2.4 Commission and Compensation Rules

Commissions Are Negotiable

In Maryland, all real estate commissions are negotiable. There is no:

• Standard or "customary" rate
• Minimum or maximum rate
• Rate set by MREC, a board of REALTORS, or an MLS

Antitrust warning: Competing brokers who discuss, suggest, or agree on commission rates commit illegal price-fixing under federal and Maryland antitrust law. Each brokerage must set its rates independently. After the 2024 NAR settlement, written buyer-broker agreements stating compensation up front are now standard practice—reinforcing that fees are negotiated, not fixed.

When a Commission Is Earned

Unless the agreement says otherwise, a broker classically earns a commission by producing a buyer who is Ready, Willing, and Able:

In practice the listing agreement or buyer-broker agreement controls exactly when and how the fee is earned and paid.

The Cardinal Payment Rule

A salesperson or associate broker may be compensated ONLY by their own supervising broker. This is the most-tested compensation fact in the chapter.

A salesperson therefore may not accept a check directly from a buyer, seller, or another brokerage, and generally may not collect on a closed deal after leaving the broker without the broker's agreement.

Sharing Fees and Referrals

A Maryland broker may share a commission with:

• Another Maryland-licensed broker
• An out-of-state broker properly licensed in their own state, under an out-of-state cooperative agreement filed with MREC (the cooperating broker stays in their home state and works through the Maryland broker)
• Other licensees within the same brokerage

Referral fees are permitted broker-to-broker for sending a client who completes a transaction, and should be disclosed. They are PROHIBITED when paid to an unlicensed person—you cannot pay a friend, a lead-generation site lacking licensure, or a past customer a fee for steering business. Undisclosed kickbacks are likewise barred (and RESPA bans kickbacks for settlement-service referrals on federally related mortgage loans).

Commission and Deposit Disputes

Broker vs. broker

A dispute over which broker earned the fee does not delay closing. The transaction proceeds; the brokers resolve their claim separately through negotiation, arbitration (often through a REALTOR board), or litigation.

Earnest-money disputes

When the buyer and seller disagree over who gets the deposit, the holding broker:

1. Keeps the funds in the trust/escrow account—does not pick a side or release to either party.
2. May file an interpleader action, depositing the disputed funds with the court so a judge decides the rightful recipient.
3. Must never commingle the deposit with brokerage operating funds or convert it.

Trap: A broker who simply hands disputed earnest money to the seller (or returns it to the buyer) to "keep the peace" violates trust-account rules. Hold, then interplead.

Trust-Account and Deposit Rules

Maryland requires brokers to maintain client funds—earnest-money deposits, rents, security deposits—in a separate trust/escrow account, never commingled with the brokerage's operating money and never converted to personal use. Key compliance points the exam tests:

• Deposits must be placed in trust promptly per MREC rules and the contract.
• The broker keeps records reconciling the account; MREC may audit.
• A broker who commingles or converts trust funds faces license discipline and possible Guaranty Fund claims.
• On a dispute, funds stay put until the parties agree in writing or a court (via interpleader) decides.

Maryland Real Estate Guaranty Fund

Maryland operates a Guaranty Fund that can reimburse consumers who suffer actual monetary loss from a licensee's fraud, misrepresentation, or conversion of trust money. A claimant generally must obtain a court judgment and pursue collection first; recovery from the Fund is capped per claim and the licensee's license is typically suspended until repayment. This protects the public when a broker mishandles deposits.

Worked Compensation Scenario

Salesperson Tara closes a sale cooperatively: her broker is the listing side; another firm brought the buyer. The seller pays the listing broker, who splits with the cooperating broker; each broker then pays its own salesperson. If the cooperating broker tried to write Tara a check directly, that would be an illegal payment—Tara may be paid only by her supervising broker. When Tara later moves to a new firm, she cannot collect on this already-closed file without her former broker's agreement.

Compensation Traps

Bottom line: Rates are negotiable, salespersons are paid only by their own broker, fees are shared only with licensees, and disputed or client funds stay safely in trust—mishandling them invites discipline and Guaranty Fund liability.