2.3 Delaware Licensee Duties and Standards of Conduct

Disclosure of Adverse Material Facts

Under 24 Del. C. § 2936(b) a licensee must disclose adverse material facts about the physical condition of the property actually known to the licensee — owed to every party, client or customer. This statutory duty runs alongside the seller's own disclosure obligation under Delaware's residential real property disclosure law.

An adverse material fact is a condition that:

• Significantly affects the value of the property
• Significantly affects a reasonable party's decision to buy or sell
• Is not readily observable to the consumer

The duty is keyed to actual knowledge — the statutory agent is not required to inspect for hidden defects, but may not conceal what is known.

Offer Presentation

A licensee must present all written offers promptly to the represented party — even after a property is under contract — unless the client has directed otherwise in writing. The only way to skip presentation of an offer is a specific, documented written instruction from the client.

Caution: Verbal instructions to stop presenting offers are not enough. Always document client direction in writing, or you risk a Commission complaint for failing to present an offer.

Escrow and Deposit Handling

Delaware escrow rules carry the chapter's most-tested numbers. The broker must deposit funds into the broker's escrow account within 72 hours of all parties signing the written agreement, excluding weekends and federal holidays (or by a later date stated in the contract).

Escrow may be held by the broker, a title/settlement company, an attorney, or another holder agreed by the parties. Interest-bearing accounts require written agreement from all parties specifying who receives the interest, plus proper accounting.

Worked example: All parties sign on a Friday afternoon. The 72-hour clock excludes Saturday and Sunday, so the deadline to deposit runs through the following business days — do not count the weekend.

Recordkeeping

The Delaware Real Estate Commission requires brokers to keep complete records of all transactions and escrow accounts for at least 3 years, available at the broker's office (paper or electronic). Records must clearly show the amount of the broker's personal funds in escrow at all times (which should be only what is needed to keep the account open).

Prohibited Conduct and Advertising

Grounds for discipline include misrepresentation, fraud, commingling, undisclosed self-dealing, fair-housing discrimination, unlicensed activity, and incompetence.

All advertising must be in the broker's name as registered with the Commission. Advertising in the salesperson's name only is prohibited, as are misleading claims, false statements about terms, and discriminatory language.

Putting the Conduct Rules Together

Escrow Math You May Be Tested On

The 72-hour escrow deposit rule is the chapter's signature calculation. The clock starts when the last party signs the written agreement and excludes weekends and federal holidays. If all parties sign Thursday morning, you count Thursday, Friday, and the next business day after the weekend — Saturday and Sunday do not count toward the 72 hours. If the contract names a later deposit date, that controls, but the licensee can never deposit slower than the contract allows and then claim the 72-hour floor.

Commingling vs. Conversion

• Commingling is mixing escrow funds with the broker's personal or operating funds — prohibited even if no money is lost.
• Conversion is using escrow money for the broker's own purposes — a more serious violation and a crime.
• The broker may keep only the minimal personal funds needed to keep the trust account open; records must show that amount at all times.

Disciplinary Exposure

A single fact pattern can hide multiple violations. Consider a licensee who advertises a home in their own name only, deposits the buyer's earnest money into the firm's operating account, and fails to present a backup offer. That is three separate grounds for Commission discipline: improper advertising, commingling, and breach of the offer-presentation duty.

Conduct Checklist

1. Disclose known adverse material facts to every party.
2. Present all written offers promptly unless directed otherwise in writing.
3. Deposit escrow within 72 hours (excluding weekends/federal holidays).
4. Never commingle; keep clean escrow records.
5. Retain transaction and escrow records 3 years.
6. Advertise in the broker's registered name, accurately, without discriminatory or misleading language.

Exam Tip: When a question lists several actions, scan for the number anchors first — 72 hours and 3 years — then check advertising name and offer-presentation duties.