Protecting Home Buyers

protecting home buyers
Home Buying Steps (infographic from nar.realtor)

Of the handful of new Maryland real estate related laws that go into effect this week, two are highly important for you to know.  These are passed for the purpose of protecting home buyers and sellers. One protects your confidential information, and the other concerns your earnest money deposit on a Maryland home sale.

Protecting home buyers and sellers’ confidentiality is HB1228/SB807, which was effective October 1st.  Besides cleaning up the definition of a brokerage relationship, the bill addresses client confidentiality.  Unless a client consents in writing, Maryland licensed real estate brokers and agents may not disclose confidential information received from or about a client to any other party and/or their representative (including their real estate agent).  The non-disclosure of confidential information protects past and present clients, and now is extended to potential clients as well. 

Confidential information is defined as: a seller/landlord willing to accept less than the listing price; a buyer/tenant willing to pay more than their offer; motivation of a client; the need or urgency to buy, sell, or rent; any facts that led the client to sell, buy, or rent; and also relates to the client’s negotiating strategy.  However, the duty to maintain confidentiality doesn’t apply to the disclosure of material facts about a property (which a home seller is also required to disclose).

Protecting home buyers deposits is effective October 1st. HB222 requires a written agreement between the buyer, seller and the escrow agent holding the earnest money deposit (EMD).  The EMD is described as “consideration” for a seller to accept an offer.  An escrow agent is the entity who accepts and holds the earnest money.  The EMD is credited to the buyer at the time of settlement.  However, if sale does not settle, the disbursement of the EMD can become contentious.  Under certain circumstances, the contract of sale is clear about when the buyer may receive their EMD.  However, real estate is not always black and white, and there are occasions when a dispute arises about whom is entitled to receive the EMD.

It used to be common practice for a real estate broker to accept and hold the EMD.  Real estate brokers are bound by law as to how to handle and care for the EMD.  However, brokers are increasingly reluctant in accepting EMDs for a number of reasons.  Instead, brokers are directing their agents to have title companies to hold these deposits.  But home buyers (and sometimes their agents) don’t realize that a title company is regulated differently than a real estate broker, and the EMD may not be handled as expected.

HB222 is important because it fills the gap for escrow agents who do not already have specific guidelines for handling EMDs. (HB222 doesn’t apply to Maryland real estate brokers and agents, and Maryland registered home builders selling new homes, as they are already regulated).  The bill provides transparency so both the buyer and seller understand the terms for holding the EMD.

The bill requires an escrow agent to enter into a written agreement with the buyer and seller when the escrow agent agrees to hold an EMD for a Maryland home sale. The written agreement must contain the amount of the EMD; the date the EMD was given to the escrow agent; the responsibility of the escrow agent to notify the buyer and seller if the EMD funds are “dishonored” (e.g., bounced check); the conditions under which the escrow agent may release the EMD; and the process to address disputes over the release of the EMD.

Original article is published at https://dankrell.com/blog/2019/10/28/protecting-home-buyers/

By Dan Krell
Copyright© 2019

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Confidential information

confidential information
Keeping your information confidential (infographic from larealtors.org)

A real estate agent, who allegedly represented Paul Manafort’s family, recently asserted his fiduciary privilege to avoid appearing in front of a grand jury.  However, as Politico reported, his efforts were thwarted by a judicial opinion, and subsequently reported to the grand jury.  But can confidential information be disclosed?

A fiduciary is generally described as someone who acts as a custodian of their client’s rights and/or assets.  The fiduciary has a responsibility to act with honesty and integrity, as well as act in their client’s best interest and not exert influence or pressure on their client for their own or others interests.

Both the National Association of Realtors and the Annotated Code of Maryland (COMAR) reference directly and indirectly a real estate agent’s fiduciary obligation and handling confidential information.  The NAR Code of Ethics Standard of Practice 11-2 states that a Realtor (when acting as an agent or subagent) has “the obligations of a fiduciary.”  COMAR states about the brokerage relationship (MD BUSINESS OCCUPATIONS AND PROFESSIONS Code Ann. § 17-534):

Except as otherwise provided by this title or another law, keep confidential all personal and financial information received from the client during the course of the brokerage relationship and any other information that the client requests during the brokerage relationship to be kept confidential, unless (i) the client consents in writing to the disclosure of the information; or (ii) ) the information becomes public from a source other than the licensee.

Of course, all jurisdictions are different, having their own laws and customs that govern the actions of real estate agents.  Manafort’s alleged real estate agent claimed a fiduciary privilege under the DC and VA real estate statutes, which is similar to Maryland’s.  However, in a recently unsealed Memorandum Opinion (www.dcd.uscourts.gov/unsealed-opinions-sealed-cases), Chief Judge Beryl A. Howell of the US District Court for DC believes that real estate agents don’t have an “absolute duty of confidentiality.”  She opined that a real estate agent is not excused from complying with an obligation to respond to a grand jury.  But what about confidential information?

Judge Howell wrote:

The respondents take the position that a court order compelling compliance with federal grand jury subpoena is required to overcome the confidentiality protection afforded to real estate brokerage records under District of Columbia and Virginia law. They rely on identical provisions of District of Columbia and Virginia statutes that require a real estate licensee engaged by a buyer, such as the Clients, to ‘[m]aintain confidentiality of all personal and financial information received from the client during the brokerage relationship and any other information that the client requests during the brokerage relationship be maintained confidential unless otherwise provided by law or the buyer consents in writing to the release of such information.’ D.C. Code § 42-1703(b)(1)(C); Va. Code § 54.1-2132(A)(3) (emphasis added). The government does not dispute that these statutes extend confidential treatment to the subpoenaed information, but argues that ‘the laws do not impose an absolute duty of confidentiality on real estate agents’ or excuse compliance with ‘a legal obligation—enforceable by a federal court—to respond to the grand jury’s request for documents, testimony, or both.’”

A real estate agent’s fiduciary obligation and handling confidential information is not taken lightly.  Thankfully, most real estate agents don’t face a grand jury subpoena.  However, during the course of daily business, a real estate agent does have an obligation (whether by NAR Code of Ethics, their local statute, or both) of keeping their client’s personal and financial information confidential.

Original published at https://dankrell.com/blog/2017/11/04/revealing-confidential-information/

Copyright© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.