MARYLAND BUILDERS MUST EMPLOY LICENSED SALES PERSONS AS OF OCTOBER 1, 2007

By
Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372

DEADLINE LOOMING IN REAL ESTATE SALES IN MARYLAND

About two months ago, I toured Frederick County in Maryland and Loudoun County in Virginia with a lovely New Homes in Marylandcouple considering buying a new home.  We visited one of my favorite builders in Ijamsville only to find the builder's model closed.  The builder's representative drove up in a hurry, breathless.  She had been in real estate school.  Further, she was not happy about it.  I could only see this new law as a good thing for buyers.

The Maryland Real Estate Commission is flexing it's muscle again.  As of October 1, 2007, the sales person in the builder's model or sales trailer, must hold a Maryland real estate license.  In the past, the person meeting with prospective buyers in the builder's model or sales trailer was clearly employed by the builder, but that wasn't always clear to prospective home buyers.  The person in the model home may have had a license, but buyer's often believed that the sales person could "help" them make home buying decisions.  Many builders required that sales persons place their real estate license in "inactive" status while working for the builder.  Or, the builder could employ sales persons who had no real estate license. 

WHAT DOES THIS MEAN TO BUYERS?
In many cases, not much.  If a buyers is working with or represented by a buyer's agent, their agent would have, or should have made it clear that the person working in the builder's model or sales trailer clearly represents the seller, the builder.  At the lease, they will be covered by the requirement to provide a buyer with the "Whom Does the Agent Represent" disclosure statement at first scheduled meeting. 

I'm not sure how the builders and agents will handle this since "Open Houses" are exempt from that requirement.  But, I suspect that it will be required to be provided by the time a person makes an appointment, or "scheduled meeting" to discuss buying the home.  I'm anxious to visit a builder's model after October 1 to see how some of the major builders handle this matter. 

BUYERS WHO TOUR WITHOUT AN AGENT.  One thing the new law will not cover is the matter of buyers visiting new home builders without an agent, registering at the site, and then not being able to bring in a buyer's  agent.  Buyers do not understand that practice and would like to just tour homes on a Saturday or Sunday afternoon without an agent.  That should not prevent buyers from working with an agent, if they so choose.  Unfortunately, builders are loathe to cooperate with a buyer's agent and use this procedure to (1) prevent the buyer from bringing in their own agent who may give the buyer advice contrary to what the builder's representative may say, and (2) co-op with the buyer's broker. 

Chapter 274 of the Laws of Maryland 2007 (HB1288)
Effective October 1, 2007, sales agents of new home builders in Maryland must hold real estate licenses issued by the Maryland Real Estate Commission. There are three categories of licenses issued by the Commission ´┐Ż broker, associate broker, and salesperson. Salespersons and associate brokers must be affiliated with a real estate brokerage that is headed by a broker. The broker is responsible for supervising the activities of the salespersons and associate brokers; they in turn offer real estate brokerage services through that brokerage. The requirements for obtaining these licenses are found on the
Commission's website.

I'm not advocating for agents to send buyers out to find their new home and then waltz in expecting to collect a Buyer's Agentfee.  Often the agent appears with the buyer to register them and then they disappear settlement to collect a commission check.  However, buyers are not always cognizant of the builders requirements and don't understand the hazards of registering without their agent.   I'm not sure how, or if, the new law will solve this very serious problem.  Somewhere along the process the builder is going to have to get the Agency Disclosure signed by the buyer telling the buyer that the sales person sitting across the desk from you "represents" the seller.

UNDERSTANDING WHOM THE AGENT REPRESENTS
Agents Who Represent the Seller
Seller's Agent: A seller's agent works for the real estate company that lists and markets the property for the sellers, or landlords, and exclusively represents the sellers or landlords. That means that he or she may assist the buyer or tenant in purchasing or renting the property, but his or her duty of loyalty is only to the sellers or landlords. The seller pays the seller's agent's fee as specified in a written listing agreement. 

FYI.  The reason this legislation is finally being implemented along with the licensing of home inspectors is because the Maryland Real Estate Commission is now funded directly by real estate licensing fees and not by the general budget.  They did not have the funds in the past to perform these valuable tasks. 

Courtesy:  Lenn Harley, Broker, Homefinders.com, 800-711-7988, E-mail. 
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Rainer
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James Gordon
Sibcy Cline Realtors® - Cincinnati, OH
REALTOR, PBD SFR SRS
Lenn in Ohio we have to give a State mandated brochure at the first point of contact except open houses. I imagine if someone wanted to know about other model or prices they would need to bring out the brochure.
Sep 26, 2007 05:38 AM #12
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Irene.

