Intermediary Relationships: What You Need to Know

For Texas real estate professionals, understanding the intricacies of agency relationships is paramount. While representing a single party in a transaction is straightforward, situations arise where representing both buyer and seller becomes necessary. This is where the concept of intermediary relationships comes into play. At School Estate, Texas Real Estate School, we believe in equipping our students with the knowledge to navigate these complex situations ethically and effectively. This post will delve into the details of intermediary relationships, helping you understand your responsibilities and avoid potential pitfalls.

What Is an Intermediary Relationship?

In Texas, an "intermediary relationship" is the legally defined framework, governed by the Texas Real Estate License Act (TRELA), that allows a single real estate brokerage to represent both the buyer and the seller in the same transaction. Texas law explicitly prohibits traditional dual agency, where a single agent or brokerage actively advocates for both opposing sides. Instead, Texas uses the intermediary model to balance both parties' representation while maintaining strict duties of fairness and non-disclosure.

How an Intermediary Relationship Is Established

Establishing intermediary status requires two things:

• Written consent: both the buyer and the seller must consent in writing to let the broker act as an intermediary, typically built into the representation agreements signed upfront, the buyer/tenant representation agreement and the listing agreement.
• Proper disclosure: the broker must present the Information About Brokerage Services (IABS) form at the first substantive communication with each party, then execute an Intermediary Relationship Notice once a specific property brings two of the firm's own clients into the same transaction.

The Two Types of Intermediary Status

Intermediary with appointments applies when the brokerage sponsors at least two licensed agents (or associated brokers), and the broker appoints one agent to the seller and a different agent to the buyer. Each appointed agent can give their own client full advice, opinions, and negotiation strategy. The broker stays neutral throughout and can't advise or favor either side.

Intermediary without appointments applies when a single agent represents both parties, when the brokerage has only the broker (or the broker plus one sponsored agent), or when the broker simply chooses not to make appointments. In this version, neither the broker nor the agent can offer advice, opinions, or advocacy to either side, they act purely as a neutral facilitator, writing up paperwork, conveying offers, and keeping the transaction moving.

What Can Never Be Disclosed

Regardless of which form applies, Texas law prohibits the broker and every agent involved from disclosing, without that party's prior written permission:

• That the seller would accept a price below the asking price.
• That the buyer would pay more than their submitted offer.
• Any other confidential information a party has specifically instructed in writing not to share (unless required by law or a court order).

Key Considerations for Agents

• Clear Communication: Open and honest communication with both parties is crucial. Explain the intermediary process in detail and answer any questions they may have.
• Documentation: Maintain thorough records of all communications, disclosures, and agreements. This documentation can be invaluable in case of disputes or misunderstandings.
• Training and Education: Stay up-to-date on the latest rules and regulations regarding intermediary relationships. Continuing education is vital for navigating these complex situations effectively.

Avoiding Potential Pitfalls

• Confidentiality Breaches: Carefully guard confidential information. Even unintentional disclosures can damage trust and lead to legal issues.
• Confusing the Two Forms: Under an intermediary without appointments, neither the broker nor the agent may advise or advocate for either side. Under an intermediary with appointments, each appointed agent can fully advise their own client, it's only the broker who must stay neutral. Know which form applies before you advise anyone.
• Lack of Informed Consent: Ensure that both parties fully understand the intermediary relationship and provide their written consent.

Conclusion

Intermediary relationships are a necessary part of the Texas real estate landscape. By understanding the rules, responsibilities, and ethical considerations involved, real estate professionals can navigate these situations successfully, ensuring fair and transparent transactions for all parties involved.

Understanding rules like this one is exactly what a mentor instructor is for. Questions like this come up constantly, and you'll have someone to ask.

Already licensed and due for renewal? Our Texas real estate continuing education courses keep you current on TREC rules like this one.