The Marketing Period

• Jurisdiction: Maryland

II. THE MARKETING PERIOD

A. Generally

Recent advances in technology are altering the process of buying and selling residential real estate. Through the use of GPS, smartphone applications can now identify properties for sale in specific neighborhoods. Information on websites easily shows recent sales and prices. You no longer need access to the Multiple Listing Service (MLS) to find comparable sales. The use of photographs and video now permit an interested buyer to "preview" homes more easily so that the process of finding a new home is shorter. Many buyers are narrowing their search for a new home without engaging a real estate agent. All of these changes present opportunities for the real estate lawyer to be more involved in residential real estate transactions.

In the traditional scenario, most sellers incur legal obligations by executing a listing agreement with a real estate broker. The terms of this listing agreement may be negotiable, especially during periods when the housing market is brisk and brokers are competing for listings and the opportunity to earn commissions or when the housing market is slow and brokers are willing to lower their commissions to gain a listing. Among other things, the listing agreement will specify the commission rate, the duration of the listing period, and whether the property may be listed only by a single broker or will be subject to "multiple listing." A careful practitioner will review a listing agreement to determine when a commission will be paid. Some broker agreements require a payment to be made upon the execution of a contract of sale while others make settlement on the property a precondition to payment.

Lawyers should make sure that their clients understand the type of commitment that the client is undertaking. For example, often sellers will sign a listing agreement that will cover a period of time, such as six months, with a commission being paid even if the broker is not the procuring cause. Clients should understand that the broker will receive a commission even if the seller finds the buyer. The other type of listing agreement is the "procuring cause" agreement. With a procuring cause listing agreement, the agent will only be paid if the agent brings the buyer. The procuring cause listing agreement is used less frequently because, in a residential transaction, it is much more difficult to identify the reason that a buyer comes to submit a contract. The procuring cause listing agreement is better suited to situations where the seller will do their own marketing.

In addition to preparing a listing agreement, an agent acting on behalf of either a buyer or a seller in a residential transaction must prepare a disclosure statement specifying their specific role in the transaction.²

The Real Estate Licensing Reform Act (the "Act"), passed by the Maryland General Assembly on April 10, 1998, became effective on Jan. 1, 1999.³ The law altered the standard duties of a real estate agent in a brokerage relationship. The Act changed the presumption that an agent represents the seller to the presumption that an agent represents the buyer as long as the agent is not acting as the listing real estate broker.⁴

The Act also changed the point when brokerage agency begins and provided for a new written disclosure.⁵ The Act also set out what must be included in a brokerage agreement.⁶ The disclosure statement replaced the former statement that unless a licensee agrees to assist the buyer as the buyer's agent or as a dual agent, the licensee represents the seller. The disclosure section included language that stated:

[A] licensee who assists a buyer . . . in locating residential real estate for purchase . . . and is neither affiliated with nor acting as the listing real estate broker for any real estate shown or located, is presumed to be acting as a buyer's agent on behalf of the prospective buyer . . . unless either the licensee or the prospective buyer . . . expressly declines to have the licensee act as a buyer's agent.⁷

On April 26, 2016, the Governor signed into law Senate Bill 1469, which made several revisions to the Act. The 2016 revisions repealed the Act's presumption created by § 17-533 that an agent represents the prospective buyer as long as the...