to provide professional liability insurance for Tennessee Real Estate Licensees. Even the most careful professional cannot always prevent the filing of a frivolous lawsuit nor can they preclude making an honest mistake. Under this program, the insurance provider has the responsibility of defending as well as paying a settlement or judgment on covered claims, subject to the deductible, up to the limits of liability. The licensee is defended against unintentional document errors which cause harm to the client or customer. More than Less than Penalty charged if not insured by 31st day from expiration 30 days 120 days $200 if back date or $400 if E&O is not back dated to January 1 120 days 6 months $500 6 months 12 months $500 plus $100 per month or part month 12 months License Revoked A Broker may be fined up to $1000 for failure to supervise the licensee after 120 days. Revocation of the license is the final disciplinary action which will impact any future chance of ever holding a real estate license again. Conditions for Reissuance of a Revoked License: Reapply for licensure; Pay penalty fees; Pass all required examinations for licensure (unless waived); Meet any current education requirements (unless waived). 38
Rule 1260-1-.15 Errors and Omissions Insurance Coverage It shall be a requirement for an active licensee to carry errors a...
∞Fair Housing in the State of Tennessee TCA 4-21-101 a. Human Rights Commission handles fair housing compliance in Tennessee b. Both equal housing and employment complaints are in the same department in Tennessee. c. Federal Fair housing protects against discrimination by race, color, religion, national origin, sex, disability, familial status. – Tennessee adds Creed as a protected class, which is a group with specific beliefs; like scientology or atheism. Tennessee covers 8 protected classes in all. d. Complaints must be filed within 180 days with the Tennessee Human Rights Commission. The Federal Fair Housing law allows 365 days for a complaint to be filed) e. Owners of one and two dwelling units are exempt from compliance, if the owner lives in one unit or rents the other part of their occupied home, they may choose to whom they rent. f. However, owners must not advertise or state an act of discrimination of the protected classes. g. Other Tennessee Fair Housing Exemptions : – owner occupied rooming houses, ◦ Allowed to advertise gender if sharing a common bath ◦ Single sex dormitories – dwellings for religious groups & – housing for older persons (90% occupied by persons age 55+ or intended for age 62+) regarding familial status h. The protected classes does not prohibit a licensee from determining financial qualifications for anyone in a protected class i. Other federal, state or local restrictions regarding number of occupants in a dwelling does not constitute discrimination of the protected classes j. A Complaint can only be in one of the systems at a time (state or federal) 39
   Fair Housing in the State of Tennessee TCA 4-21-101 a. Human Rights Commission handles fair housing compliance in Tenne...
Comprehensive License Law Review Let’s assess your understanding of the course materials. Fill in the blanks in the paragraphs below with the best possible answer for Broker B, Mary Agent and Classy Client: Broker B interviewed Mary Agent on November 1st. Mary Agent agreed to work for Broker B by providing her documentation, paying the application fees and the E&O coverage fee. Mary Agent went home that same evening and called fifteen prospects. Mary Agent scheduled three appointments for the following week with these prospects. Broker B is now waiting to receive her license. Classy Client, who is one of the prospects, scheduled to meet with Mary Agent, decided she was ready to get started right now. If Classy Client wants an agent assist her in the purchase of a home, she must sign a 1)______________________________________to be represented. If Mary Agent meets with Classy Client and signs an agreement, but she does not have a license at this time, she is in 2)____________ of license law. Mary Agent called Broker B for further instruction. Mary Agent remembered that practicing real estate without a license was a 3)___________ misdemeanor. Broker B advised Mary Agent to let him follow-up with Classy Client until Mary Agent received her 4)___________. Broker B received the real estate license for Mary Agent two weeks later. Mary Agent proceeded with Classy Client, showed her property and wrote an offer. The offer was accepted, earnest money deposited and contingencies met. Classy Client closed the sale. After closing the sale, Mary Agent submitted a HUD-1 closing statement and the 5)___________________________ to Broker B for payment. Broker B smiled and congratulated Mary Agent on her first sale. Mary Agent asked Broker B when she would receive her compensation split for the sale. Broker B informed Mary Agent that her first sale was his fee for training her. To avoid this misunderstanding, Mary Agent should have completed an 6)_____________________________________________________ to affirm her compensation and duties under Broker B. Mary Agent was not happy with Broker B at this point. She decided she would print her own business cards with just her information and forget Broker B. License laws stipulate that Mary Agent must advertise with the firm’s 7)____________ and 8)_____________________________ of record. If TREC receives a complaint on Mary Agent, she could be reprimanded, assessed a 9)______________ or her license could be revoked. Broker B asked Mary Agent to come into the office for a meeting. Broker B had prepared a TREC change form for Mary Agent and took her license from the wall or book. This action best describes that Mary Agent and Broker B’s affiliation has been 10)___________________. Mary Agent has 11)_____ days to find another broker who will sponsor her license. 40
Comprehensive License Law Review Let   s assess your understanding of the course materials. Fill in the blanks in the para...
