Obtaining a Texas Real Estate License

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3 Obtaining a Texas Real Estate License Judon Fambrough Senior Lecturer and Attorney at Law Texas A&M University Revised October 2011 February , Real Estate Center. All rights reserved.

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5 Obtaining a Texas Real Estate License Contents Steps to a Texas Real Estate License About Licensing Educational Requirements Application Process Renewal Process Licensing and Appraisals Appendix A. Texas Administrative Code Persons and Activities that Do and Do Not Require an Active Real Estate License Appendix B. Application for Inactive Salesperson License Appendix C. Salesperson Sponsorship Forms Appendix D. Application for Moral Character Determination Appendix E. Accredited Schools Offering Real Estate Courses by City Appendix F. Accredited Colleges and Universities Offering Correspondence Courses

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7 Obtaining a Texas Real Estate License Judon Fambrough Senior Lecturer and Attorney at Law A person commits a (criminal) offense if the person acts as a broker or salesperson without holding a license... (Texas Occupations Code, Section ). This publication details the steps in obtaining your Texas real estate license. More information may be found on the Texas Real Estate Commission's website at Steps to a Texas Real Estate License To engage in the practice of real estate, an individual must comply with six major licensing requirements prescribed by the Texas Real Estate Commission (commission): taking specific courses, being of high moral character, having fingerprints on file, passing the real estate exam, obtaining an inactive real estate salesperson license and receiving an active real estate license under the sponsorship of a broker. Courses Taking and passing the real estate exam is the first hurdle. To qualify to take the test, the individual must meet the educational requirements outlined under "Educational Requirements" (see page 3). Moral Character An applicant s moral character is reflected by a lack of convictions for felonies or misdemeanors (other than traffic tickets). Individuals who have convictions may file in advance to see if their records prevent licensing (see page 6). Fingerprinting All applicants must have fingerprints on file with the FBI via the Texas Department of Public Safety (DPS) to receive a real estate license. The fingerprints must be taken within six months of the date the person applies for an inactive license. The fingerprints enable the FBI to conduct a criminal background check. The process is administered by L-1 Identity Solutions Enrollment Services (formerly IBT). To get fingerprinted, the applicant must first obtain a FAST Print Pass from the Texas Real Estate Commission's website at FASTPrintPass/. After that, the process is coordinated through L-1 Identity Solutions. Some sites administering the exam provide fingerprinting if the applicant contacts the statewide L-1 Identity Solutions in advance to schedule an appointment. Otherwise, the candidate must contact L-1 Identity Solutions directly and schedule an appointment at the nearest location. The local Board of Realtors may be able to assist. The 82 locations where L-1 Identity Solutions takes fingerprints may be found at com/locations/?st=tx. The applicant may register online at tx.ibtfingerprint.com or by phone at An additional fee may be collected at the time the fingerprints are taken (see page 7). Real Estate Exam Once the applicant has satisfied the educational requirements and received confirmation from the commission, he or she submits an Application for Inactive Salesperson License (see Appendix B, page 15) and fees to the commission to take the exam. If the application is accepted, the test TREC Texas Real Estate Commission (also referred to as the commission). CIB Candidate Information Brochure. Information sent to the candidate after the application for an inactive license has been accepted by the commission. Abbreviations Used SAE Salesperson Annual Education. The first six semester hours (or 90 classroom hours) of coursework submitted to TREC for license renewal. L-1 Identity Solutions The agency coordinating fingerprinting for obtaining a real estate license. PSI Psychological Services Inc. The company under contract with the commission to administer the qualifying exam for prospective licensees. MCE Mandatory Continuing Education. Required annual coursework after the SAE requirement has been satisfied. 1

