Texas Agency & Intermediary Practice Questions
Agency and brokerage is one of the heaviest areas on the Texas state-law portion at 10 outline items. It tests Texas agency disclosure, the intermediary relationship, the Information About Brokerage Services (IABS) notice, enforcing compensation agreements, the broker and sales agent relationship, and how a sales agent must work under a sponsoring broker. Texas bans dual agency. Work the questions below, then read every explanation.
Exam prep only
Texas does not use dual agency or the transaction broker. When one broker works with both sides, Texas uses the intermediary relationship. Almost every question here is really asking one thing: which relationship is in play, and what does Texas law require.
Use the relationship-first read. When a single broker represents both parties, the answer is intermediary with written consent, not dual agency and not transaction brokerage. Then attach the right disclosure, the IABS, and the supervision rules.
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Texas Agency & Intermediary Practice Questions
15 scenario-based questions on texas agency & intermediary, scored, each with a full explanation after you answer. Every question is also written out below if you would rather study at your own pace.
Every question explained
Prefer to study at your own pace? Here are all 15 questions. Read each one and pick your answer, then reveal the correct answer, the reasoning, and the trap that catches most candidates.
1. A buyer and a seller in the same transaction are both represented by the same broker. Under Texas law, the broker may act as
- A.a dual agent with written consent
- B.an intermediary, with the written consent of both parties
- C.a transaction broker
- D.a single agent for both sides
Show answer and explanation
Correct answer: B. an intermediary, with the written consent of both parties
Why B is correct: Texas bans dual agency. When one broker represents both the buyer and the seller in the same transaction, the broker acts as an intermediary, which requires the written consent of both parties, typically obtained up front in the representation agreements.
Trap: Texas does not allow dual agency and does not use the transaction broker. The correct concept is intermediary with written consent.
Source: TRELA (Texas Occupations Code Ch. 1101.559-.561); intermediary
2. Acting as an intermediary, a broker wants different associated license holders to advise the buyer and the seller separately. This is called
- A.subagency
- B.appointment of license holders by the broker
- C.dual agency
- D.designated escrow
Show answer and explanation
Correct answer: B. appointment of license holders by the broker
Why B is correct: An intermediary broker may appoint different associated license holders to communicate with, carry out instructions for, and advise each party. This appointment must be authorized in writing, and it lets each party receive advice while the broker remains the intermediary.
Trap: Appointed license holders are still working under an intermediary, not as dual agents. The broker makes the appointments in writing.
Source: TRELA (Texas Occupations Code Ch. 1101.560); appointments
3. When must a Texas license holder provide the Information About Brokerage Services (IABS) notice?
- A.Only at closing
- B.At the first substantive communication with a party about a specific property
- C.Within 30 days after a sale
- D.Never, unless the party asks
Show answer and explanation
Correct answer: B. At the first substantive communication with a party about a specific property
Why B is correct: A license holder must provide the TREC Information About Brokerage Services (IABS) notice at the first substantive communication with a party regarding a specific property. It explains the types of representation available in Texas.
Trap: The IABS is given at the first substantive communication, not at closing. It is a disclosure, not a representation agreement.
Source: TRELA (Texas Occupations Code Ch. 1101.558); IABS notice
4. A sales agent in Texas may lawfully perform brokerage activities only
- A.after passing the exam, with no further requirement
- B.while sponsored by an active Texas broker who supervises the agent
- C.as an independent contractor with no broker
- D.if the agent also holds an appraiser license
Show answer and explanation
Correct answer: B. while sponsored by an active Texas broker who supervises the agent
Why B is correct: A Texas sales agent must act in the name of and under the supervision of a sponsoring broker. Holding a license is not enough; the sales agent's license must be sponsored by an active broker to perform brokerage activity.
Trap: Passing the exam is not enough. A sales agent needs an active sponsoring broker to work.