1. A licensee may have his or her license suspended or revoked for all of the following actions EXCEPT A) being declared mentally incompetent B) depositing earnest money into the firm's escrow account C) helping another person cheat on the licensing examination D) displaying a "For Sale" sign on a property without the owner's consent 2. Earnest money deposits received by a salesperson on behalf of the principal (client) must be turned over to the broker for deposit into the escrow trust account A) three days after receiving an offer B) upon receipt of any valid offer C) no later than five working days after receiving the offer D) immediately upon receipt 3. A licensee may lawfully be compensated by A) either buyer or seller B) his or her employing broker only C) any party to the transaction D) any licensed real estate broker 4. A person who believes that he or she has been illegally discriminated against may file a complaint with the A) Board of Realtors B) Attorney General C) Real Estate Commission D) Tennessee Human Rights Commission or HUD 5. A Tennessee affiliate broker may hold a concurrent license with more than one Tennessee real estate broker under which of the following circumstances A) under no circumstances B) with the permission of his or her sales manager C) with the written consent of the brokers being represented D) with the permission of the Tennessee Real Estate Director 41
1. A licensee may have his or her license suspended or revoked for all of the following actions EXCEPT A   being declared ...
6. If an affiliate broker is not satisfied with their present real estate firm and decides to move to a different firm; the A) current broker must send the affiliate broker's license directly to the new broker B) new broker must be the one to notify the commission of the change C) affiliate broker must take their license to the new broker and notify the commission within three days D) TREC Form 1 must be completed by the affiliate broker, the current and new broker, and sent to TREC with the fee within 10 days 7. Tennessee allows an owner to rightfully redeem property lost by a tax sale within a statutory period of A) six months B) one year C) two years D) none of these 8. The legal age of competency in Tennessee is A) 16 B) 18 C) 21 D) 25 9. A person who is awarded a judgment against a real estate licensee for a violation of the Tennessee Real Estate Broker Act of 1973, has a right to A) immediately apply to the real estate commission for full payment B) the maximum award of $500,000 from the real estate education and recovery account C) seek satisfaction from a civil suit and be compensated from the E&O insurance D) receive up to a $15,000 by complying with the procedures as outlined in the real estate education recovery account 42
6. If an affiliate broker is not satisfied with their present real estate firm and decides to move to a different firm  th...
10. A broker received an earnest money check for $5,000 and immediately cashed it. At closing, the broker wrote the closing agent a personal check for $5,300 which included interest on the funds. The broker A) should have deposited the funds in the broker's operating account B) should have deposited the funds in the escrow trust account, then disbursed to the closer C) should have paid the interest directly to the buyer D) should have deposited the funds in his personal bank account and kept the interest 11. Which of the following forms is required to be completed by the owner of residential property for compliance with license law? A) listing agreement on the property B) MLS profile sheet C) property condition disclosure D) agency disclosure 12. The Tennessee Property Condition Disclosure is required to be completed by all the following EXCEPT A) single family residence occupant B) duplex owner occupant C) trustees selling by court order D) quadraplex owner occupant 13. The listing broker is NOT required to disclose which of the following A) a sex offender B) a leak in the basement C) agency status D) name of their real estate brokerage firm 14. Tennessee allows all the following contracts as legal real estate agreements EXCEPT A) purchase and sale agreement B) buyer agency agreement C) exclusive right to sell D) a net listing agreement 43
10. A broker received an earnest money check for  5,000 and immediately cashed it. At closing, the broker wrote the closin...