8 provider, Psychological Services, Inc. (PSI), issues a Candidate Information Brochure (CIB). This qualifies the applicant to take the real estate exam for an additional fee payable to PSI. The applicant must pass the exam within one year from the time the commission receives the application for the inactive license. When submiting an Application for Inactive Salesperson License, the applicant must disclose any criminal convictions, excluding misdemeanor traffic offenses. A felony conviction or a serious misdemeanor violation may disqualify the applicant from taking the exam and getting a real estate license. Persons with questionable records may wish to file a Request for Moral Character Determination (see Appendix D, page 29) to remove any doubt before expending time and money in satisfying the educational requirements. Inactive Real Estate Salesperson License After passing the exam, and placing fingerprints on file, the individual receives an inactive real estate salesperson license. The license is issued without making any further applications to the commission. Active Real Estate Salesperson License After receiving an inactive salesperson license, the person finds a sponsoring real estate broker. Together, the applicant and the sponsoring broker complete and submit a Salesperson Sponsorship Form (see Appendix C, page 23) to the commission. If the application is accepted, an active real estate salesperson license will be issued entitling the licensee to practice real estate under the sponsorship of the broker. Must the sponsoring broker take any additional education courses? Yes. Starting Sept. 1, 2012, the sponsoring broker must attend, during the term of the current license, at least six classroom hours of broker responsibility education courses approved by the commission. The broker may use the hours to fulfill his or her MCE requirements. About Licensing What is the Real Estate License Act? How does it relate to the Texas Real Estate Commission and obtaining a license? The Real Estate License Act (act) was passed by the Texas Legislature in Presently, the act is in Chapter 1101 of the Texas Occupations Code. Among other things, the act creates the Texas Real Estate Commission, the agency charged with administering the rules and regulations for obtaining a real estate license. In addition, the commission has rule-making authority to carry out its mission. These administrative rules are in Title 22, Part 23 of the Texas Administrative Code (code) Chapters 531 through 543. The commission consists of nine real estate commissioners appointed by the governor with the advice and consent of the senate. The commission maintains a full-time staff under an administrator to carry out the agency s responsibilities. These responsibilities include overseeing the requirements for obtaining, issuing and renewing real estate licenses. In addition, the commission oversees, issues and renews licenses for real estate inspectors, residential rental locators and residential service companies. What is the difference between an inactive real estate salesperson license, an active real estate salesperson license and a real estate broker's license? The commission issues three types of real estate licenses, excluding a probationary license. The inactive real estate license is a preliminary step in obtaining an active real estate license. The commission s rules allow an applicant to reach this stage without having a sponsoring broker. The holder of an inactive real estate license cannot practice real estate. An active real estate salesperson license is the next step in being able to practice real estate. The holder is permitted to practice real estate under the guidance of a person who holds a real estate broker's license. During this tenure, the salesperson may not accept any compensation for a real estate transaction nor share a real estate commission except through the sponsoring broker. A real estate broker's license is the highest licensing status issued by the commission. After maintaining an active real estate salesperson license for 24 of the previous 36 months and completing 60 semester hours of post-secondary education in specific courses, a person is eligible to take the real estate broker's license exam. The requirements for obtaining a real estate broker's license are not discussed in this publication. All references to licensing are to either an inactive real estate salesperson license or an active real estate salesperson license. What activities require an active Texas real estate license? An active license is required for anyone who performs specific real estate activities on another's behalf for an actual or expected fee, commission or other remuneration. These activities include: selling, exchanging, purchasing or leasing real estate; offering to sell, exchange, purchase or lease real estate; negotiating or attempting to negotiate the listing, sale, exchange, purchase or leasing of real estate; listing, offering, attempting or agreeing to list real estate for sale, lease or exchange; auctioning, offering, attempting or agreeing to auction real estate; buying, selling or offering to buy or sell or otherwise dealing in options on real estate; aiding, attempting or offering to aid in locating or obtaining real estate for purchase or lease; procuring or assisting in procuring properties for the purpose of selling, exchanging or leasing real estate; selling, buying, leasing or transfering an easement or rightof-way for use in connection with telecommunication, utility, railroad or pipeline services; or controlling the acceptance or deposit of rent from a resident of a single-family residential real property unit; or providing a written analysis, opinion or conclusion estimating the price of real property as long as: (1) it is not referred to as an 2

9 appraisal, (2) it is provided in the ordinary course of the person's business and (3) it is related to the actual or potential management, acquisition or encumbrance of an interest in real property. Right-of-way agents (see last listed activity) must have an active real estate license or be registered with the commission to practice their profession. In addition to listed activities, the act requires any person employed to sell all or a part of a parcel of land for the owner at a salary, fee, commission or other valuable consideration to have an active real estate license. Also, an active real estate license is required of anyone who charges an advance fee or collects a fee under a contract to promote the sale of real estate. The promotion may be through a real estate publication or a referral. What activities and professions are exempt from the active licensing requirement? Certain people, professions and related real estate activities do not require an active real estate license. The licensing act exempts: an attorney at law licensed in Texas; a person acting under a duly executed power of attorney authorizing the consummation of a real estate transaction; a public official in the conduct of official duties; a person calling the sale of real estate by authority of a Texas auctioneer s license, provided the person does not perform any other act of a real estate broker or salesperson as defined by the act; a person conducting a real estate transaction under a court order or under the authority of a will or a written trust instrument; a person employed by an owner to sell both the structures and the land on which the structures rest, provided structures are erected by the owner in the due course of the business; an on-site manager of an apartment complex; an owner or owner's employee who leases the owner s improved or unimproved real estate; transactions involving the sale, lease or transfer of cemetery lots; transactions involving the lease or management of a hotel or motel; transactions involving the sale, lease or transfer of a mineral or mining interest in real estate; or the sale of real property under a power of sale conferred by a deed of trust or other contract lien. The act raises questions about other specific persons or activities that require or are exempt from licensing. To clarify some of these issues, the commission promulgated rules and regulations in the code. These are summarized in Appendix A on page 11. Anyone seeking an active real estate license may check to see if an activity falls within an exception. What happens if an unlicensed person engages in an activity that requires an active real estate license? Anyone failing to procure a required active real estate license faces both criminal and civil sanctions. The first violation is a Class B misdemeanor. Penalties become more severe with subsequent violations. If the violator receives any compensation, the payer may recover a sum equal to but not greater than three times the payment in a civil suit. If the violator was promised a fee but received none, the unlicensed individual is precluded from using the courts to recover the fee, commission or other promised remuneration. In addition, when a person is engaged in or about to engage in conduct that violates the act, the county or district attorney or the commission, acting through the attorney general, may nullify or prohibit the activity. What general qualifications must an applicant satisfy before applying for an inactive real estate license? Eligibility for an inactive real estate license requires the applicant to be: at least 18 years of age; a U.S. citizen or a lawfully admitted alien; a legal resident of Texas; competent; able to satisfy the commission concerning his or her honesty, trustworthiness and integrity. In addition, the applicant must have completed the required educational requirements. Changing minority status does not eliminate the age requirement. For example, married women younger than 18 are no longer minors according to Texas law, but married women must still be 18 to qualify for a real estate license. Competency, on the other hand, is determined solely by the applicant s score on the qualifying exam discussed later. What effect does military service have on the Texas residency requirement? Military service does not change a person's Texas residency status. Military personnel must establish legal residence elsewhere after leaving the service to lose Texas residency. Educational Requirements What specific educational requirements must the applicant complete before applying for an inactive real estate license before Sept. 1, 2012? Each applicant must complete a minimum of 14 semester hours or the equivalent of 210 classroom hours of post-secondary education. Ten of the semester hours (150 classroom hours) must be completed in specific core real estate courses, and the remaining four semester hours (60 classroom hours) must be in either core courses or related courses. What specific core courses are required within the ten semester hours required before Sept. 1, 2012? What specific courses are mandated within the remaining four semester hours? Four of the ten semester hours must be in the principles of real estate, two in agency law, two in contract law and two in any core course or courses. The remaining four semester hours may be in either core courses or related courses. 3

