Maryland Brokerage Relationships and Disclosure

Question 1

The parties to a brokerage agreement are

a. the broker, affiliated licensee, and the client.
b. a real estate salesperson and the client.
c. the broker and the client.
d. any real estate licensee and the client.

Answer 1

(c) the broker and the client.

A brokerage agreement is between a client and a broker. A salesperson will often enter a brokerage agreement on behalf of a broker, but the salesperson is not a party to the contract.

Question 2

A brokerage relationship begins

a. at a real estate licensee’s first contact with a consumer.
b. when a client enters a brokerage agreement.
c. when a broker assigns an affiliated real estate licensee to work with a client.
d. when a listing is filed with the multiple listing service.

Answer 2

(b) when a client enters a brokerage agreement.

There is no brokerage relationship unless there is a brokerage agreement. The brokerage relationship begins when the client enters the brokerage agreement.

Question 3

Which of the following does NOT terminate a brokerage relationship?

a. Completion of the brokerage agreement
b Expiration of the term of the brokerage agreement
c. A default of the brokerage agreement by either party
d. The broker disliking the client

Answer 3

(d) The broker disliking the client

There are several events that can terminate the brokerage contract, for example, performance, expiration of time and mutual agreement. “the broker disliking the client” does not terminate a brokerage agreement. The feeling might be mutual, and the broker should seek a mutual agreement to terminate.

Question 4

Which of the following is NOT required in a brokerage agreement?

a. A definite termination date
b. The fee owed to the broker
c. A statement of what entitles the broker to compensation
d. Disclosing how much time the broker will devote to the transaction

Answer 4

(d) Disclosing how much time the broker will devote to the transaction

It is conceivable that a “time devoted” clause would be inserted into a brokerage agreement, but it certainly is not common, and is not a required element.

Question 5

After the termination of a brokerage agreement, the broker must

a. account for all trust money.
b. provide the client with a complete copy of the file.
c. submit a complete copy of the file to the Real Estate Commission.
d. give a copy of all advertisements to the Real Estate Commission.

Answer 5

(a) account for all trust money.

There is little that can or should be done after the termination of a brokerage agreement. However, the duty to account for all trust money survives termination of a brokerage agreement.

Question 6

Which of the following is NOT determinative of whether a brokerage relationship exists?

a. The existence of a buyer representation agreement
b. The existence of a listing
c. Payment or promise of payment to the broker
d. The existence of a brokerage agreement

Answer 6

(c) Payment or promise of payment to the broker

The payment or promise of payment to a broker is one element of a brokerage agreement but is not
determinative of whether a brokerage relationship exists. The other three choices are all broker agreements. A brokerage relationship is defined as having a brokerage agreement.

Question 7

A brokerage agreement must

a. be flexible regarding the termination date.
b. express the broker’s compensation as a percentage of the purchase price.
c. specify whether the broker is authorized to cooperate with other brokers.
d. not have a cancellation provision.

Answer 7

(c) specify whether the broker is authorized to cooperate with other brokers.

A brokerage agreement must specify whether the broker is authorized to cooperate with other brokers and the amount of compensation for that. Although most compensation provisions are based on a percentage of the purchase price it could be a specific amount.

Question 8

Which of the following is NOT required in an agency relationship by express agreement?

a. A written contract
b. Specification of compensation
c. Specification of client responsibilities
d. A maximum term of 1 year

Answer 8

(d) A maximum term of 1 year

A definite termination date is required in a brokerage agreement. However, there are no minimum or maximum time length requirements.

Question 9

Which of the following is NOT a general duty of a real estate broker?

a. To exercise reasonable skill and care
b. To explain the legal consequences of the transaction
c. To deal honestly and fairly with all parties
d. To present all offers

Answer 9

(b) To explain the legal consequences of the transaction.

Explaining the legal consequences of the transaction would be practicing law, which is prohibited without a proper license.

Question 10

Which of the following is NOT confidential information?

a. Information that relates to a client’s negotiating strategy
b. Information regarding a buyer or seller’s motivation
c. Information that relates to the property that is the subject of a transaction
d. Information that the seller is willing to accept a lower price than the listing states

Answer 10

(c) Information that relates to the property that is the subject of a transaction

The real estate licensees are required to disclose information they know or should have known that relates to the property. It is not confidential information.

