Key Takeaways
- Commissions are negotiable between the parties-there are no fixed rates in Maryland
- Salespersons can only receive compensation through their supervising broker
- Commission disputes do not prevent closings; trust account disputes may require interpleader
- Brokers can share commissions with out-of-state licensees properly licensed in their state
- Referral fees to unlicensed persons are prohibited
Commission and Compensation in Maryland
Understanding how real estate commissions work in Maryland is essential for license law compliance.
Commission Basics
Negotiability
All real estate commissions are negotiable. There is no:
- Standard commission rate
- Minimum commission
- Maximum commission
- Rate set by MREC or any association
Antitrust Warning: Discussing or agreeing on commission rates with competing brokers is illegal price-fixing. Each brokerage sets its own rates independently.
When Commission is Earned
A broker typically earns a commission when they produce a buyer who is:
- Ready - Prepared to enter into a contract
- Willing - Wants to purchase on the terms offered
- Able - Has financial capacity to complete the purchase
However, commission terms are defined by the listing agreement or buyer representation agreement.
Payment of Compensation
Flow of Commission
Commissions must flow through proper channels:
| From | To | Permitted? |
|---|---|---|
| Client | Supervising Broker | Yes |
| Broker | Salesperson | Yes |
| Client | Salesperson directly | NO |
| Cooperating Broker | Salesperson directly | NO |
The Cardinal Rule
Salespersons can ONLY receive compensation from their supervising broker.
A salesperson cannot:
- Accept payment directly from a client
- Accept payment from another broker
- Accept payment from another brokerage's salesperson
- Receive commission on a transaction after leaving the broker (without broker consent)
Commission Sharing and Referrals
Sharing with Cooperating Brokers
Brokers may share commissions with:
- Other Maryland licensed brokers
- Out-of-state brokers licensed in their state
- Other licensees within the same brokerage
Referral Fees
Permitted referrals:
- Broker to broker (licensed parties)
- For referring clients who complete transactions
- Must be disclosed to all parties
Prohibited referrals:
- Paying unlicensed persons for referrals
- Paying for leads from unlicensed sources
- Kickbacks or undisclosed compensation
- Paying for referrals to other service providers (without disclosure)
Commission Disputes
Between Brokers
If two brokers dispute who earned a commission:
- The dispute does NOT delay closing
- Brokers resolve the dispute separately
- May require arbitration or litigation
Trust Account Disputes
If buyer and seller dispute earnest money:
- Broker holds funds until dispute is resolved
- May file interpleader action to deposit funds with the court
- Court then determines rightful recipient
Important Commission Rules
| Rule | Explanation |
|---|---|
| Negotiable rates | No fixed or standard rates |
| Written agreements | Commission should be in written brokerage agreement |
| Disclosure of compensation | May be required in certain transactions |
| No sharing with unlicensed | Cannot pay referral fees to unlicensed persons |
| Broker payment only | Salesperson receives from broker only |
A Maryland real estate salesperson may receive commission payment from:
Which statement about real estate commissions in Maryland is TRUE?
When buyers and sellers have a dispute over earnest money, the holding broker should: