Regulations of Code and Ethics

Maryland Real Estate Commission's Code of Ethics

• Applies to all Maryland licensees.
• Topics include:
  • Advertising guidance
  • Predatory lending practices (e.g., illegal flipping)
  • Relation to the public, clients, and fellow licensees

Objectives

• Describe the Maryland Real Estate Commission's code of ethics.
• Describe predatory or unethical business practices.

Key Terms

• Cash out refinances
• Comparative market analysis (CMA)
• Cooperate
• Fraud
• Illegal flipping
• Maryland Home Improvement Commission
• Misrepresentation
• Predatory lending
• Subprime loans

Ethics vs. Law

• Ethics are in addition to legal requirements.
• Ethics reflect agreed-upon definitions of morality and appropriateness.

Broker Act (Title 17)

• Protects the public interest.
• Commission adopts a code of ethics to set standards of conduct.
• Violating the code of ethics is a violation of license laws.

Ethics Requirements for Licensing Candidates

• Pre-license class for salesperson and brokers must include three hours of real estate ethics.
• Includes information on ethical lending, advertising, and illegal flipping.
• Mandatory three-hour continuing education class on Maryland ethics required every two years for license renewal.

National Association of Realtor (NAR) Ethics

• NAR members must attend an ethics class every two years.
• Ethics class covers both Maryland Real Estate Commission code of ethics and the National Association of Realtor Code of Ethics.

Maryland Real Estate Commission's Code

• Found in the Code of Maryland Regulations, Title 09, Subtitle 11, Chapter 02.
• Includes sections on:
  • Licensee's relation to the public
  • Relations to the client
  • Relation to fellow licensees

NAR Code of Ethics

• Sections on:

  • Realtor duties to clients and customers
  • Duties to the public
  • Duties to realtors

• Generally consistent with the Maryland Real Estate Commission's code of ethics.

Golden Rule

• \"Whatsoever ye would that others should do to you, do ye even so to them.\"
• Ethics often require a higher standard than the law.

Ethics in Relation to the Public

• Licensees must stay informed of matters affecting real estate in the community, state, and nation.
• Full working knowledge of the areas they service.
• Understanding of real estate matters on the state and national level.

Market Conditions

• Licensees must be informed on current market conditions to advise clients on fair market price.
• Monitor market conditions and trends.

Protecting the Public

• Licensees must protect the public against fraud, misrepresentation, or unethical practices.
• Endeavor to eliminate practices damaging to the public or the real estate profession.
• Assist the Real Estate Commission.
• Report unethical or fraudulent activities to the Maryland Real Estate Commission.

Material Facts

• Licensees must make a reasonable effort to ascertain all material facts concerning every property.
• Avoid error, exaggeration, misrepresentation, or concealment of material facts.
• Discuss legal requirements to disclose material facts and latent defects.
• Affirmative disclosure is required.
• Licensees must disclose what they know and what they should have known.
• Negligent misrepresentation: failing to disclose something that should have been known.

Discrimination

• Licensees cannot discriminate based on a party's membership in a protected class.
• Prohibited by federal and state fair housing laws, COMR code of ethics, and NAR code of ethics.
• Maryland has three additional protected classes: marital status, sexual orientation, and gender identity.

False Consideration

• Licensees cannot be party to false financial details in a transaction.
• Buyers' lender should be informed of the true financial qualifications.
• No under-the-table payments.
• Closing help, rent-back payments must be in the sales contract and closing disclosure.

Advertising

• Licensees must present a true picture.
• Brokers must disclose their name or company name as it appears on the license.
• Associate brokers/salespersons must connect with the broker in the advertisement.
• Associate broker/salesperson may not use individual phone numbers or email addresses unless the broker's number also appears.
• Applies to social media and all attempts to create business.

Financial Obligations

• Financial obligations and commitments regarding real estate transactions must be in writing.
• Entire agreements should be in writing, including contracts, addenda, and disclosures.
• Changes to initial contracts should be documented.
• Licensees should use preprinted forms.
• All parties should receive copies of current documents.
• Copies must be kept for five years.
• Statute of frauds requires agreements to be in writing.

Signatures

• All real estate documents must be signed by the individual licensee.
• Licensees can use team names in advertising if connected to the broker's name.

