Maryland-Real-Estate-Salesperson Questions and Answers

The metes and bounds system is the oldest method of land description used in the United States and is based on physical landmarks, measurements, and compass directions.

It begins at a defined point of beginning (POB) and traces the boundaries using distances (metes) and directions or angles (bounds), returning to the starting point.

In contrast:

Lot and block (option C) refers to recorded plats.

Rectangular survey (option D) uses township and range.

Street addresses (option A) are not legal descriptions.Maryland still recognizes metes and bounds for rural or irregular parcels.

The course states that an exclusive right-to-sell listing is a brokerage employment agreement between the seller and the listing brokerage (through the authorized broker), not with the buyer. The listing contract authorizes the brokerage to market the property and earn compensation upon a sale during the listing term, regardless of who procures the buyer. Therefore, the parties are the seller (Chuck) and the listing brokerage (Nevin’s brokerage).

In subdivision and zoning review, density is evaluated using physical and regulatory site controls—minimum lot size, setbacks, yard requirements, lot coverage, height limits, open space ratios, and boundaries—to determine how many dwelling units may be placed per acre and how they’re arranged. While property values and federal approvals can be relevant to other processes, density determinations rest primarily on local zoning metrics such as setbacks and boundaries.

Under “Leases and Property Management,” the course explains that a net lease requires the tenant to pay base rent plus some or all of the operating expenses, such as property taxes, insurance, and maintenance (often abbreviated as T, I, M). Variations include single-net (N), double-net (NN), and triple-net (NNN) leases.

A gross lease has the landlord paying most operating expenses, with the tenant paying a single rent figure. A percentage lease bases part of rent on the tenant’s gross sales (common in retail). A sublease is a transfer arrangement, not a lease type that determines expense responsibility.

References (Course Outline/Study Topics): Maryland 60-Hour Principles and Practices of Real Estate — “Leases and Property Management” (Gross vs. net vs. percentage leases; expense allocations).

The cost approach to appraisal is based on the principle of substitution, which assumes that a buyer will not pay more for a property than it would cost to purchase a similar site and construct a comparable building with equal utility.

The process involves:

Estimating the value of the land as if vacant,

Estimating the current cost to reproduce or replace the improvements,

Subtracting depreciation (physical, functional, or external), and

Adding the land value to the depreciated improvement cost.Thus, the cost approach measures the cost to acquire the land and construct a reproduction or replacement of the improvements—making option A correct.

Informed consent is a legal requirement under Maryland Agency Law when a brokerage represents both a buyer and a seller in the same real estate transaction (dual agency).

In this arrangement, the broker acts as the dual agent, while separate intra-company agents may represent each party.

The client must receive full disclosure of the potential conflicts of interest and consent in writing before dual agency can occur.

Without informed, written consent, dual agency is prohibited under Maryland Real Estate Commission (MREC) regulations.

In a gross lease, the landlord/lessor pays the property’s operating expenses—commonly including real estate taxes, property insurance, and maintenance—while the tenant pays a fixed rent. By contrast, in net and especially triple-net (NNN) leases, the tenant bears some or all of these operating costs (with NNN typically meaning taxes, insurance, and maintenance are all tenant-paid). A percentage lease bases rent (in whole or part) on the tenant’s gross sales and does not inherently shift taxes/insurance/maintenance to the landlord.

In a seller-agency relationship, the agent owes the client (seller) fiduciary duties, which include loyalty, obedience (lawful instructions), disclosure, confidentiality, accounting, and reasonable care. Practical responsibilities include advising the seller on pricing and marketing strategy, actively marketing the property, presenting offers, and negotiating in the seller’s best interests. Duties owed to buyers (customers) are limited to honesty and disclosure of material facts, not advocacy. Therefore, “Market and sell the property” reflects the seller’s agent’s core duty; negotiating for the buyer or representing the buyer would conflict with loyalty to the seller unless properly disclosed and permitted as dual agency under Maryland law.