I usually walk through the model with a floor plan and show the buyers what is an "upgrade, extention, bump-out, option, etc. 

It's an eye-opener for them to actually get a realistic price for what they see and love.

I love selling new homes and have made it a speciality since about 1990.  It was hard in the early 2001-2005 years when builders didn't want to see an agent and many stopped paying us.  But, I love it and I know all of their tricks. 

 

Sep 26, 2007 05:42 AM #13
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
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James.  If I know builders, and I do.  They are going to be working hard to avoid giving that agency disclosure until they get that buyer registered without and agent.
Sep 26, 2007 05:44 AM #14
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Celeste "SALLY" Cheeseman
Liberty Homes - Mililani, HI
(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

We have one builder (and it's known) that will not give courtesy to buyer's agents. Anyone who buys has to go through THEIR agents ONLY. I have been frustrated showing property and they end up buying in this subdivision of new homes. That's okay...they're almost finished. No more land.

On the other hand..you're right. The buyer's don't understand that they aren't represented when they walk in there alone......and their own lender...ah, another story.

Good thing they have to have agents here anyway...and good thing they have to as of Oct. 1 there!

Sep 26, 2007 05:47 AM #15
Rainer
8,751
Collin Duke
Coldwell Banker Apex, Realtors - Frisco, TX
Duke of Real Estate, Realtor, Collin County, Frisco TX

This sounds like a good thing, but I think it could be bad if the legislation is not written properly (i.e. excempt from disclosure because open house rules -- would be bad)   The idea seems like it would serve the public as it would require them to provide explanation (watered down I am sure) to potential buyers as to who represents whom.   

 I hope that it is done properly here and other states take notice and implement something similar as well. 

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Sep 26, 2007 06:00 AM #16
Rainer
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Susan Trombley
Trombley Real Estate - Wake Forest, NC
Broker/Realtor, Raleigh, Cary, Wake Forest, Youngs

Good for the state, everyone needs to know what is going on in real estate. Man this probably will be the most expensive purchase they are doing and someone should know what is going on here.

Sep 26, 2007 06:05 AM #17
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Sally.  I don't know whether the germ for this legislation came from brokers who want more co-op sales or consumers who made complaints and found that the commission was helpless because the agents aren't licensed.  But, I can't see how this can harm buyers or buyers agents.

Collin.  Thanks for commenting.  I don't know the details yet.  I've get them soon.

Susan.  I agree.  It is amazing the "stuff" that Maryland has let builders get by with for years.  It's been so bad, I wouldn't even sell new home except those built my major builders where they had some quality control.  Builders have to be licensed in MD now for the past 2-3 years.  The Attorney General's office manages the program and things have greatly improved.   

 

Sep 26, 2007 06:34 AM #18
Rainmaker
223,010
John MacArthur
Century 21 Redwood - Washington, DC
Licensed Maryland/DC Realtor, Metro DC Homes
Lenn - It is good that the orchestra has been given new sheet music. It remains to be seen whether or not the builders will dance to the new tune. I will not bore you or anyone else about the nightmare in our market operating under NV Homes or their lower priced model Ryan Homes.
Sep 26, 2007 08:12 AM #19
Rainer
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Chuck Dellorto
Coldwell Banker - Serving INDIANA & ILLINOIS - Highland, IN
"Talk To Chuck"
Lenn - In Indiana & Illinois I would like to see that happen here too. There is so much discrepancy with builders on how they do business versus how we as real estate agents by law have to conduct our business.
Sep 26, 2007 08:30 AM #20
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

John.  You don't have to tell me a thing about NVHomes or Ryan Homes.  I've sodl a half dozen NV Homes.  BTW, Ryan pays a broker fee in Virginia.  I've sold a few of them in VA. 

I absolutely hate to show an NV Home in MD with a Ryan model right next door.  Ugh.

 

Sep 26, 2007 08:49 AM #21
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
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Chuck.  I don't know how it will affect our practice.  Probably not much.  With any luck, buyers will look at the agency disclosure and say "Wait a minute!!, you represent the builder??  I better go get an agent.

Of course, the problem with that statement is that most consumers don't understand the meaning of the word "representation" here.

