Frequently Asked Questions

Legal Hotline FAQ

A blog of the most frequently asked questions to the Maryland REALTORS Legal Hotline.

Cindy Sellers
Cindy Sellers
Cindy Sellers's Blog

May a broker pay a referral fee to a builder for seller and buyer referrals?

It depends on whether the builder is a real estate broker.  Section 17-604 of the Brokers Act provides that a licensee may not pay compensation in any form for the provision of real estate brokerage services to an individual who is not licensed. Providing referrals is considered to be providing real estate brokerage services, and to do so (and to be compensated for doing so), one must have an active license.
Obviously, if the builder is a broker, referral fees are allowed. In our opinion, a referral fee paid from one broker to another is not required to be shown on the Closing Disclosure and Settlement Statement. Referral arrangements between real estate agents and brokers are exempt from RESPA.  Additionally, Article 6 of the REALTOR Code of Ethics says, “When recommending real estate products or services (e.g., home owner’s insurance, warranty programs, mortgage financing, title insurance, etc.), REALTORS® shall disclose to the client or customer to whom the recommendation is made any financial benefits or fees, other than real estate referral fees, the REALTOR® or REALTOR®’s firm may receive as a direct result of such recommendation.” Finally, we are unaware of any Maryland law or regulation that requires disclosure of broker to broker referral fees to a client or consumer.

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