Lenders compute DTI ratios using the borrower’s gross (pre-tax) monthly income.

Housing DTI (front-end) = monthly housing costs ÷ gross monthly income.

The Fair Housing Act of 1968 (Title VIII of the Civil Rights Act) prohibits discrimination in housing-related transactions and targets discriminatory practices including blockbusting (inducing sales by suggesting the entry of protected classes), steering (directing clients to or from areas based on protected characteristics), and redlining (denying or varying terms for loans or insurance based on neighborhood demographics).

Marital status, sexual orientation, and source of income are not federal protected classes in the 1968 Act’s original text; however, Maryland law provides broader protections at the state level.

References (Maryland Pre-Licensing Core Content):

Maryland 60-Hour Course: “Fair Housing and Ethics” (federal protected classes; prohibited practices—blockbusting, steering, redlining).

Federal Fair Housing Act (Title VIII) concepts as taught in the Maryland curriculum; Maryland Human Relations Law adds state protections.

When personal property (chattel) is physically attached to real property in such a way that it becomes part of the real estate, it becomes a fixture. Fixtures transfer with the property upon sale unless specifically excluded in the contract. The determination depends on attachment, adaptation, and intent. Maryland’s course addresses fixtures under “Real Property and the Law,” emphasizing how they affect ownership and conveyance.

Under sub-agency, a cooperating broker or licensee assists the listing broker in selling the property and represents the seller as a sub-agent of the listing broker.

A key drawback is that the listing broker is legally responsible for the sub-agent’s actions because the sub-agent owes fiduciary duties to the same principal (the seller).

Any misrepresentation, negligence, or violation by the sub-agent can expose the listing broker to disciplinary action or civil liability.

This is why many Maryland brokers now prefer buyer agency over sub-agency.

Reference (Maryland Source):

– Maryland 60-Hour Principles and Practices Course, Agency Relationships and Sub-Agency section.

– Business Occupations and Professions Article §17-534.

A percentage lease (common in retail) typically combines a lower base rent with an additional rent component based on a percentage of gross sales above a breakpoint. Tenants accept the percentage-of-sales feature in exchange for reduced fixed/base rent, aligning occupancy cost with sales performance.

In Maryland, when a broker or brokerage firm represents both the buyer and the seller in the same transaction, dual agency may occur only with the informed written consent of both parties.

This consent must be initially obtained when the parties agree to representation and then reaffirmed in writing before either party signs the sales contract.

This ensures both understand the limitations on confidentiality and loyalty that dual agency imposes.

Reference (Maryland Source):

– Maryland 60-Hour Principles and Practices Course, Maryland Agency Law section.

– Business Occupations and Professions Article §17-534.

– COMAR 09.11.07.07 – Consent to Dual Agency.

A listing agreement is a legally binding contract between a seller and a licensed real estate broker that establishes the broker’s authority to market the property and represent the seller’s interests in finding a ready, willing, and able buyer.

It outlines the terms of representation, including price, commission, duration, and the duties of both parties.

The agreement does not guarantee a sale; rather, it ensures mutual understanding of responsibilities and compensation should a sale occur.

This principle is covered in the Listing Agreements and Buyer Representation module.

Reference (Maryland Source):

– Maryland 60-Hour Principles and Practices Course, Listing Agreements and Brokerage Contracts section.

– Business Occupations and Professions Article §17-534.

The escrow agent (often the broker, title company, or attorney) is the fiduciary who receives and holds trust money in a regulated escrow account until contract terms are fulfilled. In Maryland, the broker is responsible for maintaining escrow records and depositing all trust money promptly in accordance with COMAR 09.11.02.19. “Escrow master” and “mortgage agent” are not legal titles under Maryland law, and “special agent” refers to the agency relationship, not handling of funds.

An owner’s (buyer’s) title insurance policy protects the buyer against covered title defects (e.g., undisclosed liens, errors, or prior claims) that surface after closing, and can reimburse for covered losses up to policy limits. Homeowners insurance covers casualty risks, not title defects. Lien proceeds and a special deed (e.g., special warranty) do not provide post-closing insurance coverage.

