Lesson 1: Brokerage-Relationship Laws in Maryland

Brokerage-relationship law within the scope of residential properties applies to:

• Real estate which has already been zoned for residential use (by the local government)
• Leases on residential properties for over 125 days
• Leasing or selling real estate in a combination of up to 4 single-family units

Agency

Agency is the relationship where a licensee acts on behalf of or represents a client in a residential real estate transaction

In residential real estate transactions, a principle (clients is typically represented by a licensee (agent)). The relationship that exists between a principal and the licensee representing them is called an “Agency.” Licensees are licensed, real estate brokers. An agent is the licensee who works with and represents a particular client in a brokerage relationship.

The Buyer's Agent

The “buyer's agent” is the licensed real estate professional who represents the potential buyer. They guide the buyer through the process of buying a home by finding the right property for their client, making and negotiating offers, and offering advice.

The Seller's Agent

Similar to the buyer’s agent, the “seller's agent” is the licensee who lists and advertises a property for the seller. In addition to marketing the home, they give the sellers recommendations about what their home could sell for given the market trends and on which, if any, improvements the seller should consider making before listing their property. Seller’s agents then negotiate offers from buyers to find an offer that meets the requirements of their clients. Agents may also recommend professionals (home inspectors, attorneys, etc.) to their clients. 

Dual Agency (Single License) 

Single License Dual Agency occurs when brokers and agents for a single firm act in a fiduciary capacity for both the buyer and seller in the same transaction; such a transaction is often referred to as "in-house." Dual agency with a single license is prohibited in the state of Maryland.

The requirement to Enact a Written Brokerage Agreement 

In some states in the US, including Maryland, a buyer’s agent is legally committed to representing the seller of a home until the buyer and the buyer’s agent have signed a buyer-broker agreement. This agreement is created as buyers and agents who have agreed to work together outline the terms of their agreement in a formal written document. Once this agreement is signed, the agent becomes an official representative for the buyer and is bound to represent their interests.

Agents must understand the difference of a client and customer, a client is someone that enters into a brokerage relationship while a customer is someone that a licensee assists but does not represent. 

Subagency

A sub-agent is a licensee who provides services to the potential buyer, but who primarily represents the seller in a transaction. Subagency occurs when, for example, the seller authorizes the listing company to allow real estate agents from other brokerages to show the home to potential buyers, or buyers who have not yet entered into a written brokerage agreement. Remember that sub-agents does not come from the same company as the sellers’ agent. Sub-agents loyalty is to the seller or the landlord. 

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Check for understanding!

What is brokerage relationship law and to whom does it apply?