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Can I Get Paid?
By Leslie Schwartz, Information Officer
While NCREC is not able to settle compensation disputes per 21 NCAC 58A .0109, there are several common compensation questions that brokers and BICs ask our Information Officers via phone call and email. Below are some common questions and responses.
Agents who are affiliated with firms, or were affiliated with a firm when conducting brokerage, should only be paid by the BIC of that firm for work completed under that BIC, or their current BIC. License rule 58A .0120(b) states, “An affiliated broker shall not be paid a commission or referral fee directly by anyone other than their current BIC or the person who served as their BIC at the time of the transaction.”
I was working under an agency agreement and got a property under contract for my clients. Two weeks before closing, my license went inactive. My BIC informed me that my license was inactive, and I stopped all brokerage activity. Can I get paid for the work I did before my license went inactive?
You may be paid for work performed while your license was active in accordance with your firm’s policies and any compensation agreement you have with the firm. This could be your full commission split, or a referral agreement with the other agent who finished your transaction. In the event of a dispute between you and your firm, NCREC does not have the authority to compel the firm to pay you. A conversation with the BIC would be appropriate. If a resolution cannot be reached between the broker and the BIC, then it might be appropriate to seek legal counsel. NCREC’s publication License Law and Rules Comments states that, “…payment could properly be made for commissions earned while the license was on active status, even if the license is inactive or expired at the time of payment. The determining factor is whether the license was on active status at the time all services were rendered which generated the commission” (pg. 8). If your firm determines that your fee was earned by your actions while your license was active, they could pay you.
I was working at a firm in June and got my seller clients’ property under contract. Shortly after, my spouse got a new job, and we moved out of state. I left the firm to be unaffiliated, and my BIC assigned a new listing agent to finish the transaction. Can I be paid commission for procuring the buyer, marketing the property, etc.?
Maybe. Like the first example, the BIC can compensate you for brokerage activity that was completed with an active license. Existing firm policy or a signed referral agreement would be the best practice to indicate the amount of money that you earned prior to assigning the contract to another broker. If you did not get this in writing prior to leaving the firm, a conversation with the BIC would be appropriate. If you and the BIC can’t agree, then you may wish to consult a private attorney.
I was working for a buyer client under an oral buyer agency agreement for a few months, but the market has been rough. Finally, in late July, we got a property under contract, and we reduced our buyer agency agreement to writing prior to making the offer. A week before closing in September, the listing agent contacted me to ask why my license was inactive. I didn’t realize it was. Apparently, I forgot to complete my CE and my license has been inactive since before we signed our agency agreement and got this property under contract. Can I be paid if I fix the CE issue and regain active status before closing?
Probably not. A licensee on inactive status cannot perform brokerage activity, including entering into agency agreements or assisting a buyer in making an offer. You may be entitled to some compensation for brokerage work performed prior to going on inactive status and/or after regaining active status, so you should discuss this with your BIC. If you signed any other contracts while your license was inactive, you cannot be paid for any work done on those transactions during the period of license inactivity.
My license is current but inactive. A friend of mine wants to buy a house. I know a great broker with whom I used to work. Can I be paid a referral fee for connecting the two of them?
No. Licensees must be on active status to conduct brokerage activity. The agent who accepts your referral cannot pay a referral fee to an unlicensed person, or a person with an inactive license. G.S. 93A-6(a)(9) specifically gives the Commission the power to take disciplinary action if a licensee compensates someone in violation of the License Law.
My license is active, but I do not work as an affiliated broker under a BIC as I just write referrals. However, my daughter is about to buy her first house. Can I work as her buyer agent for compensation?
Yes. Commission Rule A.0110(a) requires sole proprietors to also be a BIC if they are soliciting business, advertising, affiliating other agents, or holding trust monies. Since working as a buyer agent for a family member requires none of these, this brokerage activity would be acceptable as long as you do not offer to hold any escrow deposits. You will need to enter into a written brokerage agreement prior to writing any offers and address in it your compensation.
My mom has an active real estate license but isn’t affiliated with a firm. I am about to buy my first house and trust no one more with this big purchase than my mom. When I asked her to represent me, she said she’d also give me the commission earned. Can she do that?