10 What specific education requirements must the applicant complete before applying for an inactive real estate license after Sept. 1, 2012? Each applicant must complete a minimum of 12 semester hours, or the equivalent of 180 classroom hours, of specific post-secondary core curriculum courses. At least four of the semester hours (60 classroom hours) must be in the Principles of Real Estate. Of the remaining eight semester hours, two must be completed in Agency Law, two in Contract Law, two in Real Estate Financing and two in Contract Forms and Addendums. These courses are described in detail on the next page. No credit will be awarded for taking the same core course more than once within any two-year period. However, all applicants must complete at least three classroom hours of coursework on federal, state and local laws governing housing discrimination, housing credit discrimination and community reinvestment or at least three classroom hours in constitutional law. The classroom hours may be included in the context of core courses such as the principles of real estate or in separate courses. Can the commission waive the educational requirements in certain instances? Yes. The commission may waive the education requirements when the applicant has been licensed in Texas as a broker or salesperson within six months preceding the date he or she files the application. However, if the prior license was for a salesperson and not a broker, the applicant must show evidence of having successfully completed the same coursework that would have been required had the salesperson maintained the license without interruption during the same period. How do classroom hours and semester hours interrelate? One semester hour equals 15 classroom hours. Completing a three-hour semester course equals 45 classroom hours. What if the college or university is on a quarter system and not on a semester basis? How do classroom hours and quarter hours interrelate? One quarter hour equals ten classroom hours. The completion of a threehour course under the quarter system equals 30 classroom hours. Most proprietary schools and college-level continuing education courses are offered on a classroomhour basis. Applicants must identify whether a completed course is stated in classroom hours, semester hours or quarter hours and convert them to a common unit. Any combination of classroom hours, semester hours or quarter hours is acceptable, provided they meet commission requirements. The commission reduces all completed course work to a classroomhour equivalency when analyzing the applicant's educational requirements. What courses are considered core real estate courses (core curriculum) according to the act? Core courses required for a real estate license include, but are not limited to, the following. Principles of real estate* includes an overview of licensing as a real estate broker or salesperson; ethics of practice of a license holder; titles to and conveyance of real estate; legal descriptions; deeds, encumbrances and liens; distinctions between personal and real property; contracts; finance and regulations; closing procedures; and real estate mathematics. At least three of the classroom hours must be on federal, state and local laws relating to housing discrimination, housing credit discrimination and community reinvestment. Agency law** includes relationships between principal and agent, agent's authority, the termination of an agent s authority, the fiduciary and other duties of an agent, employment law, deceptive trade practices, listing or buying representation procedures, and the disclosure of agency. Contract law** includes the elements of a contract, offer and acceptance, the statute of frauds, remedies for breach including specific performance, unauthorized practice of law, commission rules relating to use of adopted forms, and owner disclosure requirements. Real estate appraisal includes the central purposes and functions of an appraisal; social and economic determinants of value of real estate; appraisal case studies; cost, market data and income approaches to value estimates of real estate; final correlations; and reporting. Real estate law includes legal concepts of real estate, land description, real property rights and estates in land, contracts, conveyances, encumbrances, foreclosures, recording procedures, and evidence of titles. Real estate finance includes monetary systems; primary and secondary money markets; sources of mortgage loans; federal government programs; loan applications, processes and procedures; closing costs; alternative financial instruments; equal credit opportunity laws; community reinvestment laws; and state housing agencies. Real estate marketing includes real estate professionalism and ethics; characteristics of successful salespersons; time management; psychology of marketing; listing procedures; advertising; negotiating and closing; financing; and the Deceptive Trade Practices Consumer Protection Act, Chapter 17, Business and Commerce Code. Real estate mathematics includes basic arithmetic skills and review of mathematical logic, percentages, interest, time-value of money, depreciation, amortization, proration, and estimation of closing statements. Real estate brokerage includes agency law; planning and organization; operational policies *A minimum of 60 classroom hours must come from the principles course. **A minimum of 30 classroom hours must come from each of these core courses. 4

11 and procedures; recruiting, selection and training of personnel; records and control; and real estate firm analysis and expansion criteria. Property management includes the role of property manager, landlord policies, operational guidelines, leases, lease negotiations, tenant relations, maintenance, reports, habitability laws, and the Fair Housing Act. Real estate investment includes real estate investment characteristics, techniques of investment analysis, time value of money, discounted and nondiscounted investment criteria, leverage, tax shelters, depreciation, and applications to property tax. The commission may establish the title and content of additional core real estate courses. What additional core real estate courses have been added by the commission in the code? In addition to the core courses described in the act, the commission has added the following in the code. Promulgated contract forms (or equivalent) includes, but is not limited to, unauthorized practice of law, broker-lawyer committee, current promulgated forms, commission rules governing use of forms, and case studies involving use of forms. (After Sept. 1, 2012, thirty classroom hours must be completed in this subject matter.) Residential inspection for real estate agents (or equivalent) includes, but is not limited to, property condition addendum; inspector and client agreement; tools and procedures; electromechanical systems (plumbing, heating, air conditioning, appliances, energy-saving considerations); and structures (lot and landscape, roofs, chimney, gutters, paved areas, walls, windows and doors, insect damage and storage areas). If the applicant has been licensed within the past six months, the commission may waive all or some of the requirements for a license including the education requirements. According to the commission, what courses are considered related courses (non-core curriculum) for purposes of obtaining a license? Related (or non-core) courses are designated solely at the discretion of the commission. A list of the recognized related course topics may be found on the commission's website at asp. The list contains 31 general categories with up to 22 subtopics under each. The list of categories includes accounting, advertising, agriculture, architecture, banking, general business, civil engineering, computer, construction, economics, education, English, finance, geography/geology, government/political science, history, home economics, insurance, investments, journalism, law, management, marketing, mathematics, petroleum and management, philosophy, psychology, real estate, science, sociology/anthropology and speech. Other courses may be submitted for consideration. The official catalog description, clipped or reproduced, taken directly from the college catalog must be attached to the submission. The successful completion of acceptable subjects, not degrees earned, controls whether the educational requirements are satisfied. What other rules regarding the educational requirements should the applicant remember for core courses? The commission must approve a core course before an applicant can receive credit. A course presentation that exceeds ten classroom hours per calendar day will not be accepted. A classroom course offered by a college, university or proprietary school must have a final course examination or other form of final evaluation. A course may not concern primarily techniques or procedures used by a particular brokerage or organization. Any related course taken for credit by an alternative delivery method must meet the requirements of Chapter 22, Section (r) of the code. A core course taken by an alternative delivery method must meet the requirements of Chapter 22, Section (d)(6). This, in part, requires the course to be certified by a distance learning certification center that is acceptable by the commission. The commission may accept no more than one course with the same course title and level, or the same course content and level if repeated within three years. But, if the course is taken more than once within a two-year period, TREC may award related course credit the second time, but not core credit. However, if the course s subject matter has been changed significantly within the two years, the repeat may be awarded core credit. Except for correspondence courses and courses using an alternative delivery method such as a computer, the student must be present in the classroom for the hours of credit granted or complete makeups as required by the provider or rules of the commission. For a correspondence course offered by an accredited college or university, the student must pass a proctored final exam under controlled conditions where the student is positively identified and the test graded by the instructor. When the exam is graded mechanically or by a computer, the answer keys must be approved by the instructor or provider. For classroom courses, the course must be taught in an area conducive to instruction, separate and apart from the work area such as in training rooms, conference rooms or assembly halls. When evaluating courses for the educational requirements, the commission may require an applicant to furnish materials such as course outlines, syllabi and course descriptions to support credit applications. The commission may require official transcripts to verify course work. 5

