Texas Real Estate Sales Agent ExamTexas Real Estate LawHard
A real estate sales agent is approached by a client who wants to purchase a property 'for investment' and asks the agent to find a property that is likely to appreciate significantly in the next year. The agent, without being a licensed financial advisor, enthusiastically recommends a specific property, stating it's 'guaranteed' to double in value. Which of the following ethical duties has the agent violated?
- ADuty of obedience.
- BDuty to avoid misrepresentation and give expert advice only within expertise.
- CDuty of accounting.
- DDuty of confidentiality.
Show answer & explanationAnswer & explanation
Correct answer: B. Duty to avoid misrepresentation and give expert advice only within expertise.
An agent must avoid misrepresentation and should not provide expert advice outside their area of expertise, especially financial guarantees which are impossible to make in real estate. Stating a property is 'guaranteed' to double in value is a clear misrepresentation and a violation of professional ethics.
Why the other options are wrong
- A. Obedience relates to following lawful instructions from the client, which is not the issue here.
- C. Accounting relates to handling funds and property, which is not applicable to this scenario.
- D. Confidentiality relates to protecting client information, not investment advice.
Agent's Duty to Avoid Misrepresentation and Exercise Competence
Real estate agents have a duty to be honest and truthful, avoid making false statements or predictions, and only provide advice within their licensed area of expertise, referring clients to experts for other matters.
- Cannot make guarantees about future property values or market conditions.
- Must disclose all known material facts truthfully.
- Should not provide legal, tax, or financial advice unless also licensed in those fields.
Memory trick: Ethics are 'Honest Handling, Expert Hand-offs'.