15. A real estate brokerage firm only represents buyers and does not list property for sale. All buyers must sign a buyer representation agreement whereas the broker agrees to never default to another status. What form of agency has the broker set as a policy? A) non agency B) single agency for a buyer C) designated agency D) dual agency 16. The real estate license law is regulated by the A) Tennessee Human Rights Commission B) Tennessee Real Estate Commission C) Tennessee Association of Realtors D) Tennessee Property Rights Commission 17. A person must have an active real estate license to A) Manage, sell or lease office space for compensation B) act under a power of attorney to convey real estate C) manage property as an employee for an owner or business D) sell a building owned by partners in a partnership 18. A licensee may renew their real estate license with A) payment of an $80 renewal fee B) proof of completion of the TN CORE course C) proof of completion for 16 continuing education hours D) all of the above 19. An unlicensed assistant may do all the following EXCEPT A) prepare a market analysis B) gather tax assessor's information C) prepare advertisement for approval D) negotiate a contract with the buyer and seller 44
15. A real estate brokerage firm only represents buyers and does not list property for sale. All buyers must sign a buyer ...
20. How many members does the governor appoint to serve five years each on the Tennessee Real Estate Commission? A) three B) five C) six D) nine 21. The Do-Not-Call laws permit a licensee to contact a For Sale by Owner on the list if A) the telephone number is advertised, even if the licensee knows the owner is on the list B) the licensee is seeking to list the property C) the licensee has an interested purchaser for the property D) the agent feels the owner does not know what he/she is doing 22. A non-resident of Tennessee may be issued a license in Tennessee without meeting all licensing requirements if the licensee has an active license in another state because Tennessee allows A) Timeshare Exchange Agreement B) License for license agreement C) Reciprocity under specific guidelines D) Attorney privilege 23. An applicant must submit all the following to obtain a real estate license EXCEPT A) $100 fee B) Proof of Errors and Omissions Insurance coverage C) $30 fee for Real Estate Education and Recovery Fund D) Sixteen hours continuing education 45
20. How many members does the governor appoint to serve five years each on the Tennessee Real Estate Commission  A   three...
24. I have an active real estate license. I have not participated in a transaction for some time but may want to continue my career later. My best option is A) to complete any required education and submit documentation to retire the license B) to request for the real estate commission to make my license inactive C) move my license to a brokerage firm 100 miles from my home D) do nothing and allow the license to expire 25. I have three contracts preparing to close in the next thirty days. If I retire my license today, can the broker pay me any commissions from the three transactions when they close? A) No, because you will not have a valid license B) No, because all funds must be sent to the real estate commission C) Yes, as long as you were licensed at the time the contracts were finalized. D) None of the above 26. An owner has fifteen lots to sell and wants to offer them for sale by auction. It is legal for a licensee to conduct an auction involving real estate sales A) because he/she holds a real estate license B) only if he/she holds a real estate license and an auctioneer license C) under no circumstances ever! D) only if the employing broker gives the licensee written permission 27. I have a college degree in Computer Science. The real estate commission will require me to provide the following proof before issuing me a license A) Diploma for high school or equivalent; or college education documentation B) Certificates for the 60 hour Real Estate Principles and 30 hour New Affiliate Course C) Proof of passing both parts of the Real Estate License Exam D) All of the above 46
24. I have an active real estate license. I have not participated in a transaction for some time but may want to continue ...
28. The buyer failed to close on a real estate transaction. The buyer wants their earnest money back and says the seller failed to complete repairs. The seller says the repairs are not the issue because the buyer failed to complete the mortgage process timely. The broker should A) make a decision based on the facts as the broker understands it B) keep the earnest money since the buyer and seller could not agree C) contact the real estate commission for mediation D) submit the file to local court as an Interpleader for the parties 29. A new broker is preparing an advertising campaign for the local newspaper. All of the advertising must at least include A) the firm name and broker of record B) the firm name and telephone number as licensed C) the firm name and address D) the firm name and license number 30. The location of a real estate brokerage firm must comply with A) local zoning requirements for a business location B) zoning requirements for residential property C) state contractor rules D) planning and subdivision departments 31. The license of a principal broker who is also a real estate instructor has been suspended. Which of the following statements are correct regarding this situation A) The broker may continue to teach real estate B) The affiliate brokers may continue with no changes to the firm possession C) The broker may continue to use all their designations and approvals associated with the real estate license D) None of the above 47
28. The buyer failed to close on a real estate transaction. The buyer wants their earnest money back and says the seller f...
