Maryland-Real-Estate-Salesperson Practice Questions

According to Maryland real estate law, a licensed real estate salesperson is an agent of their broker. The brokerage agreement for services is between the client (seller or buyer) and the brokerage firm, not the individual salesperson. Consequently, all compensation, such as commissions, must be paid directly to the salesperson's broker. The broker then compensates the salesperson based on the terms of their independent contractor or employment agreement. This ensures proper legal and financial oversight by the supervising broker, who is ultimately responsible for the salesperson's actions.

A. Salespersons are legally prohibited from accepting compensation directly from a seller or buyer; all funds must flow through their broker.

B. Private compensation arrangements between agents are illegal as they bypass the required supervision and record-keeping of the brokers.

D. Receiving direct payments from settlement providers like mortgage brokers is a violation of both state licensing laws and the federal Real Estate Settlement Procedures Act (RESPA).

1. Maryland Code, Business Occupations and Professions Article, § 17-517. Payment of compensation.

Section (b) explicitly states: "A licensed real estate salesperson may accept compensation for the provision of real estate brokerage services only from the real estate broker under whom the real estate salesperson is licensed." This directly supports the correct answer.

2. Code of Maryland Regulations (COMAR) 09.11.02.01. Code of Ethics.

Section D states: "A licensee may not accept any commission, rebate, or profit on expenditures made for a principal or receive any compensation, other than the real estate commission, from any person other than the broker with whom the licensee is affiliated without the principal's knowledge and consent." This reinforces that compensation must come from the affiliated broker.

3. University of Maryland, "Real Estate Law and Transactions" Course Materials (BMGT 452).

Course modules on Agency and Brokerage Operations consistently emphasize that the commission is earned by the brokerage and paid by the principal to the broker. The broker then pays the salesperson their agreed-upon split. This structure is a foundational principle of real estate law covered in the curriculum.

The initial face-to-face meeting is a critical component of establishing a successful agent-client relationship. Its primary professional purpose is to build trust and rapport. This foundation allows for open communication, a clear understanding of the buyer's needs and goals, and the establishment of agency duties. A strong professional relationship ensures a smoother, more effective process for finding a suitable property and navigating the complexities of the transaction. This meeting is about setting expectations and creating a partnership, not about investigation or discrimination.

B. To determine the buyer's ethnicity

This is a direct violation of the federal Fair Housing Act, which prohibits discrimination based on race, color, or national origin.

C. To get the buyer's FICO score, credit report, and tax receipts

This is the primary role of a mortgage lender. The agent's role is to confirm the buyer is pre-qualified or pre-approved, not to collect and analyze sensitive financial documents.

D. To look the buyer in the eye to see if the buyer is hiding anything

This approach is unprofessional, subjective, and not a sound or ethical business practice. Professional relationships are built on facts and clear communication, not on "gut feelings."

1. Code of Maryland Regulations (COMAR), Title 09, Subtitle 11, Chapter 02, Code of Ethics. Section 09.11.02.01.H states, "The licensee shall protect the public against fraud, misrepresentation, or unethical practices in the real estate field." Practices in options B and D would be considered unethical. Section 09.11.02.02.A requires licensees to "deal honestly and fairly with all parties," which is facilitated by building rapport (Option A).

2. The Fair Housing Act (42 U.S.C. § 3604). This federal law makes it illegal to "refuse to sell or rent... or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin." Option B is a clear violation of this statute.

3. Ling, D. C., & Archer, W. R. (2018). Real Estate Principles: A Value Approach (6th ed.). McGraw-Hill Education. Chapter 15, "Real Estate Brokerage and Listing Contracts," discusses the critical nature of the client-agent relationship, emphasizing the need to establish trust and understand the client's needs during initial consultations to fulfill fiduciary duties effectively. This supports the rationale behind Option A.

The Maryland Real Estate Commission (MREC) has the authority to impose a range of disciplinary actions for violations of the Maryland Real Estate Brokers Act or its associated regulations, which include the Code of Ethics. The specific penalty depends on the severity and circumstances of the violation. The Commission's options include issuing a formal reprimand, imposing a monetary penalty (fine), suspending the license for a period, or permanently revoking the license. This graduated system of sanctions allows the MREC to apply a penalty appropriate to the offense.

A. Suspension is only one of several possible penalties; it is not a guaranteed outcome for every ethical violation.

B. A first-time offense does not grant immunity from penalties; the MREC can and does sanction first-time offenders.

C. Imprisonment is a criminal penalty imposed by a court of law, not an administrative sanction that the MREC can issue.

1. Annotated Code of Maryland, Business Occupations and Professions Article, § 17-322. Denials, reprimands, suspensions, and revocations — Grounds. This section outlines the grounds for which the Commission may take disciplinary action. It states, "Subject to the hearing provisions of § 17-324 of this subtitle, the Commission may deny a license... or reprimand any licensee or suspend or revoke a license if the applicant or licensee... (4) violates any provision of this title; (5) violates any regulation adopted under this title or any provision of the code of ethics..."