For pre-1978 residential properties, federal law (Title X) requires disclosure of any known lead-based paint or hazards, provision of the EPA pamphlet, and a 10-day inspection opportunity (unless waived). Licensees must ensure required disclosure forms are completed and disclose known material facts, but they must not state lead exists if they do not actually know. Licensees are not responsible for abatement and must never assist in concealing hazards.

Foreclosure is the legal process by which a lender exercises its right to force the sale of mortgaged property when the borrower defaults on the note or deed of trust.

In Maryland—a judicial foreclosure state—the lender must file a court action before selling the property.

Proceeds from the sale are used to satisfy the debt, accrued interest, and foreclosure costs.

This definition is covered in the Financing module under Mortgage Default and Foreclosure Remedies.

Reference (Maryland Source):

– Maryland 60-Hour Principles and Practices Course, Financing and Foreclosure Procedures section.

– Maryland Real Property Article §7-105 et seq.

Severance is the act of detaching an item that was part of the realty, thereby converting it into personal property (e.g., removing a built-in fixture). Annexation is the opposite—attaching personal property so it becomes real property (a fixture). Emblements are annual crops treated as personal property by definition, not by a transformation act. A sale does not change the classification of items; it only transfers whatever is included (real or personal) as specified.

In Maryland, a licensee owes clients fiduciary duties that include reasonable skill and care, loyalty, obedience to lawful instructions, disclosure, confidentiality, accounting, and prompt presentation of all written offers. Failing to present an offer promptly breaches the duty of reasonable care and the professional standard of practice and is treated as negligence (a failure to exercise the care a reasonably prudent licensee would exercise under similar circumstances). This is distinct from:

Fraud (intentional deception),

Misrepresentation (false statement or omission of material fact),

Puffing (non-factual opinion or sales talk).

Because the buyer’s financial harm flowed from the licensee’s carelessness (delay), the appropriate theory is negligence.

References (Maryland Sources / Pre-Licensing Core Content):

Maryland Business Occupations and Professions Article, Title 17 (Real Estate Brokers Act) — duties to clients; grounds for discipline for incompetence or negligence.

COMAR 09.11.02 (MREC Code of Ethics) — obligation to promptly present all written offers and perform with reasonable skill and care.

Maryland 60-Hour Pre-Licensing Course: “Real Estate Brokerage and the Law of Agency” (fiduciary duties; standards of care; prompt presentation of offers).

The Statute of Frauds requires that certain contracts—including those for the sale or transfer of real property—be in writing and include:

The names of the parties,

Identification of the property, and

The essential terms and conditions (such as price and contingencies).This ensures the agreement is legally enforceable in court.

The Civil Rights Act of 1866 was the first federal law to address discrimination in housing and property rights. It declares that all U.S. citizens shall have the same rights as white citizens to inherit, purchase, lease, sell, hold, and convey real and personal property, regardless of race or color.

Unlike later fair housing laws, this Act includes no exemptions—it applies to all property transactions, public or private.

This law is a foundation of modern fair housing legislation, and its absolute prohibition on racial discrimination still applies today.

Reference (Maryland Source):

– Maryland 60-Hour Principles and Practices Course, Fair Housing and Ethics section.

– Civil Rights Act of 1866, 42 U.S.C. §1982.

HUD and fair housing organizations use paired testing to identify covert or subtle discriminatory practices that may not be openly admitted—i.e., hidden discrimination—such as disparate treatment in availability, terms, steering, or information provided. Testing is an investigative tool to enforce the Fair Housing Act, not a revenue or punitive scheme in itself.

Under the federal Residential Lead-Based Paint Hazard Reduction Act of 1992 (Title X) and the Maryland Lead Poisoning Prevention Program, sellers and landlords of housing built before 1978 must:

Provide the EPA-approved pamphlet on lead hazards.

