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Real property

agents and brokers

A real estate agent is a licensed person who helps buyers and sellers of real estate find each other and facilitates the negotiation and closing of real estate transactions. A buyer and seller will each often have an agent representing and assisting them in this process.

Real estate agents are often referred to as agents or sales agents—and may be referred to as a Realtor®—which indicates the agent is a member of the National Association of Realtors® trade association. Real estate agents may also assist landlords and tenants (renters) with finding each other and negotiating leases and are referred to as rental agents in that context.

There are various fee structures available in the market, but agents traditionally work on a commission basis, taking a percentage of the sale price of a completed real estate transaction as their fee. The seller of a property will typically sign an agreement with their agent (the listing agent) to list and market the property and will split this fee with the buyer’s agent.

The commission fee shared by the seller's agent and the buyer's agent is typically deducted from the funds paid by the buyer at the closing of the transaction (along with other closing costs) before the remaining funds are distributed to the seller.

In most states a real estate agent must be affiliated with or sponsored by a licensed real estate broker or real estate brokerage firm. A real estate broker is generally required to have a certain amount of experience as an agent in the real estate industry and must meet additional licensing requirements to own a brokerage firm and handle escrow accounts and earnest money deposits.

A real estate agent will typically split the agent’s share of the sales commission with the agent’s brokerage firm—although the percentage or amount shared may vary.

In Texas, real estate agents must be licensed to facilitate the buying, selling, or leasing of real estate. They help clients find properties, negotiate deals, and handle the closing of transactions. Real estate agents can be referred to as Realtors® if they are members of the National Association of Realtors®. They typically earn income through commissions, which are a percentage of the sale price of a property. This commission is usually split between the seller's agent (listing agent) and the buyer's agent and is paid at the closing of the transaction. Texas real estate agents must work under a licensed real estate broker or brokerage firm, which may also take a share of the commission. Brokers have additional experience and licensing requirements, including the ability to manage escrow accounts and earnest money deposits. The specific fee structures and commission splits can vary, but they are generally outlined in the agreement between the seller and the listing agent.

Texas Statutes & Rules

Federal Statutes & Rules

Real Estate Settlement Procedures Act (RESPA) - 12 U.S.C. § 2601 et seq.
RESPA is relevant because it regulates the real estate settlement process, including the activities of real estate agents and brokers, particularly in relation to residential real estate transactions.

The Real Estate Settlement Procedures Act (RESPA) is a federal statute that governs the settlement process for residential real estate transactions. It requires certain disclosures to be made to homebuyers and sellers, and it prohibits certain practices such as kickbacks or referral fees that could increase the cost of real estate transactions. RESPA mandates that borrowers receive disclosures at various times in the transaction process, including a Good Faith Estimate of settlement costs, a HUD-1 Settlement Statement detailing actual settlement costs, and information about the servicing of the loan. The act also limits the use of escrow accounts—such as those for taxes and insurance—and stipulates that buyers and sellers are not required to use any particular title insurance company.

Truth in Lending Act (TILA) - 15 U.S.C. § 1601 et seq.
TILA is relevant to real estate agents as it requires certain disclosures about the cost of credit, which can affect the financing of real estate transactions that agents facilitate.

The Truth in Lending Act (TILA) aims to promote the informed use of consumer credit by requiring disclosures about its terms and cost. In the context of real estate, TILA requires lenders to provide borrowers with clear and conspicuous disclosure of the terms of a mortgage, including the Annual Percentage Rate (APR), finance charges, amount financed, and total payments over the life of the loan. TILA also provides for a right of rescission, allowing borrowers to cancel certain types of mortgage transactions within three days after closing. Real estate agents should be aware of these requirements as they can impact the timing and structure of real estate transactions.

Fair Housing Act - 42 U.S.C. § 3601 et seq.
The Fair Housing Act is relevant to real estate agents as it prohibits discrimination in the sale, rental, and financing of dwellings based on race, color, religion, sex, familial status, national origin, or disability.

The Fair Housing Act prohibits discrimination in housing-related transactions, including those facilitated by real estate agents. Agents must ensure that they do not discriminate against any person in the sale or rental of a dwelling, the financing of housing, or in the provision of real estate brokerage services. The Act also prohibits advertising that indicates any preference, limitation, or discrimination based on protected classes. Real estate agents must be trained to understand and comply with these anti-discrimination laws to avoid legal liability and to ensure fair treatment of all clients.

Internal Revenue Code - 26 U.S.C. § 6045(e)
This section of the Internal Revenue Code is relevant to real estate agents because it pertains to the reporting of real estate transactions to the IRS, which includes the commission income earned by agents.

Section 6045(e) of the Internal Revenue Code requires certain information returns to be made by persons who are involved in real estate transactions. This includes the reporting of gross proceeds from real estate transactions to the IRS. Real estate agents and brokers are typically responsible for filing Form 1099-S, Proceeds From Real Estate Transactions, which reports the sale or exchange of real estate. This form is used to report the seller's information and the gross proceeds of the transaction. Real estate agents must be aware of their reporting obligations under this statute, as failure to report accurately can result in penalties.