2. Annotated Code of Maryland, Business Occupations and Professions Article, § 17-322. (c) Penalty. This subsection specifies the monetary penalties the Commission can impose. It states, "(1) Instead of or in addition to reprimanding a licensee or suspending or revoking a license under this section, the Commission may impose a penalty..." The section then details the maximum penalty amounts based on whether it is a first, second, or subsequent violation.

3. Code of Maryland Regulations (COMAR) 09.11.02.02. Sanctions. This regulation, which is part of the Code of Ethics, explicitly states: "A real estate broker, associate real estate broker, or real estate salesperson who violates any provision of this chapter is subject to the penalties set forth in the Business Occupations and Professions Article, §§17-322 and 17-702, Annotated Code of Maryland." This directly links violations of the Code of Ethics to the penalties of reprimand, fine, suspension, and revocation.

An escrow agent is a neutral third party entrusted with holding and disbursing funds and relevant documents (like the deed) on behalf of the principals in a transaction. This entity, which can be a title company, attorney, or a real estate broker, ensures that all contractual obligations are met before releasing the assets. The term specifically describes the function of overseeing trust or escrow money until the transaction is finalized, acting as a fiduciary for all parties involved.

B. Escrow master: This is not a standard or legally recognized term within the real estate profession.

C. Mortgage agent: A mortgage agent or loan originator assists the buyer in obtaining financing but does not hold the primary escrow funds for the transaction.

D. Special agent: A real estate broker acts as a special agent for a specific transaction, but "escrow agent" is the precise term for the role of managing trust funds.

1. Maryland Code, Business Occupations and Professions Article, § 17-505(a)(1): This statute specifies that "A real estate broker...shall be the holder of any trust money." This establishes the broker in the functional role of an escrow agent or trustee for these funds.

2. Code of Maryland Regulations (COMAR) 09.11.02.01(C): This regulation defines the responsibilities for handling trust money, stating, "A broker who is entrusted with the care and custody of trust money shall deposit the trust money promptly in an account..." This describes the duties of an escrow agent.

3. Ling, D. C., & Archer, W. R. (2021). Real Estate Principles: A Value Approach (6th ed.). McGraw-Hill Education. In Chapter 12, "Contracts and Title Closings," the text defines an escrow agent as a third party who carries out the provisions of the contract, holding funds and documents until closing (p. 338). This is a foundational concept in university-level real estate education.

Building departments ensure compliance with building codes primarily through a structured inspection process. After a permit is issued, the builder is required to schedule inspections at critical stages of construction, such as foundation, framing, electrical, plumbing, and final occupancy. A government-employed or certified building inspector visits the site to physically verify that the work completed conforms to the approved plans and meets all applicable code standards. Work cannot proceed to the next phase until the current stage has passed inspection, ensuring continuous compliance throughout the project.

A. Inspections are performed by official, certified inspectors employed by the jurisdiction, not by industry peers, to ensure unbiased enforcement.

B. An affidavit is a sworn statement of intent to comply but does not serve as the actual verification or enforcement mechanism.

C. Progress reports are self-reported by the builder and lack the independent, official verification that a physical inspection provides.

1. Maryland Department of Labor, Building Codes Administration. The Maryland Building Performance Standards (MBPS) are enforced by local jurisdictions. As detailed in the Code Enforcement - Frequently Asked Questions, "Local jurisdictions are the primary enforcers of the building code in Maryland... This is typically accomplished through the plan review and inspection processes." This confirms that official inspections are the method of enforcement. (Source: Maryland Department of Labor website, Building Codes Administration section).

2. Ling, D. C., & Archer, W. R. (2018). Real Estate Principles: A Value Approach (6th ed.). McGraw-Hill Education. In Chapter 4, "Public Restrictions on Ownership," the text explains the role of building codes: "The process of enforcing building codes is accomplished through the building permit... At various stages of construction, the local building inspector visits the site to see that the construction is proceeding according to the codes." (p. 87, Section 4.2).

3. Montgomery County, Maryland, Department of Permitting Services. (2023). Inspections. This official government documentation outlines the process: "Inspections are required at various stages of construction to ensure the work is done in compliance with the approved plans and all applicable code requirements... It is the responsibility of the permit holder to schedule all required inspections." This exemplifies the standard procedure for Maryland jurisdictions. (Source: Montgomery County DPS official website, Inspections Information page).

