Texas law and federal law prohibit a range of discriminatory and deceptive practices in real estate. The three most-tested prohibited practices are:
Steering: Directing buyers toward or away from particular neighborhoods based on the protected characteristics of either the buyer or the existing residents of the neighborhood. Even well-intentioned steering — an agent showing a Latino buyer only homes in predominantly Latino neighborhoods because "they'll feel more comfortable" — is illegal. Steering perpetuates segregation regardless of motive.
Blockbusting (panic peddling): Inducing homeowners to sell by suggesting that members of a protected class are moving into the neighborhood and that property values will decline. Classic example: an investor drives through a neighborhood telling homeowners "people are moving in who will tank your property values — sell now before it's too late." The investor then buys low and resells at a profit as demographics change. Both the manipulation and the profit-taking through manufactured panic are illegal.
Redlining: Systematically denying real estate services, financing, or insurance to residents of certain neighborhoods based on those neighborhoods' racial or ethnic composition. Originated with the literal practice of drawing red lines around minority neighborhoods on maps to exclude them from lending consideration.
TREC's disciplinary tools range from least to most severe: written reprimand, probation, license suspension, and license revocation. TREC may also impose administrative fines up to $5,000 per violation per day for ongoing violations. Revocation bars the licensee from re-applying for a set period and may impose conditions on future reinstatement.
Criminal history does not automatically bar licensure. Applicants with disqualifying criminal records may seek a Fitness Determination from TREC before incurring the expense of pre-license education. This advisory ruling tells the applicant whether the record is likely to bar licensure — it is non-binding but practically essential for applicants with serious criminal histories involving fraud, moral turpitude, or offenses related to real estate activities.
Failing to disclose a criminal history on a license application is itself grounds for denial or discipline, independent of the underlying offense.
Real-world example: An agent with a past fraud conviction failed to disclose it on her initial license application. TREC discovers this during a background check six months after she was licensed. TREC may revoke her license not only because of the fraud conviction (which might or might not be disqualifying on its own) but also — and independently — because she lied on her application.
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Quiz Questions:
Q1. A real estate agent shows a White couple ten homes in predominantly White neighborhoods but refuses to show them homes in a nearby integrated neighborhood, saying "you probably wouldn't want to live over there." This is an example of:
A) Blockbusting B) Redlining C) Steering D) Conversion
Answer: C — Steering involves directing clients toward or away from neighborhoods based on the demographics of the neighborhood or the client. The agent directed the buyers away from an integrated neighborhood without any legitimate reason — classic steering.
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Q2. An investor goes door to door in a transitioning neighborhood telling homeowners that "new people are moving in and your property will be worth half as much in two years — sell to me now while you can." This practice is:
A) Steering B) Blockbusting C) Redlining D) Conversion
Answer: B — Blockbusting (also called panic peddling) specifically involves inducing property owners to sell by suggesting that members of a protected class moving into the area will depress property values. The investor is exploiting demographic anxiety for profit.
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Q3. A licensed Texas broker is found to have violated TRELA by failing to maintain a trust account. TREC imposes a fine. What is the maximum fine TREC may impose per violation per day for ongoing violations?
A) $500 B) $1,000 C) $5,000 D) $25,000
Answer: C — TREC may impose administrative fines of up to $5,000 per violation per day for ongoing violations. For continuing violations (such as maintaining no trust account over several months), these fines can accumulate rapidly.
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Q4. A prospective licensee has a 10-year-old felony conviction for wire fraud. He wants to know if he can get a real estate license before spending money on pre-license education. What is the appropriate recommendation?
A) Complete the 180-hour education first — criminal history only affects the application, not education eligibility B) Request a Fitness Determination from TREC before investing in education — this provides an advisory ruling on likely licensability C) Apply for a license immediately; TREC cannot consider criminal history that is more than 7 years old D) The conviction automatically bars licensure; no application is possible
Answer: B — The Fitness Determination process exists precisely for this situation. It lets applicants with criminal histories get TREC's preliminary assessment before spending time and money on qualifying education. The ruling is advisory and non-binding, but provides critical practical guidance. Wire fraud involves moral turpitude and is directly related to the duties of a licensee, so it warrants careful review.
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Q5. Which of the following is an example of redlining?
A) A broker avoids listing properties in a flood zone because of liability concerns B) A lender declines to make loans to properties in neighborhoods with predominantly minority residents regardless of individual borrower creditworthiness C) An agent refuses to show a property in a gated community because the HOA restricts entry D) A property manager charges higher security deposits to tenants with poor credit scores
Answer: B — Redlining is the practice of denying financial services (or real estate services) based on the racial or ethnic composition of a neighborhood — treating geography as a proxy for race. The key is that the lender is rejecting applications based on where the property is located (and by whom), not based on individual financial qualifications.