Source: TRELA (Texas Occupations Code Ch. 1101); sponsorship
5. A grateful seller hands a sales agent a $500 cash bonus at closing. The sales agent may
- A.accept it directly because it is a gift
- B.accept it directly if it is under $1,000
- C.not accept it directly; compensation for brokerage must flow through the sponsoring broker
- D.accept it if disclosed to the broker within ten days
Show answer and explanation
Correct answer: C. not accept it directly; compensation for brokerage must flow through the sponsoring broker
Why C is correct: A Texas sales agent may receive compensation for brokerage activity only from or through the sponsoring broker. The agent cannot accept payment directly from a buyer, seller, or another broker. Calling it a gift does not change the rule.
Trap: Compensation for brokerage must pass through the sponsoring broker. A direct payment, gift or not, is a violation.
Source: TRELA §1101.651(c); compensation through the sponsoring broker
6. A broker who acts as an intermediary
- A.may favor the buyer because the buyer pays the commission
- B.may not disclose one party's confidential price information to the other without authorization, and must treat the parties fairly
- C.owes full fiduciary loyalty to the seller only
- D.must withdraw from the transaction
Show answer and explanation
Correct answer: B. may not disclose one party's confidential price information to the other without authorization, and must treat the parties fairly
Why B is correct: An intermediary must act fairly and may not favor one party over the other. The intermediary may not disclose that a party will accept a price different from the listed or offered price, or other confidential information, unless authorized in writing.
Trap: An intermediary stays neutral. It cannot leak one party's bottom line to the other without written authorization.
Source: TRELA §1101.561; intermediary duties
7. Under TREC rules, a broker is responsible for
- A.only the broker's own transactions
- B.the real estate brokerage activities of the sales agents sponsored by the broker
- C.nothing an agent does after hours
- D.the personal taxes of each sponsored agent
Show answer and explanation
Correct answer: B. the real estate brokerage activities of the sales agents sponsored by the broker
Why B is correct: A sponsoring broker is responsible for the real estate brokerage activities of the sales agents the broker sponsors. The broker must supervise those agents and is accountable for their conduct in brokerage transactions.
Trap: The broker's responsibility extends to the brokerage acts of every sponsored agent, not just the broker's own deals.
Source: TREC Rules; broker responsibility
8. An unlicensed assistant working for a brokerage may
- A.negotiate contract terms with buyers
- B.perform clerical and administrative tasks but not activities that require a license
- C.show homes and solicit listings
- D.be paid directly by clients for brokerage work
Show answer and explanation
Correct answer: B. perform clerical and administrative tasks but not activities that require a license
Why B is correct: An unlicensed assistant may perform clerical and administrative tasks but may not perform activities that require a license, such as negotiating, soliciting, or showing property in a way that constitutes brokerage. Doing licensed acts without a license is prohibited.
Trap: Unlicensed assistants stay on clerical and administrative work. Negotiating or showing crosses into licensed activity.
Source: TRELA (Texas Occupations Code Ch. 1101); unlicensed activity
9. At an open house, a visitor casually asks a license holder about that listed property. Regarding the IABS notice, the license holder
- A.must deliver the IABS before saying anything
- B.is not required to provide the IABS for that open-house communication
- C.must mail the IABS within 24 hours
- D.never has to provide an IABS to anyone
Show answer and explanation
Correct answer: B. is not required to provide the IABS for that open-house communication
Why B is correct: A communication at an open house about that property is one of the exceptions to the IABS requirement. The notice becomes required at the first substantive communication about a specific property outside the exceptions, such as beginning to advise the visitor on buying.
Trap: The open-house exception is narrow. Once the talk turns substantive about representing the buyer, the IABS is due.
Source: TRELA §1101.558; IABS exceptions
10. A license holder represents the seller. To the unrepresented buyer (a customer), the license holder owes
- A.the full fiduciary duties owed to a client
- B.honesty, fair dealing, and disclosure of known material defects
- C.no duties at all
- D.a duty to negotiate the lowest price for the buyer
Show answer and explanation
Correct answer: B. honesty, fair dealing, and disclosure of known material defects
Why B is correct: To a customer, the party the license holder does not represent, the license holder owes honesty, fair dealing, and disclosure of known material defects, but not the full fiduciary duties (OLD CAR) owed to a client.
Trap: Customers get honesty and material-defect disclosure, not loyalty. Full fiduciary duties run only to a client.