12 What are some of the sources of real estate education courses? Pre-license and post-license courses can be taken at various community and junior colleges, universities, proprietary real estate schools and by correspondence courses offered within the commission s guidelines. Local Boards and Associations of Realtors also may offer courses that satisfy the commission s requirements. However, the board or association must first obtain approval from the commission to offer the course as an accredited school or provider. Texas educational institutions offering real estate courses are listed in Appendix E on page 33. Schools offering correspondence courses are listed in Appendix F on page 39. Many institutions offer courses during evenings and on weekends. The sponsoring broker can assist in identifying local sources of real estate education and also in selecting courses most beneficial to the applicants. What educational sources will the commission evaluate for educational credit? To be acceptable, courses must be completed at one of the following types of schools: college or university accredited by the appropriate regional accrediting body, professional trade association or proprietary real estate school approved by the commission, state Associations of Realtors (GRI courses only), or military or other government entity or other licensing agency (courses reviewed individually for acceptance). How does an applicant get verification that the educational requirements have been met? Prior to Jan. 1, 2010, an applicant had to submit all transcripts and other certifications of course completions to the commission for review to see if the educational requirements had been met. This was required before filing an application for an inactive salesperson license. This is no longer the case. The transcripts and certifications are now included with the filing for the inactive salesperson license. However, the applicant may wish to limit the number of core courses used for pre-licensing credit if more than the required number has been completed from different accredited schools. The hours may be saved and applied toward renewal of the real estate license. See page 8 for details. Application Process How does an individual apply for an inactive Texas real estate license? Once an applicant meets all the general qualifications, including the educational requirements, the applicant must file the Application for an Inactive Salesperson License (TREC Form ISL-1). This form is available from the commission's website or may be reproduced from the copy in Appendix B on page 15. Starting Dec. 1, 2011, the applicant must provide his or her current mailing address, telephone number and address (if available) in the application. The applicant must notify the commission of any change in this information while the application is pending. Other things the applicant must provide prior to Dec. 1, 2011, include driver s license number, employment history for the past five years and a list of criminal offenses (felonies and misdemeanors, except traffic tickets). The applicant's Social Security number is required but is kept confidential if the application is submitted after Sept. 1, Social Security numbers on applications filed prior to Sept. 1, 1995, are not kept confidential. All other information on the form may become public record. Applicants with criminal records (felony and misdemeanor convictions other than traffic tickets) may wish to file a Request for Moral Character Determination (TREC Form MCD-5) (Appendix D on page 29) prior to filing an application for an inactive license for reasons discussed in the next section. By submitting and signing the application form, the applicant authorizes the commission to investigate any information it deems necessary. The DPS is contacted to verify the applicant s criminal record. The Texas Guaranteed Student Loan Corporation (TGSLC) is contacted to see if a student loan is in default. State law prohibits renewing a license more than once after a licensee defaults on a student loan guaranteed by TGSLC. The commission may also check with the Attorney General s Office concerning unpaid child support. A real estate license can be issued, but not renewed, if the person is delinquent on child-support payments. What do the act and the code require regarding an applicant s moral character and criminal history? An applicant convicted of a felony or serious misdemeanor may be ineligible for a real estate license. The act allows a determination of moral character before the applicant files any other paperwork with the commission. The Request for Moral Character Determination form (Appendix D on page 29) requires a $25 filing fee. If the applicant has no criminal record, the form need not be filed. Civil judgments, criminal convictions or bankruptcy proceedings will not automatically bar an applicant from obtaining a real estate license. However, the commission may disapprove an applicant for bad moral character based on the facts. Generally, the commission will not consider the applicant s honesty, trustworthiness and integrity until all other requirements for a license have been met, including passing the examination. For this reason, a pre-filing of the form is recommended for those concerned with this issue. The commission requires applicants to disclose criminal convictions, excluding misdemeanor traffic offenses. This includes pleas of guilty or nolo contendere (no contest) to a felony. Also, the applicant must disclose whether the time for appeal has lapsed or the judgment or conviction has been affirmed on appeal, regardless of whether probation or community supervision has been granted following the conviction or suspension. As noted, the commission checks with the DPS to see if the applicant s disclosure is correct. Nondisclosure of a felony or serious misdemeanor may cause denial of a license. The commission may issue a provisional moral character determination based on reasonable guidelines adopted by the commission. 6