Maybe. While the License Law does not prohibit a broker from sharing all or part of their commission with a party to the transaction, the money cannot be paid outside of closing and should be reflected on the closing disclosure. If there is a lender involved, the lender will have to approve the concession, and not all borrowers may qualify. Be sure your buyer understands this – if the lender does not approve, the buyer cannot receive the concession in any other way. If the lender approves it, and the amount is reflected accurately on the closing disclosure, then this should be fine. You should consult the closing attorney about how to accomplish this.
I’m a provisional broker with a signed buyer agency agreement. I recently changed firms, but my buyer clients decided they wanted to stay at the original firm. They don’t have a property under contract yet, but I have shown them dozens of houses and spent many hours working to educate them about the market, the standard offer to purchase contract, and the home-buying process. If they buy a house under my old firm, can I get any payment from that? And how would that money come to me?
Maybe. In this scenario, it would be best to have a signed referral agreement indicating your split of any commission before you leave the firm, or an established firm policy that addresses this scenario. If neither of these is the case, then you should discuss this with your previous BIC. If you and the BIC work out a payment agreement, your previous BIC can pay you through your new BIC. G.S. 93A-6(a)(5) indicates that a provisional broker cannot accept compensation for brokerage activity from anyone other than their BIC. . If you can’t come to terms with the previous BIC, you could consider consulting an attorney.
My BIC just fired me unexpectedly and removed me from affiliation with the firm. I have a transaction closing tomorrow. She said she won’t pay me. Is that legal?
Maybe. The firm owns the agency agreement and any commissions tied to it. As in the example where a broker left the firm voluntarily, your BIC could choose to pay your commission at your previously agreed split, or a portion of it in accordance with any affiliation agreement or company policy. However, if you and the BIC are in disagreement about whether the money is owed, you will need to seek the commission through the appropriate legal process.
I am retired, but I am considering taking a job as a “transaction coordinator.” I do have an active license, but I am not affiliated with any firms, and I don’t conduct brokerage activity anymore. In this new position, I will make sure all of the paperwork is signed and organized and that none is missing per a list of required documents on behalf of agents who hire me. Can I charge a flat fee for these services?
Yes, this job does not require a real estate license if there is no brokerage taking place and payment is made by a flat fee. You can refer to a prior article for other tasks that unlicensed persons or licensed persons not looking to perform brokerage services can perform.
In conclusion, an ounce of prevention is worth a pound of cure. If you are a BIC, review your firm policies to see if each of these scenarios are clearly addressed. If you are an affiliated agent, it could be beneficial to consult your firm policy and your BIC in advance of any of these issues arising. Make sure you know how to remain compliant with the License Law and Rules, in addition to working within the bounds of your established firm policy, so that you are never faced with the sobering realization that you just worked for free.
Staff Appearances
Brian Heath, Consumer Protection Officer, spoke at Coldwell Banker HPW on May 7.
Bruce Rinne, Information Officer, spoke at BlueCoast Realty Corporation on May 21.
Diversity, Equity, and Inclusion
In the Commission’s December 2023 eBulletin Diversity, Equity, and Inclusion update, we reported on our efforts to engage with and attract diverse groups of young professionals to the real estate industry. Over the last year the Commission’s Diversity, Equity, and Inclusion (DEI) Officer has worked in collaboration with state and local REALTOR® associations and various industry organizations to establish partnerships with Historically Black Colleges and Universities (HBCUs) throughout the state.
Through these partnerships, the Commission has been able to engage with students at five of the ten North Carolina HBCUs at events such as career fairs, luncheons, guest lecture series, panels, and other campus sponsored events. Students were exposed to a variety of professional opportunities in real estate, expanded their professional networks, and gained access to scholarship and internship opportunities. Through this initiative, the Commission established an internship program and has hired two summer interns for 8 weeks, with one intern in the Accounting Division and one intern in the Education and Licensing Division.
The Commission is continuously working to expand our programming under this initiative, with plans to include high schools, other colleges, and consumers in our efforts. If you would like to be a part of our programing, please contact us here and Commission staff will be in contact with you.
Tech Corner: How to Renew Your License
Link: https://share.synthesia.io/844cae67-b19b-4015-a537-1009ff9bcc78
Case Study: Agency
FACTS: A broker conducts a listing appointment for an older home in a desirable neighborhood. During the meeting, the broker discusses the price, fees, disclosures, marketing, and other listing considerations.
