The North Carolina Real Estate Agent Safety Guide has undergone review and revision, including a new front cover design.
The booklet is published as a cooperative venture of the North Carolina Association of REALTORS® Real Estate Safety Council and the Real Estate Commission.
It is recommended by the Safety Council that every real estate firm implement a formal safety program. The Safety Guide is a resource for the design of such programs.
Orders for the 20-page booklet may be placed online at the Commission’s website, www.ncrec.nc.us, or by printed forms available on the website and on page 7 of this Bulletin.
This article came from the January 2008-Vol38-3 edition of the bulletin.
Several changes in Commission rules became effective January 1. The newly adopted changes include:
Agency Agreements and Disclosure
• A requirement that written agency agreements be signed.
Business Entities
• A provision that the Commission will not issue a license to a firm when another firm is licensed under the same name or using the name as a trade name.
Broker-in-Charge
• A clarification that LLCs and other eligible entities organized solely for receipt of compensation which are treated as “Subchapter S Corporations” by the Internal Revenue Service are eligible for the same exemption from the broker-in-charge requirement as corporations.
• A provision that brokers-in-charge who fail to take the BIC Course within the deadline are required to take the course before being re-designated as a broker-in-charge.
• A provision permitting former brokers-in-charge to remain eligible to serve as broker-in-charge if they continue taking the Broker-in-Charge Annual Review (BICAR) course every year and remain on active status.
• A clarification of continuing education requirements for nonresident brokers and nonresident BICs.
Residential Property Disclosure Statement
• A revision of the statement to require sellers to disclose whether the road that serves the property is maintained publicly or privately and to require sellers to disclose whether proper building permitting has been obtained for additions and improvements.
License Date Reinstatement
• A provision that the license date for a licensee who obtains the reinstatement of an expired license is the date of reinstatement.
Website Advertising
• A requirement that brokers’ websites identify the broker and his or her firm in a clear and conspicuous manner.
“Shopping Offers”
• A new rule prohibiting brokers from disclosing the price and material terms of an offer to a competing buyer.
This article came from the January 2008-Vol38-3 edition of the bulletin.
To expand real estate educational opportunities for persons serving as brokers-in-charge of real estate offices and to better assure that a cadre of qualified individuals is available to serve as brokers-in-charge, the Real Estate Commission recently amended its rules to enable brokers to become “broker-in-charge eligible.”
Prior to the January 1 rule change, a broker-in-charge who had any “break in service,” that is, any period when he or she was not actively managing an office, would be required to satisfy the initial experience and education requirements when he or she was redesignated a broker-in-charge. Under the new rule, however, a broker may become “broker-in-charge eligible” and may retain that status indefinitely, even during periods when he or she is not actively serving as broker-in-charge of a particular real estate office.
To become “broker-in-charge eligible,” a broker must either:
1. be designated on Commission records as a broker-in-charge as of January 1, 2008 and have satisfied all initial requirements to serve as a broker-in-charge; or
2. declare oneself a broker-in-charge on or after January 1, 2008 and satisfy the initial experience and education requirements (2 years full-time brokerage experience and 12 hour Broker-in-Charge Course).
Once a broker has designated himself or herself as a broker-in-charge and satisfied the initial requirements, that broker may retain his or her broker-in-charge eligibility indefinitely thereafter by continually maintaining his or her broker license on active status and by taking the Broker-in-Charge Annual Review course each year beginning the license year after the license year when the broker was designated a broker-in-charge. For example, a broker who declares himself or herself as a broker-in-charge in March 2008 will first be required to take the Broker-in-Charge Annual Review course during the July 2008-June 2009 license year and continuing each year thereafter. A broker’s “broker-in-charge eligibility” will be terminated if the broker does not complete the Broker-in-Charge Annual Review course (and the mandatory Real Estate Update course) each year or the broker loses his or her license for any reason, e.g., failure to renew, license suspended, etc..
If your broker-in-charge eligibility is terminated, then to be redesignated a broker-in-charge you must:
1. have an active license and demonstrate that you have at least two years full-time (or equivalent part-time) real estate brokerage experience within the past five years;
2. take the 12-hour Broker-in-Charge Course (or, if you have taken the 12-hour Broker-in-Charge Course within the past three years, you may instead take the 4 hour Broker-in-Charge Annual Review Course); and
3. submit a properly completed Broker-in-Charge Declaration form to the Commission.