13 Fingerprints Required Starting Jan. 1, 2008, applicants must meet an additional requirement regarding their criminal history. A complete, legible set of fingerprints must be provided to the DPS. The prints must be in the FBI's required format and taken at a location approved by the commission. Currently, there are about 82 locations statewide. Fingerprints must be taken within six months of the date the person applies for an inactive license. The DPS and the FBI use the fingerprints to check the applicant's criminal history. The fingerprints must be provided on a form provided by the commission. The form and the procedure is discussed earlier in this publication. An additional fee may be collected by the DPS for taking the prints. What causes an application to be rejected? The application will be rejected if: an incorrect filing fee or no filing fee is included, the application is submitted in pencil, the applicant is not a citizen of the United States or a lawfully admitted alien, the applicant is not yet 18 years old or the applicant is not a resident of Texas. According to the instructions on the form, the applicant must ensure that: information is printed in ink or typewritten, all requested information is provided, all questions have been answered, required signatures and signing dates are included and a single check or money order per application payable to the commission for the appropriate fees is attached. One check cannot be used to cover more than one application. An incomplete application will not be returned. A follow-up letter requests the additional information. When will the commission stop processing or evaluating an application? An application is considered void and subject to no further processing if the applicant fails: to pass the real estate exam within one year from the date the application was filed, to submit the required fee within 60 days after the commission makes written request or to provide information or documentation within 60 days after the commission makes written request. How much is the application fee? What other fees must be submitted with the application? The application fee is $127. In addition, there is a $10 fee for the Texas Recovery Fund and a $20 processing fee. None of the fees are refundable. After completing and submitting the application to the commission, what is next? The commission reviews and either rejects or accepts the application. If accepted, the test provider, Psychological Services Inc. (PSI), mails a Candidate Information Brochure (CIB) to the applicant. The candidate has one year from the time the commission receives the application to take and pass the real estate license exam. The one year is calculated from the time the commission receives the application, not from the time the applicant receives the CIB. Any exam taken before the commission receives the application or after the one year expires will not count toward licensing. Prior to June 1, 1996, the commission issued a Certificate of Eligibility whenever the application was accepted. This has been replaced by the CIB. The administration of the real estate exam by a private company prompted the change. Who administers the exam for a real estate license? Where is the exam given? The license examinations are administered by PSI. The CIB mailed to the applicant contains the necessary information and instructions for making a reservation to take the examination. Also, the CIB contains study material and instructions about licensing. Once an applicant receives the CIB, all details concerning the examination process are handled by PSI. Applicants should not contact the commission. PSI has centers that administer the exam in the following cities: Abilene Amarillo Arlington Austin Corpus Christi Dallas El Paso Fort Worth Harlingen Houston Lubbock McAllen Midland Richardson San Antonio Tyler Waco Lake Charles, LA* Shreveport, LA* *treated as a Texas site Because the tests are now administered under contract, both the code and the license application form were changed to deal with confidentiality of the test material. Obtaining or attempting to obtain questions and answers on a test from an applicant, the commission or any personnel associated with the testing service is grounds for disciplinary action. Likewise, a pending test application may be denied or revoked for removing or attempting to remove questions or answers from a test site or for providing or attempting to provide test questions or answers to another applicant or prospective applicant. How long must an applicant wait after registering before the exam may be taken? Generally, the earliest an applicant may schedule an exam is two days after registering. This means if the registration form is received on Tuesday, the exam may be scheduled and taken on Thursday. PSI administers the exam Monday through Saturday. 7

14 What information must the applicant provide? The examination registration form contained in the CIB or the one found online with PSI specifies the information needed to register for the exam. However, applicants subject to the Americans with Disabilities Act who require special accommodations must describe in writing the specific accommodations needed and include supporting documentation on official letterhead from a licensed professional. Allow two weeks to process the special arrangements. What identification must be presented to take the exam? The applicant must have two forms of identification. One must be a valid government-issued identification (driver's license, state ID, passport, military ID), that bears the applicant's signature and photograph or a complete physical description. The second ID must have the applicant's signature and preprinted legal name. All identifications must match the name on the examination registration form, the registration confirmation notice and the mailing label found on the CIB. Failure to provide the required identification at the time of the exam without notifying PSI in advance is considered a missed appointment. In such a case, the applicant cannot take the exam and forfeits the registration fee. What items may the applicant take into the exam? What procedural rules apply? The exam is closed book (no reference materials are allowed in the exam). Candidates need to bring a silent, battery-operated, nonprogrammable calculator. It cannot have paper-tape printing capabilities or a keyboard containing the alphabet. Notes and books are not allowed, nor are cell phones, pagers, purses or children. No smoking, eating or drinking is allowed in the examination center. Candidates may not exit the building during the examination. Candidates may not copy or communicate the contents of the exam to other individuals; either may result in a disqualification and legal action for violating copyright laws. Candidates may spend up to 15 minutes familiarizing themselves with the computer and keyboard before taking the exam, answering questions and reviewing the answers. The 15-minute tutorial does not count as part of the examination time. All questions are multiple choice and have been approved by a panel of Texas real estate experts. Great care is taken to develop an exam that is fair, free of bias and designed to measure the applicants knowledge, skills and abilities. How is the exam structured? When can the applicant find out the test results? The exam consists of national and state sections. The national section contains 80 items, the state 30. Candidates are allowed 105 minutes to take the national exam and 45 minutes to take the state. An applicant must take both parts the first time. After one part is passed, it need not be retaken. Both parts must be passed within one year from the date the application is filed with the commission. Test results will be provided immediately following the exam. PSI analyzes the exam to help identify areas of weakness for those who fail. Those who fail cannot retake the exam immediately. In fact, the candidate may not schedule a retake on the day the test was failed because of processing and reporting scores. Retakes may be scheduled the following day by phone, fax or online. As with the original scheduling, the candidate must wait two days before the exam may be taken. This means that if the candidate fails the exam on Wednesday, he or she may schedule another exam on Thursday and take it on Saturday. During the one-year period, the applicant may take the entire exam or only the part that was failed as many times as desired if space is available, and the required test fee is paid each time. What happens after the applicant passes both parts of the exam? When an applicant passes both parts of the exam and satisfies other requirements, such as the determination of moral character and fingerprinting, the commission may print the applicant s inactive real estate license within two business days. If all requirements have not been satisfied, the commission will advise the applicant. How does a new licensee apply for an active real estate license? There are two ways to apply for an active real estate license. These are listed in chronological order. Each requires finding a sponsoring real estate broker. The three forms may be found in Appendix C on page 23. The first way requires using the Salesperson Sponsorship Form-2 (Form SF2-1) either (1) after the person has submitted the application for an inactive license and before it has been issued or (2) after the person has been notified by the commission he or she has an inactive license (the receipt of the license is not required at this stage). Both the salesperson and the sponsoring broker must sign the form and submit it to the commission. There is no fee required. The second way requires using the Salesperson Sponsorship Form-1 (Form SF1-1) when the salesperson had a sponsoring broker before their current license became inactive. This applies when he or she wishes to receive an active license under a different sponsoring broker. Both the salesperson and the new sponsoring broker must sign the form and submit it to the commission. A $20 filing fee is required. Renewal Process What educational requirements must the newly licensed real estate salesperson meet to renew the license? After receiving a real estate license, the licensee must satisfy either the Salesperson Annual Education (SAE) or Mandatory Continuing Education (MCE) requirements annually for a license renewal. The SAE requirements must be satisfied first. This entails submitting the completion of six semester hours (90 classroom hours) of additional core courses to the commission. Surprisingly, the coursework meeting SAE requirements may be taken either before or after receiving a license. The key is timing when the evidence of completed coursework is submitted to the 8