Question 11

When does the duty of confidentiality expire?

a. It does not expire.
b. One year after termination of the agency relationship
c. Immediately after termination of the agency relationship
d. A reasonable time after termination of the brokerage agreement

Answer 11

(a) It does not expire.

The duty of confidentiality survives the termination of an agency relationship.

Question 12

Which of the following statements is TRUE regarding dual agency?

a. Dual agency is not allowed in Maryland.
b. Only a real estate broker may be a dual agent.
c. At least 3 real estate licensees are needed for a firm to engage in dual agency.
d. At least 4 real estate licensees are need to engage in dual agency.

Answer 12

(c) At least 3 real estate licensees are needed for a firm to engage in dual agency.

A broker and 2 intercompany agents are needed to engage in a dual agency.

Question 13

To engage in a dual agency transaction, the broker must

a. designate 1 intra-company agent (ICA).
b. designate 2 intra-company agents (ICA’s).
c. obtain a waiver of confidentiality from the buyer and seller.
d. obtain advice from a lawyer.

Answer 13

(b) designate 2 intra-company agents (ICA’s).

To engage in a dual agency the broker must designate two intra-company agents (ICAs). One ICA represents the buyer and the other represents the seller. The broker operates as a dual agent.

Question 14

In a residential real estate transaction that does not involve a buyer’s agent

a. the seller must disclose to prospective buyers that the seller is represented by a real estate broker.

b. the seller’s broker must disclose to prospective buyers that the seller’s agent represents the seller.

c. the seller’s broker must obtain a waiver of representation from prospective buyers.

d. the seller’s broker must advise prospective buyers to obtain representation.

Answer 14

(b) the seller’s broker must disclose to prospective buyers that the seller’s agent represents the
seller.

This disclosure rule helps ensure that a buyer does not mistakenly believe that the buyer is also represented by the seller’s agent.

Question 15

A licensee holding a property open to the public may comply with the “Understanding Whom Real
Estate Agents Represent” disclosure by

a. displaying in a conspicuous manner a notice to prospective buyers that the licensee present on the property represents the seller.
b. discussing the contents of the disclosure individually with each prospective buyer.
c. sending an email to each prospective buyer.
d. making a telephone call to each prospective buyer.

Answer 15

(a) displaying, in a conspicuous manner, a notice to prospective buyers that the licensee present
on the property represents the seller.

By displaying a sign at an open house, the agent can give notice to prospective buyers that the sellers agent represents the seller and not the buyers.

Question 16

An intra-company agent (ICA) is designated by a broker in

a. transactions involving a licensee’s personally owned property.
b. dual agency transactions.
c. residential but not commercial transactions.
d. transactions that include a subagent.

Answer 16

(b) dual agency transactions.

When a broker operates as a dual agent the broker must appoint two intra-company agents, one to represent the buyer and the other to represent the seller.

Question 17

The “Understanding Whom Real Estate Agents Represent” disclosure

a. does not apply to residential transactions.
b. applies to commercial transactions.
c. does not apply to a lease of 125 days or less.
d. applies to a seller with whom a broker has entered a written brokerage agreement.

Answer 17

(c) does not apply to a lease of 125 days or less.

A lease for 125 days or less is not considered a residential transaction for which the “Understanding Whom Real Estate Agents Represent” disclosure applies.

Question 18

Unless the licensee is holding an open house, the “Understanding Whom Real Estate Agents Represent” disclosure must be made

a. immediately after a purchase agreement is entered.
b. immediately after an offer is made.
c. before the transaction closes.
d. no later than the first scheduled face-to-face contact with the customer.

Answer 18

(d) no later than the first scheduled face-to-face contact with the customer. Many disclosure laws require the disclosure to be made no later than the first scheduled face to face contact with the customer.

Question 19

Which of the following is NOT required by the “Understanding Whom Real Estate Agents Represent” disclosure?

a. An explanation of the differences between a seller’s agent and a buyer’s agent
b. An explanation of a real estate licensee’s duty to exercise reasonable care and diligence
c. An explanation of how a real estate licensee is paid
d. A statement that a real estate licensee is qualified to advise only on real estate matters

Answer 19

(c) An explanation of how a real estate licensee is paid

How a real estate licensee is paid can be complex. An explanation to the client could be useful but it is not required by the “Understanding Whom Real Estate Agents Represent” disclosure.