The primary drawback of sub-agency for a listing broker is vicarious liability. In a sub-agency relationship, the sub-agent (a cooperating broker working with a buyer) is an agent of the listing broker and, by extension, the seller. Consequently, the listing broker and the seller can be held legally responsible for the actions, misrepresentations, or omissions of the sub-agent. This creates a significant risk for the listing broker, who has limited direct control or supervision over the sub-agent from another firm.

A. This is incorrect because sub-agency and dual agency are two different and distinct forms of representation. Sub-agency involves two firms representing the seller.

C. This is incorrect because the commission is typically split with a cooperating broker regardless of whether they are a sub-agent or a buyer's agent. This is not a unique drawback.

D. This is incorrect because, as explained above, the significant risk of vicarious liability is a major drawback of sub-agency.

1. Galaty, F. W., Allaway, W. J., & Kyle, R. C. (2022). Modern Real Estate Practice (21st ed.). In the chapter on "Real Estate Agency," the text explains that under sub-agency, the principal (seller) and the agent (listing broker) are liable for the sub-agent's misconduct. This concept of vicarious liability is detailed as a primary reason for the decline of sub-agency. (See Chapter 5, "Liability and Responsibility").

2. Maryland Real Estate Commission. (2021). Understanding Whom Real Estate Agents Represent (Disclosure Form). This official form, required by Maryland law, outlines the different agency relationships. It clarifies that a sub-agent owes loyalty to the seller, and the seller may be held responsible for the sub-agent's actions, implicitly highlighting the liability passed through the listing broker. (Section on "Sub-Agent").

3. Jennings, M. M. (2017). Real Estate Law (11th ed.). Cengage Learning. In discussions on agency law, the text establishes the principle that a principal is liable for the acts of their agents and sub-agents performed within the scope of their agency duties. This legal principle is the foundation for the listing broker's risk in a sub-agency arrangement. (See Chapter 7, "The Agency Relationship in Real Estate").

An agent's fiduciary duty of care requires them to protect their client's interests and property from foreseeable harm. Publishing a photograph that clearly displays a collection of valuable and potentially dangerous items, such as antique guns, creates a significant security risk. It advertises the presence of these items to the public, potentially making the property a target for theft. This action would be a breach of the agent's duty to safeguard the client's property and confidentiality regarding their personal possessions. Therefore, such a photograph should not be published for public viewing.

A. This is a standard and desirable marketing photograph that highlights valuable amenities of the property, which is a primary goal of real estate advertising.

C. This reflects poor photography skills and is unprofessional, but it does not pose a direct security, safety, or legal risk to the client or their property.

D. Using a wide-angle lens is a common and accepted practice in real estate photography to showcase a space; it is not considered prohibited unless it creates a material misrepresentation.

1. Maryland Real Estate Commission, Code of Maryland Regulations (COMAR) 09.11.02.01 - Code of Ethics. Section D states, "In accepting employment as an agent, the licensee shall protect and promote the interests of the client. This obligation of absolute fidelity to the client's interest is primary..." Publishing photos that endanger the client's property is a violation of this primary obligation.

2. Mettling, S., & Cusic, D. (2022). Principles of Real Estate Practice. In discussions of agency and fiduciary duties, the "duty of care" is defined. This duty requires a licensee to use their skills and knowledge to protect the client from foreseeable harm. Advertising a gun collection negligently creates a foreseeable risk of theft, violating this duty. (See Chapter on Agency Duties).

3. University of North Texas, Real Estate Program Courseware (REAL 3100 - Principles of Real Estate). Course materials on "The Agent's Fiduciary Responsibility" emphasize that the duty of care includes protecting the client's property during the marketing process. This includes advising clients to secure valuables and ensuring marketing materials do not inadvertently create security risks.

Bracketing is a fundamental technique within the sales comparison approach to appraisal. It involves the appraiser selecting a range of comparable properties, some of which are superior to the subject property and some of which are inferior in terms of their key characteristics (e.g., size, condition, features). The principle is that the value of the subject property should fall within the range established by these superior and inferior comparables after adjustments are made. This process helps to support the appraiser's final value conclusion and ensures a credible and defensible valuation.

B. Competition: This is an economic principle of value stating that market demand generates profits, which in turn attracts competition that can affect value, not a specific appraisal technique.

C. Correlation: This is the final step in the appraisal process, also known as reconciliation, where the appraiser weighs the different value indications to arrive at a single value estimate.

D. Substituting: This refers to the Principle of Substitution, the theoretical basis for the sales comparison approach, which states a buyer won't pay more for a property than for a comparable substitute.

