The dramatic changes last Saturday in contracting for residential real estate across the U.S. do not alter the requirements that those contracts of sale include disclosures, notices, and other provisions required by law.

Anyone who thinks this is simply about reducing commissions paid to Realtors does not understand.

The quick backstory 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, the largest trade group in the country.) The defendants settled the $1.8 Billion jury verdict which resolution included an overhaul in the way real estate agent commissions are paid after August 17, 2024.

In residential real estate transactions, agents are typically paid a commission between 5% and 6% of the home’s sale price. That commission has usually been paid by the seller. And prior to August 17, that commission was then split equally between the seller’s agent and the purchase’s agent. But no more.

Post August 17, in the current Internet age meets our ‘do it yourself’ society, many residential sellers and purchases alike are wondering if they need to pay a real estate agent or, maybe more accurately if they need an agent at all? (Note, 6% of $500,000 is a $30,000 commission for the average house that is on the market for 22 days before a contract is 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. Identifying mandatory contract provisions for a residential contract of sale is not hard; it is not like trigonometry but more like long division.

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 make entering into such a contract a misdemeanor.

Again, requirements vary from place to place but Baltimore County, Maryland is a great example to consider, both because it has more contract requirements than any place we know of, and the failure to include those required provisions in Baltimore County can be a misdemeanor and upon conviction is subject to a fine not exceeding $1,000 or imprisonment not exceeding 30 days or both; yes, this can actually be criminal.

It is a long time since the first Maryland lawmaking assembly of freemen enacted the first laws for the conveyance of land on February 26th, 1634.

Today much of what government mandates 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, there is a relatively new requirement that there be included a “notice of zones of dewatering influence” using the specific language required by state law that must be in bold and underlined. MD Real Property Art., Sec 10-711.

Third, there is a mandate that the seller disclose if a house has been relocated from the 100 year floodplain. Baltimore County Code Sec 32-8-208.

Fourth, in the event the property is served by a private water supply (.. a well) there are certain disclosures including mandatory testing requirements in county law that include prescribed forms for “waiver of yield requirement for improved property” to “waiver of chemical quality prior to conveyance” as may be appropriate. MD Real Property Art., Sec. 10-711, and Baltimore County Code Sec 32-2-104 and Sec 32-2-102.

Fifth, if the property is served by a private sewerage facility (.. a septic system) specific disclosures are required, including if there are privately imposed fees for that septic or a water system all of that must also be separately disclosed by state law and County code. Baltimore County Code Sec 20-1-112.

Sixth, the County requires a panhandle lot disclosure to be included in each contract whether or not the residence is located on a panhandle driveway. Baltimore County Code Sec 35-3-303(2)(ii).

Seventh, a notice that the property may be subject to a development plan is required, which notice includes information on where a development plan may be viewed. Baltimore County Code Sec 35-3-301(b)(2).

Eighth, similarly there is a requirement that a contract contain a specified notice in bold that the County has a Master Plan (.. a land use plan) that may be viewed in the County office. Baltimore County Code Sec 35-3-301(b)(i).

Ninth, many places in the country require a “right to farm” disclosure and Baltimore County has its own required text for land within five hundred feet of an R.C. 4 zoning District. Baltimore County Code Sec 35-3-303(b).

Tenth, whether or not a property is designated as or proposed to be historic must be disclosed. Baltimore County Code Sec. 32-7-107.

Eleventh, 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. If the condominium 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.

Twelve, if the property is rented, not only does the County have a rental registration program, but such must be disclosed in the contract. Baltimore County Code Sec 35-6-109.

Thirteenth, there is a state law requirement for disclosure that the property may be located in the “critical area” of the Chesapeake and Atlantic Coastal Bays. MD Real Property Article Sec 14-117(d).

Fourteenth, 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).

Fifteenth, 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

Sixteenth, 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 a latent environmental defect. 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 themselves and again as described above, this may actually be a misdemeanor in Baltimore County if you get this wrong.

In preparing this blog post, we searched online available contract of sale forms for residential contracts for a property in Baltimore County, 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 Baltimore 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 with your residential contract of sale in Maryland.