How should all compensation related to real estate transactions be handled according to real estate law?

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.