However, so long as a broker remains “broker-in-charge eligible,” he or she may have periods when he or she is not actively managing an office, but may then be redeclared broker-in-charge of a particular office by simply submitting a properly completed Broker-in-Charge Declaration form to the Commission and will not be required to take the 12-hour Broker-in-Charge Course.
Brokers-in-charge who neither live in North Carolina nor manage an office located within North Carolina are not required to take any of the special broker-in-charge education. However, if such a broker-in-charge subsequently moves to North Carolina or becomes broker-in-charge of an office in North Carolina, then he or she will be required to take the special broker-in-charge education.
This article came from the January 2008-Vol38-3 edition of the bulletin.
As a real estate agent licensed by the State of North Carolina, you are required under Real Estate Commission rules to review the content of the brochure, Working With Real Estate Agents, with a seller or buyer at the time of first substantial contact, and determine who you will represent in the transaction.
Upon review of the form, check the “Disclosure of Subagency” box if it applies, and in any event, have the prospective buyer or seller sign the acknowledgement on the tear-off panel of the brochure. If the prospect refuses to sign it, document that fact on the panel. Keep the tear-off panel in the transaction file for three years.
The primary goals of this procedure are:
• to inform your seller or buyer of the available options for an agency relationship and, through that disclosure, to choose the most appropriate one;
• to prevent the communication of confidential information by the seller or buyer to the agent before a specific agency relationship has been established.
Working With Real Estate Agents may be purchased online at the Commission’s website, www.ncrec.state.nc.us, or with an order form that can be mailed with a check or faxed with credit card information. The form may be printed from the website’s Publications page and is also available in each issue of the Commission’s newsletter, the Real Estate Bulletin.
You may substitute use of the printed brochure and card with materials available on the Commission’s website: a reproducible version that can be printed using legal size (8 ½” x 14”) paper or text for both brochure and acknowledgement card that can be copied and pasted into a word processing program.
To quickly communicate content with a seller or buyer that resides elsewhere, you can download a portable document file (pdf – for opening with Acrobat Reader) and email it as an attachment. You can then review the content with the client/customer so that an appropriate agency relationship may be established.
There is a substantial discussion of what is meant by “first substantial contact” in the North Carolina Real Estate Manual, the textbook written and published by the Real Estate Commission for required postlicensing education. (The 2008-2009 edition of the Real Estate Manual has just been published and may be ordered online at the Commission’s website.)
In brief, the term is defined in the Manual as “the point in time when a customer, whether a prospective seller or buyer, begins to act as though an agency relationship exists…” or “…when the licensee begins to speak or act in such a way that a reasonable buyer or seller would believe that an agency relationship exists.”
“First substantial contact” commonly (but not exclusively) occurs with sellers in a pre-listing meeting, with buyers in a meeting to define the parameters of a home search, and with owners marketing their own property (FSBO’s) when approached by an agent for a buyer interested in the FSBO property. Disclosure should be made during or prior to these occasions, in order to avoid the possibility of obtaining confidential information before the prospect has been advised of the available agency relationships, and their consequences.
Agents can easily review with sellers the agency relationship options described in Working With Real Estate Agents at the time of listing. If the agent lists a property using the North Carolina Association of REALTORS® Form 101 (Listing Agreement) Paragraph 7 concerning Agency Relationships states that the seller has received and reviewed a copy of the brochure, and requires the seller to authorize either “dual agency” (subject to the terms of an attached Dual Agency Addendum) or “exclusive representation at all times”.
Agents working with buyers generally should review the Working With Real Estate Agents brochure before entering into a written agency agreement, as the first substantial contact is likely to occur very early in the relationship between the buyer and agent. Following a general rule of “sooner is better than later” is prudent.
Agents making an inquiry for a buyer about FSBO property should begin their conversation with the seller with a prompt review of the brochure so that the seller fully understands the consequences of working with the buyer and his agent without representation and/or entering into a fee agreement with the agent.
This article came from the January 2008-Vol38-3 edition of the bulletin.
I resolve to:
• Be certain that records of brokers affiliated with my office are accurate and complete.
• Review the continuing education records of all brokers in time for completion of necessary courses.
• See that all provisional brokers are in compliance with Commission rules relating to postlicensing education.
• Notify the Commission within 10 days of broker address changes.
This article came from the January 2008-Vol38-3 edition of the bulletin.
The North Carolina Real Estate Manual, 2008-2009 Edition is now available to purchase.