Question 20

In discharging the customary duties of a licensee in a brokerage relationship, the licensee must do all of the following EXCEPT

a. seek a sale at a price specified in the brokerage agreement.
b. present all offers to and from the client.
c. account for all money received.
d. advise the client regarding the legal implications of the transaction.

Answer 20

(d) advise the client regarding the legal implications of the transaction.

Legal and tax matters are beyond an agent’s expertise. A seller’s agent has a specific duty to advise the seller to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise.

Question 21

The “Understanding Whom Real Estate Agents Represent” disclosure must include all of the following EXCEPT

a. the duty of a buyer’s agent to assist in the evaluation of a property.
b. the duty of a buyer’s agent to assist in the preparation of an offer.
c. the duty of a buyer’s agent to explain the tax ramifications of a transaction.
d. the possibility that a dual agency may arise.

Answer 21

(c) the duty of a buyer’s agent to explain the tax ramifications of a transaction.

Legal and tax matters are beyond an agent’s expertise. A seller’s agent has a specific duty to advise the seller to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise.

Question 22

A real estate licensee must do all of the following EXCEPT

a. seek a sale at a price specified in the brokerage agreement.
b. present all offers to and from the client.
c. account for all money received.
d. advise the client regarding the legal implications of using comparable sales in pricing.

Answer 22

(d) advise the client regarding the legal implications of using comparable sales in pricing.

Legal and tax matters are beyond an agent’s expertise. A seller’s agent should advise the seller to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise.

Question 23

The disclosure called, “Understanding Whom Real Estate Agents Represent”

a. is required in all real estate transactions where a real estate licensee is involved.
b. is required in all real estate transactions where a real estate licensee is involved and an offer has been made.
c. does not apply to any leases.
d. is only required in residential transactions.

Answer 23

(d) is only required in residential transactions.

The disclosure called, “Understanding Whom Real Estate Agents Represent” is a consumer protection provision and only required in residential transactions.

Question 24

A real estate licensee must do all of the following EXCEPT

a. seek a sale at a price specified in the brokerage agreement.
b. present all offers to and from the client.
c. account for all money received.
d. generate a comprehensive appraisal on the property.

Answer 24

(d) appraise the property.

Real estate licensees should conduct a competitive market analysis for their clients. However, they should not prepare an appraisal unless they have an appropriate appraisal license.

Question 25

A real estate licensee must do all of the following EXCEPT

a. seek a sale at a price specified in the brokerage agreement.
b. present all offers to and from the client.
c. disclose to all parties all material facts related to the transaction.
d. disclose to all parties all material facts related to the property.

Answer 25

(c) disclose to all parties all material facts related to the transaction.

Real estate licensees are required to disclose all material facts related to the property but not all material facts related to the transaction. Suppose the listing agent had private, confidential information about the motivations of the sellers that would be material to a buyer. It is confidential information and a listing broker is not allowed to disclose it.

Question 26

A real estate licensee may not disclose a client’s confidential information unless the

a. client consents in writing.
b. broker directs the licensee, in writing, to make the disclosure.
c. licensee has written permission from the Real Estate Commission.
d. client has already entered a purchase agreement.

Answer 26

(a) client consents in writing.

A client can choose to waive or partially waive, the licensee’s duty of confidentiality and allow otherwise confidential information to be disclosed. The consent or waiver must be in writing.

Question 27

Which of the following is NOT, by law, considered a material fact relating to the property?

a. That the roof leaks
b. That a homicide or suicide occurred on the property
c. That the heater and air conditioner are defective
d. That the property contains lead paint

Answer 27

(b) That a homicide or suicide occurred on the property

By law, a homicide, suicide, or death occurring on the property is not considered a material fact and
therefore is not required to be disclosed.

Question 28

Which of the following is NOT required in a brokerage agreement?

a. A definite termination date
b. The amount of compensation to be paid to the broker
c. A provision for cancellation by the client or the broker
d. A statement of the statute of limitations for a breach of contract action

Answer 28

(d) A statement of the statute of limitations for a breach of contract action

The statute of limitations sets forth the time limit within which one must file a lawsuit. It is not required to be in a valid brokerage agreement and is seldom, if ever, included. Alternatively, the other provisions are required.

Question 29

A brokerage relationship begins when

a. a client enters a brokerage agreement.
b. a broker first provides a service.
c. an offer is made.
d. an offer or counteroffer is accepted.

Answer 29

(a) a client enters a brokerage agreement.