Vendor Recommendations

• Licensees must verify the license status of home improvement contractors yearly.
• Provide consumers with a link to check the license status.
• Disclose if any recommended vendor is a relative or if the licensee profits from the consumer using that vendor.

Relations to Clients

• Licensees must protect and promote the client's interest.
• Act as a fiduciary to their clients, placing their clients' interests first.
• Cannot follow unethical, illegal, or discriminatory instructions.

Staying Informed

• Licensees must stay informed regarding laws, legislation, government orders, and public policies.
• Complete three hours Broker came legislative updates every two years.

Compensation

• Licensees cannot accept compensation from more than one party without full knowledge of all parties.
• Sales associates can only accept compensation from employing brokerage.
• Bonuses and incentives should be disclosed to the client and paid to the broker.

Disclosure Requirements

• Licensees acquiring an interest in real property must disclose their license status in writing to the seller/landlord.
• Applies when acting on behalf of immediate family, a business where they have ownership, or their employer.
• Written notice can be given through MLS.

Immediate Family

• Includes spouse/domestic partner, child, stepchild, child's spouse, parent, sibling, grandparent, or grandchild.

Property Management

• Licensees cannot accept commissions, rebates, or profits on expenditures without the owner's knowledge and consent.

Competitive Market Analysis (CMA)

• May be prepared for clients, prospective clients, or customers.
• Must include the statement:
  • \"This analysis is not an appraisal. It's intended only for assisting buyers and sellers in deciding the listing, offer, or sales price of a property.\"
  • If a licensee includes a comparable property they own, they must disclose that.

Advertising Property

• Licensees must have a signed listing agreement authorizing them to advertise a property.
• Price and offer terms must be authorized by the owner.

Presentation of Offers

• Licensees must present all written offers and counteroffers to the client.
• Until a client has accepted an offer, all written offers must be brought to the client's attention.
• Even after an offer has been accepted, backup offers received before settlement must also be presented unless instructed otherwise in writing.

Property Disclosure Disclaimer Statement

• Unexcused failure to ensure that the buyer has a real property disclosure disclaimer statement may be a violation.
• Licensees preparing an offer for a for-sale-by-owner should request the completed form.
• The form must be completed without blanks.

Relations to Fellow Licensees

• The agency of a licensee who holds exclusive listings shall be respected.
• Licensees must not knowingly interfere with another agent's client.
• Inquire if a customer has already signed an agreement with another broker.
• Negotiations concerning a property listed exclusively with one broker shall be carried solely with the listing broker.

Cooperation

• Licensees should cooperate in the sale of a property as long as it's in the client's interest.
• Cooperation does not guarantee compensation.

Signs

• Licensees must have a signed listing agreement giving them permission to advertise and put up a for-sale sign.
• Be aware of any restrictions on signs.

Predatory Business Practices

• Illegal flipping: reselling a property at an artificially inflated value for considerable profit.
• Involvement in a transaction with altered loan, title documents, or appraisals is illegal.

Appraisal Independence

• Appraisers must be part of an established panel for a lender or assigned by a management company.

Subprime Loans

• Home loans for people with lower credit scores without established credit, charging them a higher interest rate.

Cash Out Refinancing

• Allows homeowners to roll additional debts into the refinance.
• Should be compared to a streamlined finance.

Mortgage Brokers

• Cannot collect a fee for refinancing an original loan if they process that loan within the last 24 months.

Consumer Rights

• Request a copy of the loan estimate form from the lender before viewing houses.
• Shop for a loan from different lenders.

Homebuyer Education Classes

• Buyers should make use of homebuyer education classes.
• Real estate licensees are fiduciaries to buyer clients; loan officers are not.

Advertising Requirements

• Advertising includes all written and verbal contact with the public intended to generate business.
• Licensees are responsible for ensuring advertisements meet requirements.
• Sales associate may not be in any advertisement unless the individual is an associated broker.
• Additional guidance directs agents to advertise only as their name is to your license and to consider adding any variation of nickname to their license to avoid confusion that would be considered an advertising violation.
• A licensee must disclose that they are the owner of a property in advertisements if they are trying to sell it.