The Manual is the required text for the three thirty-hour postlicensing courses which most provisional brokers must take, as well as for the 24-hour Broker Transition Course which will be offered through March 31, 2008.
In addition to significant revisions in the chapter on “Financial Legislation and Practices”, the new Manual contains discussion of changes to the new Offer to Purchase and Contract form which is also the subject of the 2007-2008 Real Estate Update Course.
The North Carolina Real Estate Manual continues to be a comprehensive guide to real estate law and brokerage practices in North Carolina. It covers everything from basic real property law, taxation, valuation, land use, agency relationships and agreements, basic contract law principles and sales contracts, landlord-tenant law, fair housing, property management and commercial brokerage practices, among other topics.
To purchase the Manual, place your order online at the Real Estate Commission’s website, www.ncrec.state.nc.us, or use the order form on page 10 of this Bulletin.
This article came from the January 2008-Vol38-3 edition of the bulletin.
By Emmet R. Wood, Director, Audits and Investigations
What are some of the things that a Broker-in-Charge can do to check the bank reconciliation performed by your company’s trust account bookkeeper? Reconciling the ending balance shown on your trust account bank statement to the corresponding balance on the trust account journal or check stubs (bank reconciliation) is a procedure required by the Commission. You need the following items:
• Current month’s bank statement
• Journal showing the currents month’s transactions
• Last month’s bank reconciliation
The most important procedure that you can do is to have each bank statement delivered directly to you not the bookkeeper. Open that bank statement and examine the checks for valid payors and valid endorsements. Look for online banking transfers to unfamiliar bank accounts. Then, give the bank statement to the bookkeeper. Just receiving the bank statement before the bookkeeper is an internal accounting control that will help to deter a trust account embezzlement.
Next, perform the following procedures:
| Compare the trust account ending bank statement balance to the beginning balance on the current month’s bank reconciliation. They should agree. Place the mark “@” to show that you have compared the two balances and that they agree.
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| Check the math on the current month’s reconciliation and, if it is correct, mark it with “@”.
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| Verify that the deposits-in-transit shown on the prior month’s bank reconciliation cleared on the current month’s trust account bank statement. If someone has taken trust money out of the trust account, they may try to hide the embezzlement by recording false deposits-in-transit and thus inflating the cash on the bank reconciliation.
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| Verify that the deposits-in-transit shown on the current month’s bank reconciliation appear on the Journal near the end of the month but not on the bank statement. If you have a deposit in transit that is dated more than three days before the end of the month, some trust monies may not have been deposited within the time frame required by the Commission.
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| Compare the debits/withdrawals on the bank statement to the outstanding checks on the prior month’s bank reconciliation and the current month’s journal. Show that each debit/withdrawal on the bank statement agrees in amount and check # (if applicable) with the corresponding disbursement shown on the journal by marking each disbursement on the journal with “t”. The disbursements not marked with a “t” should agree with the check #s and amounts on the outstanding checks on the current month’s reconciliation. If there is a debit/withdrawal on the bank statement that also appears on the current month’s bank reconciliation as an outstanding check, the books may not be in balance with the bank. If there are unmarked disbursements on the journal that do not appear as outstanding checks on the current month’s bank reconciliation, cash on the bank reconciliation has been inflated and there may be an embezzlement.
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Just by checking the bank reconciliation on a monthly basis, you are putting into place some internal controls to help safeguard the funds in your trust account. If you are not comfortable checking the bank reconciliation, consider hiring an accountant outside your company to assist you with the process.
This article came from the January 2008-Vol38-3 edition of the bulletin.
Governor Michael F. Easley has appointed Benjamin Cone, III, of Charlotte and Jeffery J. Malarney of Manteo to the North Carolina Real Estate Commission; it was announced by Phillip T. Fisher, Executive Director.
Cone is one of two public Commission members without affiliation with the real estate industry.
Chief Financial Officer of Uni-Screw, LLC, in Charlotte, he has held management positions in the textile and commercial furniture industries.
He is a graduate of the University of North Carolina with a Bachelor of Arts in Economics and North Carolina State University with a Bachelor of Science in Textile Management, Magna Cum Laude.
Malarney is General Counsel for Twiddy & Company and a Commander in the U.S. Navy Judge Advocate General’s Corps (Res) and a prosecutor for the U.S. Navy Region Mid-Atlantic Trial Service Office (Res).