Disclose known lead-based paint or hazards and supply any available records.

Allow buyers a 10-day inspection period (unless waived).

A licensee’s duty is to ensure that the sellers comply with these disclosure requirements and to remind them to deliver the proper forms and pamphlet.

The licensee is not responsible for testing or remediation but must ensure all disclosures are completed prior to ratification of the contract.

Reference (Maryland Source):

– Maryland 60-Hour Principles and Practices of Real Estate Pre-Licensing Course, Environmental Issues and Disclosures section.

– 42 U.S.C. §4852d (Residential Lead-Based Paint Hazard Reduction Act).

– COMAR 26.16.02 (Maryland Lead Poisoning Prevention Program).

A home inspection is a professional, non-invasive evaluation of the property’s physical condition (systems and components) to inform buyers about defects and needed repairs. It is not an appraisal (value) and doesn’t set list price; while it can reveal “red flags,” its primary purpose is to provide the buyer an accurate picture of condition to inform negotiations and contingency decisions.

The principle of regression states that a property of higher value may decrease in worth when located near or among lower-quality properties. Conversely, the principle of progression means a lower-valued property can gain value by proximity to higher-quality ones.

This concept is emphasized in the Maryland pre-licensing module “Real Estate Appraisal and Valuation” to explain how neighborhood characteristics influence market value.

Polychlorinated biphenyls (PCBs) are synthetic chemical compounds formerly used as coolants and insulators in electrical equipment, hydraulic systems, and fluorescent-light ballasts. They are toxic, persistent in the environment, and regulated by the U.S. EPA under the Toxic Substances Control Act (TSCA). Maryland’s course covers PCBs among major environmental hazards requiring disclosure or remediation.

The Property Management section of the Maryland pre-licensing course teaches that licensees must monitor their listings for fraudulent online activity, such as rental scams where criminals copy legitimate ads and re-post them with false contact details.

Setting up automated alerts through tools like Google Alerts or If This, Then That (IFTTT) can help licensees detect unauthorized use of their listings or identifying information.

These monitoring tools allow quick corrective action and protect both the brokerage and the public from scams.

Reference (Maryland Source):

– Maryland 60-Hour Principles and Practices Course, Property Management and Advertising Compliance section.

– Maryland Code of Ethics, COMAR 09.11.02.01–.02.

In Maryland, a real estate licensee may only perform brokerage services and be entitled to compensation when a written brokerage agreement exists between the client and the broker.

This agreement must clearly state the broker’s duties, compensation terms, and representation type (buyer, seller, or dual).

Verbal agreements are insufficient to establish an enforceable right to a commission.

The buyer determines the amount of the earnest money deposit, since it is the buyer’s good-faith indication of intent to perform under the contract.

The licensee can explain customary local practices and typical deposit amounts but may not set or require a specific figure.

The offer, including the deposit amount, becomes binding only when accepted by the seller.

This is emphasized in the Contracts and Offer Preparation module, which explains that the buyer controls all offer terms, including price, contingencies, and deposit.

Reference (Maryland Source):

– Maryland 60-Hour Principles and Practices Course, Real Estate Contracts section.

– Business Occupations and Professions Article §17-322 (Improper Brokerage Practices).

Only licensed or certified appraisers may perform an appraisal for a fee in a federally related transaction.

A real estate licensee, however, may prepare a Comparative Market Analysis (CMA) or Broker Price Opinion (BPO) to help a seller decide on a listing price or a buyer to make an offer.

A CMA compares recent sales, active listings, and expired listings of similar properties to estimate a realistic price range.

This procedure is emphasized in the “Appraisal and Valuation” module as a permitted pricing tool for real estate professionals.

Reference (Maryland Source):

– Maryland 60-Hour Principles and Practices of Real Estate Pre-Licensing Course, Valuation and CMA section.

– Business Occupations and Professions Article §17-511 (b).