15 commission. The renewal requirements depend on the number of classroom hours submitted for an inactive license in excess of the minimum needed for a license. If only the minimum number of hours was submitted, then the licensee must submit proof of having completed two semester hours (30 classroom hours) of core courses for each renewal for the first three years. Thereafter, the MCE requirements must be met. If the applicant submits six or more classroom hours of core courses above the minimum needed for a license, the SAE requirements have been satisfied with the license application. Thereafter, the licensee must meet the annual MCE requirements for renewals. The following explains the renewal process when fewer than six semester hours of coursework above the minimum requirements are submitted for licensing. If one excess hour is submitted, the licensee must submit an additional hour for the first renewal. Thereafter, the licensee must submit two additional hours for the second renewal and another two hours for the third renewal. If two excess hours are submitted for licensing, the licensee need not submit any additional hours for the first renewal. However, the licensee must submit two additional hours for the second and another two additional hours for the third renewal. If three excess hours are submitted for licensing, the licensee need not submit additional hours for the first renewal. However, the licensee must submit one additional hour for the second renewal and another two hours for the third renewal. If four excess hours are submitted for licensing, the licensee need not submit any additional hours for the first or second renewals. However, the licensee must submit two additional hours for the third renewal. Finally, if the licensee submits five excess hours for licensing, the licensee need not submit any additional hours for the first or second renewals. The licensee must submit one additional hour for the third renewal. Once six hours in excess of the needed hours for licensing is submitted, the MCE requirements automatically begin. When a transcript or course certification is submitted, the commission applies all relevant courses first to the licensing requirement, then to SAE credits. The applicant or licensee cannot ask the commission to apply only a certain number of hours on a transcript to licensing and reserve the rest for renewals during the SAE. However, applicants who receive approved educational credits from different accredited colleges or schools need not submit all transcripts and course certifications at once. Credit is given as evidence of completion is received. For example, if one transcript shows six semester hours of core courses and six semester hours of acceptable related or core courses, it can be used to satisfy the requirements for a license. Transcripts or certificates showing completed core courses at other schools can be saved and submitted to satisfy renewals during the SAE. However, once six semester hours (90 classroom hours) of core courses are submitted above the initial six semester hours for licensing, the MCE requirements automatically commence. The only reason to save course work is to postpone meeting the MCE requirements. What happens once the licensee submits and proves to the commission that 18 semester hours of core courses have been completed? Once the licensee submits evidence of completing 18 semester hours of post-secondary education, 14 of which must be core courses, whether the completion occurred before or after receiving the real estate license, the licensee must then satisfy the MCE requirements. This entails the completion of 15 classroom hours (six of which must be in specific legal topics) for each license renewal. After Sept. 1, 2012, 18 semester hours of core courses are required for the first renewal. Licensing and Appraisals What are the rules regarding the necessity of having a real estate license to do appraisals? A real estate broker (not salesperson) license entitles a person to appraise real estate for a fee. However, a real estate license is not an appraiser s license. To understand the interplay between a real estate license and an appraiser's license, some knowledge of the Texas Appraiser Licensing and Certification Act (Chapter 1103 of the Texas Occupations Code) is required. In 1989, the Federal Legislature passed Title XI, Financial Institutions Reform, Recovery, and Enforcement Act (12 U.S.C.A. Section 3331 et seq.). The act, as amended, requires any appraisal of a federally related transaction for more than $250,000 to be conducted by someone licensed or certified by a state agency. The standard for the appraisal must be according to the Uniform Standards of Professional Appraisal Practice. In 1991, responsibility for appraising licensing and certification was transferred from the commission to the Texas Appraiser Licensing and Certification Board (TALCB) created by the 72nd Legislature. Thus, to appraise a federally related transaction i.e., any real estaterelated transaction engaged in, contracted for or regulated by a federal financial institution regulatory agency or the Resolution Trust Corporation, amounting to more than $250,000, the person must be licensed or certified by the TALCB. No real estate broker or salesperson license is required. A person who is not licensed or certified by the TALCB may appraise nonfederally related transactions or federally related transactions of $250,000 or less. To do so, the person must have a Texas real estate broker license. However, the following language must be placed verbatim on the report: "THIS IS AN OPINION OF VALUE OR COMPARATIVE MARKET ANALYSIS AND SHOULD NOT BE CONSID- ERED AN APPRAISAL. In making any decision that relies upon my work, you should know that I have not followed the guidelines for development of an appraisal or analysis contained in the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation." A real estate salesperson not having a license or certificate from the TALCB may not appraise real property for compensation except through the sponsoring broker. The real estate salesperson may make, sign and present appraisals for the sponsoring 9