He is a member of the North Carolina Bar Association, the First Judicial District Bar Association, Chairman of the Board of Directors of the Outer Banks Chamber of Commerce, member of the North Carolina Vacation Rental Managers Association and a former Special Assistant U.S. Attorney.
He has been awarded the Navy Commendation Medal, Navy Achievement Medals, the Global War on Terrorism Medal, the Humanitarian Service Medal, National Defense Medals and overseas ribbon.
A graduate of Wake Forest School of Law, Malarney is married to the Honorable Amber D. Malarney, District Court Judge for the First Judicial District Court, and the father of two children, Cullen, 12, and Lainy, 11.
This article came from the January 2008-Vol38-3 edition of the bulletin.
Recently the Commission created an Incentive Disclosure Advisory Committee charged with determining whether changes in Commission rules are needed to reasonably assure that real estate purchasers and sellers are properly informed of any compensation received by or offered to their real estate agents from another party to the transaction.
In addition to concerns about disclosure of compensation to agents, Commission staff regularly receive inquiries about a variety of other scenarios. Here are a few do’s and don’ts related to compensation issues:
If you are acting as a buyer agent in a transaction:
• DON’T negotiate with the seller or builder to increase the amount of agency compensation being offered without the knowledge and consent of your buyer client. As a buyer agent, it is your duty to represent your buyer client to the best of your ability. This means getting your client the property they want at the lowest cost to them.
• DON’T take a larger commission with the understanding that you will “kick back” or “rebate” a portion of the commission to the buyer after closing. ALL COMMISSION REBATES TO BUYERS MUST BE DISCLOSED TO THE LENDER IN THE TRANSACTION AND MUST BE SHOWN ON THE CLOSING STATEMENT. If the lender won’t allow it on the closing statement, the rebate CANNOT be made outside the closing.
• DO disclose to your buyers that any commission rebate you have agreed to is SUBJECT TO LENDER APPROVAL and MUST be shown on the closing statement. Again, if the lender will not allow the rebate to be shown on the closing statement, it CANNOT be paid to the buyer. Lenders often permit certain percentages of the purchase price to be offered as incentives to buyers. Once they have met the defined percentage, a buyer is not permitted to receive further incentives in the transaction under the loan as approved. Buyers should be alerted up front that they will only receive such a rebate if the lender allows it. Because it will affect the lender’s calculation of loan-to-value ratio for buyers’ loans, the lender may not permit the buyer to receive the rebate.
Regardless of who you represent:
• DON’T allow a charitable group, church or school to advertise that you will donate a portion of each commission you receive to that group as an incentive for buyers or sellers to work with you. You may not pay incentives to unlicensed persons or firms, including charities, to help you obtain business. You MAY advertise that you regularly contribute to a church or charity or other organization.
• DO disclose to your clients that you will receive a referral fee if you are referring clients to another agent and you have or will ask to be paid a fee. Referral fees must be agreed to by the agents involved in advance of the referral.
• DON’T advertise your commission in such a way as to indicate there is any industry standard. Commissions are always negotiable between the firm and its clients.
• DON’T pay rebates, incentives, or referral fees to unlicensed persons or entities who are not buyers or sellers in the transaction.
• DO pay agents licensed in another state BUT NOT IN NORTH CAROLINA referral fees or real estate commissions after verifying licensure ONLY if the out-of-state licensee did not enter North Carolina at any time to take part in any aspect of the transaction in question. If an out-of-state licensee enters the state to show or list a property, or participate in any way in the transaction, they cannot be compensated.
Licensees with questions about these issues are encouraged to contact the Commission’s Legal Staff for clarification.
This article came from the January 2008-Vol38-3 edition of the bulletin.
If you advised the Commission that you had the necessary experience in the real estate field to qualify for removal of “provisional” status from your broker license, you may be asked by the Commission to further certify that experience.
When North Carolina changed to a single license system on April 1, 2006, resident salespersons and nonresident salespersons licensed before October 1, 2005 became “provisional brokers”. To remove the “provisional” status from their license, they could either take the 24-hour Broker Transition Course or certify that they had four years of full-time experience within the past six years.
Licensees who certified experience to the Commission are now being audited to verify their experience by listing transactions in which they have participated or having their current and/or former broker(s)-in-charge certify their experience.
If the properly completed form(s) are received in the Commission office by February 6, the Commission will notify the audited licensee by March 1 of the results of their evaluation.
This article came from the January 2008-Vol38-3 edition of the bulletin.