 

Sep 26, 2007 08:51 AM #22
Rainmaker
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Bryant Tutas
Tutas Towne Realty, Inc and Garden Views Realty, LLC - Winter Garden, FL
Selling Florida one home at a time
Lenn, That's a good law. We need it in Florida. If nothing else it gives us one more layer of protection for the consumer when a license is at stake.
Sep 26, 2007 09:25 AM #23
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
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Bryant.  I hope so.  It might also make a few buyers think twice about working without an agent.  Fact is, once they are in the model without an agent, it's all pretty much over.  You can't usually go back with an agent and expect them to get paid.

 

Sep 26, 2007 09:29 AM #24
Rainmaker
147,171
Kaye Thomas
Real Estate West - Manhattan Beach, CA
e-PRO, Manhattan Beach CA
Lenn- I think you have to be licensed in CA to do anything that involves quoting a price or discussing anything real estate related.. We don't have many new developments in my area but I have sold a few and the buyer registration thing is a big rip-off for buyers... I would love to see it challenged in court.
Sep 26, 2007 12:50 PM #25
Rainer
3,119
Lance Sonka
New Home Marketing - Huffman, TX

Q: When acting as a listing broker or licensed sales agent for a property, and you are approached by an individual without representation interested in purchasing it, do you recommend to the potential buyer that they should seek professional assistance before proceeding with the purchase of your listing?

A: ...

Sep 26, 2007 01:06 PM #26
Rainer
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Jolynne Photography, Creative Wedding Photography, Family Portraits, Bar Mitzvahs
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Lenn and BB:  That's how it is for sure in California...once you walk in without an agent, no agent is going to get involved and get paid. It's been embarrassing as the home loan guy to get a referral from an agent, pre-approved them, and then the agent gets cut out of the deal...but that's the way it frequently happens. Yuck.
Sep 26, 2007 06:57 PM #27
Rainmaker
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Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate
Hi Lenn,  I am sure it is going to take quite a while for everyone concerned to figure out how all the variety of possibilities will be handled.  I sold for three major builders in Northern Virginia during the late 80's and early 90's... so I can only try and imagine how confusing things may be at first... and probably for quite some time.
Sep 26, 2007 07:02 PM #28
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
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Kaye. 

The question is, who would challenge it in court?  Surely, no buyer would front the $Thousands of Dollars of legal fees needed.  No broker would.  Would the state?  Doubtful because this isn't anything new.  It's a matter of disclosure and the problem, as I see it is that the buyers usually don't understand the value of having an agent with them when they just visit a new home builder.  Fact is, the pathetic representation most agents give with new homes, they buyers are right.  But, it's really more complicated than that because their agent may have also have been showing them resales for 3 months.  Then one Sunday afternoon the buyers drop in to a new home model without their agent and the poor agent is out in the cold. 

I believe that if more agents do what I do and really TALK to their buyers, these things wouldn't happen.  Tell the buyers what's at stake if they intend to visit new home without you.  Talk with them about the market, the financing, the options, the lots, the builder's contract, etc., etc.   By the time I finish talking with a buyer about buying to-be-builts, they're absolutely not going to make a move without me.  With the exception, of course, of the occassional buyer couple who just wants to tour by themselves and then calls to tell you what they found and "would you check it out?" 

"Well, no, I won't.  You visited it without me, you can buy it without me.  Get your information from the builder.  You'll be like a lamb going to slaughter". 

I fired a buyer couple in May this year because of that very scenario.  I'm not going to beg for a commission from a builder.  That buyer knew that I had to accompany them to the builder.  They just figured it would all work out. 

 

 

 

 

Sep 26, 2007 11:21 PM #29
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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
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Karen.  I don't really expect major changes.  But, it just might make a few buyers think more carefully when they are sitting across from the builder's rep. 

Joey.  I've seen that happen.  Buyers in this area usually use the builders lender anyway because they need the incentive to pay the monstrous closing costs around here. 

Lance.  Yes.  Yes I do.  And if they insist that they can take care of themselves because, after all, buying a home isn't that hard, I proceed with them as a customer and I clean their clock.  If they ask questions that rise to an agency level, I simply tell them that I can't answer that because I represent the seller.  If they ask stupid questions like how much can we negotiate the price, I tell them that, if they had an agent, their agent would know that I can't answer that quesion.  As far as condition of the property, that's all disclosed and they can have an inspection anyway.  Where the buyer loses is in negotiating price, repairs, etc.

They usually have no respect for REALTORS anyway, which is why they aren't already working with an agent.  After all, how complicated is buying a home? 

 

 

Sep 26, 2007 11:30 PM #30
Rainer
3,119
Lance Sonka
New Home Marketing - Huffman, TX

Lenn,

Thanks for your response. I applaud your honesty.

Sep 27, 2007 04:26 AM #31
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