16 broker. The appraisal, though, must be submitted in the broker s name and the broker must take responsibility. Special rules apply when a licensee attempts to buy property for himself or herself while under contract as a real estate agent for the seller. Here, the licensee is obligated to tell the seller his or her opinion of the value of the property. A salesperson who makes an appraisal for the Veterans Administration must do so through the sponsoring broker. A trade organization or association must have a broker license when it offers to appraise or appraises real estate for compensation. Finally, an employee need not have a real estate license to appraise property for the financial institution or investment firm where he or she works as long as the appraisal is in contemplation of a loan or investment by the employees

17 Appendix A Texas Administrative Code 11

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19 Persons and Activities that Do and Do Not Require an Active Real Estate License According to the code, what other persons or activities require an active real estate license in addition to those specified in the act? A person who sells another cotenant s interest in real property for compensation A person who, for compensation, finds someone to sublease another s apartment or dwelling A person who manages real property or collects rent and, at the same time, leases or rents the owner's property to another for a fee. (On-site employees and managers are exceptions.) A person who operates a rental agency. However, employees need not be licensed as long as they perform clerical or secretarial tasks and do no more than confirm the size, price and terms of advertised property. (However, unlicensed employees, agents or associates may not solicit business for the broker or hold themselves out as authorized to act as real estate brokers or salespersons.) A person employed by a corporation or other business entity to buy or sell its real estate A subsidiary corporation that, for compensation, negotiates the sale of the parent corporation s Texas real estate A person who arranges for another to occupy vacant residential property when the person: (1) does not own or lease the property from the owner (2) receives valuable consideration and (3) is not exempted from requirements of a license by the act A person who solicits listings or negotiates for listings in Texas A person who shows a broker's listings A person who supervises other persons who perform acts for which a license is required A person who assists another for a fee or other consideration to locate real property for sale, purchase, rent or lease such as an operation that finds apartments or homes A person who advertises real estate, accepts response calls to the advertisement and refers the respondents to the property owner A person who refers a prospective buyer, seller, landlord or tenant to another in a proposed real estate transaction when valuable consideration is expected for the referral. "Valuable consideration" includes, but is not limited to, money, gifts, or merchandise having a retail value exceeding $50, rent, bonuses or discounts A person who acts as a real estate broker or salesperson while physically within Texas, regardless of the location of the real estate or the residences of the customers or clients A person conducting a brokerage business from another state by mail, telephone, the Internet, or other medium when all the prospective buyers, sellers, landlords or tenants are legal residents of Texas and the real property is located wholly or partly within the state. A person who compiles and distributes information about rental vacancies, property for sale, purchase, rent or lease as long as no fee is contingent on the sale, purchase, rental or lease of the compiled information. An advance fee is a contingent fee if the person is obligated to return the fee if the property is not purchased, sold, leased or rented. According to the code, what other persons do not require an active real estate license in addition to those specified in the act? An owner who lists his or her property whether or not for compensation A person who buys, sells or rents real property for his or her own account A person who sells his or her interest in co-owned property A tenant who subleases his or her apartment or dwelling, whether or not for a profit A person who performs clerical, secretarial or managerial tasks and is identified to callers as such and does not solicit work or represent to others as having authority to act as a real estate agent A person hired solely to act as a hostess, attendant or custodian of homes offered for sale A trade association or other organization formed to provide computerized listing services for members as long as no compensation is received when the real estate is sold Effective Oct. 1, 1997, the commission added another person. Basically, a person is not required to be licensed if the following four conditions are met: the person engages in selling goods and services to the public; the person sells goods or services to a real estate licensee who intends to offer them as an inducement to potential buyers, sellers, landlords or tenants; the person who sells the goods or services to the real estate licensee refers customers to the licensee; and the payment for the goods or services by the real estate licensee is not contingent on the consummation of a real estate transaction by the referred customers. A person who is employed by the business entity owning the property to buy, sell or lease the property for the entity. 13

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