The broker produces a comparative market analysis (CMA) with an estimated listing price range of $250,000-$262,000. The seller agrees to a $259,000 list price and signs a listing agreement and the required disclosures. Prior to publicly posting the listing of the property, the broker contacts the seller-client with a potential investor who would be interested in the property.
The investor is shown the property and submits a cash offer of $225,000. The seller-client is not interested in the low offer. The broker attempts to pressure the seller-client into accepting the offer since the offeror is not asking for any inspections and will close quickly.
The seller-client accepts the offer and completes the transaction. A few months later, the property is back on the market for $320,000. Upon further research, the seller learns that the investor who bought the property is the father-in-law of the listing broker; the CMA was purposefully inaccurate; and the broker intended to profit from the subsequent sale.
ISSUE: Did the broker comply with the License Law and Commission rules?
ANALYSIS: No. Brokers owe fiduciary duties to their clients. These fiduciary duties prohibit brokers from self-dealing. Commission Rule 58A .0104(p) specifically requires listing brokers who want to purchase their client’s property to disclose in writing their conflict of interest and to advise the seller-client that they may want to seek independent counsel. Before the listing broker contracts to purchase the property, they must disclose to the seller-client in writing that the seller has a right to terminate the listing. If the seller does not terminate the listing, the listing broker must still transfer the listing agreement to another broker affiliated with the firm.
The North Carolina Real Estate Commission has long made clear the implications regarding brokers and self-dealing. When a principal engages a real estate broker as their agent, they are entitled to loyalty and obedience. This means that the broker must prioritize the interests of the principal above their own personal, business, or familial concerns. The principal’s interests take precedence, and the broker must refrain from engaging in any actions that may compromise or dilute this loyalty. In this case, the broker misrepresented the probable selling price and pressured the seller-client into accepting an under-value offer made by a family member.
Furthermore, North Carolina General Statute 93A-6(a)(4), (8) and (10) gives the Commission authority to discipline brokers who act for more than one party without the knowledge of all parties for whom they act (here, the seller-client and the family member), who are unworthy or incompetent to act as a real estate broker in a manner as to endanger the interest of the public, and for conduct which constitutes improper, fraudulent, or dishonest dealing.
The Commission determines whether a broker acted competently by analyzing documents, interviewing witnesses, and reviewing written correspondence. The Commission uses the Reasonableness Standard to evaluate a broker’s expected competency. A broker must exercise the degree of skill, care, and diligence that a reasonably prudent real estate broker would exercise under similar circumstances.
N.C.G.S. § 93A-6(a)(15) states that the Commission has power to suspend or revoke at any time a license issued under the provisions of this Chapter, or to reprimand or censure any licensee, if following a hearing, the Commission adjudges the licensee to be guilty of violating any rule adopted by the Commission.
As a result of this fraudulent self-dealing and the potential violations of License Law and Commission rules, the broker may be subject to disciplinary action by the Commission.
RESOURCES:
N.C.G.S. § 93A-6(a)(8), 93A-6(a)(10), and 93A-6(a)(15)
License Law and Commission Rules: Rule 58A .0104
Articles: NCREC Bulletins – Self-Dealing
2021-2022 General Update Course – Broker Fiduciary Duties
Help Us, Help You! Identify Yourself….Please!
Please help Commission staff respond more quickly and accurately to your emails, voice messages, and letters by fully identifying yourself in the communication. Providing your broker license number and your full legal name vs. your nickname allows us to locate your records that contain the answers to most of your questions. If your parents gifted you with a name that contains a suffix, such as Jr., III, or the Great, be sure to include the suffix. We do have some brokers that share very similar names. Help us … so we can help you more efficiently!
Reminder: Have you taken your CE courses for the 2023-2024 license year?
Do you know the CE deadline is June 10, 2024? If so, did you take the appropriate CE course?
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Reminder: Renew Your Instructor Approval
Commission-approved instructors are required to complete six hours of real estate instructor educational program each license year prior to the renewal of their instructor approval. The Guidelines for Instructional Educational Requirement (Form REC 3.78) explain the rule requirements, list some of the education options, and provide links to those resources. Renewal of instructor approval should be submitted as soon as possible before June 30th to ensure timely processing.
If you have any questions, please review the Commission’s website.
How to Check your CE record
Did you know that you can check your continuing education records on www.ncrec.gov prior to calling the North Carolina Real Estate Commission?
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