In practice and per course guidance, the buyer is responsible for initiating and completing the loan application, arranging the appraisal through the lender, ordering the home inspection, and securing homeowners insurance prior to closing. Although lenders order the appraisal to comply with appraisal independence rules, the buyer is the party who applies for financing and is responsible for ensuring the appraisal, inspection, and insurance are in place to meet loan and contract conditions by closing.

Maryland practice (as taught in pre-licensing) recognizes a customary 50/50 split of transfer and recordation taxes between buyer and seller, subject to local custom and negotiation. Parties may allocate differently in the contract, and some jurisdictions have varying defaults; however, exam-prep materials present 50/50 as the standard custom unless otherwise agreed.

A special agent (also called a limited agent) is authorized to perform a single, specific act or transaction—such as assisting in the purchase or sale of a property.

Real estate brokers and salespersons generally act as special agents, with limited authority defined in the brokerage agreement.

They may not bind their clients to contracts without express permission.

This principle appears in the Law of Agency module and is contrasted with general agents (brokers’ affiliated licensees) and universal agents (power-of-attorney representatives).

Reference (Maryland Source):

– Maryland 60-Hour Principles and Practices Course, Law of Agency section.

– Business Occupations and Professions Article §17-530 – §17-534.

In Maryland, agency exists when a licensee represents a client under a brokerage agreement. If the seller has a written listing agreement with a broker, the seller is the client.

An unrepresented buyer is considered a customer, not a client. The licensee owes customers limited duties—honesty, fair dealing, and disclosure of material facts—but does not owe fiduciary duties such as loyalty, confidentiality, or obedience.

Therefore, in this case, the seller is the only client.

Wetlands provide critical ecosystem services—they serve as wildlife habitat, enhance aesthetics, control erosion, store floodwaters, and filter pollutants. Because of these public benefits, wetlands are protected under federal and state law, and Maryland licensees are trained to recognize that development near wetlands often triggers permitting, setbacks, and disclosure obligations.

References (Maryland Pre-Licensing Core Content):

Maryland 60-Hour Course: “Environmental Issues and Disclosures” (wetlands functions; permitting; protected resources).

Overview of federal/state wetland protections as discussed in course materials.

Under Maryland’s agency law, a licensee must establish a relationship of trust, confidence, and loyalty with a client.

Meeting face-to-face helps the agent explain agency relationships, present the Understanding Whom Real Estate Agents Represent disclosure, and begin building rapport and confidence, which are critical in fiduciary relationships.

As emphasized in the Brokerage and Agency module, personal contact helps ensure informed consent and professional transparency—never to collect personal demographic or financial data outside proper procedures.

Reference (Maryland Source):

– Maryland 60-Hour Principles and Practices Course, Law of Agency and Broker-Client Relationships section.

– Business Occupations and Professions Article §17-530 through §17-534.

Agreeing—or even coordinating—on a minimum commission or listing fee among competing brokerages is price fixing, a per se violation of antitrust law. Maryland pre-licensing emphasizes that competitors must not discuss or set commission rates, fees, or pricing policies; each brokerage must independently determine its fees.

Group boycotting = competitors conspiring to refuse to deal with a party.

Market allocation = dividing territories/customers.

Tie-in arrangement = conditioning sale of one product/service on purchase of another.

References (Maryland Sources / Pre-Licensing Core Content):

Maryland 60-Hour Course: “Real Estate Brokerage Operations” (antitrust compliance: price fixing, market allocation, group boycotts, tie-ins).

Sherman Antitrust Act principles as incorporated in Maryland real estate education.

COMAR 09.11.02 (ethical conduct; avoiding anticompetitive practices); MREC guidance on commissions being negotiable and set independently by each brokerage.

A package loan (package mortgage) finances both real property and personal property (chattels) together in a single loan—common with new homes that include appliances or furnishings. A blanket loan covers multiple parcels; a wrap-around is junior financing that “wraps” an existing loan; “security” is not a loan type but a general concept.