1. The Appraisal Institute, The Appraisal of Real Estate, 14th Edition. Chicago: Appraisal Institute, 2013. In Chapter 18, "Sales Comparison Approach: Analysis and Application," the text explains that bracketing is a process of selecting comparables that are both superior and inferior to the subject property to establish a credible range of value and support adjustments.

2. Ling, David C., and Wayne R. Archer, Real Estate Principles: A Value Approach, 6th Edition. McGraw-Hill Education, 2020. Chapter 7, "Valuation Using the Sales Comparison and Cost Approaches," describes the selection of comparable sales, emphasizing the importance of bracketing the subject property's characteristics to produce a reliable value estimate (pp. 180-181).

3. University of North Texas, College of Business, REAL 3100: Principles of Real Estate Course Syllabus. The course curriculum covering the Sales Comparison Approach details the necessity of selecting comparables that "bracket" the subject property's physical and locational attributes to support the final opinion of value.

A buyer's primary concern regarding additions or alterations is to verify the legality and safety of the work. This is accomplished by determining if the proper building permits were obtained from the local jurisdiction. Unpermitted work can create significant liability for a new owner, including municipal fines, orders to remove the alteration, difficulty obtaining homeowner's insurance, and potential safety hazards if the work does not comply with building codes. Verifying permits is a critical step in the buyer's due diligence process to avoid inheriting these substantial legal and financial risks.

A. A price reduction is a potential outcome of discovering unpermitted work, not the primary reason for the initial inquiry.

C. Removing additions is a possible remedy if unpermitted work is found, but it is not the reason for asking the question in the first place.

D. Identifying the contractor is secondary to the more critical issue of ensuring the work was legally permitted and compliant with safety codes.

1. Maryland Code, Real Property Article, § 10-702. This statute governs the Maryland Residential Property Disclosure and Disclaimer Statement. The form itself, mandated by this law, requires sellers to disclose information about the property's condition, including "additions, structural alterations, or other structural changes to the property." A subsequent question directly asks if permits were secured for these changes, underscoring that permit status is the key legal concern.

2. University of Maryland, Francis King Carey School of Law. Course materials for Real Estate Transactions often emphasize the buyer's due diligence. A central component of this diligence is the verification of the property's legal compliance, which includes ensuring all construction, additions, and alterations were properly permitted and inspected by the relevant government authority to ensure they meet building and safety codes. (e.g., Real Estate Transactions Course Syllabus, section on "Buyer's Due Diligence & Title Review").

3. Maryland Real Estate Commission, Public Records and Property Information. Official guidance for licensees stresses the importance of verifying material facts. The existence of unpermitted additions is a material fact that can affect a property's value and legal status. Licensees are encouraged to advise buyers to investigate permit history through local municipal or county records as part of their due diligence. (Reference: Maryland Real Estate Commission, Code of Maryland Regulations (COMAR) 09.11.02.01 on licensee obligations).

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as Superfund, is the primary federal law governing the cleanup of hazardous substance sites. Enacted in 1980, it grants the U.S. Environmental Protection Agency (EPA) the authority to identify contaminated properties and compel the parties responsible for the contamination to perform the cleanup. If responsible parties cannot be found or are unable to pay, CERCLA provides a trust fund ("Superfund") to finance the remediation efforts. The law establishes a strict liability standard, meaning a party can be held responsible regardless of fault.

B. The Department of Housing and Urban Development (HUD) primarily deals with housing policy and fair housing laws, not the broad cleanup of industrial or commercial hazardous waste sites.

C. While a State Department of Environmental Quality often implements and enforces cleanup programs, CERCLA is the foundational federal law that created this national framework and authority.

D. The National Environmental Policy Act (NEPA) requires federal agencies to assess the environmental impact of proposed actions, not to clean up existing contamination from past activities.

1. U.S. Environmental Protection Agency (EPA). "Summary of the Comprehensive Environmental Response, Compensation, and Liability Act (Superfund)." This official documentation states, "CERCLA ... provided broad Federal authority to respond directly to releases or threatened releases of hazardous substances... [and] establishes prohibitions and requirements concerning closed and abandoned hazardous waste sites." Retrieved from the official EPA website.

2. University of Maryland Francis King Carey School of Law. Course Catalog, LAW 737: Environmental Law. The course description explicitly covers "major federal environmental statutes," including "the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) (governing liability for contaminated property)." This confirms its role as the key legislation in this area.

3. Ando, A. W., & Khanna, M. (2004). "Natural Resource Damage and the Public Trust Doctrine: A Path to Coherence." Journal of Land, Resources, & Environmental Law, 24(1), 1-26. This academic article discusses CERCLA's framework for holding parties liable for cleanup costs and damages to natural resources from hazardous substance releases (see Section II.A. CERCLA).