Even under a disclaimer, latent (hidden) defects must always be disclosed.
Before you read
Test yourself first: 5 questions
Question 1 of 5
Maryland requires licensees to provide a specific disclosure that explains the different ways a licensee may represent parties in a transaction. This disclosure is titled:
Answer: B. Maryland law requires licensees to provide the 'Understanding Whom Real Estate Agents Represent' disclosure, which explains agency relationships (seller's agent, buyer's agent, dual agent, etc.) so consumers understand who is representing whom. It is an agency-disclosure document, distinct from defect or environmental disclosures.
Question 2 of 5
A Maryland salesperson is found to have commingled a client's earnest money deposit with personal funds in a private checking account. Which entity has the authority to investigate this conduct and impose disciplinary sanctions on the licensee?
Answer: A. The Maryland Real Estate Commission (MREC) regulates licensees and is the body empowered to investigate complaints and impose disciplinary actions such as reprimand, suspension, or revocation. Commingling client trust funds with personal funds is a license-law violation. Private trade associations cannot suspend or revoke a state license.
Question 3 of 5
A Maryland salesperson personally receives an earnest money deposit at a listing presentation. Under Maryland Real Estate Commission rules, what must the salesperson do with that deposit?
Answer: B. In Maryland, all trust money belongs to the broker's responsibility. A salesperson who receives a deposit must promptly turn it over to the broker, who is obligated to place it in the brokerage's trust/escrow account. The salesperson may never hold client funds personally.
Question 4 of 5
A Maryland broker deposits earnest money checks into the firm's general operating account because the trust account was 'temporarily low.' This practice is best described as:
Answer: A. Mixing client trust funds with the broker's own business or personal funds is commingling, which Maryland prohibits. Trust money must be kept separate from the broker's operating funds at all times, regardless of intent to restore it.
Question 5 of 5
In Maryland, what is the key distinction between commingling and conversion of trust funds?
Answer: B. Commingling is improperly mixing client/trust funds with the broker's own funds. Conversion is the more serious act of actually using, spending, or appropriating those trust funds for the broker's own benefit. Both are violations, but conversion is the misappropriation of the money.
Keep the streak going with more questions like these, each with a full rationale.
Must-know rules
- Sellers use the Residential Property Disclosure OR Disclaimer statement.
- Even under a disclaimer, latent (hidden) defects must always be disclosed.
- Client/deposit money must be held in the broker's escrow/trust account.
- Commingling brokerage funds with trust funds is prohibited.
- Maryland Real Estate Guaranty Fund can reimburse consumers harmed by licensee fraud.
- Pre-licensing education is 60 hours for a salesperson.
- Renew on schedule and complete required MREC continuing education (CE) hours.
Maryland Disclosures, Trust Funds & Key Items Cheat Sheet: FAQs
Is Maryland Disclosures, Trust Funds & Key Items Cheat Sheet on the real estate exam?
Yes. State License Law is a scored domain on the Maryland real estate licensing exam, and this topic appears in the state license-law portion.
Is this cheat sheet free?
Yes — every page on Cinna RE's resource library is free to read, print and share. The app adds practice questions, mock exams and a readiness score.
Does Maryland test this differently?
Maryland applies its own license law on top of the national portion. This page covers the Maryland rules specifically, which is what the state section of your exam tests.