In Maryland, licensees must disclose material facts that are adverse, that they actually know, and that are physical to the property or the transaction—even to customers (non-clients). The MAAP framework (Material, Adverse, Actually known, Physical) is taught in pre-licensing to help practitioners decide what must be disclosed and to distinguish disclosable facts from confidential information or client motivations that must be protected. Examples include known structural defects, roof leaks, or latent physical conditions. This aligns with Maryland’s duties of honesty, disclosure of material facts, and prohibition against misrepresentation.

References (Maryland Pre-Licensing Core Content):

Maryland 60-Hour Course: “Real Estate Brokerage and the Law of Agency” (brokerage duties to clients and customers; disclosure vs. confidentiality; MAAP decision tool).

COMAR 09.11.02 (standards of practice: honesty; disclosure of material facts; avoidance of misrepresentation).

Business Occupations & Professions, Title 17 (grounds for discipline related to disclosure and misrepresentation).

Amortization is the process of systematically paying down a loan balance over time through periodic payments that cover interest and principal, according to an amortization schedule.

Installment refers to a single periodic payment, not the full process.

Loan is the debt itself.

Mortgage is the security instrument (lien) that pledges property as collateral for the loan.

References (Maryland Pre-Licensing Core Content):

Maryland 60-Hour Course: “Real Estate Financing” (amortization schedules; principal vs. interest; fully vs. partially amortized loans).

Basic finance terminology as standardized across pre-licensing materials.

In development analysis, costs include impacts that require public or private expenditure—for example, the increased demand on infrastructure (roads, utilities, schools, water/sewer), which necessitates capacity expansions, impact fees, or mitigation measures.

Crime rates and lower unemployment are socio-economic conditions/impacts, not direct development costs.

Local density zoning rules are regulatory constraints (land-use controls), not a cost in themselves (although they can influence costs).

References (Maryland Pre-Licensing Core Content):

Maryland 60-Hour Course: “Land Use Controls and Property Development” (infrastructure capacity, impact fees, concurrency, mitigation of development impacts).

Planning and subdivision concepts taught in Maryland curriculum (infrastructure and service demands as development costs).

Within the Agency/Fiduciary Duties portion of the course, self-dealing is identified as a breach of fiduciary duty that occurs when a licensee has a personal interest in a transaction and fails to disclose it fully and obtain informed consent. Examples include purchasing a client’s property for oneself (or through an undisclosed third party), steering a client to a business in which the licensee has a hidden financial stake, or otherwise placing personal gain ahead of the client’s interests without disclosure. Maryland law requires full disclosure of material interests and adherence to fiduciary duties of loyalty, disclosure, and obedience.

Maryland licensees may fill in blanks on approved contract forms and explain business terms (e.g., common contingencies, offer strategies, earnest money customs). But giving legal advice—interpreting legal consequences, drafting custom legal clauses, or advising on rights/remedies—is considered the unauthorized practice of law unless the licensee is a Maryland attorney. Clients should be referred to legal counsel for legal questions.

References (Maryland Pre-Licensing Core Content):

Maryland 60-Hour Course: “Real Estate Contracts” (use of approved forms; scope of practice; prohibition on legal advice).

Maryland Real Estate Commission guidance (practice limits; unauthorized practice of law).

A sole proprietor in Maryland may operate under their personal legal name or under a trade name that has been properly registered with the Maryland Department of Assessments and Taxation (SDAT).

If a trade name is used, it must be clearly disclosed in all brokerage advertising and license registration records with the MREC.

This ensures public transparency and compliance with Maryland’s real estate advertising and licensing requirements.

Earnest money is a good-faith deposit tendered by the buyer with an offer to purchase, demonstrating the buyer’s commitment and providing liquidated damages/security per the contract terms. The deposit is typically held in a broker or title/escrow trust account and is credited to the buyer at closing or disbursed according to the contract if the transaction does not close.

The Closing Disclosure (CD) is a federally required document under the TILA-RESPA Integrated Disclosure Rule (TRID).

It must be provided to the borrower at least three business days prior to closing and itemizes loan terms, fees, and total closing costs.

