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, more often than new agents expect, especially at brokerages with a smaller roster of sponsored agents. 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, enforceable 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.

Per TREC's own guidance, the prohibited-conduct language in both the listing agreement and the buyer representation agreement has to appear in conspicuous bold or underlined print, not buried in standard paragraph text. That's not a formatting suggestion, it's part of what makes the consent legally valid.

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, especially since TREC's own rules in this area continue to evolve, as the pending BRAC recommendation below shows.

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.
• Assuming It Doesn't Apply to You Yet: Even a brand-new sales agent can end up in an intermediary transaction quickly, especially at a smaller brokerage, so this isn't a rule to learn later once you're more experienced.

Quick Answers

Is dual agency legal in Texas? No, traditional dual agency, where one agent actively advocates for both sides, is explicitly prohibited. Texas uses the intermediary model instead, which is a different, more restricted framework.

What form has to be presented before any of this applies? The Information About Brokerage Services (IABS) form, at the first substantive communication with each party, before an Intermediary Relationship Notice ever comes into play.

Who decides whether appointments are used? The broker. Appointments are only possible when the brokerage sponsors at least two licensed agents, one appointed to each side, otherwise it defaults to intermediary without appointments.

Can a broker ever say what a seller would actually accept? No. That a seller would take less than asking, or a buyer would pay more than their offer, can never be disclosed without that party's prior written permission, regardless of which intermediary form applies.

Does written consent apply to the whole relationship or just one transaction? Both parties have to consent in writing before a broker can act as an intermediary at all, typically built into the representation agreements signed upfront, not something added after the fact once a shared transaction comes up.

What actually happens if a broker or agent gets this wrong? Real disciplinary sanctions from TREC, per its own FAQ, up to and including license revocation, suspension, a reprimand, or an administrative penalty, not just an internal brokerage issue.

What actually happens if this isn't followed

This isn't just a best-practice recommendation, it's enforceable. Per TREC's own FAQ, failure of the intermediary broker or the sponsored sales agents to comply with the intermediary provisions of TRELA (Sections 1101.558 through 1101.561) can subject them to real disciplinary sanctions, up to and including license revocation, suspension, a reprimand, or an administrative penalty. A confidentiality slip isn't just an awkward conversation to walk back, it's a license-level risk.

Why this matters even before you're the one making the call

As a new sales agent, the decision to operate as an intermediary and which form applies sits with your sponsoring broker, not you. But you're still bound by the same confidentiality rules the moment you're working a transaction under that arrangement, so understanding it now, not after you've already made an uninformed comment to a client, is what actually protects you. This is exactly the kind of rule that's easy to misread from a textbook and much easier to get right when you can just ask someone. Your mentor instructor, a licensed Texas broker who's actually navigated this in real transactions, is there specifically for questions like this one.

A gap TREC is currently reconsidering

This isn't adopted rule yet, so don't treat it as current law, but it's worth knowing about. TREC's Broker Responsibility Advisory Committee (BRAC) has flagged a real gap: current rules don't automatically trigger intermediary requirements when two different business-entity brokerages share the same designated broker, even though that one individual is effectively overseeing both sides of the deal. BRAC voted to recommend reconsidering the definition of intermediary to close that gap, as business-entity broker structures get more common and more complex. If you're at a firm with a business-entity structure, this is one to watch, not because it changes anything today, but because it's the direction TREC is actively looking.

Conclusion

Intermediary relationships are a necessary, genuinely common part of the Texas real estate landscape, not a rare edge case you can safely ignore until it happens to you. 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 in real transactions, and you'll always have someone real to ask instead of guessing at a statute on your own.

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

Rules like intermediary status are set at the brokerage level. If you're working toward leading your own firm someday, see what it takes to earn a Texas real estate broker license.

Intermediary rules, disclosure requirements, and disciplinary consequences sourced directly from the Texas Real Estate Commission's own frequently asked questions page, TRELA Sections 1101.558-1101.561, and a BRAC meeting recap on a proposed (not yet adopted) definition change.