32. Which statement is most true should an owner not provide a property condition disclosure? A) The seller could risk a fine of $1000 B) TREC could revoke the transfer of the sale C) The sale would not be invalidated by TREC solely because the disclosure was not provided. D) The buyer's acceptance of the property voids any further actions. 33. A licensee enters a buyer representation agreement with The Masons on March 1st. An offer was accepted on March 15th at a sales price of $145,000 closing in 45 days funded by a conventional loan. The contract stated that $5,000 earnest money was submitted in a personal check. The listing broker actually received a personal check for $3,000 and a promissory note for $2,000 payable within five days. The selling licensee A) is in compliance as long as the total amount equals $5,000 B) should have changed the amount to $3000 after the acceptance and just submitted the $2000 later C) is in violation of license law if the contract does not specifically state the $3000 and $2000 promissory note for the funds with agreement by buyer and seller D) None of the above 34. The commission may assess a civil penalty for each separate violation of a statute and each day of a continued violation, in penalty amounts up to A) $2000 B) $1000 C) $250 D) $100 35. The broker shall clearly specify in a contract which authorizes the broker to deposit earnest money this information concerning the funds; A) the name and address of the closing agent B) the terms and conditions for disbursement; the name and address of the holder of the funds C) the terms and conditions of the listing agreement D) the terms and conditions of the buyer agreement 48
32. Which statement is most true should an owner not provide a property condition disclosure  A   The seller could risk a ...
36. A licensee representing a seller who completes a property condition disclosure has a duty to A) inform the seller of the seller's rights and obligations under the property law B) complete the forms for the seller C) inspect the property D) provide any misrepresentation the seller prefers to keep confidential 37. A broker's license may be revoked or suspended if a firm moves and fails to A) have a new license issued B) input a change of address into the MLS C) notify the commission within 10 days D) have mail forwarded to the new address 38. Tennessee requires the disclosure of all the following EXCEPT A) agency status B) a title search C) lead based paint disclosure D) seller property condition disclosure 39. The Tennessee Real Estate Commission is appointed by A) State Legislature B) Popular vote C) the Governor D) The President 40. The only environmental disclosure that is required by the Federal Government in all 50 states is A) Radon disclosure for homes built prior to 1978 B) Lead Based Paint disclosure for homes built prior to 1978 C) Mold disclosure for all homes D) None of the above 49
36. A licensee representing a seller who completes a property condition disclosure has a duty to A   inform the seller of ...
41. A broker may use which of the following to establish a firm presence A) a conspicuously displayed sign on the outside of the door/building in the firm's name B) a mail drop on a door only C) a post office box as the primary address D) the address of a telephone answering service 42. Upon passing the real estate exam, the student must apply for a license with a licensed broker A) within six weeks of passing the exam B) immediately upon receipt of the passing score C) within six months of passing the exam D) within six days of passing the exam 43. Unlawful interference with an agency relationship is best described as A) explaining the corporate relocation policies B) explaining state required disclosures to a seller or buyer C) counseling a buyer regarding the home purchase process D) counseling a client of another real estate licensee on how to terminate or amend an existing agency contract 44. The Governor appoints a Real Estate Director to oversee day-to-day operations. The Tennessee Real Estate Commission is appointed by the Governor as A) a Judicial body B) a professional organization C) state employees D) legislators 45. When a licensee is employed to perform a fee for services less than the minimum level of duties outlined by law, the agreement must A) specifically state the employing duties and waiver of all other duties outlined by the minimum level of duties B) specifically state the full bundle of services C) specifically disallow any agency relationships D) none of the above 50
41. A broker may use which of the following to establish a firm presence A   a conspicuously displayed sign on the outside...
