By: Jonathan A. Azrael

As we cross the threshold of the year 2000, more and more Maryland real estate brokers and agents are representing buyers who purchase residential real estate. Buyers agency, once the province of a few “maverick” real estate brokers, is now very much in vogue.

Maryland Real Estate Law defines a “Buyer’s Agent” as a licensed real estate broker or agent “who represents a prospective buyer or lessee in the acquisition of real estate.” A buyer’s agent has the statutory duty to assist the buyer in “the evaluation of a property, including the provision of a market analysis of the property.” A buyer’s agent also has a statutory responsibility to assist in the preparation of an offer on a property and to negotiate in the best interests of the buyer.” “Since January 1, 2000, buyer’s agents account for practically all sales of our residential listings,” says Norma J. Marsho, President of Re/Max Columbia, an active Columbia real estate brokerage firm. A few years ago, the number of homes sold through buyer’s brokers was miniscule, Marsho reports. Other real estate professionals confirm the astounding growth of buyer brokerage.

Buyers apparently feel more comfortable being represented by a buyer’s agent, rather than dealing only with the seller’s agent, or through a cooperating subagent of the seller.
Maryland Real Estate Law imposes only limited statutory obligations on a seller’s agent in the agent’s relationship to the buyer. A seller’s agent has a duty to treat the buyer fairly, promptly, present each written offer and counteroffer, respond truthfully to each question, disclose all material facts that are, become, or should be known relating to a property and offer each property without discrimination.

With the increasing popularity of buyer’s brokerage, it is likely that the legal landscape will change, and that heightened duties and responsibilities of buyer’s agents via-a-vis their clients will be defined by judicial decisions.
The major areas where buyer’s agents face increased legal responsibilities likely relate to:

The buyer’s agent’s negligence in responding to specific inquiries from the buyer about the property or the transaction; The buyer’s agent’s failure to negotiate in the best interest of the buyer; and The buyer’s agent’s failure to give proper assistance in the preparation of an offer on the property.

The statutory duty of a buyer’s agent to assist the buyer in the evaluation of the property will be fleshed out by judicial decisions. Clearly, the agent’s duty includes providing the buyer with a market analysis of the property. If a buyer’s agent neglects to give the buyer a market analysis or provides an analysis which is inaccurate or misleading, and the buyer pays too much for the property, a court may hold that the buyer’s agent can be liable for damages. For example, in some of the “flipping” lawsuits recently filed in Baltimore City, lawyers allege that buyers’ real estate agents provided market information which grossly overvalued the properties in questions, and that the buyers relied to their detriment on the agents’ misleading market analysis.

A buyer’s agent also may be liable for failing to properly respond to buyer’s inquiries about land use restrictions. In Lewis v. Long & Foster Real Estate, Inc., a 1991 case, Maryland’s Court of Special Appeals held that a homebuyer advised their agent that they intended to operate a daycare center on the premises, and inquired about any relevant restrictions. The real estate agent made a cursory investigation and informed the buyers that they need only obtain a permit from the government body. After purchasing the home, the buyer obtained the requisite permit and proceeded to operate the daycare facility until the subdivision homeowners association sought a judgment declaring the use of the property to be in violation of the private subdivision restrictions. The Court of Special Appeals held that since an agency relationship existed, the real estate agent and broker owed a tort duty of care where they are made aware of a buyer’s anticipated use of the property. The Court recognized “that specific inquiries by buyers place a burden upon real estate professionals who venture to respond.”

Buyer’s agents who venture beyond their traditional role may find themselves liable for misrepresentation if they undertake to certify lot size, title matters, subdivision regulations, zoning or other issues relating to the property.

Few reported cases have held a buyer’s agent liable for failing to properly assist in negotiating for the purchase of the property. In general, in providing assistance in negotiating the purchase of property, an agent must advise the purchaser of all facts within the agent’s knowledge that are reasonably calculated to influence his principal’s decision.

With regard to the preparation of offers and other contract documents, courts usually will hold a buyer’s agent to the same standard as an attorney. Real estate agents have been held liable for drafting a contract which misdescribed the property and for failing to follow the buyer’s instruction to include a “Satisfactory Inspection” addendum in a form real estate contract.

As the case law develops in the area of “negligent contract preparation,” we may see revisions to the form contracts currently published by the Maryland Association of Realtors as well as several local real estate boards. These form contracts contain clauses relating to financing, home inspections, award of attorney’s fees and other matters which are not “buyer-friendly,” and which in some respects are more favorable to sellers or the brokers themselves than they are to buyers.

Buyer’s agency provides a homebuyer with the comfort of a real estate professional whose sole allegiance is to assist them in very important transactions. Traditional agency principles and the Maryland Real Estate Law impose significant duties on buyers’ agents. Failure to measure up these legal standards can expose a buyer’s agent and their brokers to substantial liability.

Jonathan A. Azrael is a partner with the law firm of Azrael Franz in Baltimore County. He maintains a substantial practice in real estate law and transactions.