The Loan Estimate (LE) is given earlier in the process—within three business days of loan application—while the Closing Disclosure confirms final figures.

Maryland licensees must understand both forms as part of the Closing and Settlement Procedures portion of their coursework.

Reference (Maryland Source):

– Maryland 60-Hour Principles and Practices Course, Closing Procedures and Federal Disclosure Requirements section.

– TILA-RESPA Integrated Disclosure Rule (TRID), 12 C.F.R. §1026.19(f).

The U.S. Department of Agriculture (USDA) Rural Development Loan Program provides financing for low- to moderate-income borrowers in rural areas.

The Maryland course teaches that Section 502 Direct Loans may offer repayment terms of up to 38 years, depending on borrower income and property location.

These loans are designed to promote homeownership in eligible rural communities and may include payment assistance or subsidies to reduce monthly payments.

The agency module explains that agency may be created by express agreement (written or verbal) or by implication through conduct. When parties act as if an agency relationship exists—for example, a licensee regularly advising and assisting buyers without a signed agreement—this can form implied agency. Because no express (written or oral) agreement exists in this scenario, the relationship described is implied agency, created by the parties’ behavior and course of dealings.

A tax-deferred exchange, also known as a 1031 exchange, allows investors to exchange one qualifying investment or business property for another “like-kind” property and defer payment of capital gains taxes until the new property is sold.

This provision falls under Internal Revenue Code §1031.

In the Maryland pre-licensing curriculum, this is explained under the “Real Estate Financing and Investment” section to show how investors legally postpone capital gains recognition by following IRS guidelines.

In the closing/title section of the pre-licensing course, learners are taught that a title policy contains Schedules—most notably Schedule A (coverage basics) and Schedule B (exceptions). Schedule B—Exceptions lists specific matters found of record prior to the policy’s effective date (e.g., recorded easements, covenants, restrictions, prior-of-record liens, and taxes/assessments) that are excluded from coverage unless affirmatively insured over or removed.

While policies also include standard exceptions (which can address certain unrecorded matters), the items “generally” shown on the schedule of exceptions are the recorded encumbrances discovered in the title search that predate the policy.

REO stands for Real Estate-Owned. This term refers to properties that have gone through the foreclosure process and are now owned by the lender—usually a bank or mortgage company—because the property did not sell at the foreclosure auction.

These properties become part of the lender’s real estate inventory and are often sold through REO departments or asset managers. The Maryland pre-licensing course includes REO properties under “Real Estate Brokerage Operations,” explaining how real estate professionals handle and market foreclosed or bank-owned properties.

Under the Uniform Commercial Code (UCC) Article 3 principles taught in real estate financing, a negotiable instrument (e.g., a promissory note) must be an unconditional promise or order to pay a fixed amount of money. Thus, if it does not contain an order to pay, it must contain a promise to pay. The amount must be fixed (not “flexible”), and while signatures are required for enforceability, notarization is not a UCC requirement for negotiability.

Appreciation refers to the increase in a property's value over time due to factors such as market demand, improvements, inflation, or location desirability.

It is the opposite of depreciation, which is a decline in value. Appreciation may result from physical improvements (e.g., renovations) or external factors (e.g., neighborhood development).

This concept is emphasized in the Maryland 60-Hour Course within the “Real Estate Appraisal and Valuation” module as a key element of market analysis and investment potential.

Interest is the cost of borrowing money, expressed as a rate applied to the outstanding principal. Principal is the loan amount itself. Discount points are prepaid finance charges used to adjust the loan’s yield/interest rate. Usury refers to charging an illegally high interest rate, not the ordinary charge itself.

A triple-net (NNN) lease requires the tenant to pay a proportionate share of the landlord’s property taxes, insurance, and maintenance costs, in addition to base rent.

This type of lease is common in commercial and industrial properties like warehouses.

The Maryland course covers lease types in property management, emphasizing the distinctions between gross, net, and percentage leases.