46. If I am a customer with no agreement for representation, a licensee can legally work with me A) in writing an offer when the licensee discloses their representation of the seller. B) when showing property on a one time basis C) as a facilitator in a transaction D) all of the above 47. I showed Mr. Jones three properties today. Mr. Jones did not sign a representation agreement with me nor did he contract for any of the properties shown. Since I performed duties of a real estate licensee, Mr. Jones may consider me his agent. However, in Tennessee a licensee works with everyone as customer until there is a signed agreement. Tennessee does not recognize A) buyer representation agreements B) dual agency agreements C) implied agency in real estate D) sub agency 48. When an agent sells property owned by them, they can legally A) represent a buyer interested in purchasing their property B) represent only their interest as owner/agent C) be a dual agent in the transaction D) sell the property without any agency disclosure 49. If unlicensed when performing real estate duties which require a license it is a A) Class A Misdemeanor B) Class B Misdemeanor C) Class C Misdemeanor D) None of the above 50. The pre-license education required for an affiliate to become a broker in Tennessee is A) 120 hours approved real estate education B) 240 hours approved real estate education C) both A and B D) neither A nor B 51
46. If I am a customer with no agreement for representation, a licensee can legally work with me A   in writing an offer w...
51. The Tennessee Real Estate Commission requires a newly licensed broker to A) immediately complete 16 hours of continuing education within two years of passing the broker exam B) complete an additional 120 hours of education within three years of passing the broker exam C) complete the Tennessee CORE course in the first year D) all of the above 52. An affiliate broker taking the exam to become a broker, must pass the exam A) with a 80% or better score B) with a 75% or better score C) with a 70% or better score D) with a 65% or better score 53. Upon passing the broker exam, an affiliate broker must submit the broker application A) to TREC within three years B) to PSI Exams within six months of passing the exam C) to TREC within six months of passing the exam D) none of the above 54. An affiliate broker seeking to become a broker must complete this 30 hour course A) Business Applications B) Personnel Training C) Tennessee CORE D) Office Broker Management 55. I own a real estate firm but I am not the broker of record. As the owner, I cannot A) file income taxes for the firm B) manage the operating account for the firm C) hire and fire employees D) control the escrow trust account 52
51. The Tennessee Real Estate Commission requires a newly licensed broker to A   immediately complete 16 hours of continui...
56. A buyer plans to schedule a home inspection. The buyer has selected his father to do the inspection. This is allowable if the father is A) a licensed home inspector in Tennessee B) a licensed contractor C) careful not to take anything apart during the inspection D) covered by home owners insurance 57. The Tennessee fair housing laws add an additional protected category for discrimination relating to employment, public accommodations, and housing. This category is A) "Scientology" B) "Marital Status" C) "Unemployed" D) "Creed" 58. A listing agreement must A) identify the property and parties to the agreement B) state the list price, terms of sale, the compensation and termination date C) both A and B D) neither A nor B 59. A licensee retired their Tennessee license in 2009 and moved to New York. The broker and agent must maintain the real estate transactions closed by the agent for a total of at least A) two year B) three years C) five years D) seven years 60. An agent must verbally disclose their agency relationship regarding how they will work with the customer upon contact and A) place a notice in the association database B) notify the broker by fax of the date of first contact C) a written notary statement to their attorney of record D) provide a written disclosure prior to entering a real estate transaction 53
56. A buyer plans to schedule a home inspection. The buyer has selected his father to do the inspection. This is allowable...