A brokerage relationship does not begin until a client enters a brokerage agreement.

Question 30

Which of the following does NOT terminate a brokerage relationship?

a. The expiration date agreed upon in the brokerage agreement
b. When an offer or counteroffer is accepted
c. A termination arrangement mutually agreed upon by all parties
d. A default by either party to the brokerage agreement

Answer 30

(b) When an offer or counteroffer is accepted

The acceptance of an offer or counteroffer is part of the contract formation process not the termination of a contract.

Question 31

“Brokerage agreement” means

Answer 31

A written agreement between a broker and a client to provide real estate brokerage services under a brokerage relationship

Question 32

“Brokerage relationship” means

Answer 32

Means an agency relationship under a brokerage agreement between a client and a broker

▪ note: the payment or promise of payment of compensation to a real estate broker is not determinative of whether a brokerage relationship has been created or exists

Question 33

Listing requirements: the brokerage agreement must:

Answer 33

▪ be in writing
▪ have a definite termination date
▪ specify the compensation as either a specific amount or a specific percentage
▪ state whether compensation can be paid by someone other than the client
▪ state when compensation is earned and paid
▪ explain the events or conditions that will entitle the broker to a commission or other compensation
▪ state whether the broker is authorized to cooperate with other brokers and share
compensation with the other brokers and the amount of that compensation
▪ state the duties of the broker
▪ state the responsibilities of the client
▪ contain a provision for the cancellation of the brokerage relationship by either the client or the broker

Question 34

A brokerage relationship begins when a client enters into a brokerage agreement and continues until

Answer 34

▪ the completion of performance in accordance with the brokerage agreement or

▪ the earlier of
- The termination date in the brokerage
agreement
- Any mutually agreed on termination
- A default of the brokerage agreement by either party

Question 35

A broker may operate using any of the following models

Answer 35

▪ single agency company representing buyers or sellers but no dual agency

▪ exclusive seller-agency representing sellers only and no dual agency

▪ exclusive buyer-agency representing buyers only and no dual agency

▪ dual agency company

Question 36

A Maryland real estate licensee owes the following common law duties to a client (“COLD AC”)

Answer 36

▪ Care
▪ Obedience
▪ Loyalty
▪ Disclosure
▪ Accounting
▪ Confidentiality

Question 37

Statutory Duties of Licensees in a Residential Transaction

Answer 37

“Agency relationship” means each relationship in which a licensee represents another person with the person’s authority in a residential real estate transaction

Question 38

Statutory Duties of Licensees in a Residential Transaction

Answer 38

“Intra-company agent”, or ICA, means an associate broker or real estate salesperson who has been designated by a dual agent to act on behalf of one of the parties in a purchase or lease transaction.

Question 39

Statutory Duties of Licensees in a Residential Transaction

Answer 39

“Ministerial act” means an act that

▪ a licensee performs on behalf of a client before and after the execution of a contract of sale or lease;

▪ assists another person to complete or fulfill a contract of sale or lease with the client of the licensee; and

▪ does not involve discretion or the exercise of the licensee’s own judgment

Question 40

A competitive market analysis must include the following statement on the front page

Answer 40

COMPETITIVE MARKET ANALYSIS DISCLOSURE

Question 41

COMPETITIVE MARKET ANALYSIS DISCLOSURE (CMA)

Answer 41

This analysis is not an appraisal. It is intended only for the purpose of assisting buyers or sellers or prospective buyers or sellers in deciding the listing, offering, or sale price of the real property.

Question 42

COMPETITIVE MARKET ANALYSIS DISCLOSURE

Answer 42

▪ If a licensee includes a property in which the licensee has an interest as one of the comparable properties, that fact shall be disclosed to the client, prospective client, or customer.

▪ The licensee may not submit or advertise property without authority

▪ unexcused failure to ensure that a prospective purchaser has the real property disclosure statement or disclaimer statement in hand before the submission of an offer to purchase may be considered a violation of the licensee’s obligation to protect and promote the interests of the licensee’s client when this failure could result in a contract becoming void or voidable.

Question 43

State of Maryland policy: to provide for fair housing throughout the State to all its citizens, regardless of (protected classes)

Answer 43

▪ race
▪ color
▪ religion
▪ sex
▪ familial status
▪ national origin
▪ marital status
▪ sexual orientation
▪ age
▪ gender identity
▪ disability