Source: TRELA (Texas Occupations Code Ch. 1101); duties to customers
11. The written consent that authorizes a broker to act as an intermediary is usually obtained
- A.verbally at closing
- B.up front in the listing agreement and the buyer-representation agreement
- C.only after the parties dispute
- D.from TREC before each transaction
Show answer and explanation
Correct answer: B. up front in the listing agreement and the buyer-representation agreement
Why B is correct: The written consent to intermediary status is normally built into the listing agreement and the buyer-representation agreement, which authorize the broker to act as intermediary if the same firm ends up on both sides of a transaction.
Trap: Intermediary consent is set up in the representation agreements in advance, in writing, not arranged verbally at the last minute.
Source: TRELA §1101.559; intermediary consent
12. A broker acting as an intermediary may NOT, without written authorization,
- A.disclose that a party will accept a price different from the one offered
- B.treat both parties fairly
- C.hold earnest money in trust
- D.provide each party the IABS notice
Show answer and explanation
Correct answer: A. disclose that a party will accept a price different from the one offered
Why A is correct: An intermediary may not disclose that a party will accept a price or terms different from those offered, and may not reveal confidential information, unless the party authorizes it in writing. The intermediary must still disclose known material defects about the property.
Trap: An intermediary cannot leak a party's bottom line. Property-condition facts, however, are not confidential.
Source: TRELA §1101.561; intermediary duties
13. When a broker makes appointments in an intermediary transaction, the broker may
- A.appoint the same license holder to both the buyer and the seller
- B.appoint a different license holder to each party but never the same one to both
- C.appoint only unlicensed assistants
- D.skip the parties' written consent
Show answer and explanation
Correct answer: B. appoint a different license holder to each party but never the same one to both
Why B is correct: If the written consent authorizes appointments, the broker may appoint one associated license holder to advise the buyer and a different one to advise the seller. The broker may never appoint the same license holder to both parties.
Trap: Appointments split advice between two different license holders. One person cannot be appointed to both sides.
Source: TRELA §1101.560; appointments
14. A buyer signs a buyer-representation agreement with a broker. The broker now owes the buyer
- A.only honesty and fair dealing
- B.the full fiduciary duties of a client relationship
- C.no duties until closing
- D.duties only to the seller
Show answer and explanation
Correct answer: B. the full fiduciary duties of a client relationship
Why B is correct: A representation agreement creates a client relationship, so the broker owes the buyer the full fiduciary duties (obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care). A customer, by contrast, is owed only honesty, fair dealing, and material-defect disclosure.
Trap: A signed representation agreement turns the buyer into a client owed full fiduciary duties, not just honesty.
Source: TRELA (Texas Occupations Code Ch. 1101); client duties
15. Even when no representation agreement exists, a Texas license holder must
- A.conceal known defects to help the seller
- B.disclose a known material defect about the property
- C.refuse to speak to unrepresented parties
- D.guarantee the property's value
Show answer and explanation
Correct answer: B. disclose a known material defect about the property
Why B is correct: Disclosure of a known material defect is owed to all parties, including a customer the license holder does not represent. Honesty and fair dealing are baseline duties that do not depend on a representation agreement.
Trap: Material-defect disclosure is not optional and does not depend on agency. It is owed even to a non-client.
Source: TRELA (Texas Occupations Code Ch. 1101); honesty and disclosure
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Get the full question bankFrequently asked questions
Does Texas allow dual agency?+
No. Texas bans dual agency. When one broker represents both the buyer and the seller in the same transaction, the broker acts as an intermediary, which requires the written consent of both parties. The intermediary may appoint different associated license holders to advise each party.
When must a Texas license holder give the IABS notice?+
A license holder must provide the Information About Brokerage Services (IABS) notice at the first substantive communication with a party about a specific property. The IABS is an informational disclosure explaining the brokerage relationships available in Texas, not a representation agreement.
Can a Texas sales agent be paid directly by a client?+
No. A Texas sales agent may receive compensation for brokerage activity only from or through the sponsoring broker. A sales agent must act under an active sponsoring broker and cannot accept direct payment from a buyer, seller, or another broker.