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Real Estate Agents: Think Twice Before Referring a Client to a Service Provider

September 23, 2014

Real Estate Agents: Think Twice Before Referring a Client to a Service Provider

The Real Estate Commission has adopted a new requirement in its Code of Ethics that will make the prudent agent wary of freely providing referrals to clients.  Under the new rule, personal experience with a service provider will no longer serve as adequate vetting of a service provider if the agent recommends that service provider to a client. Rather, the new rule imposes an affirmative duty on the agent to research and verify that service provider’s licensure status before making a referral.  The new rule applies to referrals to any third party service provider, including, but not limited to, a mortgage lender or mortgage broker, a real estate appraiser, a home inspector, a home improvement contractor, a plumber, an electrician, or a heating/ventilation/air conditioning/cooling (HVAC) contractor. 

Specifically, in making any referral to a client, the agent must: 

  1. Verify that the service provider’s license in the State of Maryland is current;
  2. Inform the client of the date on which the agent last verified the service provider’s licensure status; AND
  3. Provide the client with the electronic link to the service provider’s licensing record information. 

Since any violation of this rule is grounds for discipline by the Commission, agents should exercise caution before making a referral.  Although an agent may seem like the most logical source of referral information for a  layperson client, and although the agent may be providing a referral based on years of experience with a particular service provider, that agent’s good intentions will not excuse him or her from compliance with the explicit verification and disclosure requirements of the new rule. 

The new rule is codified at Section 09.11.01.01(J) in the Code of Maryland Regulations, and was effective August 18, 2014.

Contact

Matthew D. Alegi
301-230-6574

David M. Kochanski
301-230-5211

Marc D. Lipman
301-231-0953

Sarah D. Cline
301-945-9245