The huge real estate industry wide changes that were effective August 17, 2024, literally rewriting the process of contracting for the sale and purchase of residential real estate across the U.S., do not change the legal requirements that those contracts include disclosures, notices, and other geographically specific provisions.

The explanation for the changes in how houses will be bought and sold is that in 2023, a federal court found that the National Association of Realtors together with several large real estate brokerage firms, conspired to inflate Realtors’ commissions. (Note, a Realtor is a licensed real estate agent who belongs to the National Association of Realtors, arguably the largest trade group in the country.) The parties settled after a $1.8 Billion jury verdict which resolution included an overhaul in how residential real estate is advertised for sale on Multiple Listing Services, the way real estate agent commissions are now paid, etc.

Post August 17, when more than 50% of buyers find the home they purchase online, many residential sellers and purchases alike are wondering if they need to pay a real estate commission or, maybe more accurately if they need a real agent at all? (Note, 6% of $500,000 is a $30,000 commission for a real estate agent  for the average house in Howard County that last quarter sold for more than the asking price and was only on the market for 10 days before a contract was signed.) This is much more than surfing Redfin (.. which was in the past a form of escapism for many and a noncontact sport for others) when today untold numbers of houses for sale can be found on Tik Tok?

When drafting a real estate contract there are federal, state, and local law requirements, including environmental disclosures and disclaimers that must be included. Some suggest the sale of residential real estate is among the most highly regulated industries. However, identifying mandatory contract provisions for a residential contract of sale is not hard; it is not like trigonometry but more like long division (.. you just have to show your work).

The failure to include required provisions can, depending upon the jurisdiction, make the contract void or voidable by one party or the other, and in some instances even make entering into such a contract a misdemeanor.

Again, requirements vary from place to place. Howard County, Maryland is a great example to consider, both because it was recently ranked as the wealthiest locality in the State and sixth wealthiest county in the U.S. based on median household income.

It is a long time since 1652, when the Susquehannock tribes signed a peace treaty with the Maryland governor, giving up their provenance over the territory, in what was arguably the first real estate conveyance in what is now Howard County.

Today many of the government mandates that must be contained in a contract of sale are environmental matters. First, there are federal and state lead based paint disclosures and information requirements that must be given for structures erected before 1976. 40 CFR Part 745 (Section 1018 of Title X); MD Environmental Article, Sec 6-801.

Second, Howard County Code Section 17.502. provides (2) A prospective buyer shall indicate by signing an addendum to the contract or a separate section of the contract printed in boldface type, that: (i) The seller has notified the buyer of the buyer’s right to examine the current general plan maps and current generalized zoning map; and (ii) The buyer acknowledges such notification by the seller and understands that in order to become fully informed of current and future roadway improvements and land use plans, the buyer should consult the Howard County Department of Planning and Zoning, 3430 Courthouse Drive, Ellicott City, Maryland 21043.

Third, in the event the property is subject to the imposition of mandatory fees as defined by the Maryland Homeowners Association Act or is a condominium unit, there are state law requirements for matters that must be included in a contract and documents exchanged, and this is a big deal in Howard County where one of those association’s the Columbia Association is home to approximately 100,000 people. If that community association is within a building that is 35,000 square feet or more there are regulations proposed that mandate a specific greenhouse gas emissions disclosure that must be accompanied by emission data.

Fourth, a purchaser must be “advised that the property may be located near a military installation that conducts flight operations, munitions testing, or military operations that may result in high noise levels.” MD Real Property Article, Sec 14-117(k).

Fifth, a contract must contain “Section 14–104 of the Real Property Article of the Annotated Code of Maryland provides that, unless otherwise negotiated in the contract or provided by State or local law, the cost of any recordation tax or any State or local transfer tax shall be shared equally between the buyer and seller.” MD Real Property Art., Sec 10-711

Sixth, mandatory disclosures as to the condition of the residential property, including a host of specific residential matters that need to be described (e.g., are there any hazardous or regulated materials (including, but not limited to, licensed landfills, asbestos, radon gas, lead-based paint, underground storage tanks, or other contamination) on the property?), and while state law allows a seller to disclaim those matters rather than disclose them it is a violation of state law to not disclose latent defects including latent environmental defects. That is, it is not possible to sell residential real property in Maryland truly “as is.” MD Real Property Article, Sec 10-702.

There are a host of other matters beyond the scope of government mandated disclosures discussed here that should be properly considered in a residential real estate contract of sale in Baltimore County (.. including if a real estate agent is involved) but it is of great import that these matters be included in contracts written by a seller or purchase themself without the assistance of a real estate agent.

There is no get out of jail free card because a party writes the contract themself. Of import Section 17.504 of the Howard County Code provides that the failure of a seller to provide these required notices “would constitute a violation of Title 24, ‘Civil Penalties’ of the Howard County Code and may result in a Class B offense under Title 24 against the Seller.”

In preparing this blog post, we searched online for contract of sale forms for a residential contract for a property in Howard County, and not one on the first five pages of a Google search appeared to be accurate and complete.

Mandatory requirements for entering into a residential contract of sale may cause some parties to use a real estate agent even post August 17. Others may determine to have a contract written by an attorney at law. However, it appears more likely than not that the majority of home sellers will now list their house on any one of a number of online services and that purchases will present contracts that they have prepared or had prepared by an attorney, sidestepping the use of real estate agents.

This post may be a good checklist of matters that should be considered by a seller or purchaser of residential real estate in Howard County in advance of consulting with an attorney about the form of contract.

Make no mistake, the selling of residential real estate is radically altered for the better. We can assist you in saving time, inconvenience, and expense with your residential contract of sale and the resultant transaction across Maryland.