The Recovery Fund can reimburse consumers for actual losses from a licensee's fraud, misrepresentation, or related wrongdoing when a court judgment cannot be collected.
Before you read
Test yourself first: 5 questions
Question 1 of 5
A Tennessee licensee receives a complaint-based investigation from TREC for alleged mishandling of escrow funds. TREC's authority in such a matter includes:
Answer: B. TREC has administrative authority to investigate and discipline licensees, including suspending or revoking a license, for violations such as escrow mishandling, following appropriate due process.
Question 2 of 5
Tennessee maintains a fund to reimburse members of the public who obtain a court judgment against a licensee for fraud or misrepresentation in a real estate transaction but cannot collect it. What is this fund called?
Answer: A. Tennessee funds a Real Estate Education and Recovery Account that can reimburse injured consumers who hold an uncollectible judgment against a licensee arising from a covered transaction. It is funded by licensee fees and is distinct from the licensee's own E&O insurance.
Question 3 of 5
Which of the following is a core power of the Tennessee Real Estate Commission?
Answer: D. TREC's authority is administrative: it promulgates rules to implement the license law, issues and renews licenses, and imposes discipline such as fines, suspension, or revocation. It does not set tax rates, decide zoning, or bring criminal prosecutions.
Question 4 of 5
In Tennessee, which body is empowered to investigate complaints against licensees and to suspend or revoke a real estate license for violations of the license law?
Answer: A. The Tennessee Real Estate Commission (TREC) administers and enforces the real estate license law, including investigating complaints and imposing discipline such as suspension or revocation. Private trade associations like a local board of REALTORS can enforce their own codes but cannot revoke a state license.
Question 5 of 5
A Tennessee licensee tells a buyer that a neighborhood is 'changing' and steers minority buyers away from certain streets. Beyond federal fair housing law, how would TREC most likely treat this conduct?
Answer: A. Steering and other discriminatory practices constitute improper, fraudulent, or dishonest dealing and are grounds for TREC discipline, in addition to violating fair housing law. TREC can act on conduct that demonstrates a licensee is unfit, including discrimination.
Keep the streak going with more questions like these, each with a full rationale.
Must-know rules
- TREC investigates complaints and may discipline licensees for violations of the license law and rules.
- Disciplinary actions include reprimand, license suspension, and license revocation.
- TREC may assess civil penalties and require additional education as part of discipline.
- Tennessee maintains an Education and Recovery Fund (a recovery/guaranty fund) funded by licensee fees.
- The Recovery Fund can reimburse consumers for actual losses from a licensee's fraud, misrepresentation, or related wrongdoing when a court judgment cannot be collected.
- Recovery is subject to statutory per-claim and per-licensee maximum limits set by the Commission.
- A licensee whose actions trigger a Recovery Fund payment can have the license revoked until the fund is repaid.
- Practicing real estate without a license is prohibited and can lead to penalties.
Tennessee License Discipline, Penalties & Recovery Fund: FAQs
Is Tennessee License Discipline, Penalties & Recovery Fund on the real estate exam?
Yes. State License Law is a scored domain on the Tennessee real estate licensing exam, and this topic appears in the state license-law portion.
Is this cheat sheet free?
Yes — every page on Cinna RE's resource library is free to read, print and share. The app adds practice questions, mock exams and a readiness score.
Does Tennessee test this differently?
Tennessee applies its own license law on top of the national portion. This page covers the Tennessee rules specifically, which is what the state section of your exam tests.