Tennessee Laws affecting Real Estate Land Descriptions Tennessee was not surveyed in the Government Rectangular Survey. Part of Tennessee was in the North Carolina Territory. Descriptions were under Metes and Bounds or the now Lot and Block system. Property is classified in the five general categories of real estate. Zoning typically regulates the number of buildings allowed per parcel which describes density zoning. Restrictions on the exterior appearance of buildings and property are controlled under Aesthetic zoning. Typically used for historic preservation or community conformity. Mechanic’s Liens Tennessee statute for a Mechanic’s lien is based on when a laborer commences work. – – A contractor has up to one (1) year to file a claim but the earliest filed claim takes priority. Subcontractors have up to ninety (90) days to file. Home builders typically have specific notices that a lender must confirm has been filed to verify that a mechanics lien will not supersede the first mortgage lender. Property Owned by Married Couples Curtesy and dower rights have been abolished in Tennessee. However, laws which were instituted for protection under dower and curtesy such as a signature release of the other spouse to clear title, remain in effect when conveying real property.  Tennessee recognizes tenancy by the entirety for married couples.  Each spouse has an undivided interest in all property owned by the other ∞Homestead Act – protects the primary residence from creditors unless owner specifically places a lien on the property. Tennessee does not require a homestead exemption to be filed for property ownership. Partnerships ∞Tennessee requires partnerships to file under provisions of the Uniform Partnership Act. Real property must be in connection with the business of the partnership. 54
Tennessee Laws affecting Real Estate Land Descriptions Tennessee was not surveyed in the Government Rectangular Survey. Pa...
ADVERSE POSSESSION  In Tennessee, the required duration of adverse possession to attain ownership is seven (7) years for someone claiming under color of title and twenty (20) years for someone without color of title. (T.C.A. 28-2-101) Tacking of the number of years to claim title is allowed.  Easement by prescription in Tennessee happens with adverse use for twenty (20) years when someone’s property is used continuously without objection from the owner. WILLS  In Tennessee when you die Testate, property is held in probate for six months after testator’s death. A property can be sold during the six months but proceeds may not be distributed to an heir until the will is out of probate.  An Elective Share Right now allows a spouse to contest a will if the living spouse claims it is unfair. This right must be filed in a specific time period to make a claim. The living spouse is allowed up to 40% of the deceased spouse’s estate based on the length of time they were married. The living spouse would be entitled to a percentage of value for both real and personal property of the deceased spouse. (See tn.gov for more information) If the decedent and the surviving spouse were married to each other: The elective-share percentage is: Less than 3 years 10% 3 years but less than 6 years 20% 6 years but less than 9 years 30% 9 years or more 40% No Will (Intestate)  If there is no Will the property falls under the law of descent or succession rights in Tennessee. TCA 32-2-101  Deceased heirs include: Spouse (not less than 1/3 interest), children, parents, siblings, grandchildren if child is deceased, a relative does not have to be a citizen of the US to make a claim. Holographic Will is recognized in Tennessee Nuncupative Will - an oral will  In Tennessee an oral will cannot be used to devise real property. Only personal property. 55
ADVERSE POSSESSION     In Tennessee, the required duration of adverse possession to attain ownership is seven  7  years fo...
Contract Law Presenting Offers in Tennessee: There is no law governing multiple offer presentation. It is the choice of the offeree, who may obtain advice on various ways to proceed. Some choices may be to: 1. 2. 3. 4. Notify all parties that there are multiple offers and encourage the highest and best offer Counter each offer and may the first one back be agreed Work the offers based on the order received Work the offer the offeree prefers one by one ∞Tennessee allows assignment of a contract to another party as long as the assignment is not prohibited in the terms of the agreement. Encumbrances and Liens  The state law makes a difference in how liens are handled. Tennessee is neither; it is intermediary.  Tennessee allows the legal process in the mortgage or deed of trust to dictate the foreclosure proceedings.  The most common is the Non-Judicial under the Power-of-sale in a deed of trust. Deficiency judgments are allowed and can happen. Occupants can be evicted through court after a foreclosure. Foreclosure statues are found Tennessee Code Annotated 35-5-101 to 35-5-111, 66-8-101 to 66-8-103. Tennessee Home Loan Protection Act at TCA 45-20-101 to 45-20-111 also addresses high risk mortgages. Tennessee includes special provisions for military personnel. Tennessee: A Statutory right of redemption allows an owner who loses their home to re-purchase the property at the same cost it was sold, within one year of the tax sale or foreclosure. The statutory redemption right will apply unless waived or legally addressed in the original legal document. The statutory redemption right applies with tax sales. The owner has an equitable right of redemption prior to the actual sale to pay and stop a sale before losing the property. This right stops a lienor from dis-allowing an owner due process to bring the account current. 56
Contract Law Presenting Offers in Tennessee  There is no law governing multiple offer presentation. It is the choice of th...