What is the purpose of the Texas Real Estate Recovery Trust Account, and what are its payment limits?
The Recovery Trust Account reimburses consumers who suffer financial losses due to illegal acts by real estate license holders, capped at $50,000 per transaction.
If a consumer wins a court judgment against a licensee for fraud or misrepresentation and cannot collect, they can apply to the fund. Payments are capped at $50,000 per transaction and $250,000 total per license holder.
TRELA §1101.610— Limits on Recovery from Account
Select Your Answer Choice
Exam Explanation
The Texas Real Estate Recovery Trust Account
The Recovery Trust Account is a state-administered fund that acts as a safety net for consumers harmed by dishonest licensees. It is a vital E-E-A-T trust symbol of the Texas real estate industry.
Why the Correct Option is Right
Option B is correct because the Recovery Trust Account exists solely to reimburse members of the public who are victims of fraud, misrepresentation, or deceit by licensed brokers or sales agents. The statutory limits are $50,000 for a single transaction/judgment, and a lifetime cap of $250,000 on behalf of any single license holder (until they repay the fund).
Why the Other Options are Traps
- Option A is a trap because the fund never pays brokers or license holders for commissions or business disputes.
- Option C is a trap because the fund is held in trust and cannot be used for TREC’s operating expenses.
- Option D is a trap because TREC does not buy, sell, or own real estate.
The Exam Trap
If a payment is made from the Recovery Trust Account on behalf of a licensee, the licensee’s license is automatically suspended until they repay the account in full, plus interest. They cannot practice real estate until they clear this debt.
Worked Texas Example
Scenario: Broker Bob steals $60,000 in earnest money from buyer Kelly and flees the state. Kelly sues Bob, wins a $60,000 court judgment, but cannot collect because Bob has no assets. Kelly petitions TREC for payment from the Recovery Trust Account. Outcome: TREC will pay Kelly $50,000 (the statutory transaction limit) from the account. Bob’s license is immediately suspended, and he cannot work in real estate again until he pays the fund back $50,000 plus interest.