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.
If you hold a North Carolina Non-Resident Limited Commercial License, or you are searching for someone who does, you can access valuable information on the Commission’s website, www.ncrec.state.nc.us.
Click on “Licensee Search” and then “Non-Resident Limited” on the home page. In the designated fields on the page that opens, type in your name or the name of the licensee you wish to find.
The record will show license name, firm name, address, license number, license status, and last renewal date.
If your have a question about your record, please contact Information Services at the Commission.
This article came from the January 2008-Vol38-3 edition of the bulletin.
When market conditions make it more difficult to sell real estate, sellers sometimes offer incentives to real estate agents to promote the sale of their properties.
These “compensation incentives” may be in the form of cash, vacations, or other prizes. They are in addition to the sales commission or compensation the agent would otherwise receive from the sale and are usually given after the sale closes. They are especially popular among homebuilders to focus attention on their properties.
Real estate agents are permitted to receive compensation incentives so long as they are fully disclosed to their clients.
Responding to recent reports that some buyers are not being properly informed that their agents are being offered these special incentives, the Real Estate Commission formed an advisory committee consisting of real estate brokers, builders and consumer representatives to assist it in determining whether changes in its rules are needed to reasonably assure that real estate purchasers and sellers are properly informed of any compensation received by or offered to their agents from another party to the transaction.
The members of the Commission’s Incentive Disclosure Advisory Committee were Kimberly D. Alston (Greensboro), William C. Bass (Asheville), Cindy S. Chandler (Charlotte), Tony H. Jarrett (Greensboro), C. Nash Lindsey, III (Fayetteville), P. Robert Measamer, Jr. (Fayetteville), Hampton Pitts (Raleigh), Page Robertson (Wilmington), James H. Sears (Gates), Grady F. Watkins, Jr. (Holden Beach), and Assistant Attorney General Harriet Worley. Special Deputy Attorney General Thomas R. Miller served as advisor to the committee and Executive Director Fisher facilitated the discussions.
After reviewing and discussing the relevant issues, the committee determined that proper disclosure of incentives of more than nominal value requires:
1. That the disclosure be in writing and preferably accompanied by an oral explanation of the incentive arrangement, that it be prominent, and that it be acknowledged by the agent’s clients; but if the client fails to acknowledge the written disclosure, the broker may proceed with the transaction after noting this in his or her transaction records.
2. That the value of the incentive be disclosed and, if other than cash, a description of the incentive item and its monetary value stated.
3. That the disclosure by the agent be timely; i.e., preferably while showing properties for which an incentive is being offered, but in no event later than the making of the buyer’s offer to purchase such properties.
The committee then concluded that, since the current Commission rule on disclosing the receipt of sales incentives does not require that the disclosure be made in writing nor does it address the timing or content of the disclosure, the rule should be amended to incorporate the disclosure elements it identified.
At its December meeting, after discussing the committee’s report and recommendations, the Real Estate Commission initiated rulemaking to consider amending its Rule A.0109 governing the disclosure of compensation incentives. A rulemaking hearing will be held in the Conference Room of the Commission’s Raleigh office on April 16 beginning at 10:00 a.m. during which the Commission will receive comments from interested persons concerning the proposed rule including any written comments received prior to the hearing. A complete copy of the proposed rule and the Incentive Disclosure Advisory Committee report is available on the Commission’s website, www.ncrec.state.nc.us.
Pending action by the Commission on the proposed rule change, licensees are reminded that they are required by current Commission rules to fully disclose to their clients any compensation incentive they are offered and that federal law requires them to report on the HUD-1 form their “total sales/broker’s commission” including any compensation incentives.
This article came from the January 2008-Vol38-3 edition of the bulletin.
The 2007-2008 Broker-in-Charge Annual Review course focuses on the broker-in-charge’s obligation to oversee adherence to the Commission’s agency disclosure and agreements rule (Rule A.0104) by all associated agents.
Brokers-in-charge should be aware that they may be subject to disciplinary action if agents under their supervision fail to timely disclose agency relationships and obtain written agency agreements.
The course reviews the history of Rule A.0104, the genesis of disclosure requirements. It then proceeds to explain the rules: agency disclosure requirements in all sales transactions, determination and establishment of an agency relationship before beginning to work with a consumer in any transaction, and the latest point by which that express agency agreement must be in writing. Fact situations are presented throughout the materials to assist brokers-in-charge in applying the rule.
The course materials are designed to eliminate confusion about how brokers-in-charge and their associated agents are expected to comply with the rule. It is hoped that the materials will serve as a primer on agency requirements and will be used by brokers both as a reference and in training their associated agents.
This article came from the January 2008-Vol38-3 edition of the bulletin.
Only brokers who are designated on the Real Estate Commission’s records as “broker-in-charge eligible” may take the Broker-in-Charge Annual Review Course (BICAR). To verify your eligibility, brokers who are broker-in-charge eligible may download a “Statement of Broker-in-Charge Eligibility” from the Commission’s website, www.ncrec.state.nc.us, to give to the course provider. BICAR must be taken every license year after the license year in which a broker is designated a broker-in-charge in order to remain broker-in-charge eligible.
Note that as of January 1, 2008, licensees who are not “broker-in-charge eligible” according to the Commission’s records will not receive any continuing education credit if they take the BIC Annual Review course on or after January 1, 2008.
This article came from the January 2008-Vol38-3 edition of the bulletin.
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License Type
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Requirement
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Provisional Broker (PB9)1 |
Complete at a minimum the second 30-hour postlicensingcourse. All 90 hours must be completed by April 1, 2009.
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Provisional Broker PBT2 |
Complete the 24-hour Broker Transition Course or certify four years of brokerage experience within the past six (up to April 1, 2008).
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Nonresident
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Either comply with the above requirements according to your License Type, or complete equivalent education in another state, or obtain a broker license in another state.
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1PB9 – Initially licensed as a salesperson between October 1, 2005 and March 31, 2006 and converted to “provisional” broker status on April 1, 2006.
2PBT – Initially licensed as a salesperson before October 1, 2005 and converted to “provisional” broker status on April 1, 2006.
This article came from the January 2008-Vol38-3 edition of the bulletin.